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Health Care Reform Memo: December 3, 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: the fiscal cliff and health care: the slowing of health spending in the U.S.

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

The fiscal cliff is the focus of a flurry of activity in DC these days, and as a result, lots of numbers are thrown around in support of varied views about the severity, urgency, and appropriate formula for avoiding a second downturn or restoring the economy’s growth. Whether or not that includes going over the cliff December 31 or not is a related issue: some are betting we’ll avoid it by extending, at least partially, a few year-end tax cuts and emergency unemployment benefits, and expanding the government debt ceiling, leaving long-term issues—entitlement reforms, changes in individual and capital gains taxes, short term stimulus efforts, and others—for the 113th Congress to tackle next year.

I follow the studies and policy papers coming out of government and trade groups fairly closely and have concluded one thing: the whole thing is complicated but at the end of the day, government spending on health care will probably be less than it has been in previous years. We can’t fix the economy short or long term without spending less per capita on health care in the future than we have in the past. It’s a necessary part of an overall solution regardless of the cliff, and regardless of how much additional revenue is in a formula for economic recovery. Whether the ratio of federal government spending cuts to new revenues is 3:1 a la Simpson Bowles, or 2.5:1 as in the White House proposal floated last week by Treasury Secretary Geithner, it’s clear spending cuts including health care will be on the table. How fast, how much, and where will be the key questions.

As the week ended, all parties seemed to be at the table trying to find a middle ground for avoidance of the cliff. The magic number for spending cuts appears to be $4 trillion over ten years; whether $109 billion in sequestration cuts is included next year or delayed is among the deliberations that party leaders and their advisors will consider before taking their recommendations to the lame duck session for approval.

Here’s what’s known for sure: the federal debt is $15.96 trillion (if future obligations to Social Security—$20.5 trillion, federal employee retiree benefits—$23.5 trillion, and Medicare obligations—$42.8 trillion, are not counted per the Medicare Trustees Report and U.S. Office of the Actuary). The 2012 federal deficit is $1.1 trillion—the fifth year of deficits exceeding $1 trillion.

And federal spending on health care is a big deal: 25 percent of overall federal spending when Medicare, Medicaid, military health, federal employee health benefits, and other federal health programs like the Indian Health Service are factored in.

It’s a safe bet that health spending will slow in coming years because it’s simply necessary, but slower growth does not mean the demise of the industry nor stifling of its innovation. The fact is we will continue to be a growth industry: increased demand for primary and specialized services driven by aging and economics, accelerated clinical innovation in the diagnosis and treatment of medical problems using advanced analytic techniques and a new breed of smart medical devices, and consumer demand for value through individual insurance programs will drive growth. Even if health care spending slows from 5.7 percent annual growth to less than 4 percent, it will still be a job creator industry wherein our technologies and workflows contribute to our national interests and economic viability at home and abroad.

But the “new normal” will be unsettling to many in our industry who prefer the “old normal”. There will be winners and losers in every sector, and for sure there will be new competitors who see our chaos as their opportunity. It’s clear economic realities will dominate our industry dialogue with policy-makers on all sides, but at the end of the day, our industry must own solutions to constrained resources and increased pressure from employers, consumers, and policymakers to provide more value. To be part of a federal spending solution, we need to lead on answers to these questions:

Fraud: how do we rid our system of fraud, replacing pay and chase methods with aggressive weeding out of the bad actors that harm the system and its resources?

Unnecessary care: how do we identify and incorporate evidence-based practices—both traditional western medicine and alternative health—in diagnosis and treatments, and align payments with only care that’s necessary?

Technology-enabled consumer-directed care: how do we leverage electronic health records to engage consumers in active decision-making, equipping them to make thoughtful decisions about their health and associated costs?

Integrated health and financing: how do we reduce fragmentation and inefficiencies in the complicated system we operate to simplify access, coordination, and financing of health services in a cohesive way? And how do we offer and coordinate services across a continuum from cradle to grave, from retail, to home, to online, to specialized facilities and providers? And how do we demonstrate value to customers—whether selling directly to consumers or as part of the supply chain—and get paid for value created and measured?

Getting to affordable care and reducing costs for the goods and services we sell demands a radical re-thinking in our industry that’s void of protectionist perspectives that guard jealously each sector’s view that others are to blame for inefficiencies and high cost.

Our system has had a great run, but the reality is this: it’s not sustainable. Cost is the issue, and our costs matter to policymakers grappling with the fiscal cliff and to Joe Six Pack who’s struggling to make ends meet and hoping a medical crisis won’t wipe out his lifetime savings.

