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Health Care Reform Memo: March 12, 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: financial burdens of health care: how can the U.S. make health care more affordable?

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

Last week, the Centers for Disease Control and Prevention (CDC) released its analysis of the National Health Interview Survey observing that in the first six months of 2011, one in three families was wrestling with a financial burden resulting from health costs, and 26 percent were paying off medical bills over time.

In line with the CDC analysis, our annual consumer surveys point to the growing impact of health cost: with one in seven adults saying medical bills are problematic, and one in eight indicating they are forced to choose between medical bills and basic necessities:

In the past 12 months, has your household done any of the following?
  2011 2010 2009
Base - total adult respondents 4,000 4,008 4,001
Had serious problems paying or were unable to pay medical bills 11% 13% 13%
Ran up credit card or other debt your household is still paying off due to medical costs 10% 11% 14%
Had to choose between paying for health care or prescriptions and paying for other essential needs (such as rent, mortgage, utilities) 10% 11% 12%

Even those with insurance coverage are hard pressed: at 19 percent of household discretionary spending (close to $9,000 per capita), costs for health care for most consumers are high, forcing tough decisions—for one in five households, delayed care for non-emergency and preventive health is the only option.

Why did you decide not to see a doctor/medical professional when you were sick or hurt?
  2011 2010 2009
Base - total adult respondents 4,000 4,008 4,001
Cost was too high 35% 36% 49%
My insurance did not cover the service/treatment I needed 9% 10% 13%

Since my knee surgery on December 20 and subsequent complications, as of this weekend, I have spent slightly more than $3,700 out of pocket for my prescription medications, lab tests, and co-payments to hospitals and physicians. I have not received “explanations of benefits” for two of my five emergency room visits, and for my December 29 eight-hour stay in a “top 100” hospital emergency room, I have received a satisfaction survey and a receipt for my $100 co-payment—nothing else.

I can afford my journey through the health system. I am fortunate. Increasingly, many can’t.

Last fall, the Government Accountability Office (GAO) examined government and private sector efforts to improve price transparency in health care, concluding it was too confusing to consumers and too complicated for providers. Price transparency is only a modest element in the Affordable Care Act (ACA), isolated to one area primarily—requirements that state health insurance exchanges (HIXs) provide consumers information about insurance premiums for qualified health plans (QHPs) they offer. Incentives to encourage consumers to consider prices when non-emergency treatment decisions are made are missing, as are other means of engaging consumers more directly in their care and the cost implications thereof.

Ideally, an individual should be able to compare prices via a mobile device linked to their medical record and insurance coverage provisions so in that teachable moment, decisions are informed by clinical options and costs… but we’re a long way from the ideal. And in reality, today, the issue is health cost and affordability more than price transparency—though it’s a good place to start.

I do not agree that prices for routine, uncomplicated tests, procedures, and therapies are too confusing to be useful. In searching a variety of government, hospital, surgeon, and insurance company sites, I can’t find an expected “price” or “range” for my surgery, or even the routine lab tests I am required to do periodically to monitor my warfarin use.

When I engage a professional to handle my taxes or legal matter, I’m at least aware of an hourly rate and usually a total project estimate as well: not so in health care. It’s hard to know what’s affordable when prices and costs are hidden or inaccessible.

But price transparency doesn’t solve the issue of affordability and the growing impact of health costs in the average household. It’s more complicated than a shopping list of prices.

A society reflects its values in services it funds. The arguments for public education, parks, and the arts are parallel to health care, though some in health care might consider its role above others. In fact, our laws separate health care from others, establishing a private system of insurance and delivery that’s augmented by public financing for 110 million people covered by Medicare, Medicaid, military health, Federal Employee Health, and prison health programs. And in fact, our society has reflected its esteem for the health system, having invested 2.6 percent more than our overall gross domestic product (GDP) for 30 years in this system of care. But at a cost: affordability for many Americans (directly or through employers) is slipping away.

To be affordable to the average American and employer seeking to provide health benefits for its workforce, radical cost reduction in the U.S. system is necessary—that’s the bottom line. Our system is expensive: on a unit cost basis, as much as four times what most developed systems of the world pay. And on a volume basis, there’s little in our system to drive demand for acute interventions down in favor of preventive self-care and management of chronic conditions before it’s too late.

It’s doable, but only if incentives change from fee-for-service to performance, technologies are leveraged to reduce paperwork and error, and price transparency is linked directly to treatment options in teachable moments when decisions can be made.

It’s not surprising that one in three families is struggling with health costs in some way; it’s not surprising that many resort to delayed care or elect to take their chances in lieu of buying medication or paying insurance premiums. Health care costs are increasing as their incomes have stalled and even those with insurance find co-payments, premiums, and coverage restrictions problematic when gas prices are at $4/gallon and housing values fall below loan obligations. And it’s not surprising that almost half of the U.S. employers, especially smaller employers, have dropped health benefits altogether.

It’s time for a candid discussion about health costs in the U.S. It’s time to put all the cards on the table to set aside parochial agendas. It need not begin with the presumption that cost reduction equates to poor quality or compromised safety. Rather, it should begin with a white board to re-design the system around a new paradigm, innovative thinking, and bold execution. The status quo is not sustainable.

