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Health Care Reform Memo: September 24, 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: medicare and the sequester: how should we address the economy while protecting Medicare and the health of future seniors?

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

I flew from West Palm Beach, Florida to Las Vegas, Nevada Tuesday sitting beside Arlene—an 87 year old grandmother recently widowed and traveling alone for a two week getaway to the casinos. She explained that Texas Hold ‘Em was her favorite poker game, but occasionally she plays Blackjack and the 25 cent slots when she’s bored. She proudly noted her sons encourage her gambling boondoggles: she reasoned she lives alone, enjoys her independence and they know she loves to gamble but limits her losses. And I learned all this before the plane took off.

Arlene volunteered she was a pro-choice Republican—I didn’t ask. She noticed my reading included the New England Journal of Medicine and observed I must be in health care. And without hesitation, she then offered her view on Medicare and what’s ailing the health system.

To Arlene, it is simple: any change to Medicare is bad. “They” can save it by simply reducing fraud, raising the age of eligibility and then, instead of giving money to other countries, keep it at home.

She meticulously explained details of her knee replacement—it only cost her $300 dollars—and the gall bladder surgery one of her girl-friends had, which cost $38. She insisted she was not a member of AARP because it sells “too much stuff”, and admitted her suspicion that Medicare would probably run out of money before her children and grandchildren in Virginia were eligible. She said she hated Obamacare, but admitted she didn’t know much about what’s in it.

Health issues are deeply personal historically and usually discussed discreetly within a close circle of friends. That has changed in the past three years since health reform took center stage in the national debate. And increasingly, opinions about how well the system performs and necessary changes have been marked by polarizing rhetoric on all sides of issues.

What struck me about Arlene was her quick wit, strong opinions and the salience of health care to her independence and happiness. She had thought about Medicare and knew it had to change. She understood younger folks were paying into a system that might not be there for them one day, and she knew she was lucky to have it.

I asked how Medicare related to other priorities of the government, like defense and education. She didn’t bite: they’re all important.

I asked about which programs might be cut to allow for Medicare to continue. She didn’t know. She reminded me the U.S. spends more than it takes in, and that fraud and waste are the real problem in government and in health care. She said all the doctors she knows make “millions” so she didn’t understand their complaints, and she had not heard of “sequestration”—suspected it was a plan to lock Congress in a penalty box so they’d start acting like adults.

I learned a lot listening to Arlene. She relates to the health care system in a deeply personal way like we all do. She said she’s lucky to be healthy: it’s what allows her get to Atlantic City and Vegas for fun, and she’s a regular she quickly noted.

When we arrived in Las Vegas, I asked if I could help get her to her hotel. She insisted she was OK because she needed her wheelchair to get from place to place, and preferred to take her time. And she confided that one of the hotels where she’d be staying was sending a car to pick her up.

So with 43 days until the election, and ten days to the first debate, it’s clear the issue of health reform is going to get more attention. It is included as one of the six domestic agenda items for first debate in Denver but that’s only 15 minutes to discuss an industry that’s almost 18 percent of the U.S. gross domestic product (GDP) and 26.7 percent of the federal budget. I wish an entire hour could be invested in discussing an industry that’s so relevant to each of us.

I offered to call Arlene from time to time to see how she is doing and glean her thinking about health care. She told me not to call because she doesn’t answer unless it’s one of her gambling buddies or a family member. But she asked for my number in case she has questions.

I hope she calls. I learned a lot from her and I know Arlene is paying attention to the national discussion about health reform and Medicare. But she’ll be listening for ways other programs can be cut so it’s left alone. Arlene has health reform figured out: fix the rest of government and leave Medicare alone. I wish it was that simple, but for Arlene, it is.

Paul Keckely

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

P.S. Last week, the Deloitte Center for Health Solutions published a new Issue Brief on Medicaid, examining challenges to improve care quality and reduce costs: State Medicaid Program Management: Update and Considerations.

