Health Care Reform Memo: May 31, 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
Tuesday, Democrat Kathy Hochul defeated Republican Jane Corwin and Independent Jack Davis for the 26th District of New York seat in Congress. The focus of the winning campaign was the GOP-backed proposal to change Medicare to a defined contribution voucher program espoused by Representative Paul Ryan (R-WI) and House Republican leaders. Pundits called the race a referendum on Medicare reform, arguably the hot topic circulating as fiscal year (FY) 2012 budgets are debated in Congress these days.
I am a numbers guy. The Medicare numbers scare me: there are more enrollees and fewer taxpayers to pay their bills. And with annual Gross Domestic Product (GDP) growth at three percent and health costs increasing at six percent, the math doesn’t add up:
|Enrollment (number and percent of population)||19 million1 (9 percent)||49 million (16 percent)2|
|Life expectancy at birth (males, females)3||71 overall3
66.8 (m), 73.8 (f)
75.7 (m), 81.6 (f)
|Eligibility age for enrollment||65||65|
|Taxpayers paying Medicare withhold tax per Medicare beneficiary4||4.65||4 [Note: projected to reach 2 by 2030]6|
|Medicare spending (as percent of federal budget)||$7.5 billion2; (3.5 percent7 in 1970)||$523 billion2; (15 percent)8|
Total enrollment includes individuals ages 65 and older, dual eligibles (e.g., individuals enrolled in both Medicare and Medicaid), and the disabled.
Individuals under age 65 (including children) may qualify for Medicare if they have a qualifying disability (e.g., end-stage renal disease [ESRD] or Lou Gehrig’s) and meet certain requirements. Medicare coverage for the disabled began in 1973.
1CMS, Medicare Enrollment Reports, “Medicare Enrollment: National Trends 1996-2009”
2CMS, 2011 Trustees Report
4Economic Report of the President
5Government Printing Office, “Economic Report of the President 2007”
6The Actuarial Foundation, “On the Edge of Change: Time for a Medicare Checkup”
7Congressional Budget Office, Budget and Economic Outlook, January 2010
8Office of Management and Budget, Budget for FY 2011
In November, voters elected legislators in both parties to fix America’s economy and restore jobs. One group—seniors—wanted protection of Medicare and voted for repeal of the Affordable Care Act (ACA). They are 13 percent of the population but 24 percent of the November vote.
So I have come to the reluctant conclusion that Medicare can’t be fixed through the political system. It’s understandable: Medicare is a lightening rod issue. The current funding model for Medicare is unsustainable – more retirees are depending on fewer workers to fund higher costs for retiree health care. Even in the face of the numbers, candidates running for office risk their careers if they chose any combination of traditional potential government solutions – changes in benefits or increases in taxes.
There are things we can do as a society to protect Medicare that make sense—like aggressively managing chronic conditions for adults in their 40s and 50s, fixing medical malpractice, changing incentives from volume to outcomes, leveraging information technologies to better coordinate care and eliminate errors, and implementing new approaches to equipping seniors with tools to manage their own care intelligently and effectively. But it starts with an honest assessment of reality: unless Medicare is changed soon, it will collapse under its own weight.
I study health systems of the world. There are three notable differences between the U.S. and the 30 countries considered the most developed:
- Most developed systems feature mechanisms whereby coverage for tests, surgeries, and diagnostics is reviewed and approved by a central authority that amasses large amounts of clinical data to determine what works best and why. Not a cookbook; rather guidelines for optimal treatment based on outcomes and evidence.
- Most systems place primary care at the front door to facilitate coordination of care and channel referrals for specialty services.
- And most feature a government-regulated insurance industry where citizens have access to basic benefits while encouraging additional coverage through private plans.
We need a fresh discussion about Medicare in the context of its solvency and sustainability. We need to learn from other systems of the world, adapting where appropriate best practices. And we need to put a moratorium on demonization of efforts to change the program.
The vote in New York last week and the current budget debate in Congress need not dissuade thoughtful discussion about the future of Medicare. But the discussion must be an honest debate with input across the country rather than across the aisle. We can afford no less. The numbers are scary.
Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions
CBO, JCT address impact of funding cuts for ACA implementation
In a 14-page letter to Representative Henry Waxman (D-CA) Thursday, the Joint Committee on Taxation (JCT) and Congressional Budget Office (CBO) noted that funding for the implementation of ACA and the Reconciliation Act above what is appropriated in the law will be necessary. CBO and JCT estimated that the Internal Revenue Service (IRS) and the U.S. Department of Health and Human Services (HHS) would each require about $5 to $10 billion over ten years to implement the law. Cuts to these appropriations “would significantly alter the effects of many provisions of the legislation, including changes to Medicare; the establishment of health insurance exchanges, tax credits, and cost-sharing subsidies designed to increase the number of Americans with health insurance; changes to Medicaid; and other provisions that affect federal revenues. Among other consequences, CBO and JCT expect that such a ban would reduce the number of people with health insurance coverage compared with what would occur if the health care laws are fully implemented.”
Trade groups weigh in on ACO rules: Pioneer ACO more attractive than shared savings models proposed
The accountable care organizations (ACO) rule published March 31 has drawn comments from key industry groups:
- The Academy Advisors: Tuesday, its 17 health system CEOs sent a letter to the Centers for Medicare & Medicaid Services (CMS) Administrator Don Berwick recommending five changes to the rule to simplify and lower the costs of participation in the ACA Section 3022 Shared Savings Program.
- College of Healthcare Information Management Executives (CHIME): in its May 10 letter, CHIME urged CMS to disallow Medicare enrollee opt-out for sharing of their data because it would undermine efforts to coordinate care for seniors. In the current rule, an ACO is required to provide a form to enrollees allowing them to opt out.
- American Medical Association (AMA): in its letter to CMS May 26, the primary concerns are the methodology for determining the Primary Service Area (PSA) and enforcement of the anti-trust oversight provisions. It encouraged increasing the safety zone threshold from 30 to 40 percent. It also seeks clarification of financial integration issues involving physicians and hospitals, and assurance that physicians are not at a disadvantage in forming ACOs in communities where hospitals are consolidating physicians: “Physicians should not have to become employed by a hospital or sell their practice to a hospital in order to participate in ACOs or other innovative delivery models.”
- America’s Health Insurance Plans (AHIP): in its letter, AHIP requested the safety zone be decreased from 30 to 20 percent so as to preclude provider consolidation and anti-competitive behaviors. And in its letter, it requested that regulations be created that preclude an ACO from cost shifting operating costs for the ACO to commercial plans.
But reactions to the Pioneer ACO are more positive to date: announced May 16, Pioneer ACOs allow prospective assignment of Medicare enrollees to the ACO, partial capitation and bigger shared savings bonuses than the two-sided ACO model, and do not carry a downside risk associated with cost benchmarks. Provider organizations with more experience in risk-based contracting might be attracted to the Pioneer ACO model which has a minimum savings rate of one percent (vs. 2 to 3.9 percent for ACOs) and upside of between 50 and 75 percent of savings (vs. 50 to 60 percent for ACOs).
Note: a clinically integrated provider group may not participate in the Center for Medicare and Medicaid Innovation (Innovation Center) programs if it participates in either the Section 3022 ACOs or the Pioneer ACO pilots. The deadlines for comments on rules are June 6 for the ACO and June 10 for the Pioneer ACO.
GOP Senators ask HHS to withdraw ACO rule
Tuesday, Senators Tom Coburn (R-OK), Jon Kyl (R-AZ), Mike Crapo (R-ID), Mike Enzi (R-WY), John Cornyn (R-TX), Pat Roberts (R-KS), and Richard Burr (R-NC) wrote to HHS Secretary Kathleen Sebelius and CMS Administrator Donald Berwick expressing concern with details of the proposed ACO regulation, citing reservations and criticism from a variety of industry sources. The Senators praised the intent of the ACO program and requested that CMS re-draft the proposed rule with more input from “experienced stakeholders.”
MLR study: excluding agent and broker commissions reduces consumer rebates
Last week, Senator John Rockefeller (D-WV) and the Senate Committee on Commerce, Science, and Transportation released its study on the benefits of the medical loss ratio (MLR) requirements included in ACA (80 percent for individuals / 85 percent for groups). According to the study, had these thresholds been in place in 2010, health plan enrollees would have received $1.951 billion in rebates. Additionally, if agent and broker commissions were excluded from the MLR calculation, consumer rebates would have been reduced by $1.1.billion. The study is based on National Association of Insurance Commissioners (NAIC) financial information. Note: AHIP cautioned the report is based on preliminary data and did “not provide a full accounting of the medical benefits paid out by health plans on behalf of their customer.”