For many Americans, time is running out.

Paul Keckely

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

Implementation update

HHS: ACA lifetime limit elimination helps 105 million

Monday, the U.S. Department of Health and Human Services (HHS) released two reports noting that elimination of lifetime limits on health care coverage provision in ACA (Section 1001) benefitted 105 million Americans and the expansion of health insurance coverage to dependents up to age 26 provision in ACA (also Section 1001) increased coverage for 1.3 million minority (e.g., Latinos, Blacks, Asian Americans, and American Indian/Alaska Natives) adults up to age 26. It estimates 70 million people in large employer plans, 25 million people in small employer plans, and 10 million people with individually purchased health insurance had lifetime limits previously.

PCORI approves updated definition of patient-centered outcomes research

Monday, a working group of the Patient Centered Outcomes Research Institute (PCORI) Methodology Committee and board members approved a new working definition of “patient-centered outcomes research” adding “palliative care” to the definition and highlighting a greater focus on improving communication between patients and caregivers. PCORI received over 500 comments about the original description. Executive Director Joe Selby emphasized that the definition is a “living” one that needs updating in the future as the field of research grows and patients’ and caregivers’ needs change.

Note: PCORI is perhaps the most significant elements of ACA that most don’t know about or understand. Its idea is to lower health care costs by funding studies (comparative effectiveness research, or CER) that allow direct comparisons between prescription drugs, diagnostic tests, and surgical treatment options based on strength of evidence about what works for specific patient populations. To achieve this goal, ACA (Sections 6301 and 10602, Public Law 111-148), created PCORI as an independent, non-profit health research organization. PCORI has a $160 million operating budget in 2012, and will have an estimated $3 billion over the next decade to fund CER. PCORI is an independent organization created to help people make informed health care decisions and improve health care delivery. It will commission research that is guided by patients, caregivers, and the broader health care community and will produce high integrity, evidence-based information.

PCORI is committed to transparency and a rigorous stakeholder-driven process that emphasizes patient engagement. It will use a variety of forums and public comment periods to obtain public input throughout its work.

DOJ files brief to Supreme Court on individual mandate

Thursday, the U.S. Department of Justice (DOJ) filed another brief to the U.S. Supreme Court on the constitutionality of ACA’s individual mandate per Section 1501, affirming that the mandate is more protective of individual choice than traditional Medicare. DOJ stated in the brief, “the ‘novelty’ about which respondents complain results from Congress's choice of a regulatory means that is more protective of individual choice, market efficiency, and state prerogatives than traditional approaches like Medicare." DOJ argues that the individual mandate is constitutional under the Commerce Clause.

Note: the Supreme Court will hear oral arguments on ACA March 26-28.

IPAB repeal bill moves to House floor for vote week of March 19

Monday, 42 state medical associations representing 400,000 physicians sent a letter to the House Energy and Commerce Committee supporting a full repeal of the Independent Payment Advisory Board (IPAB) stating:

“With the advent of the IPAB, however, the people’s elected representatives will no longer have power over Medicare payment policy. Instead, these major health policy decisions will rest in the hands of 15 unelected and largely unaccountable individuals. Even worse, if IPAB fails to report recommendations or never becomes operational, this power will rest solely in the hands of a single individual—the Secretary of the Department of Health and Human Services. Additionally, fewer than half of the IPAB members can be health care providers, and none are permitted to be practicing physicians or be otherwise employed. Thus, not only does the creation of IPAB severely limit congressional authority, it essentially eliminates the transparency of hearings, debate and a meaningful opportunity for critical stakeholder input…the IPAB will be required to recommend cuts based on unrealistic spending targets starting in 2014. Unfortunately, we have all witnessed the inaccuracies associated with projecting future Medicare expenditures, most notably the problems with the sustainable growth rate (SGR) formula. It is estimated that it will now cost over $300 billion to “fix” the SGR, and we clearly cannot afford the IPAB to become the next SGR.”

 —Letter to the House Energy and Commerce Committee from 42 state medical associations, representing 400,000 physicians supporting a full repeal of IPAB, March 5, 2012

Tuesday, the House Energy and Commerce Committee voted to repeal IPAB and Thursday, the House Ways and Means approved by voice vote a bill repealing IPAB. The full House will vote on the bill the week of March 19. The House bill introduced has 232 sponsors, including 20 Democrats. House Republicans are considering separate legislation introduced by Representative Phil Gingrey (R-GA), a physician to offset IPAB’s budgeted savings by limiting non-economic damages for medical malpractice to $250,000 and capping attorney contingency fees.

Background: per ACA Section 3403, IPAB is a new 15-member government agency that has the explicit task of achieving specified savings in Medicare without affecting coverage or quality. It replaces MedPAC which, since 1997, has recommended changes but with no authority to implement Medicare payment changes. Under ACA, IPAB has the authority to make changes to the Medicare program with Congress being given the power to overrule the agency's decisions. It is precluded from any recommendation to ration health care, raise revenues or increase Medicare beneficiary premiums, increase Medicare beneficiary cost sharing (deductibles, coinsurance, or co-payments), or otherwise restrict benefits or modify eligibility criteria.