Implementation update

Sequestration and the Affordable Care Act: looking ahead

Per the Budget Control Act of 2011, $1.2 trillion in additional spending cuts, including $109 billion in 2013, will be cut from federal spending starting January 1, 2013. In some cases, the spending cut is a reduction in the previous rate of growth for a particular area of spending, in others, it’s elimination of a program, or sharp reductions in spending. Based on a variety of sources, here are the cuts to Affordable Care Act (ACA)-related programs likely to be included in the sequester unless stopped by Congress:

The potential impact of sequestration on major programs/provisions in the ACA for fiscal year (FY) 2013:

Major programs/provisions Congressional Budget Office (CBO) projected federal spending Sequestration cuts, FY2013
Medicaid and Child Health Insurance (CHIP) Outlays $642 billion1 (FY2012-2022) Exempt
Exchange subsidiesa, high risk poolsb, premium review activitiesc, loans to CO-OP plansd, risk adjustment and transitional reinsurancee, and grants to states for the establishment of exchangesf $1,017 billion1 (FY2012-2022) $66 millionf
Small business health insurance tax creditg $23 billion1 (FY2012-2022) $10 million4
Prevention and Public Health Fundh $16 billion2 (FY2012-2021) $76 million5
Increase in Health Care Fraud and Abuse Control Accounti $100 million3 (FY2011-2020) $78 million

1CBO projected 11 year effect on federal deficit, by fiscal year 2012-2022 (July 2012)
2CBO projected 10 year effect on federal deficit, by fiscal year 2012-2021 (April 2011)
3Total amount appropriated by Congress in ACA: $10 million for fiscal years 2011-2020
Payment where small business health insurance tax credit exceeds liability for tax
Department management
ACA Sections 1401, 1402, 1411, 1412, 1414, and 1415; bACA Sections 1101 and 1102; cACA Sections 1401, 1402, 1411, 1412, 1414, 1415; dACA Section 1322; eACA Sections 1341, 1342, 1343; fACA Section 1311; gACA Section 1421; hACA Section 4002; iACA Section 6402

Sources: CBO, Estimates for the Insurance Coverage Provisions of the ACA Updated for the Recent Supreme Court Decision, July 2012; CBO, Cost Estimate H.R. 1217 A Bill to Repeal the Prevention and Public Health Fund, April 2011; The "Patient Protection And Affordable Care Act ('PPACA')”, March 2010; and OMB, Sequestration Update Report to the President and Congress for Fiscal Year 2013, August 2012.

Sequestration assumes the following taxes expire at the end of the year:

Tax provision to expire December 31, 2012 Estimated 2013 revenue due to expiration
Reduced income tax rates (25%, 28%, 33%, 35%) $35.1 billion
Expanded 10% income tax bracket $30.7 billion
Reduced rate on capital gains and dividends $21 billion
Itemized deduction and personal exemption phase-out $5.4 billion
Estate and gift tax provisions $4.6 billion
Joint filers’ 15% bracket and standard deduction $4.3 billion
Child credit at $1000 $4.1 billion
American Opportunity tax credit $2.6 billion
Education provisions $360 million
Earned income tax credit modifications $65 million
Child credit refundable threshold to $3,000 $7 million
Other provisions $78 million
Total $108.4 billion

Source: The Joint Committee on Taxation, List of Expiring Federal Tax Provisions 2011-2022

Sequestration will cut 2 percent ($11.1 billion) from Medicare provider pay because such pay is non-discretionary. There will be no cuts to benefits, and as shown above, Medicaid is shielded entirely, the Administration said.

Study: unexpected cost-sharing under ACA’s prevention benefit

Last week, the Kaiser Family Foundation, American Cancer Society, and National Colorectal Cancer Roundtable released a study focused on unexpected cost sharing for patients who undergo colorectal cancer screening. Unexpected cost sharing was found to occur when:

  • A polyp is detected and removed during a screening colonoscopy
  • A colonoscopy is performed as part of a two-step screen process following a positive stool blood test
  • The individual is at increased risk for colorectal cancer and may receive earlier or more frequent screening compared with average risk adults

(Source: Kaiser Family Foundation, “Coverage of Colonoscopies Under the Affordable Care Act’s Prevention Benefit,” September 2012)

Background: Title IV of the ACA addresses chronic disease prevention and public health. Specifically, Section 4003 calls for the “development of a task force to review scientific evidence related to the effectiveness, appropriateness, and cost-effectiveness of clinical preventive services for the purpose of developing recommendations for the health care community, and updating previous clinical preventive recommendations, to be published in the Guide to Clinical Preventive Services, for individuals and organizations delivering clinical services.” Section 1001 of the ACA, which amends Section 2713 of the Public Health Service Act, requires all plans to cover certain preventive services without any cost-sharing. Section 2713 took effect for new plans beginning on or after September 23, 2010.