Paul Keckely

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

Implementation update

CMS requests input on quality measurements for health plans in health exchanges

Last week, the Centers for Medicare & Medicaid Services (CMS) issued a request for comments about current quality rating systems, quality improvement, and purchasing strategies that promote care redesign and patient safety, as well as effective methodologies to measure health plan value. It also requested feedback about how to align current quality improvement requirements (i.e., the National Strategy) with future quality reporting and display requirements for Quality Health Plans (QHPs) effective in 2016.

Background: Section 1311 of the Affordable Care Act (ACA) requires QHP issuers to focus on quality improvement and patient safety through contracting requirements and data reporting, and Section 10329 of the ACA required the Secretary of the U.S. Department of Health and Human Services (HHS) Kathleen Sebelius to develop a method for determining the value of a health plan. In May 2012, HHS released the General Guidance on federally facilitated exchanges that announced a phased approach to quality reporting and display standards for all health insurance exchanges (HIX) and QHP issuers; new quality reporting standards are effective 2016. Per Section 3011 of the ACA, the National Quality Strategy was implemented last year to promote health care quality improvement at the local, state, and national levels.

My take: this is a big deal! And while government and industry leaders figure out how to measure and report on the quality of health plans in the HIXs, how ‘bout adding this question: how should consumers be engaged in comparing between health plans, doctors, and hospitals based on valid and reliable standardized performance measures is essential to transforming the health system and engaging consumers effectively? There are 700 “top 100” hospitals, 397 health plan operators producing report cards about doctors and hospitals, and a plethora of non-government organizations that produce quality, safety, efficiency, and patient experience reports. It’s complicated already, and the ACA appropriately requires public reporting of specific reporting measures for many of its demonstrations and pilots—value-based purchasing-17 measures, accountable care organizations-33 measures, and so on. Maybe HHS should convene a group of industry leaders, agencies, and consumer analysts to consider how best to structure and report performance metrics to consumers in a way they can understand and use the data most effectively. It is appropriately determined that to make the exchanges more useful, standardization of useful measures is necessary to equip consumers to choose plans. Why not apply to the rest of the system? Our surveys suggest consumers want more transparency from the system, but they don’t understand most of what’s available already.

New proposed rules released for multistate plans, ACA benefit and payment parameters, effective 2014

Friday, the U.S. Office of Personnel Management (OPM) and CMS released proposed rules, one covering the Multi-State Plan Program (MSPP), and another on benefit and payment parameters related to provisions in the ACA, effective January 1, 2014.

The first proposed rule suggests a framework for the MSPP that the federal government will administer in an effort to keep health care premiums in the individual market stable by creating a level playing field for MSPP issuers and non-MSPP issuers.

Specifically, OPM proposes:

  • All federal laws applicable to qualified health plans (QHPs) will also apply to multi-state plans (MSPs) and MSPP issuers, unless specified by OPM at a later date
  • MSPs and MSPP issuers must comply with the “level playing field provision” (Section 1324 of the ACA) and adhere to 13 categories of state laws specified in the ACA, and is seeking comment on all 13 categories, but specifically: appeals, rating, and benefit plan material or information
  • The establishment of a dispute resolution process to resolve potential conflict about the MSPP and state law compliance
  • OPM must conduct its own rate review process, which will allow states to comment and contest decisions made by OPM
  • MSPP issuers must offer a choice of plans on each HIX at different levels of cost-sharing

The deadline for comments is January 4, 2013 for the MSPP.

Background: per ACA Section 1334, OPM must contract with at least two MSPs that offer coverage through HIXs in all geographic regions. The objectives of the MSPP are to provide choice of plans on each HIX, to promote competition, to allow families living in different geographic areas the option to purchase coverage from one issuer, to oversee MSP issuers, and to create a level playing field between QHPs and MSPs. Open enrollment for MSPs for coverage offered on HIXs will begin in October 2013 for coverage beginning January 1, 2014.

The 373-page proposed rule from CMS suggests benefit and payment parameters for the ACA’s premiums stabilization programs (i.e., the three-year transitional reinsurance program, risk corridors, and risk adjustment), which are meant to reduce incentives for health plans to avoid high-cost patients by spreading risk among health plans. The rule lays out how risk adjustment data should be collected, but says states can propose alternative methodologies.

The rule also lays out how CMS will administer the federally facilitated exchange program in states; proposing a user fee for federally facilitated exchanges to help finance the program, capping fees at 3.5 percent in 2014 to align with state-based exchanges.

For QHPs, it proposes that all issuers notify the HIX through the “enrollment acknowledgement process” if a premium received for the premium tax credit on behalf of an individual was reduced. HHS is also proposing to “eliminate the community benefit expenditure in the medical loss ratio (MLR) calculation for issuers exempt from Federal income tax.”