Beginning in 2013, the Chief Actuary of the Centers for Medicare and Medicaid Services (CMS) will determine the projected per capita growth rate for Medicare for a multi-year period ending in the second year thereafter (the "implementation year"). If the projection exceeds a target growth rate, IPAB must develop a proposal to reduce Medicare spending in the implementation year by a specified amount submitting that proposal in January of the year before the implementation year (i.e. January 2014 submission that takes effect in 2015). If the Board fails to submit a proposal that the Chief Actuary certifies will achieve the savings target, the HHS Secretary must submit a proposal that will achieve that amount of savings and implement the changes unless Congress overrides the Board's (or the Secretary's) decisions under a fast-track procedure that the law sets forth.

Physicians object to IPAB because they believe it might threaten their income long-term and because they think it unfair that hospitals are exempted initially and they are not: IPAB powers exempt hospitals and hospices until 2020 and clinical laboratories until 2016, but physician fees may be cut as early as 2015 per the law. Other savings would have to be found in private Medicare Advantage plans, Medicare’s Part D prescription-drug program, or spending on skilled-nursing facilities, home-based health care, dialysis, durable medical equipment, ambulance services, and services of ambulatory surgical centers.

HHS Secretary testifies before congressional committees re: health exchange subsidies

Tuesday and Wednesday, Secretary of HHS Kathleen Sebelius testified before several Congressional subcommittees about the White House’s FY2013 budget request for an additional $864 million to fund the federal HIX as HHS in addition to $1 billion already approved in ACA (Sections 1311, 1321-24).

Note: HHS is expected to release final regulations on state HIXs this month followed by initial guidance and or regulations of the federal exchange model. Starting January 2014, states must operate their insurance exchanges with four major capabilities specified in the law and subsequent guidance: (1) eligibility and subsidy determination; (2) IT/website infrastructure; (3) outreach, marketing, and advertising; and (4) qualified health plan procurement. In addition, several operational functions are required: call center development, enrollment, and premium billing. Each state may choose to create an exchange, or allow the federal government to operate the exchange instead. The law requires:

  • At least two “qualified health plans” in each exchange including one offered by a non-profit entity (one might be a non-profit, member-run health insurance CO-OP).
  • Access limited to U.S. citizens and legal immigrants.
  • Eligible purchasers are individuals and small businesses with up to 100 employees.
  • Provision for the operation of an HIX in each state.
  • Plan offered must meet a minimum set of standards at four levels of coverage that vary based on premiums, out-of-pocket costs, and benefits beyond the minimum required plus a catastrophic coverage plan.
  • Premium subsidies will be provided to families with incomes up to 400 percent of the poverty level ($29,327 to $88,200 for a family of four in 2009) who do not have access to other coverage to help them purchase insurance through the HIXs. These subsidies will be offered on a sliding scale basis and will limit the cost of the premium to between 2 percent and 9.5 percent of income for eligible individuals.
  • Cost-sharing subsidies will also be available to people with incomes between 100-250 percent of the poverty level to limit out-of-pocket spending.

Currently, 14 states have enacted legislation to operate their exchange. For more information about exchanges, see Health Insurance Exchanges: A strategic perspective, from the Deloitte Center for Health Solutions, 2011.

Retail industry leaders meet with White House to discuss ACA implementation

The Retail Industry Leaders Association’s (RILA) Healthcare Committee met with White House staff expressing concern that the federal government has not provided key regulations regarding ACA’s requirement that employers provide or share in the cost of providing health coverage staring in 2014. RILA supports a transition period of two years, where employers will not face penalties for these years and regulations that allow for flexibility avoiding a “one-size-fits-all” approach.

Legislative update

AHRQ analysis: 'Disappointing results' in usefulness of its health IT implementation toolkit

Friday, the Agency for Health Care Research and Quality (AHRQ) posted its negative assessment of the Workflow Assessment for Health IT Toolkit it developed in 2008 to assist physicians and hospitals in implementing electronic health records (EHRs). It is asking the Office of Management and Budget (OMB) to approve a $793,456 budget over 27 months to conduct field assessments of the toolkit in ten small- and medium-size clinical practices and two regional extension centers that provide support to some of the practices. According to AHRQ, "The evaluation will address the issues of system validation as classically defined in software engineering: determining whether the software or system actually meets the requirements of the user to perform the relevant tasks.”

AHRQ noted a "growing consensus that deployment of health IT has often had disappointing results," and emphasized a need for greater attention to sociotechnical issues and problems associated with modeling workflow. AHRQ is accepting comments on its proposal through May 8. (Source: Federal Register, March 9, 2012)

Medicare fraud efforts questioned by House Ways and Means oversight subcommittee

Wednesday, the U.S. Ways and Means Subcommittee on Oversight chairman, Representative Charles Boustany (R-LA), wrote letters to HHS Secretary Sebelius, DOJ Attorney General Eric Holder, and CMS acting Administrator Tavenner regarding the efforts to stop Medicare waste, fraud, and abuse. In the HHS and DOJ letter, Boustany requested a briefing by March 21, 2012 on efforts to address Medicare fraud, including identifying areas with overutilization of Medicare services and activities by the Health Care Prevention and Enforcement Action Team (HEAT) task forces. He also requested that CMS provide information on the geographic variation of Medicare payments to find outliers in the system.