PCORI: $96 million for clinical effectiveness research projects

Last week, the Patient-Centered Outcomes Research Institute (PCORI) announced $96 million in its second cycle of PCORI funding for comparative clinical effectiveness research. The National Priorities for Research Agenda, which outlines the priorities for PCORI, includes five research areas for this funding cycle’s funding announcements: assessment of prevention, diagnosis, and treatment options; improving health care systems; communication and dissemination; addressing disparities; and accelerating patient-centered and methodological research. Four of the five priorities were addressed this funding cycle. Funding announcements for the fifth priority—accelerating patient-centered and methodological research—will be released later this year. The first funding cycle was in May 2012.

Background: PCORI is a private, nonprofit entity governed by a public-private sector board that was established by Section 6301 of the ACA and is tasked with developing priorities for comparative outcomes research.

Senate Special Committee on Aging examines Medicare fraud in use of motorized wheelchairs

Last week, the Senate Special Committee on Aging held a hearing on Medicare fraud related to the use of power mobility devices (PMDs) focused particularly on seven states where fraud is prevalent. PMDs are covered by Medicare Part B benefit when a Medicare beneficiary has significant difficulty participating in daily life activities due to a mobility limitation that cannot be resolved with a cane, walker, or manual wheelchair.

Background: Section 6402 of the ACA increased funding for the Health Care Fraud and Abuse Control Account by $100 million over 10 years. Section 6402 also requires Medicare and Medicaid Integrity Program contractors to provide the Secretary of the U.S. Department of Health and Human Services (HHS) and the Inspector General with “performance statistics, including the number and amount of overpayments recovered, the number of fraud referrals, and the return on investment of such activities by the entity.”

Legislative update

Bipartisan Policy Center: health care cost drivers

Last week, the Bipartisan Policy Center’s Health Care Cost Containment Initiative released a report focused on unsustainable cost growth in the U.S. health care system. The report highlights 15 major drivers of cost the initiative will prioritize and issue recommendations for developing effective cost-containment strategies in early 2013:

Cost drivers Bipartisan Policy Center analysis
Fee-for-service (FFS) reimbursement Incentive to generate income by performing more tests and procedures is exacerbated by having the costs typically paid by third party insurance, masking the true cost to consumers
Fragmentation in care delivery Lack of care coordination often leads to overtreatment, medical errors, duplicative tests costing between $158-226 billion annually
Administrative burden on providers, payers and patients Fragmented payment and delivery leads to higher administrative burdens, raising provider/payer costs and consuming physician and patient time. Administrative costs in the U.S. are estimated to between $156-183 billion annually
Population aging, rising rates of chronic disease and co-morbidities, as well as lifestyle factors Over the next 25 years population aging will be responsible for 52% of the growth in spending on major federal health program; 84% of U.S. health care dollars and 99% of Medicare spending are attributable to those with chronic disease
Advances in medical technology Unnecessary utilization of new technology where a less costly treatment would be equally effective drives health care spending
Tax treatment of health insurance Employer-sponsored insurance tax exclusion generally subsidizes individuals at higher incomes more than individuals at lower incomes; represents $250 billion in annual revenue loss to the U.S. Treasury
Insurance benefit design Incentivizes employers to offer generous benefit designs and lower patient cost-sharing, which, in turn, encourage higher care utilization; similar design in Medicare due to limits on out-of-pocket costs
Lack of transparency about cost and quality, limited data to inform consumer choice Lack of a uniform, widely-accepted standard for evaluating the effectiveness of medical treatments and technologies; consumers lack information about the price of medical services
Cultural biases that influence care utilization Culture tends to favor medical interventions that have the potential to prolong life/ improve function, even when the chances for success are very low, and cost of treatment is high
Changing trends in health care market consolidation and competition for providers and insurers Excessive concentration of either providers or insurers in a single market can impact competitive price negotiation and potentially limit consumer choice
High unit prices of medical services Buyers in the system are numerous and their leverage is constrained by consumer desire for broad provider choice
The health care legal and regulatory environment, including current medical malpractice and fraud and abuse laws Regulatory system is structured to support the FFS model, more difficult for providers and payers to implement more cost-effective systems of care; inefficient medical malpractice system encourages the practice of “defensive medicine”
Structure and supply of the health professional workforce, including scope of practice restrictions, trends in clinical specialization, and patient access to providers Professionals not performing the work that reflects the fullest extent of their education and training; physician oversight of work that can be performed by nurse practitioners, physician assistants, and pharmacists increase total costs without additional benefit to patients; lack of accessible primary care professionals drives patients to seek out specialists or drive patients to the emergency department