FDA extends menu labeling comment period
Last week, the U.S. Food and Drug Administration (FDA) extended the comment period on the ACA-mandated chain restaurant menu labeling proposed rule by 30 days to July 5, 2011. Per ACA Section 4025, restaurants and chain retail food establishments with 20 or more locations with the same business name and primarily the same menu items must list calorie information in the 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.”
CMS Office of the Actuary analysis: Medicare Trustee Report projections too optimistic, do not account for physician payments accurately
CMS released alternative Medicare projections to help “quantify and underscore the likely understatement of the current-law projections show in the 2011 Trustees Report.” The actuaries state that physician payment reductions required under current law (e.g., ACA market basket reductions) are “implausible” and that productivity adjustments will be unsustainable in the long run. The Trustee Report assumed physician payments would drop 3.7 percent in 2012 vs. 2011, whereas the actuaries estimate physician payments will increase from $220.3 billion in 2011 to $248.2 billion—an 8 percent increase. It encouraged Congress to consider changes to the way physician payments are updated annually and phasing out of productivity adjustments.
|Total Medicare expenditures as a percentage of GDP|
|Calendar Year||Current Law||Alternative Scenario|
|2009||3.54 percent||3.54 percent|
|2010||3.58 percent||3.58 percent|
|2020||3.99 percent||4.31 percent|
|2030||5.16 percent||5.88 percent|
|2040||5.77 percent||7.14 percent|
|2050||5.94 percent||7.96 percent|
|2060||6.09 percent||8.79 percent|
|2070||6.22 percent||9.65 percent|
|2080||6.25 percent||10.36 percent|
Source: CMS, Office of the Actuary, May 23, 2011
FY 2012 budget votes in Senate
Wednesday, the Senate voted 57-40 against the House Budget plan (with five GOP Senators joining the Democratic majority) and then 97-0 to reject the White House proposed FY 2012 $3.7 trillion budget.
Note: these votes reflect the intent of the Senate to pursue alternate approaches to Medicare reforms and deficit reduction previously proposed by Representative Paul Ryan (R-WI) and the White House. The Ryan-sponsored House Budget proposed a $6.2 trillion cut in federal spending, changes to Medicaid featuring block grants to states, and a voucher program for future Medicare enrollees under age 55 to purchase coverage in the private health insurance market.
Regulatory overhaul proposed by OMB
Thursday, the Office of Management and Budget (OMB) released its plan to streamline government regulatory operations’ existing regulations including these suggested changes in HHS:
- Elimination of conflicting requirements between Medicaid and Medicare in CMS that create barriers to high quality, seamless, and cost-effective care for individuals receiving care from both programs (e.g., dual eligibles).
- Updating the methods and criteria to identify Health Professional Shortage Areas and Medically Underserved Areas established in 1978.
- Incorporating information technology into regulations to increase flexibility for states and businesses including use of paperless systems for reporting adverse events and increased use of telemedicine.
House panel recommends FDA 2012 budget cut
Tuesday, the House Appropriations Subcommittee on Agriculture, Rural Development, and Food and Drug Administration, and Related Agencies approved an 11 percent cut to the FDA’s FY 2012 budget by $285 million to $3.7 billion. The budget would provide about $800 million to FDA’s food center, $1 billion to the drug center, $328 million to the biologics center, and $321 million to the device center. The full appropriations committee will consider the proposed budget next week.
House Appropriations Committee trims $1.3 billion from President’s budget
Also Tuesday, the House Appropriations Committee approved a Military Construction/Veteran’s Affairs (VA) budget bill for FY 2012 providing $60.2 billion in discretionary funding for the VA, a $1.4 billion increase from FY 2011 and $476 million less than President Obama’s budget request. The bill also provides $69.5 billion in mandatory funding, a $5.2 billion increase from FY 2011, and matches President Obama’s request. The bill would meet President Obama’s request for the Veterans Benefits Administration and the Veterans Health Administration (VHA) by providing an additional $52.5 billion in advance for FY 2013 for medical services and facilities.