The deadline for comments on the proposed rule is December 31, 2012.

Background: premium stabilization programs (i.e., transitional reinsurance, risk corridors, and risk adjustment) were enacted by the ACA (Sections 1341, 1342, and 1343). Per section 1401 of the ACA, the Internal Revenue Code was amended to allow for “advance, refundable premium tax credit to help individuals and families afford health insurance coverage.” The HIX must determine at the time of enrollment whether an individual is eligible for an advance tax credit, which would be paid on a monthly basis to the QHP providing coverage.

CBO analysis: increased access to medications via Part D reduces utilization and costs

The Congressional Budget Office (CBO) updated its estimate of the cost of closing the Medicare Part D donut hole, projecting it will cost $51 billion vs. the $86 billion previously estimated. Notably, the improvement is based on a CBO analysis showing a link between changes in prescription drug use, and changes in the utilization of medical services: a 1 percent increase in the number of prescriptions filled by beneficiaries would result in Medicare spending on medical services—doctors, hospitals, etc.—to decrease by 0.2 percent.

Background: prior to ACA implementation, beneficiaries paid 25 percent of the cost of prescription drugs until the total cost of drugs reached $2,800. Once this limit was reached, beneficiaries were in the coverage gap (donut hole) where they were responsible for 100 percent of the cost of prescription drugs until the total cost reached the yearly out-of-pocket spending limit of $4,550. Per Section 3301 of the ACA, drug manufacturers participating in the Medicare Part D program are required to provide beneficiaries a 50 percent discount on the plan negotiated price for brand-name drugs at the point-of-sale when they reach the coverage gap or “donut hole.” Beginning in 2013, Medicare will pay 2.5 percent of the plan-negotiated price for brand-name drugs. Medicare will increase its subsidy to 25 percent for brand-name drugs by 2020, while manufacturers will continue to pay the 50 percent discount through 2020 when the coverage gap will be closed.

Update: court challenges to religious freedom arguments against ACA

Last week, the Eighth Circuit Court of Appeals overturned a lower court ruling that denied a mining company’s request to be exempt from covering contraception with no cost sharing for employees. The mining company requested a preliminary injunction, and was granted a stay pending appeal.

Related: the U.S. Supreme Court ordered the Fourth Circuit Court of Appeals to hear Liberty University’s complaint that the individual and employer mandates violate religious freedom, making the ACA unconstitutional.

Background: in November 2010 the Fourth Circuit District Court dismissed Liberty University’s case challenging the constitutionality of the individual mandate that requires individuals to purchase health insurance. In January 2011, the Fourth Circuit Court of Appeals vacated the district court ruling and dismissed the case stating that the individual mandate penalty was effectively a tax; therefore, the Anti-Injunction Act (AIA) prohibits lawsuits seeking to block collection of a tax prior to its effective date of January 2014. The Supreme Court later ruled in June 2012 that the AIA does not apply to the mandate and the Supreme Court solicited feedback from the U.S. Department of Justice (DOJ) on whether the Court should hear Liberty University’s challenge. The DOJ stated that it would not contest a decision by the Court to review the case, but believes Liberty’s claim lacks merit.

Legislative update

ONC sets sights on stage 3 meaningful use

Last week, the Office of the National Coordinator (ONC) for Health Information Technology Policy Committee (HITPC) released guidance about its stage 3 meaningful use (MU) requirements that go in effect in 2016. Comments on the draft will be accepted until January 14, 2013. Specifically, the HITPC seeks feedback about how stage 3 technical standards relate to six areas: improving quality, safety, and reducing health disparities; engaging patients and families; improving care coordination; improving population and public health; information exchange; and overarching meaningful use questions. The report separates stage 3 recommendations from proposed future stage recommendations, and is especially interested in receiving comments on the latter.

In its announcement, HITPC noted: “The stage 3 vision includes a collaborative model of care with shared responsibility and accountability, building upon previous MU objectives. While the committee appreciates and recognizes today’s challenges in setting up data exchanges, it is the committee’s recommendation that stage 3 is the time to begin to transition from a setting-specific focus to a collaborative, patient- and family- centric approach.”