Source: Bipartisan Policy Center, “What Is Driving U.S. Health Care Spending? America’s Unsustainable Health Care Cost Growth,” September 20, 2012

My take: regardless of the election outcome, health cost containment will be the central story in health care in 2013. The Deloitte Center for Health Solutions is actively engaged with the Bipartisan Policy Center in analyses and is supportive of its efforts.

Congress passes Continuing Resolution for FY2013

Last Wednesday, the U.S. House of Representatives passed the Continuing Appropriations Resolution (CR) 2013, which was passed by the U.S. Senate late Saturday night. The CR is meant only to provide for the operation of the government through March 27, 2013. The CR requires agencies, including HHS, to submit a spending, expenditure, or operating plan to Congress reflecting CR funding levels, and if sequestration is ordered by the President per Section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985, agencies will be required to submit a revised spending, expenditure, or operating plan that reflects sequestration funding levels within 30 days of enactment. Under the CR, funding levels will maintain government operations at a level that will avoid furloughs and the Office of Management and Budget (OMB) will be required to submit a report monthly during the CR period to ensure each federal agency has met spending requirements.

Congressional activity on health bills in the final week before recess

Last week, Congress recessed until after the November 6, 2012 election addressing several health bills in its last week:

  • Representatives Fred Upton (R-MI) and Henry Waxman (D-CA) introduced the FDA User Fee Corrections Act of 2012 to amend U.S. Food and Drug Administration (FDA) drug user fees to allow the FDA to collect all of the generic drug user fees authorized in the FDA Safety and Innovation Act (FDASIA) through an amendment to current FDA statute as opposed to amending the CR to fund government operations through March, 2013. (The generic drug industry urged lawmakers to appropriate the new user fee program after the House-passed CR excluded a provision that would have allowed for the collection of all the fees associated with newly enacted user fee programs for generic drugs and biosimilars). Current statutory language enables FDA to collect a one-time, $50 million generic backlog fee, which would allow the agency to get the program started, but it would not allow the agency to collect fees associated with abbreviated new drug applications, prior approval supplements, or facilities and drug master files.
  • The House passed Veteran Emergency Medical Technician Support Act (H.R. 4124) to expedite the process for veterans to become emergency medical technicians; Taking Essential Steps for Testing Act (H.R. 6118) to ease sanctions on laboratory proficiency tests; the National Pediatric Research Network Act (H.R. 6163) to promote research on rare pediatric diseases; and the Pancreatic Cancer Research and Education Act (H.R. 733) to promote recalcitrant cancer research. In addition, a separate bill was introduced in the Senate by the Health, Education, Labor, and Pensions Committee on recalcitrant cancer and laboratory proficiency testing (S. 3391).
  • Senator John Kerry (D-MA) introduced the Medicaid Information Technology to Enhance Community Health (MITECH) Act (S. 3539) to expand eligibility of certified electronic health-record (EHR) technology incentive payments to include qualified safety net clinics serving low-income patients.
  • The House Energy and Commerce Committee approved H.R. 1206, the Access to Professional Health Insurance Advisors Act, which would exclude broker commissions from the medical loss ratio requirement (MLR) in the ACA.

    Note: 34 consumer groups wrote a letter to the Committee to discourage H.R. 1206 on the grounds that the MLR rule is causing insurers to lower premiums and a lack of evidence that consumers have difficulty finding agents/ brokers to assist in their insurance transactions.