Note: according to GAO, Medicare waste, fraud, and abuse was estimated to cost $48 billion in FY2010.

State update

Dual eligible market opportunity strong and growing per analysts

Industry analysts expect the managed care market for dual eligibles to be $25 billion in 2012, doubling to $50 billion in 2013 and to reach $300 billion (per Citigroup Research).

Note: "dual-eligibles" qualify for Medicaid and Medicare due to age, disability and poverty. Per CMS, nine million are classified as dual eligibles, representing 15 percent of Medicaid enrollment and 39 percent of its costs. Fifteen states including New York and California have received grants to implement dual-eligible managed care programs. Some, like Ohio, have recently announced plans to implement managed care programs: its Office of Health Reform plans to enroll 200,000 duals (10 percent of its Medicaid enrollment, 40 percent of the program cost) in its new program that also features its PASSPORT home-care program.

HHS releases draft guidelines for state oversight of insurance premium rate reviews

Last week, HHS released a draft of recommended approaches for establishing state-specific thresholds for the annual review of health insurance premium increases per ACA Section 100 which triggers a rate review of health insurance plans’ proposed premium rate increases of 10 percent or more. States will set thresholds starting September 1, 2012. It recommends that state thresholds consider previous average rate increases, aggregate medical loss ratio (MLR) levels, and market competitiveness. HHS will work with the National Association of Insurance Commissioners (NAIC) to identify data elements and information states can use as the basis for their thresholds. The new thresholds will be published by June 1, 2012. The Center for Consumer Information and Insurance Oversight (CCIIO) is also expected to release guidance on how states can be exempted from the 10 percent threshold soon.

Note: Per HHS, 43 states and D.C. have an effective rate review process in place.

Bipartisan Policy Center Governors’ Council recommends changes to Medicaid waivers

Last week, the Bipartisan Policy Center (BPC) released recommended reforms to the Medicaid waiver process to promote innovation in state Medicaid oversight. Key recommendations include:

  • CMS should create and distribute a detailed and transparent process for state-federal budget neutrality negotiations and waiver evaluations. All relevant parties should be engaged from the start of the waiver approval process.
  • CMS should create State Plan Amendment (SPA) templates for effective Medicaid strategies used to disseminate reforms and best practices across states.
  • CMS should design waiver templates for addressing time-sensitive and important Medicaid challenges, particularly alongside ACA implementation. These templates could standardize certain aspects of the waiver application process to give better direction to states and reduce uncertainty. States would have more flexibility in resource allocation in addressing common challenges.
  • CMS should create a tool to convert successful Medicaid waivers into permanent or semi-permanent state innovations. This mechanism should provide clear guidelines and processes for approval and needed statutory changes.
  • HHS should make guidance and assistance to state leaders from the Medicaid State Technical Assistance Teams (MSTATs) transparent and public, making questions and answers available on

The BPC’s Governor’s Council includes former governors Phil Bredesen (D-TN), Jim Douglas (R-VT), Brad Henry (D-OK), Linda Lingle (R-HI), Mike Rounds (R-SD), and Ted Strickland (D-OH). (Source: Bipartisan Policy Center, “Reforming Medicaid waivers: the Governors’ Council perspective on federalism today,” March 2012)

State round-up

Minnesota’s projected Medicaid spending was lowered by $230 million due to a decrease in projected Medicaid enrollment from 90,000 adults without children predicted to enroll in the state’s Medicaid program over two years, to new projections of 8,000. The state also projects $108 million in savings from low enrollments and costs due to an early expansion of the Medicaid program, before ACA’s Medicaid coverage expansion is effective in 2014.

Also, Minnesota state Senators David Hann (R) and Steve Gottwalt (R) recently announced a plan that would allow residents to open a personal health premium account where individuals can pool money from various sources (e.g., employers, family members, charitable organizations) to purchase health insurance.

Montana became the 25th state to adopt the state-based systems (SBS) developed by NAIC.

Note: SBS is an electronic web-based system owned and operated by NAIC in partnership with state insurance departments that supports regulatory functions used by state regulators of insurance. States that have adopted SBS include Alabama, Alaska, Delaware, D.C., Florida, Illinois, Iowa, Kansas, Maryland, Missouri, Nebraska, New Hampshire, New Jersey, North Carolina, North Dakota, Oklahoma, Oregon, Puerto Rico, Rhode Island, Tennessee, U.S. Virgin Islands, and West Virginia. South Carolina and Virginia license limited SBS services in their states.

Monday, a federal judge ruled that the New Hampshire health commissioner must notify providers when they plan to reduce Medicaid reimbursement rates. The ruling stems from a lawsuit from hospitals in the state claiming the New Hampshire violated the Medicaid Act by not providing proper reimbursement to providers that see Medicaid beneficiaries.

Thursday, New Hampshire’s House of Representatives approved a bill prohibiting the state from planning, creating, or participating in a state-based HIX. The bill would need to be passed by the full legislative body and signed into law by the governor before it becomes law.