CBO: malpractice reform reduces the federal deficit by about $57 billion over ten years
Monday, the CBO released its cost estimate of the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011 (H.R. 5), which would limit medical malpractice litigation in state and federal courts by capping monetary awards and attorney fees, modifying the statute of limitations and the “collateral source” rule, and eliminating joint and several liability. CBO and the staff of the JCT estimates that H.R. 5 would increase federal revenues by almost $10 billion over the decade (2012-2021) and reduce the federal deficit by almost $57 billion over ten years.
Note: medical malpractice awards fell 11.9 percent from 2000 to 2010, while health spending increased 90 percent. Malpractice payments were 0.13 percent of national health costs in 2010, the lowest recorded percentage. (Source: Public Citizen)
Energy and Commerce Subcommittee discusses purchasing insurance across state lines
Wednesday, the House Energy and Commerce Subcommittee on Health held a hearing on the Health Care Choice Act of 2011 (H.R. 371), which would allow the purchase of health insurance across state lines. The hearing featured testimony from Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight (CCIIO) at CMS and from health financing experts, the American Cancer Society and the American Legislative Exchange Council (ALEC). A summary of the arguments is below.
“States have imposed over 2,100 benefit mandates on health coverage. Estimates show that these requirements increase premiums anywhere from 10 to 50 percent.” – Representative Fred Upton (R-MI)
“The best scenario to reduce the uninsured, numerically, is competition among all 50 states where one or more states emerge as dominant players. This scenario would yield a reduction in the uninsured by 8.1 million people.” – Steve Parente, Ph.D., health financing expert, University of Minnesota, who recently completed a peer-reviewed study on purchasing insurance across state lines that will be published in the Journal of Risk and Insurance
“Selling insurance across State lines has long been proposed as an option to increase competition and choices in health insurance, but there are serious pitfalls with this approach when it is not coupled with adequate consumer protections. The Affordable Care Act allows health care to be sold across State lines when both States agree and consumer protections are maintained. Without the consumer protections included in the Affordable Care Act, we run the risk of creating an environment where there is a `race to the bottom’ in which insurers have an incentive to sell plans from the State with fewest consumer protections.” – Steve Larsen, Director of CCIIO
“It allows them [insurers] to choose to operate under the laws of states with weaker consumer protection and risk-pooling standards. By doing so, plans will be allowed to cherry-pick the best risk, leaving older, sicker individuals isolated in pools without healthier individuals to offset their medical costs. The result will be insurance markets in disarray, without any real pooling of risk.” – Representative Frank Pallone, (D-NJ)
Note: the Deloitte Center for Health Solutions’ research staff has been unable to locate authoritative studies that quantify savings that might accrue in the aggregate if cross-state insurance was approved. An individual might be able to purchase a cheaper policy across state lines, but the aggregate impact on community health costs might not be lower since those with complex medical problems would be left in the current risk pool and have higher premiums as healthier consumers leave the pool.
Senate legislation to repeal ACA health insurer tax introduced
Monday, Senator Jon Kyl (R-AZ) introduced the Small Business Health Relief Act to repeal ACA’s health insurer tax, employer mandate to provide health coverage, and limits on flexible spending arrangements. The bill is supported by the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB) who, along with several other small business groups, formed a coalition to stop the health insurers’ tax (HIT) – “Stop HIT.” According to the coalition, the tax will cost small businesses $87 billion over ten years and will cost each family about $5,000 in higher premiums over the decade.
House repeals graduate medical education mandatory funding
Wednesday, the House passed H.R. 1216 (234-185) which repeals ACA’s mandatory funding for graduate medical education (GME). ACA Section 5508 establishes a new grant program for primary care residency programs at teaching health centers. It authorizes $50 million for FY 2011 and “such sums as necessary” for FY 2012. ACA also provides up to $230 million in mandatory funding for primary care residents at qualifying teaching health centers between FY 2011 and 2015. The bill would repeal ACA’s funding with $46 million in annual discretionary funding between FY 2012 and 2015. CBO estimates that the bill would save $220 million over ten years.