In its stage 3 recommendation, HITPC used the following guiding principles: to be considered for stage 3, an objective should:

  • Support new models of care (e.g., team-based, outcomes-oriented, population management)
  • Address national health priorities (e.g., NQS, Million Hearts)
  • Have broad applicability (since MU is a floor) to provider specialties (e.g., primary care, specialty care) patient health needs and areas of the country
  • Promote advancement – not "topped out" or not already driven by market forces
  • Be achievable – e.g., there are mature standards widely adopted or could be widely adopted by 2016
  • Reflect reasonableness/feasibility of products or organizational capacity
  • Prefer to have standards available if not widely adopted

Notable additions in stage 3 are: the requirement that providers must allow at least 10 percent of their patients the ability to submit patient-generated health information to increase their active engagement in care management decisions, expansion of requirements for care synopsis, setting-specific goals, and instructions for care during the transition, and a new requirement that providers implement 15 clinical decision support interventions, as opposed to the proposed five in the stage 2 proposal.

Related: CMS paid out $692 million in electronic health record (EHR) incentives to hospitals, doctors, and other eligible professionals in October, bringing the total payout to $8.4 billion to date: $2.84 billion to physicians and other professionals and $5.38 billion to hospitals. (Source: CMS)

My take: the 37-page stage 3 guidance last week makes a huge step toward coordination of care with particular focus on error avoidance, i.e., drug-drug interaction and improved sharing of information. Though meaningful use is not part of the ACA per se, it is integral to the ACA’s goals of improved safety and enhanced care coordination via ACOs, bundled payments, medical homes, and avoidable readmissions.

Related: e-prescribing accelerating

Per ONC, among U.S. physicians using an EHR platform, e-prescribing increased from 7 percent in December 2008 to 48 percent in June 2012. Other findings:

  • New Hampshire, North Dakota, Wisconsin, Iowa, and Minnesota had the highest growth in percentage of physicians using e-prescribing;
  • 19 states increased the percentage of physicians e-prescribing through an EHR by 50 percent or more from December 2008 to June 2012;
  • As of June 2012, at least 88 percent of community pharmacies in each state were enabled to accept e-prescriptions, compared to at least 76 percent in December 2008.

(Source: ONC, “State Variation in E-Prescribing Trends in the United States,” November 2012)

Related: CMS announces EHR meaningful use extension for hospitals hit by Hurricane Sandy

Also last week, in a letter to hospital associations in New York and New Jersey, CMS announced that hospitals “adversely affected” by Hurricane Sandy would have an extension on the November 30, 2012 deadline to submit fiscal year (FY) 2012 attestations for the Medicare EHR Incentive program meaningful use requirements. To qualify, hospitals must submit to CMS an extension application describing the reasons they are unable to attest, and if approved would have until the spring of 2013 to submit.

Background: in order to receive an incentive payment under the Medicare EHR Incentive program, eligible professionals and hospitals must submit data for the meaningful use objectives, clinical quality measures, indicate if they qualify for exclusions to specific objectives, and legally attest that they have successfully demonstrated meaningful use. For the first year of payment, the EHR reporting period is 90 consecutive days within the calendar year for eligible professionals or within the federal fiscal year for eligible hospitals.

Upton appoints clinicians to leadership roles in key health oversight committee

U.S. House of Representatives Energy and Commerce Committee Chairman Fred Upton (R-MI) announced two subcommittee appointments Thursday impacting legislative oversight of the ACA and related health care legislation: Rep. Tim Murphy (R-PA) will be the new chairman of the Energy and Commerce Oversight and Investigations Subcommittee next year, replacing Rep. Cliff Stearns (R-FL) who was defeated in the GOP primary, and Rep. Michael Burgess (R-TX) will be the new subcommittee vice-chairman, in addition to keeping his role as vice-chairman of the health subcommittee. Murphy is a psychologist and Burgess an obstetrician. Upton’s recommendations must be approved by the GOP steering committee.

Note: there are 31 physicians, nurses, and allied health professionals in Congress, 25 Republicans, and 6 Democrats. In the U.S. House of Representatives: 4 surgeons (4-R), 1 anesthesiologist (R), 3 BSNs (2-D, 1-R), 2 dentists (2-R), 4 family practice physicians(1-D, 3-R), 1 gastroenterologist (R), 1 LPN (D), 4 OB/GYN (R), 1 ophthalmologist (R), 1 osteopathic physician (R), 1 PA (D), 1 psychiatrist (D), 1 psychologist (R), 2 RN (R). In the U.S. Senate: 1 orthopedic surgeon (R), 1 optometrist (R), 1 family practice physician (R), 1 ophthalmologist/surgeon (R).

GOP physicians pursue repeal of ACA

Last week, the GOP Doctors Caucus, which is comprised of Republican doctors and nurses in favor of repealing Obamacare, appointed a new Co-Chair and Vice Chair— Representative Phil Roe (R-TN) has been appointed Co-Chair, and Representative Diane Black (R-TN) will serve as Vice-Chair. Representative Roe is an OB/GYN and Representative Black is a registered nurse.