DOL grants $500 million for HIT workforce training

The Department of Labor (DOL) announced $500 million in grant funding to 300 community colleges and universities through the Trade Adjustment Assistance Community College and Career Training (TAACCCT) initiative to develop and expand health information technology (HIT) workforce training programs, especially in rural areas.

Background: in 2009, the American Recovery and Reinvestment Act amended the Trade Act of 1974 to authorize the TAACCCT Grant Program. In 2010, the Health Care and Education Reconciliation Act, included $2 billion over four years to fund the TAACCCT program, which provides community colleges and other eligible institutions of higher education with funds to expand and improve their ability to deliver education and career training programs that can be completed in two years or less and prepare program participants for employment in high-wage, high-skill occupations.

HHS hiring, compensation constraints sought in House legislation

Last Friday, the U.S. House Energy and Commerce health subcommittee held a hearing on HHS’ hiring and compensation practices: “Title 42 – A Review of Special Hiring Authorities.” Noting its need for flexibility to attract top scientists, GOP lawmakers said practices should be limited and transparent.

The HHS Employee Compensation Reform Act of 2012, introduced by Representative Joe Barton (R-TX), would place a 5 percent cap on the number of specialists (individuals hired at salaries above the pay limit for federal employees). It allows HHS to hire under Title 42 of the Public Health Service Act capping salaries at 150 percent of the annual rate of pay for level I of the executive schedule, requires annual reporting to Congress, and allows 50 employees to be paid without regard to compensation limits.

Note: A recent GAO report found that 1,461 HHS Title 42 employees earn more than $155,500. The report also found that HHS' use of its special hiring authorities under Title 42 increased by 25 percent from 2006-2010, including a 54 percent increase at FDA.

Senators searching for middle ground on deficit reduction

Last week, Senator Dick Durbin (D-IL) told Inside Health Policy that “any honest plan for deficit reduction puts everything on the table.” Senator Durbin and seven other senators are working on a deficit reduction deal. Other senators include: Kent Conrad (D-ND), Mark Warner (D-VA), Saxby Chambliss (R-GA), Mike Crapo (R-ID), Tom Coburn (R-OK), Mike Johanns (R-NE), and Mike Bennet (D-CO). Senator Durbin did not mention specific health care sector cuts; however, last year’s “Gang of Six” proposal requested that the Senate Finance Committee find $200 billion in savings and fix and fully offset the Medicare physician formula, known as the Sustainable Growth Rate (SGR).

State update

Health insurance exchange update

To date, 13 states and the District of Columbia have notified HHS they intend to set up a health insurance exchange (HIX) on their own and seven have notified HHS they will not be setting up an HIX.

Upcoming deadlines: the exchange blueprint is due on or before November 16, 2012. If states submit their exchange model declaration by October 22, 2012 they will be eligible for technical assistance and guidance from the Centers for Medicare & Medicaid Services (CMS) on how to complete the exchange blueprint. HHS suggests that states select essential health benefits benchmark plans prior to October 1, 2012.

Background: Section 1311 of ACA establishes state HIXs as regulated, online marketplaces for individual and small group coverage.

Medicaid expansion update

To date, 12 states and the District of Columbia have indicated they will expand their Medicaid program’s eligibility threshold to 133 percent of the federal poverty level (FPL), six states indicated they will not expand.

Background: Section 2001 of the ACA expands Medicaid to 133 percent (plus a 5 percent income disregard) of FPL for most individuals under age 65. On June 28, 2012 the U.S. Supreme Court ruled that states may reject ACA’s Medicaid expansion without losing all of their federal Medicaid funding. Since the Supreme Court ruling, CMS has indicated there is no deadline for states to notify CMS of their intent to expand and many states are still in the process of deciding whether to expand coverage in 2014.