Constitutional challenge update: judges named in multi-state challenge to ACA
Wednesday, the Court of Appeals for the 11th Circuit in Atlanta, GA announced the judicial panel that will hear the 26-state lawsuit against the ACA on June 8. The panel includes Judge Joel Dubina, nominated by President Bush, and Judges Frank Hull and Stanley Marcus, both appointed by President Clinton.
Thursday, Vermont Governor Peter Shumlin (D) signed into law a bill that will allow the state to establish a single-payer system in 2013, with enrollment beginning in 2014. Shumlin must receive federal approval before beginning implementation. Vermont would be the first state to establish a single-payer system.
Note: per ACA Section 1332, states may apply for a waiver from specified ACA requirements beginning in 2017 so long as they demonstrate that they will cover at least as many residents with coverage that is at least as comprehensive and affordable as prescribed under federal law.
Hawaii’s Medical Service Association, a non-profit health plan that covers 700,000 of the state’s 1.3 million population, announced a value-based purchasing initiative (Advanced Hospital Care) wherein it will link 15 percent of hospital payments to performance on quality and efficiency.
Health exchanges: update
To date, governors in California, Washington, North Dakota, West Virginia, and Maryland have signed legislation that establish state exchanges, which must be operational in 2014 and self-sustaining by 2015, as mandated by the ACA Section 1311.
Monday, CMS announced funding for health exchange start-up costs: Indiana received $6.8 million, Washington State $23 million, and Rhode Island $5.2 million.
Management of effort waivers: update
A House Energy and Commerce Subcommittee passed the State Flexibility Act (H.R. 1683) that repeals the management of effort (MOE) requirement for Medicaid enrollment in ACA. The CBO estimates repealing MOE would cut Medicaid and Children’s Health Insurance Program (CHIP) costs by $10.3 billion over a decade, but increase spending on state health exchanges by $6.6 billion.
Note: the National Conference of State Legislatures is urging repeal of MOE.
MLR waivers: update
CCIIO announced waivers for Nevada and New Hampshire: for individual plans, Nevada was granted a 75 percent MLR waiver for 2011, New Hampshire a 70 percent one-year waiver. Maine previously received a waiver, and requests are pending from 7 other states and Guam: Kentucky, Florida, Georgia, North Dakota, Iowa, and Kansas. Also, Indiana Insurance Commissioner Stephen Roberston is pursuing a four-year waiver for consumer-directed health plans starting at 65 percent increasing to 80 percent in 2015.
Prescription drug fulfillment costs formula changed for state Medicaid programs
Monday, CMS’ Medicaid Pharmacy Division notified state Medicaid directors that it will not accept average acquisition costs (AAC) measurement to determine prescription drug costs. States must now use dispensing costs in their reporting.
Note: most states use average wholesale price (AWP) to set product reimbursement rates paid to pharmacists for drugs. Use of the AAC would cut rates paid to pharmacists, whose trade group, the National Community Pharmacists Association (NCPA), favors an alternative, a Maximum Allowable Cost (MAC) instead of AAC.
Governors asked for Medicaid modernization ideas
Monday, Ranking Senate Finance member Orrin Hatch (R-UT) and House Energy and Commerce Chairman Fred Upton (R-MI) sent a letter to governors requesting ideas on ways to modernize Medicaid noting “West Virginia’s personal responsibility emphasis, New York’s efforts to better coordinate care for dual eligible beneficiaries, and Florida’s patient choice improvements” were examples of changes that should be considered.
Health Information Technology
CMS announces $75 million in Medicare EHR Incentive Payments
Thursday, CMS announced that it issued the first round of payments totaling $75 million to providers who signed up in the first two weeks of the Medicare Electronic Health Record (EHR) program on May 19, 2011. Medicaid EHR Incentive Programs are being implemented on state by state basis. Since January 2011, 15 states have initiated their Medicaid EHR Incentive Programs and over $83 million in incentive payments have been provided to qualified Medicaid providers.
ONC provides exam to help identify HIT experts
The Office of the National Coordinator for Health Information Technology (ONC) opened up six Health Information Technology (HIT) Professional Examinations to identify skilled health IT professionals. Employers who implement, support, and use health IT can use the exams to identify additional training for existing employees and assess employer needs. Academic institutions can also use the exams to evaluate and improve their health IT programs. Six roles are targeted for training: Clinician/Practitioner Consultant, Implementation Manager, Implementation Support Specialist, Practice Workflow & Information Management Redesign Specialist, Technical/Software Support Staff, and Trainer. Vouchers to take an exam free of charge are available for 27,500 U.S. health IT workers; others will pay $299.