State update

Report: Medicaid expansion costs to states

The Kaiser Commission on Medicaid and the Uninsured released findings last week about costs associated with the expansion of Medicaid under Section 2001 of the ACA to 133 percent of the federal poverty level (FPL) concluding:

  • Between 2013 and 2022, state Medicaid spending will increase 3 percent; federal spending will increase 26 percent
  • 41 percent more individuals will be Medicaid eligible
  • In total, states would spend $8 billion between 2013 and 2022 on Medicaid expansion; a 0.3 percent increase from what states will spend to implement other aspects of the ACA
  • State and local spending on uncompensated care will decline $18 billion
  • In total, states will see a $10 billion decrease in Medicaid spending between 2013 and 2022
  • Half of the states will see costs increase by less than 5 percent between 2013 and 2022; other states will see increase by 5 to 11 percent

(Source: Kaiser Commission on Medicaid and the Uninsured, “the Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis,” November 2012)

Note: on June 28, 2012, the Supreme Court ruled that it is optional for states to expand their Medicaid programs, and it limited the federal government’s ability to use other means of encouraging expansion.

State round-up: health exchanges

Health exchange update: 17 states and DC established or declared intent to establish state-operated exchanges, 20 states will not establish state-operated exchanges, five states considering or declared federal-partnership exchanges, eight states undecided. Announcements last week:

  • Earlier estimates on the cost of Minnesota’s HIX were $30 to $40 million; more recent estimates have indicated $54 million, according to the office of Governor Mark Dayton (D). In response to these findings, last week Governor Dayton announced they would seek an additional $39 million in funds to assist with the development—increasing their total amount of HIX grants to $110 million if the request is approved by the federal government.
  • Last Thursday, the Michigan House Health Policy Committee voted down (5-9) the creation of the state’s HIX, leaving it to the federal government to establish an exchange for the state. Although the Committee could reconsider this issue in the future, the deadline for states to apply to set up their own exchange is less than two weeks away and several state representatives continue to push against efforts to establish one in the state.

State round-up: Medicaid expansion

Medicaid expansion update: eight states not participating, 13 states and DC participating, 29 states undecided/undeclared. Recent announcements:

  • The Medicaid program in Alabama is facing a $22 million shortfall in funds for the fiscal year (FY) 2013 budget, even after voters approved taking $437 million from a state oil and gas fund to fill a budget gap earlier this year. In order to help manage the cost of beneficiaries, Alabama’s State Health Officer Don Williamson is looking to shift care to a managed care organization.
  • In a letter to the Director of the Office of Consumer Information and Insurance Oversight, Governor Janice Brewer (R) of Arizona indicated last Wednesday the state does not intend to operate its own state-based exchange due to the lack of timely and detailed regulations, written guidance, and information about when states will receive required federal services. In the letter, Governor Brewer announced that Arizona will participate in a federally facilitated exchange and does not intend to operate its own transitional reinsurance program.
  • In the 2014 supplemental budget proposal to the state legislature, Wyoming Governor Matt Mead (R) announced the state would not expand Medicaid coverage in 2014 under the terms of the ACA. The Wyoming Department of Health requested $50 million in federal funds in order to cover the optional expansion of the program, which the Governor announced he is denying. However, Governor Mead will submit a request for $7.63 million of federal funds to cover the expected enrollment of “mandatory children” and those individuals currently eligible for Medicaid but who have not yet enrolled.
  • Friday, Oregon Governor John Kitzhaber (D) filed his recommendation for the 2013-15 budgets for the state, proposing $11 billion in health care savings over the next decade. Governor Kitzhaber also estimated that expanding the state’s Medicaid program, Oregon Health Plan, to 133 percent of the FPL would allow 200,000 additional residents to become eligible for the program. As a result, almost 30 percent of the uninsured in the state will have access to coverage. The Governor’s plan also set measures of success such as reducing per capita Medicaid by 2 percent, allowing coordinated care models to be accessed by public and private employers as well as individuals, decreasing the number of uninsured in the state by 50 percent, and lowering the adult obesity rate to less than 30 percent and the childhood rate to less than 10 percent.
  • Missouri Governor Jay Nixon (D) announced Thursday that the state would participate in the Medicaid expansion, offering coverage to approximately 300,000 individuals across the state. Governor Nixon will include federal funding for an expansion in the budget proposal he sends to the state legislature in January. He stated he believes expanding the program is “the smart thing to do and it’s the right thing to do,” and points to a report released last week by the University of Missouri that predicts an influx of 24,000 new jobs as a result of the expansion, as well. Although the governor has made this announcement, the budget request faces a state legislature that is dominated by Republicans in both chambers.