Thursday, Governor Kitzhaber (D) signed Oregon’s HIX into law which will open to individuals and small groups (up to 50 employees) in January 2014. The state projects 280,000 enrollees by the end of 2015. Also, March 2nd, the governor signed legislation into law that would assign certain Medicaid enrollees to a caseworker to manage their health care, with specific focus on those with chronic diseases, mental illnesses, and addictions. The legislation is intended to decrease unnecessary tests and procedures, while improving quality and reducing costs. The state may expand the program to public employees and the general public. This plan is awaiting CMS approval.

Note: supporters estimate that if all states enacted the same methods to managing Medicaid care passed in Oregon’s Medicaid reform legislation, the federal government could save $1.5 trillion over ten years.

March 1, Texas enacted a law that would reduce Medicaid pharmacy reimbursements by 80 percent to match rates for private insurance companies and Medicare. Texas predicts savings up to $100 million over the next two years.

Note: independent pharmacy trade groups commissioned a study that found up to 1,300 stores could be closed due to lower rates, resulting in a loss of 36,000 jobs. Approximately 3.3 million low income and disabled Texas residents are enrolled in Medicaid. The state’s Medicaid costs are expected to increase $15 billion by 2013.

Oklahoma state Senate President Pro Tempore, Brian Bingman (R) said recently, “Republicans in the state Senate will do everything in our power to block 'Obamacare' in Oklahoma. When President Obama rammed through a trillion-dollar unconstitutional assault on the health care freedom of Oklahomans, he proved his values are fundamentally at odds with ours.”

Industry news

CMS: ICD-10 delay

Monday, CMS held its bi-monthly call with states regarding the implementation of ICD-10, indicating it is still reviewing industry comments and conducting its impact analysis.

Note: a final decision on ICD-10’s implementation deadline has not been announced but the most likely scenario is keeping the current timing or delaying implementation by one year. CMS says it is “aggressively moving towards a decision by April.”

Study: individual long-term care insurance options shrinking

Ten of the top 20 long-term care (LTC) insurers by premium revenues have announced or halted sales of LTC policies in the past five years, per LIMRA International research. Most will continue to provide group coverage.

Background: LTC coverage covers nursing-home, assisted-living, and home care. Consumers purchase LTC policies in their 50s or early 60s, paying premiums for up to 30 years before making a claim. Insurers build reserves for paying those claims through investment income, mainly from high-quality bonds. With bonds offering low yields, aging policyholders making more claims, and refusals by state regulators raise premiums for existing policyholders, companies are choosing to exit the market.

For new policies sold in 2011, premiums increased 4 percent from 2010, though buyers dropped 2 percent to 230,000. Coverage costs average $2,350/year for a 55-year-old couple and $4,660/year for a 65-year-old couple per the American Association for Long-Term Care Insurance.

CDC: financial burden for medical care pervasive

  Had problems paying a medical bills in past 12 months Were paying medical bills over time Were unable to pay medical bills at all Experienced a financial burden of medical care
Total 20% 26.2% 10.5% 32.4%
By insurance status
Uninsured 35.7% 33.9% 22.8% 46.7%
Private 15.7% 26.7% 6.2% 30.4%
Public 28.0% 28.3% 17.6% 38.7%

Source: Robin A. Cohen et al., “Financial Burden of Medical Care: Early Release of Estimates from the National Health Interview Survey, January–June 2011,” CDC, March 2012

Study: meaningful use rates vary by state

A survey of 5,105 physicians by The Doctors Company released February 29 found:

  • 30 percent of doctors say have already implemented EHRs that meet meaningful use criteria. Fourteen percent of the doctors surveyed said they plan to implement an EHR in the next three years. Seventeen percent have no plans to use an EHR in their practice.
  • Highest EHR meaningful use: Oregon (41 percent), Georgia (39 percent), Florida (37 percent), Washington (35 percent) and Virginia (34 percent).

(Source: The Doctors Company, "The Future of Health Care, A National Survey of Physicians," February 2012)

Court challenge to prescription drug coupon programs initiated

Many drug makers use coupons to lower co-payments for prescription medications. Prescription benefits management and health insurance companies promote increased use of generics over coupons as a means of managing drug costs. Community Catalyst filed suit in NJ against eight drug makers, alleging the net effect of the coupon programs is to raise overall health costs by causing consumers to hit their premium caps sooner. Community Catalyst’s Prescription Access Litigation Project seeks a court ruling as a class action lawsuit that co-payment subsidies are illegal and is seeking triple damages for plaintiffs reflecting the difference between brand name and generic costs.

Background: Community Catalyst is a national advocacy organization founded in 1997 and funded by 34 not-for-profit foundations. Per their website, Community Catalyst “has been giving consumers a voice in health care reform for more than a decade. We provide leadership and support to state and local consumer organizations, policymakers and foundations that are working to guarantee access to high-quality, affordable health care for everyone. Our contributions, which range from policy analysis and strategic assistance to managing national campaigns, enable consumer groups to provide leadership in the hard work of transforming the U.S. health care system. Since 1997, in states and communities across the country, we have been a catalyst for collaboration, innovation, and action in health care reform.”