Behavioral health, federally qualified health centers lobby for inclusion in HITECH funding
In the Health Information Technology for Economic and Clinical Health (HITECH) Act, notable exclusions from the $27 billion funding for meaningful use (MU) were clinical psychologists, clinical social workers, psychiatric hospitals, substance abuse treatment centers, and mental health treatment centers. In March, 2011, they formed the Behavioral Health IT Coalition and introduced the Behavioral Health Information Technology Act sponsored by Senators Sheldon Whitehouse (D-RI) and Susan Collins (R-ME).
A separate bill, the Fix HIT Act sponsored by Senator Debbie Stabenow (D-MI) and Representative Adam Kinzinger (R-IL) would amend HITECH to qualify federally qualified health centers for incentive payments paid through Medicaid.
Other excluded groups pursuing funding are the American Academy of Physician Assistants (AAPA), the National Rural Health Association (NRHA), Home Care Technology Association of America (HCTAA), and groups representing rescue squads.
HITECH repeal efforts
Two bills have been introduced to repeal funding for HITECH: Representative Jim Jordan (R-OH) introduced the Spending Reduction Act, which proposes — among other cuts — eliminating $45 billion in unspent stimulus dollars, including the funds for HITECH. In February, Representative Thaddeus McCotter (R-MI) introduced the Preserving Patients’ Choices Act, which specifically proposes repealing health care-related stimulus appropriations. The two bills have been referred to committee.
Note: the fact that little cash has been awarded could encourage a rescinding of funds. Starting in January, 13 states have now launched the program in which incentive payments through Medicaid are disbursed. Though CMS says it is pleased with the participation so far, only eight states have actually made Medicaid payouts — totaling just $83 million. Payments through Medicare began just this month, as had been scheduled in HITECH.
CMS proposes changes to the Medicare eRx Incentive Program
Thursday, CMS released a proposed rule changing the Medicare Electronic Prescribing (eRx) Incentive Program for 2012. Eligible providers (EPs) for the program who are successful electronic prescribers could receive a one percent incentive payment for program years 2011 and 2012, and 0.5 percent for 2013. The Medicare Improvements for Patients and Providers Act (MIPPA) requires physician payment reductions for EPs who are not successful electronic prescribers, beginning in 2012 to include: one percent for 2012; 1.5 percent for 2013; and two percent for 2014. AMA responded supporting the changes.
New accounting disclosure requirements align HIPAA with HITECH
Friday, HHS issued a notice of its intent to change accounting requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) that apply to disclosing information shared about a consumer by “covered entities” including health providers, health plans, and health care clearing houses. The Privacy Rule requires “the release, transfer, provision of access to, or divulging in any other manner” to individuals dating back for six years on request of an individual. Friday’s notice aligns HIPAA with HITECH: “Pursuant to both the HITECH Act and its more general authority under HIPAA, the Department proposes to expand the accounting provision to provide individuals with the right to receive an access report indicating who has accessed electronic protected health information in a designated record set. Under its more general authority under HIPAA, the Department also proposes changes to the existing accounting requirements to improve their workability and effectiveness.”
CBO: banning direct-to-consumer advertising would decrease prescriptions filled
Thursday, CBO released a study analyzing the impact of a moratorium on direct-to-consumer (DTC) advertising of prescription drugs advertising during the first two years following a drug’s approval by the FDA. CBO used data documenting DTC advertising and other promotional activities used by pharmaceutical producers and academic analyses of how advertising has affected the market for drugs. According to the brief, a moratorium could have the following effects:
- Drug manufacturers would probably expand their marketing to physicians to substitute for at least some of the banned advertising to consumers.
- The number of prescriptions filled would probably decrease for some drugs. For other drugs, the number of prescriptions might be little changed, owing both to the likely substitution of other types of promotions and to the various other factors that influence a drug’s reach in the prescription drug market.
- Any change in prescription drug prices would depend on changes in demand; to the extent that the effects on demand are likely to be limited, so too are the effects on prices.
Note: in 2006, the industry spent $4.8 billion for DTC for prescription drugs. (Source: TNS Media Intelligence analysis).