State round-up

  • Oklahoma Attorney General Scott Pruitt amended a lawsuit filed on the state’s behalf in federal court, contesting the ACA’s constitutionality under the Commerce Clause and whether the federal government holds the authority to mandate individuals to purchase health insurance. The updated lawsuit takes into consideration the U.S. Supreme Court’s June 28, 2012 ruling and now raises the complaint that because the Court deemed the ACA’s mandate a tax, it no longer conflicts with Oklahoma’s constitutional provision that no law can force participation in the health care system.
  • Two Wyoming health care entities have won grants of $22 million from the Center for Medicare & Medicaid Innovation to be used to implement patient-centered medical homes, virtual pharmacists, and registered nurse care transition coaches, and improve access to specialists and mental health services through the use of technology.
  • Kansas’s Health Information Exchange (KHIE) board has elected to disband in order to reduce costs. The Department of Health and Environment will take on the duties of the board. KHIE is currently an independent, quasi-public body, and the board is expected to cost around $400,000 annually vs. $54,000 a year if the state department assumes the board’s responsibilities. The board had difficulty recruiting providers to pay user fees to cover its operating costs after its grant from the Office of the National Coordinator for Health Information Technology (ONC) expires in 2013.
  • According to the Indiana Family and Social Services Administration, the state’s Medicaid costs could increase by $600 million over the next seven years when the ACA’s individual mandate requirement goes into effect. This increased spending would be necessary irrespective of the state’s pending decision regarding whether to expand Medicaid under the ACA.

Industry news

CMS: Medicare Advantage enrollment, premiums in 2013

Medicare Advantage (MA) enrollment will increase 11 percent within the next year according to CMS projections released Wednesday. The average MA plan premium will be $32.59 in 2013—a $1.47 increase from 2012. CMS also projects that most Medicare beneficiaries (99.6 percent) will have access to a MA plan, with plan choice increasing by 7 percent in 2013.

Reaction: “We remain concerned that the benefits and coverage Medicare Advantage beneficiaries rely on today could be put at risk as the health care reform law’s unprecedented $200 billion in cuts to the program are phased in and a new premium tax begins in 2014. As the payment cuts and new taxes take effect, Medicare health plans will continue to do everything they can to preserve benefits and keep coverage as affordable as possible for the millions of seniors and people with disabilities they serve. However, given the size and scope of these cuts, Medicare beneficiaries are likely to face higher costs and coverage disruptions in the coming years.”— Karen Ignagni, President and CEO, America’s Health Insurance Plans

Background: an MA plan (Part C) is a type of Medicare health plan offered by a private insurance company that contracts with Medicare to provide Part A (hospital), Part B (physician), and prescription drug benefits. MA plans include health maintenance organizations, preferred provider organizations, private fee-for-service plans, special needs plans, and Medicare medical savings account plans. In 2011, 25 percent of Medicare enrollees were enrolled in a Part C plan.

Wal-Mart and HumanaVitality partner for healthy eating initiative

Last week, Wal-Mart announced a new healthy eating initiative to be launched this fall partnering with HumanaVitality to provide consumers a grading system for food sold in Wal-Mart stores. Certain foods that pass a “rigorous, two step nutrition criteria process” will be stamped with a “great for you” icon that will indicate to shoppers that the food product is a healthy purchase, and HumanaVitality members will be eligible for a 5 percent savings on these products. The objective of this program is to increase affordability of healthy food options to improve health outcomes and reduce health care spending in the U.S.

Note: national health expenditures comprise 18 percent of the U.S. GDP in 2012.

Background: children and adolescents consume an average of 3,387 mg/day of sodium, and 37 percent are overweight or obese. Each 1,000 mg higher daily sodium intake was associated with about 1 mm Hg higher systolic blood pressure overall and about 1.5 mm Hg higher in overweight or obese children. Thirty-one percent of adults and 18 percent of kids are obese in the U.S. (Source: Centers for Disease Control and Prevention, “Sodium Intake and Blood Pressure Among US Children and Adolescents, September 2012)

Study: upcoding costs Medicare $11 billion

A recent study by the Center for Public Integrity found physicians billed Medicare for “longer and more complex office visits.” The study included a 5 percent sample of Medicare patients and their claims submitted by 400,000 medical practitioners and 7,000 hospitals and clinics. Study findings include:

  • The higher codes for routine office visits were not supported by increased time or patient complexity cost: $6.6 billion over the decade.
  • From 1999 through 2008, the number of doctors who billed at least half of their office visits at one of the two most expensive codes doubled to at least 17,000 practitioners. Those who quit using the two least expensive codes rose 63 percent (13,000 in 2008).
  • In 2010, Medicare paid for more than six million more visits at the second highest pay rate than the year before. That upsurge cost Medicare more than $1 billion, government records show.
  • 7,500 physicians billed the two top paying codes for three out of four office visits in 2008, a sharp rise from the numbers of doctors who did so at the start of the decade. 750 doctors billed the two highest-paying codes exclusively for office visits, some for as long as seven years.
  • The most lucrative codes are billed two to three times more often in some cities than in others, costly variations government officials said they could not explain or justify. In some instances, higher billing rates appear to be associated with use of electronic medical records and billing software.
  • Changes in billing patterns vary sharply by market i.e. Milwaukee, Phoenix, and Salt Lake had the highest increases in use of the two highest codes vs. decreases in New York City and Los Angeles.

(Source: The Center for Public Integrity, How Doctors and Hospitals Have Collected Billions in Questionable Medicare Fees, September 2012)

Background: in May 2012, the HHS Office of the Inspector General (OIG) released a report indicating Medicare payments for evaluation and management—visits with beneficiaries by physicians to assess and manage a patient’s health—rose from $22.7 billion to $33.5 billion between 2001 and 2010. According to this report, Medicare evaluation and management services have been “vulnerable to fraud and abuse.” Per Florida Medical Association v. Department of Health (1979), HHS is barred from publicly releasing doctors’ names and Medicare reimbursements.

Hospitals oppose changes to non-emergency coding payment caps

Last week, five hospital associations—American Hospital Association, the Federation of American Hospitals, Association of American Medical Colleges, Catholic Health Association of the United States, and National Association of Public Hospitals and Health Systems—sent a letter to Congress to voice concerns regarding a proposed policy to “cap total payment for non-emergency department evaluation and management services at the rate paid to physicians for providing services in their offices.” Hospitals are concerned that this policy will “undermine the ability of hospitals to adequately fund their emergency stand-by capacity” and suggest that this policy would reduce hospital payments by 71 percent for 10 of the most common outpatient services. (Source: America’s Hospitals and Health Systems, Letter to Congress, September 12, 2012)

UnitedHealth joins the Dow; health care prominent

Effective today, UnitedHealth Group Inc. is replacing Kraft Foods in the Dow Jones industrial average, the elite group of 30 companies that many investors use as a gauge of the stock market. UnitedHealth's inclusion reflects its growth into the largest publicly traded company in Minnesota, with revenue exceeding $100 billion.

Note: this is likely to draw increased attention to health care as media and economists analyze the U.S. economy. In the 30 Dow companies, health care is prominent: Merck, Pfizer and Johnson and Johnson are included, in addition to notable multi-national companies with major verticals in health care including Intel, Microsoft, and Wal-Mart.

Study: health information exchanges struggle to prove ROI

Last Tuesday, Perspectives in Health Information Management published a study revealing:

  • 50 percent of surveyed health information exchange (HIE) executives say they use or plan to use return on investment (ROI) metrics to measure the impact of their exchanges. Responses were received from 21 HIEs of which 18 met the survey criteria of exchanging data as of January 1, 2010.
  • Nine of the 18 reported using metrics for quality improvement (e.g., clinical outcomes, preventive measures, readmissions, vaccination rates, diabetes management, and cancer screening).
  • More than half of the organizations target reduction in duplicative tests or procedures, improved communication among providers, and improved health outcomes to measure the impact on ROI.
  • Ten of 18 respondents said that based on the performance of their own HIE, they believed that HIEs show positive ROI, while eight respondents (44 percent) felt more evidence was needed to make such a determination. Two respondents who believed HIEs show positive ROI stated that they have not used metrics to calculate ROI but are in the process of developing ROI metrics. Seventeen believed that HIEs improve quality of care.

(Source: Perspectives in Health Information Management, Health Information Exchange: Metrics to Address Quality of Care and Return on Investment, September 2012)


“Every medical home must have a physician serving as a leader who brings the highest level of training and preparation to guide the integrated, multi-disciplinary team.” 

Primary Care for the 21st Century: Ensuring a Quality, Physician-led Team for Every Patient,” American Academy of Family Physicians, September 18, 2012

“We need death panels. Well maybe not death panels exactly, but unless we start allocating health care resources more prudently, rationing by its proper name, the exploding cost of Medicare will swamp the federal budget.”