Study: increased computer access to patient test results increased number of tests performed

Increased access to EHRs by physicians increased the likelihood of ordering imaging tests by 40-70 percent. Physicians with computer access ordered imaging tests for 18 percent of visits compared to physicians without access who ordered them for 12.9 percent of visits. Primary care physicians ordered fewer imaging tests compared to surgeons or other specialists.

Dr. Farzad Mostashari, the National Coordinator for Health Information Technology, expressed concern about study’s limitations and broad conclusions, noting data was collected before payment incentives for the meaningful use of EHRs were implemented per the Health Information Technology for Economic and Clinical Health (HITECH) Act. Previous studies have predicted computer access could save up to $8.3 billion a year in imaging and lab testing. (Sources: Danny McCormick et al. “Giving office-based physicians electronic access to patients’ prior imaging and lab results did not deter ordering of tests,” Health Affairs, March 2012 and Farzad Mostashari, HealthITBuzz, Office of the National Coordinator, “Recent Study: Get the Facts,” March 6, 2012)

Note: the use of information technologies in health care for monitoring safety and adherence to evidence-based practices exposes higher-than-estimated gaps between best practices and performance. The precedent in use of computerized provider order entry (CPOE) systems found organizations had significantly more drug events than previously assumed.

Medicare redesigns claims and benefits statement to improve enrollee understanding

Wednesday, the Acting Administrator of CMS, Marilyn Tavenner announced the redesign of Medicare services and benefits statement known as the Medicare Summary Notice (MSN). Paper copies of the MSN will be mailed out early 2013.

AHRQ testing toolkit to improve practice adaptability to literacy gaps

HHS’s AHRQ seeks OMB approval to conduct an assessment of Health Literacy Universal Precautions Toolkit to assess whether it encourages practices to improve communication with patients of all literacy levels. Twelve primary care practices will be recruited to implement at least four tools from the toolkit.

Background: the toolkit includes 20 tools to prepare practices for health literacy-related quality improvement activities and to guide in improving performance related to (1) improving spoken communication with patients; (2) improving written communication with patients; (3) enhancing patient self-management and empowerment; and (4) linking patients to support systems in the community. 77 million Americans have limited health literacy (2003 National Assessment of Adult Literacy).

Study: Medicare Hospital Compare has minimal impact on mortality rates

Medicare’s Hospital Compare significantly lowered mortality for heart attack, heart failure, and pneumonia cases after it was implemented. However, after controlling for the downward trend of mortality and non-reported conditions (e.g., stroke and hip fracture), researchers found that the Hospital Compare website was only significantly associated with a reduction in mortality for heart failure, and only at a small magnitude. (Source: Health Affairs, “Medicare’s public reporting initiative on hospital quality had modest or no impact on mortality from three key conditions,” March 2012)

Note: HHS launched Hospital Compare in 2005 as an online tool which allows Medicare enrollees to compare data from over 3,000 hospitals on patient experience scores, readmission, and mortality rates, and rates of complication have been added to the site’s measures.

FDA releases guidance on overseas clinical studies

Last week, the U.S. Food and Drug Administration (FDA) released guidance on the requirements of overseas clinical studies not conducted under an investigational new drug (IND) or new drug applications (NDA) intended to encourage sponsors and applicants to standardize information relating to foreign clinical trials in their INDs and NDAs for marketing approval. (Source: FDA, “Guidance for Industry and FDA Staff: FDA Acceptance of Foreign Clinical Studies Not Conducted Under an IND Frequently Asked Questions,” March 2012)

FDA seeks input from experts on accelerated drug review process

Thursday, Janet Woodcock, director of the Center for Drug Evaluation and Research at the FDA and those representing pharmaceutical manufacturers and academic and scientific research entities testified before the Energy and Commerce Health Subcommittee on proposed amendments to the FDA’s drug user fee reauthorization. Key topics included accelerated drug approval, the regulation of medical gases, antibiotic development, and downstream pharmaceutical supply chain. Woodcock discussed FDA’s attempt to streamline the drug approval process in four ways: (1) widening access to drugs through the agency’s “accelerated approval” process that relies on non-traditional clinical endpoints to approve a drug; (2) creating a process to identify drugs that that have a never-before-seen effect earlier in the process so the drug can get to the market faster; (3) addressing restrictions on use of drugs once they have been released into the market; and (4) approving more prescription drugs for over the counter use. Woodcock also expressed concern about a proposal that would establish a new regulatory pathway for medical gases.

The Committee also heard about an industry proposal for a uniform tracking system requiring drug labels to have a unique bar code, similar to California’s which will require uniform labeling and tracking in 2015. Woodcock, who expressed support for the system stated, “… We would need real time detection to see if drugs had been stolen from that lot, to see if a drug has been diverted and re-entered the supply chain at some point. We would not be able to detect that unless we're tracking that lot as it goes along.”

Note: the FDA’s user fee authorization expires September 30, 2012. The House of Representatives are seeking to pass a five-year reauthorization by summer 2012 based on a framework developed from discussions with the life sciences industry.