FDA approves drug for hospital-acquired infection, first in 25 years
Friday, the FDA approved Optimer Pharmaceuticals’ Dificid (also known as fidaxomicin), the first new medicine in 25 years approved to treat diarrhea caused by Clostridium difficile, a major bacterial infection that along with Methicillin-resistant Staphylococcus aureus (MRSA) are the leading causes of hospital-acquired infections (HAIs). Up to one percent of hospitalized patients must have their colons removed and about 5 percent die. Dificid is the first approved product for 13-year-old San Diego-based Optimer, which expects the course of treatment to cost $1,000.
“Any candidate who doesn’t deal with Medicare is going to have to explain how they let the country go bankrupt, and any candidate who does deal with Medicare is going to have to explain why it saves Medicare.”
– Senator Lamar Alexander (R-TN), May 25, 2011, Politico
“Medicare, Social Security, and Medicaid are the drivers of the debt. It was once said, when asked why Willie Sutton robbed banks, that that's where the money was. You simply cannot get a comprehensive solution or a pathway to a solution on our debt and deficit problem and leave entitlements aside.”
– Senate Minority Leader Mitch McConnell (R-KY) statement May 27, 2011 regarding proposed expansion of federal debt ceiling by $2.406 trillion per House Bill 1954
“Republicans are holding the United States' credit hostage to ram through their plan to end Medicare. They are now saying they won't accept any plan to reduce the deficit unless it also cuts Medicare. Voters have resoundingly rejected this ideological agenda. Republicans should drop it and move on.”
– Senate Majority Leader Harry Reid (D-NV), statement Friday, May 27 regarding debt ceiling expansion
“If we can start with steps on Medicare physician payment, other reforms that also support more flexibility in getting the best results for patients without unnecessary costs, including further payment reforms as well as reforms in benefits and how beneficiaries choose care, will be that much easier to achieve… Practicing physicians — and the professional associations and health professionals who work with them — know best where there are opportunities to improve care and to avoid unnecessary costs. Physicians can and should lead on healthcare reform, and Medicare needs to provide them a better opportunity to do so than having to fight for short-term `fixes.’”
– Mark B. McClellan, Engelberg Center for Health Care Reform, May 20, 2011
“Public programs must be accountable to elected officials. However, to carry out its job effectively, Congress should mobilize the expertise of professionals who can assemble evidence on how payment incentives affect care delivery and suggest sensible improvements. The IPAB [Independent Payment Advisory Board] is constituted to make such professional expertise available to the Congress. Giving a body of experts the capacity to propose ways to slow spending growth will not diminish the power of elected officials, because Congress may approve, disapprove, or replace the IPAB's proposals with alternatives that achieve the same objectives. Having the IPAB, however, will force debate on difficult choices that Congress has not thus far addressed…Eliminating this board would severely hamper our ability to learn from experience or to act on the lessons of experiments the Affordable Care Act seeks to promote.”
– May 20 letter to Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), House Speaker John A. Boehner (R-OH), and House Minority Leader Nancy Pelosi (D-CA) signed by 100 health policy experts and academics in defense of the IPAB created under Section 3403 of ACA with operations starting 2014
Note: in years when the program's costs exceed the GDP growth by one percent or more, the 15-member Board appointed by the President will set Medicare reimbursement policy that will become law unless Congress intervenes
“Republicans have been passing such reform quarter-measures for 20 years, with little to show for it. Medicare Advantage already offers private insurance options to one in four seniors, but this camel's nose hasn't led to a reconstruction of the larger Medicare tent. The same is true of health savings accounts in the 2003 prescription drug benefit, or the current Republican talking point that medical malpractice reform will somehow solve every problem in health care.
All of these are important but don't reach Medicare's core problem of government-controlled prices and regulation, and in any case Democrats always gut the reforms once they return to power. In retrospect, this play-it-safe strategy paved the way for ObamaCare.”
– The Wall Street Journal, Editorial: “Republicans and Mediscare,” May 23, 2011
“Last year, Medicare expenditures reached $523 billion, but the income was only $486 billion -- leaving a $37 billion deficit in just one year. And with 10,000 new individuals becoming eligible each day, it's only going to get worse.”