Industry news

AMA study: health plans control anticompetitive markets

According to the American Medical Association (AMA) analysis of health maintenance organization (HMOs), preferred provider organization (PPOs), and point of service (POS) plans in 385 markets in all 50 states:

  • A significant absence of health insurer competition is present in 70 percent of metropolitan areas
  • 68 percent of metropolitan areas had at least one health insurer with a HMO, PPO, or POS market share of 50 percent or greater
  • The top ten least competitive commercial health insurance markets in order from least to most competitive are: Alabama, Hawaii, Michigan, Delaware, Alaska, North Dakota, South Carolina, Rhode Island, Wyoming and Nebraska

(Source: AMA, “Competition in Health Insurance: A Comprehensive Study of U.S. Markets”, November 2013)

Study: 70,000 cases of breast cancer over diagnosed in 2008, 1.3 million over 30 years

Researchers examined mammography screening trends, finding that the number of early-stage breast cancers detected increased from 112 to 234 cases per 100,000 women from 1976 to 2008. And the rate women are diagnosed with breast cancer at late stages decreased 8 percent, from 102 to 94 cases per 100,000 women. Extrapolating the data, the researchers calculated 70,000 women were over-diagnosed with breast cancer, accounting for 31 percent of all breast cancers diagnosed in 2008.

(Source: Bleyer A, Welch HG. Effect of Three Decades of Screening Mammography on Breast-Cancer Incidence. N Engl J Med 367;21:1998-2005).

USPSTF updates recommendations for Hepatitis C screening

Tuesday, the U.S. Preventive Services Task Force (USPSTF) recommended that adults with any history of intravenous drug use or blood transfusions before 1992 be screened for hepatitis C virus (HCV) infection, and that physicians may consider screening adults born between 1945 and 1965 (baby boomers). Screening for high-risk adults received a grade “B” rating, while screening for baby boomers received a grade “C” rating from the USPSTF based on the evidence of both the benefits and harms of the service.

Background: in May 2012, the U.S. Centers for Disease Control and Prevention (CDC) recommended that all baby boomers be tested for HCV. According to CDC, More than two million U.S. baby boomers are infected with hepatitis C, accounting for more than 75 percent of all American adults living with the virus, and baby boomers are five times more likely to be infected than other adults. Per Section 2713 of ACA any group health plan or insurer in the group or individual market must provide preventive health services rated grade “A” or “B” by USPSTF with no cost sharing or co-payment beginning August 1, 2012.

Extending prescription drug expiration dates as a cost-saving strategy

Researchers examined the potency of certain prescription drugs that were 28 to 40 years past their expiration date, finding that 12 of the 14 active ingredient drug compounds tested were present in concentrations of at least 90 percent of the labeled amounts. Researchers note that most medications marketed in the U.S. contain 90 percent to 110 percent of the amount of the active ingredient claimed on the label, and expiration dates usually range from 12 to 60 months after their production. The study concluded that many prescription drugs are still viable for long periods after these expiration dates, and that the pharmaceutical industry should revise current practices of drug expiration dates considering the potential cost savings.

(Source: Cantrell et al Stability of Active Ingredients in Long-Expired Prescription Medications, Archives of Internal Medicine. 2012;172(21):November 26, 2012)

Leapfrog analysis: hospital safety improving gradually

Wednesday, the Leapfrog Group released its latest hospital safety scores for 2,618 U.S. hospitals based on preventable medical errors, injuries, accidents, and infections. Key findings:

  • Grades: A = 790 hospitals, B = 678 hospitals, C= 1004 hospitals, D = 121 hospitals, F= 25 hospitals
  • Change in grade levels since June 2012: 58 percent of hospitals maintained the same grade level, 34 percent of hospitals changed by one grade level (higher or lower), and 8 percent of hospitals moved two grade levels or more up or down
  • No one class of hospital (e.g., teaching hospitals, public hospitals, etc.) earned significantly more “A,” ratings than others
  • Massachusetts and Maine had the highest proportion of top safety hospitals, with 83 percent and 80 percent of hospitals in the state earning “A” ratings respectively


Report: 25 to 31 million receiving care through accountable care arrangements

A research team at Oliver Wyman concluded that accountable care organizations (ACOs) have penetrated the health care system at a higher rate than expected, defining ACOs broadly as “providers participating in population-oriented, value-based care delivery and reimbursement models” and do not include provider organizations that have only piloted bundled payment programs or who receive pay for performance or care-coordination payments. Key highlights:

  • 10 percent of the U.S. population receive care through ACOs
  • Over two million Medicare beneficiaries receive care through an ACO
  • Fifteen million non-Medicare beneficiaries receive care through Medicare ACOs
  • Eight to 14 million are patients of non-Medicare ACOs

(Source: Oliver Wyman, “The ACO Surprise,” November 2012)

Study: health insurance plans smoking cessation efforts challenging

None of the 39 health insurance contracts analyzed in this study did all of the following:

  • Stated clearly that tobacco cessation treatment was a covered benefit (without general exclusions)
  • Provided coverage for individual, group and phone counseling, and U.S. Food and Drug Administration (FDA) approved tobacco cessation medication
  • Provided tobacco cessation treatments by in-network providers with no cost sharing
  • Provided access to treatment without prerequisites such as medical necessity or health risk assessment

The Georgetown research team concluded that insurance contracts are not clear on whether tobacco cessation is a covered benefit. While 36 of the 39 analyzed insurance contracts indicate they are providing coverage for tobacco cessation or are providing coverage consistent with the USPSTF recommendations, 26 of these contracts also included language excluding tobacco cessation from coverage entirely or partially.

(Source: Mila Kofman, J.D., Katie Dunton, J.D., M.P.A., and Mary Beth Senkewicz, J.D. “Implementation of tobacco cessation coverage under the Affordable Care Act: Understanding how private health insurance policies cover tobacco cessation treatments” Health Policy Institute, Georgetown University, November 26, 2012)

Study: medical homes ROI inconclusive

The patient-centered medical home (PCMH) practice model "holds promise" for improving patient and staff experiences, but evidence to determine how the model affects clinical outcomes and costs is inconclusive, per a study funded by HHS's Agency for Healthcare Research and Quality.

Researchers identified individual medical-home interventions, analyzed financial models and implementation strategies, and evaluated the medical-home model's effects on patient and staff experiences, care processes, and clinical and economic outcomes. A medical home was defined as a practice that used team-based care; incorporated at least two of four care improvement focused elements such as enhanced care access, care coordination and a systems-based approach to improving quality and safety; represented a “sustained partnership”; and featured “an intervention that involves structural changes to the traditional practice”.

“In 19 comparative studies, PCMH interventions had a small positive effect on patient experiences and small to moderate positive effects on the delivery of preventive care services (moderate strength of evidence). Staff experiences were also improved by a small to moderate degree (low strength of evidence). Evidence suggested a reduction in emergency department visits (risk ratio [RR], 0.81 [95 percent CI, 0.67 to 0.98]) but not in hospital admissions (RR, 0.96 [95 percent CI, 0.84 to 1.10]) in older adults (low strength of evidence). There was no evidence for overall cost savings… The PCMH holds promise for improving the experiences of patients and staff and potentially for improving care processes, but current evidence is insufficient to determine effects on clinical and most economic outcomes.”

(Source: Jackson et al “The Patient-Centered Medical Home: A Systematic Review” Annals of Internal Medicine, 27 November 2012)

District court ruling: tobacco companies ordered to admit deception

Last Tuesday, U.S. District Court Judge Gladys Kessler ordered tobacco companies to admit deception and use TV, packaging, and newspaper ads to rectify what she framed as “decades-long deception” about the dangers of cigarette smoking. The ruling stems from a racketeering charge brought against tobacco companies in 2006. Her 55-page ruling includes a requirement that packaging include the following statement: “More people die every year from smoking than from murder, AIDs, suicide, drugs, car crashes, and alcohol combined.”

Note: in 2009, Congress gave the FDA oversight of tobacco allowing it to impose stricter warnings on labels. Since 1972, the industry has been disallowed TV advertising as a means of promoting its products.

Energy drinks: FDA takes closer look

In a letter to Senator Richard Blumenthal (D-CT) and Senator Dick Durbin (D-IL) last Tuesday, the FDA said it intends to study the effects of energy drink consumption, after recent possible association with 13 deaths. The letter indicated the FDA is not inclined to tighten regulatory controls over the $10 billion energy drink sector until it has scientific evidence linking the high caffeine drinks with cardiac arrest.

Compounding pharmacy update

Thursday, Public Citizen called on the FDA to reinspect the 16 compounding pharmacies that received formal warning letters in the last ten years.


“There are no standing structures and procedures within the federal government for analyzing the impacts on states and localities of reduced federal spending or federal tax changes, and there is little dialogue about these issues between the federal government and state and local governments.”