President Obama names HHS Park as director of Office of Science & Technology Policy

Friday, the White House announced that President Obama is appointing Todd Park as the new White House Office of Science and Technology Policy Director. Park served as HHS Chief Technology Officer (CTO) for three years, leading the creation of The CTO was created by President Obama to help the federal government modernize its technology and better use technology tools to address the nation’s challenges.

DOJ appeals ruling that tobacco warning labels violate First Amendment rights

Monday, DOJ filed an appeal against D.C. District Judge Richard Leon’s recent ruling that found that the FDA-developed mandatory graphic tobacco warning labels violates tobacco manufacturer’s First Amendment rights.

2012 scorecard: medical school faculty conflict of interest scrutiny improving

Per results from the PharmFree Scorecard 2011-2012 from the American Medical Student Association (AMSA), 67 percent of medical schools got grades of A or B in 2011-2012 based on policies measured in 11 areas of potential conflict, including gifts, scholarships, samples, and consulting—up from 52 percent in 2010-2011. Other findings of 152 eligible medical institutions: two academic medical centers had perfect scores for their sales rep policies; for on-site continuing medical education, 20 schools had perfect scores; 54 schools have “no significant policy restricting the distribution and use” of free pharmaceutical samples; and three schools did not submit information and received automatic F scores.

Note: AMSA is student-run association for physicians-in-training that promotes a view that “doctors should not seek education from industry marketing efforts, whether they are in the form of advertisements, sales pitches from representatives, or sponsored lectures by paid physicians.”

GAO study: price transparency in health care falls short

GAO released a study, “Health Care Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain Prior to Receiving Care,” focused on consumer out-of-pocket costs and the availability of information useful in their understanding of prices. The study concluded: (1) meaningful information useful to consumers about prices is not available as a result of the complexities involved in other than simple, uncomplicated treatments; (2) current sources vary in method and accuracy; and (3) there is need for standardization so that consumers can be provided accurate and appropriate pricing. The report stated that “GAO recommends that the Department of Health and Human Services (HHS) determine the feasibility of making estimates of complete costs of health care services available to consumers, and, as appropriate, identify next steps.”

New commission to release recommendations on physician payment system reform in 2013

Monday, the Society of General Internal Medicine launched a 12-person National Commission on Physician Payment Reform, which will draft recommendations on reforming the physician payment system and study how payment incentives affect patient care. This commission consists of physicians, policy experts, and industry representatives with Dr. Steven Schroeder, former president of the Robert Wood Johnson Foundation and professor at the University of California, San Francisco as Chair, and former Senate Majority Leader Bill Frist (R-TN) serving as honorary chairman. The panel will release its report early 2013.

Pain meds problematic in veteran population

The study by the U.S. Department of Veterans Affairs of 141,000 veterans who received pain therapy for problems other than cancer between 2005 and 2010 concluded widespread overuse of pain medications (e.g., opiates, benzodiazephines) for a variety of chronic and psychological problems. A special warning in the study: the combination of pain meds with alcohol consumption. (Source: Seal et al “Association of Mental Health Disorders With Prescription Opioids and High-Risk Opioid Use in U.S. Veterans of Iraq and Afghanistan” JAMA. 2012;307(9):940-947)


“GE is opening a new chapter in management philosophy. The conglomerate that once groomed jack of all trades generalists is now betting on deep industry experts instead.”

 —Kate Linebaugh, The Wall Street Journal, “The New GE Way: Go Deep, Not Wide,” March 7, 201

“China's push to overhaul its health-care system is encountering challenges from public hospitals, Health Minister Chen Zhu said, an obstacle that has broad implications for the country's economic outlook… China has extended basic medical coverage to 96 percent of rural Chinese… Until a few years ago, the bulk of the rural population had no health insurance, which meant that a serious sickness within a family often led to financial ruin, and returned many farmers to the poverty they had recently escaped… the biggest obstacle to fixing health care in China is public hospitals that see reform as a threat to their for-profit status—and to the income of both doctors and administrators.”

 —Shirley S. Wang, The Wall Street Journal, “China Hospitals Seen Defying Reforms,” March 9, 2012

Note: China’s 12th Five Year Plan begun in 2009 includes $125 billion earmarked to expand health insurance coverage to 833 million rural Chinese by improving primary care facilities and revamping the public hospital system that offsets low government payments for inpatient, outpatient, and long-term care through high utilization and pricing for diagnostic testing and prescription drugs. Among reforms, a list of "essential drugs" for common illnesses whose prices are fixed at a discount and whose use doesn't lead to a commission was instituted, lowering hospital revenue. Total health expenditures in China are 5 percent of its GDP: 28 percent paid for by the government, 35 percent by individuals, and 37 percent by employers. By the end of 2015, the goal is to increase the government's contribution to 33 percent and reduce individuals' out-of-pocket expenses to 30 percent.

“The promise is that low cost gene sequencing will lead to a new era of personalized medicine, yielding new approaches for treating cancers and other serious diseases. The arrival of such cures has been glacial, however, although the human genome was originally sequenced more than a decade ago. Now that is changing, in large part, because of the same semi-conductor industry manufacturing trends that opened up consumer devices like the PC and the smartphone: exponential increases in processing power and transistor density are accompanied by costs that fall at an accelerating rate.”