– Representative Dave Camp (R-MI), Chairman House Energy and Commerce, May 24, 2011
“The projections shown in the 2011 Medicare Trustees Report for current law should not be interpreted as our best expectation of actual Medicare operations in the future, but rather as illustrations of the very favorable impact of permanently slower growth in healthcare costs, if slower growth can be achieved.”
– CMS Office of the Actuary, May 25, 2011
“Doctors were once overwhelmingly male and usually owned their own practices. They generally favored lower taxes and regularly fought lawyers to restrict patient lawsuits. Ronald Reagan came to national political prominence in part by railing against `socialized medicine’ on doctors’ behalf. But doctors are changing. They are abandoning their own practices and taking salaried jobs in hospitals, particularly in the North, but increasingly in the South as well. Half of all younger doctors are women, and that share is likely to grow.
There are no national surveys that track doctors’ political leanings, but as more doctors move from business owner to shift worker, their historic alliance with the Republican Party is weakening from Maine as well as South Dakota, Arizona and Oregon, according to doctors’ advocates in those and other states. That change could have a profound effect on the nation’s health care debate. Indeed, after opposing almost every major health overhaul proposal for nearly a century, the American Medical Association supported President Obama’s legislation last year because the new law would provide health insurance to the vast majority of the nation’s uninsured, improve competition and choice in insurance, and promote prevention and wellness, the group said.”
– “As Physicians’ Jobs Change, So Do Their Politics,” The New York Times, May 30, 2011
- Eighty-three percent of U.S. adults want to discuss mental health issues with their child’s primary care physician; one in three families wants the doctor to initiate the conversation, and 32 percent prefer the discussion to take place in person without the child present. However, 42 percent do not think physicians give them enough time to answer their questions and half said they didn't feel their child’s primary care doctor was knowledgeable about mental illness. (Source: National Alliance on Mental Illness [NAMI] survey of 554 parents May 2011)
- Maternal care accounted for five percent of U.S. hospital costs in 2008, or $17.4 billion. (Source: Agency for Healthcare Research and Quality [AHRQ])
- Fifty-six percent of newly-hired physicians received signing bonuses in 2010, and 12 percent received loan forgiveness packages. (Source: Medical Group Management Association [MGMA])
- Through April 30, $166 million has been distributed to 270,883 recipients, averaging $612.80 per recipient. (Source: CMS)
Note: Section 3301 of ACA provides a 50 percent discount on all brand-name prescription drugs purchased in the Medicare coverage gap after January 1, 2011. Section 1101 of the Health Care and Education Reconciliation Act (HCERA) provided a $250 rebate to all Medicare Part D beneficiaries who entered the “donut hole” in 2010.
- Fifty-four percent of Americans think the budget can be balanced without altering Medicare (44 percent think Medicare cuts are necessary); 59 percent think it is possible without cutting Social Security (39 percent think cuts are necessary). (Source: Associated Press / GfK)
- Two to four percent of adults have a gambling problem. (Source: Journal of Gambling Studies)
- When asked about the overall state-federal balance in ACA, 41 percent of industry leaders said the federal government should have more authority and 29 percent said the law has struck an appropriate balance between states’ and the federal government’s roles and 25 percent thought the states should have more authority. Sixty-one percent support or strongly support the creation of a federal health insurance exchange, in addition to the state exchanges that will become operable in 2014. (Source: Commonwealth Fund Survey of Policymakers May 2011)
- The number of home births, 28,357 in 2008, in the U.S. jumped 20 percent in recent years to .67 percent of live births—the highest since 1990. (Source: U.S. Centers for Disease Control and Prevention [CDC] analysis of birth certificates for 4 million live births registered in the U.S. in 2008)
- Sixty percent of U.S. adults say they would prefer to keep Medicaid as a joint federal-state program, 35 percent would rather change the program so that the federal government gives states a fixed amount of money (block grants) and each state decides who to cover and what services to pay for. Thirteen percent support major reductions in Medicaid spending as part of Congress’ efforts to reduce the deficit, 30 percent support minor reductions, and 53 percent support no reductions at all. (Source: May Kaiser Health Tracking Poll)
- 1,372 companies, labor unions, and states that have applied for and been granted waivers from an early provision of the health overhaul law that says health policies must provide at least $750,000 a year in insurance protection. (Source: HHS)
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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