Steven Rattner, New York Times, “Beyond Obamacare,” September, 16, 2012

Fact file

  • Household net worth: median net worth in households declined nearly 38.8 percent from 2007-2010 to $77,300. (Source: Federal Reserve)
  • Median household income 2011: real median household income fell between 2010 and 2011, decreasing by 1.3 percent from $51,144 to $50,502. (Source: Census Bureau, Household Income for States: 2010 and 2011, September 2012)
  • Military health costs: contract obligations for health care firms more than tripled between 2001 and 2011: in 2001, it spent $2.3 billion on contracts to health care service providers vs. $9.5 billion in 2011. (Source: Tricare Management Agency, Department of Defense)
  • Hospital readmissions: 2 million Medicare enrollees are readmitted to hospitals within 30 days at a cost of $17.5 billion; 19 percent of discharges. (Source: CMS)
  • Medical training: 31 percent of 348 general surgery residents in six California medical schools required additional studies or attendance at conferences or had to repeat a clinical year; another 15 percent of the residents in the study cohort were lost to attrition. (Source: Archives of Surgery, General Surgery Resident Remediation and Attrition: A Multi-institutional Study, September 2012)
  • Hospital RAC audits: RACTrac survey shows that claims denials from Recovery Audit Contractors (RAC) increased by 21 percent compared with the first quarter of 2012. (Source: American Hospital Association September 18, 2012)
  • Consumer-driven health plans (CDHPs): 58 percent of employers offered CDHPs in 2011—the second most popular health benefits option for the first time. (Source: Aon Hewitt, “2012 Health Care Survey: Better Health. Bette Results,” September 2012).
  • Forecast for 2013 economy: consumer spending will increase 3.5 percent and the economy will grow at 2.5-3.0 percent. (Source: Moody’s Analytics)
  • 2011 federal program costs: Social Security ($725 billion); Medicare ($483.6 billion); Medicaid ($275 billion); veterans’ medical care ($50.1 billion); food and nutrition assistance ($103 billion); federal employees’ retirement and insurance ($181.4 billion); and unemployment ($119 billion). (Source: Congressional Budget Office)
  • Voter turnout: 61.6 percent in 2008, 60.1 percent in 2004, and 54.2 percent in 2000; range from 77.8 percent in Minnesota to 48.8 percent Hawaii. Education, household income predictive: 51.9 percent turnout for household income of less than $20,000 vs. 79.8 percent for households at $100,000 or more. (Source: George Mason University’s United States Election Project)
  • Hospital quality and safety: 620 (18 percent) of The Joint Commission recognized hospitals achieved top performance status—up 53 percent from 2011. Across 45 accountability measures, including pneumonia care, heart-failure care, and inpatient psychiatric services, the hospitals provided an evidence-based practice 95 times out of 100 opportunities. Of the top performers, 244 hospitals achieved this rating for the second year in a row. (Source: The Joint Commission, “The Joint Commission’s Annual Report on Quality and Safety,” September 2012)
  • Uninsured: 48.6 million in 2011, or 15.7 percent of U.S. population vs. 49.9 million (16.3 percent) in 2010. (Source: Census Bureau September 19, 2012)
  • Obesity: 36 percent of adult population (2010) projected to increase to 50 percent in 2030; highest rate in Mississippi (37 percent) and lowest in Colorado (21 percent). Estimates of costs range from $147-210 billion per year. (Source: CDC September 19, 2012; National Heart Forum)
  • Federal tax returns: Number of tax returns not eligible for federal income taxes: 39.9 percent (2007), 50.8 percent (2008), 50.8 percent (2009), 49.5 percent (2010), 46.4 percent (2011). Breakdown of the 46.4 percent: 28.3 percent pay payroll taxes but qualify for deductions that preclude a federal tax liability, 10.3 percent are elderly and covered under Social Security, 6.9 percent are non-elderly with income under $20,000, and “other” are less than 1 percent. (Source: Tax Policy Center)
  • Suicides in the military: 260 in 2011 to date vs. 160 in 2001—increases annually. (Source: U.S. Department of Defense)
National health reform: What now?

National health reform: What now?

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