 —John Markoff, New York Times, “Cost of Gene Sequencing Falls, Raising Hopes for Medical Advances,” March 8, 2012

Fact file

  • Employment update for February 2012: the economy added 227,000 jobs—1.2 million in the past six months—with unemployment unchanged at 8.3 percent.
    Note: the health-care industry accounted for 49,000 of the 227,000 jobs as compared to the 43,300 jobs in January: hospitals +15,400, ambulatory health-care services +28,200, doctors’ offices, outpatient care centers, and home-health services lost 2,400. Nursing and residential-care facilities overall + 5,400. (Source: U.S. Bureau of Labor, March 9, 2012)
  • International health spending comparisons:
Procedure Argentina India Spain France Chile Germany Switzerland U.S.
Cost per hospital day $380 $236 $515 $655 $1,552 $632 $690 $3,949
Cost per hospital stay $1,473 n/a $1,825 $3,396 $4,948 $5,004 $4,566 $15,734
Routine office visit $9 $16 $11 $23 $45 $40 $64 $89
Health spending % of GDP n/a n/a 9.5% 11.8% 8.4% 11.6% 11.4% 17.6%

Source: International Federation of Health Plans, “2011 Comparative Price Report Medical and Hospital Fees by Country,” 2012

Note: health spending as a percent of GDP was provided by the Organisation for Economic Co-operation and Development (OECD) report, “How Does the United States Compare,” 2011.

  • Health care spending is expected to increase from 17.6 percent of GDP in 2009 to 19.8 percent in 2020. (Source: Congressional Budget Office)
  • Annual cost of health coverage will increase 6 percent to an average of $11,664 per employee in 2012, with employees’ share rising 9.3 percent on average from $2,529 to $2,764. (Source: National Business Group on Health and Towers Watson, “17th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care,” March 2012)
  • U.S. health care spending hospital care - $760 billion (or 27 percent of total expenditures), professional care - $832 billion (or 29 percent), and prescription drugs - $246.3 billion (or 9 percent). (Source: Deloitte Center for Health Solutions and Deloitte Center for Financial Services, “The hidden costs of U.S. health care for consumers: A comprehensive analysis,” 2011)
  • Collection agency calls to Americans for unpaid medical bills increased from 22 million in 2005 to 30 million in 2010. (Source: Associated Press, “Medical bills can wreck credit, even when paid off,” March 4, 2012)
    Note: Congress is considering the Medical Debt Responsibility Act that would require credit agencies to delete medical debt from credit reports within 45 days. This legislation has been referred to the House Committee on Financial Services.
  • 74 new medications that either treat or prevent asthma are in development. (Source: Pharmaceutical Research and Manufacturers of America (PhRMA), “More than 70 medicines in development for asthma,” March 5, 2012)
    Note: 24 million adults and children have asthma in the U.S—up 12 percent over the last decade; 40,000 people miss school or work because of asthma-related symptoms, costing the U.S. an estimated $56 billion each year (CDC).
  • The inflation rate of drugs most commonly used by Medicare beneficiaries doubled from 2005 to 2009—an increase in annual costs of therapy of $1,000. (Source: AARP, “AARP Rx price watch report: tracking retail price changes for widely used prescription drugs,” March 2012)
    Note: PhRMA expressed concerns with the report, citing drug costs have been growing at historically low rates. In 2010, drug spending grew by the slowest rate of 1.2 percent. AARP’s analysis only included the price of brand medicines even when generic versions of the drugs were available, which patients commonly use and may result in long-term savings. (Source: PhRMA, “PhRMA Statement on AARP Drug Pricing Report,” March 6, 2012)
  • In 2012, the annual cost of caring for Alzheimer’s disease will reach $200 billion and $1.1 trillion by 2050. (Source: Alzheimer’s Association, “2012 Alzheimer’s Disease Facts and Figures,” 2012)
  • 80 percent of Americans indicate they find it difficult to get nine servings of fruit and vegetables daily, 60 percent find it difficult to reach the goal of 150 minutes of exercise per week, and 25 percent are not regularly practicing healthy oral care habits (e.g., brushing and rinsing twice per day and flossing at least once per day). (Source: American Heart Association, “Survey reports that just over 10 percent of American adults regularly practice healthy habits – lack of time is a culprit,” March 5, 2012)
  • 1,200 people die daily from tobacco-related illnesses. (Source: Office of the Surgeon General, “Preventing Tobacco Use Among Youth and Young Adults,” 2012)
  • 10 percent of adult Americans (23.5 million people) consider themselves to be in recovery from drug or alcohol abuse. More men than women reported being in recovery (12 percent vs. 7 percent). (Source: Opinion Research Corporation survey of 2528 adults sponsored by conducted Partnership at in 2011 among a nationally representative sample of 1,272 men and 1,254 women age 18 years and older)
  • Mobile technology in health care: 7.4 billion mobile subscriptions by 2015. (Source: Boston Telenor Group)
  • Employees who participated in a health-improvement program had fewer medical costs than non-participants, according to a new report in the American Journal of Health Promotion. In addition, three-year employer savings outpaced the program costs with a return on investment of almost $3 to $1. (Source: American Journal of Health Promotion).
National health reform: What now?




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 today.

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