— State Budget Crisis Task Force, 2012

“When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collection annually. That is the total of the average annual accrued liabilities of the two largest entitlement programs, plus the annual cash deficit….According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate tax income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws. In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all the corporate tax income for the year before the recession, it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.”

— Chris Cox, Former SEC Commissioner, and Bill Archer, former Chairman, House Ways and Means Committee “Why $16 trillion only hints at the true U.S. debt” Wall Street Journal November 27, 2012

“Arguably, the most prestigious medical journal in the world, the New England Journal of Medicine, regularly features articles over which pharmaceutical companies and their employees can exert significant influence. Over a year-long period ending in August (2012), the NEJM published 73 articles on original studies of new drugs, encompassing drugs approved by the FDA since 2000 and experimental drugs…Of those articles, 60 were funded by a pharmaceutical company, 50 were co-written by drug company employees, and 37 had a lead author, typically an academic, who had previously accepted outside compensation from the sponsoring drug company in the form of consultant pay, grants, or speaker fees Note: NEJM is read by 600,000 in 177 countries weekly. It receives 5,000 submissions annually, reviewed by 20 editors including nine physicians and a geneticist.”

— Peter Whorisky “Can Drug Research Still be Trusted: Doctors grow wary of Research Funded by Industry?” Washington Post November 25, 2012

“If you have the privilege of selling a drug, in return should come the responsibility to share everything you know about the drug. This is not about doing gotcha with industry. It’s about how to restore trust.”

— Harlan Krumholz, Yale University School of Medicine, Member, Patient Centered Outcome Research Institute Board of Directors

Fact file

  • M&A activity: in 2012, 10,346 deals worth $859.2 billion YTD—up 9 percent in deal volume and down 8 percent in valuations. CEOs have $985 billion cash on hand. (Source: Dealogic)
  • HIV infection: 60 percent of young people (ages 13-24) with HIV do not know they have the infection vs. 20 percent in the general population; 1.2 million Americans have AIDS including 50,000 new infections annually. (Source: CDC)
  • Cyber sales: online sales for “Cyber Monday” were up 30 percent but average orders were down 6.6 percent. (Source: IBM Smarter Commerce)
  • Household debt: in 3Q 2012, household debt fell $74 billion to $11.3 trillion; mortgage debt fell $120 billion to $8.03 trillion-lowest since 2006, auto loans increased $18 billion to $768 billion, balances on credit cards increased $2 billion. Two-thirds of 1.4T debt reduction since 2008 has been loan forgiveness. (Source: Federal Reserve Bank of NY)
  • Median wage: nannies earn $11 per hour, home care workers earn $10 per hour, and receive no benefits (survey of 2,086 workers in 14 markets: 95 percent of domestic workers are women, 46 percent immigrants, 54 percent non-white, 35 percent non-citizens). (Source: National Domestic Workers Alliance, “Home Economics: the invisible and unregulated world of domestic work,” November 2012)
  • Drug shortages: In 2012, close to 100 drugs on FDA list vs. 251 in 2011; shortages more prevalent in certain injectables--chemotherapy, anesthesia, antibiotics. (Source: FDA)
  • Medicaid fraud pursuit: Medicaid invested $102 million in the last four years to improve its capabilities in fraud detection recovering $20 million. (Source: CMS November 14, 2012)
  • Fiscal cliff impact:
    • Allowing the middle-class tax rates to rise and failing to patch the Alternative Minimum Tax could cut the growth of real consumer spending by 1.7 percentage points in 2013 and the growth of real GDP could slow by 1.4 percentage points
    • Consumers could spend $200 billion less than they otherwise would have in 2013 if taxes increase
    • Consumer spending on health care is expected will decrease $32 billion/10 years if taxes increase for the middle class
      (Source: White House, “The Middle Class Tax Cuts’ Impact on Consumer Spending & Retailers,” November 26, 2012)
  • Student loans: in 3Q 2012, student loan debt increased $42 billion (4.6 percent) to $956 billion; payments on 11 percent of student loan balances were delinquent (above 90 days old)—up from 8.9 percent at end of 2Q 2012. 93 percent of student loans are made directly by the government. Note: student loan debt is higher than credit card debt, mortgage balances, and revolving home equity loans and auto loans: Three-fourths of these are Stafford loans capped at $57,500 for undergraduates that do not require credit standards Especially troubling to the Department of Education are default rates on loans made to students attending for-profit colleges—12 percent of undergraduates with student loans, 22 percent of Stafford loans funding, 23 percent default rat(Source: Federal Reserve Bank of NY, “Quarterly Report on Household Debt and Credit,” November 2012)
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


National health reform: What now?

National health reform: What now?

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