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Health Care Reform Memo: June 27, 2011

Deloitte Center for Health Solutions publication

The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.

My take 

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

In the Affordable Care Act (ACA), the employer pay-or-play provision (Section 1513) is key. Per ACA, an employer, with 50 or more full-time employees that does not provide coverage compliant with federal benefit and affordability standards and has at least one full-time employee receiving a premium assistance tax credit (for coverage through the exchange), must pay the lesser of $3,000 for each of those employees receiving a tax credit or $2,000 each full-time employee. This provision essentially seeks parity between the 63 percent of companies that provide coverage and those that do not provide coverage, and in the process attempts to reduce the number of uninsured since 70 percent of the uninsured live in a household with at least one full-time worker and 75 percent live with a part-time worker.

In the past two weeks, two studies forecasting the likelihood of a mass exit from employer sponsored insurance (ESI) were released with substantially different conclusions. One study suggested that as many as 30 percent of employers would drop health coverage for employees and thereby flooding state-run health exchanges with new enrollees. The other study concluded the impact would be nominal. Not surprising, each study used a different methodology and assumptions in its design.

Whether smaller employers drop coverage after 2014 when exchanges begin operating or after 2016 when larger companies have the option is speculative. The Congressional Budget Office (CBO) and five other organizations have weighed in on the studies (see table below) and arrived at different conclusions. But based on our discussions with employers, the common surmise is this:

Employers might drop coverage if health exchanges are up and operating successfully, if the company’s access to a healthy, productive workforce is not adversely impaired, and if dropping employer sponsored insurance does not put an employer at a competitive disadvantage to their direct competitors. We’ve heard the phrase “I’d be a fast second” used by employers who would consider an exit from ESI simply because of math: the loss of the tax deduction for ESI plus the penalty are far less costly to a company than paying 75 percent of health premiums for employees. It’s understandable. The notion of employer-sponsored coverage deserves a second look; consider:

In the U.S., 85 percent of us have health insurance of some type; 60 percent of us through one of the 27 million employers, nine percent buy directly, and 31 percent through a government program like Medicare, Medicaid, Children’s Health Insurance Program (CHIP), or military health care.

Employers do not have to provide insurance: in fact, two in five don’t. And if employees in companies that do not provide coverage do not purchase coverage independently, their costs are passed through in hidden taxes paid by those with coverage. Ironically, employers that provide ESI end up subsidizing companies that do not. And to complicate matters, employers and self-employed individuals are able to deduct health insurance expenses, while individuals who purchase policies on their own are not. So the premise and construct of ESI is worth fresh re-consideration and a major element in the ACA.

Background: ESI dates back to 1850 when the Franklin Health Assurance Company of Massachusetts offered insurance against injuries arising from railroad and steamboat accidents. By 1866, 60 health insurance companies offered accident insurance to employers. Disability coverage followed in 1911 to cover lost wages, and in 1929, the Dallas teachers were provided hospitalization insurance leading to the birth of the Blue Cross Association plans in most states.

The wage controls imposed in the post-WWII era sparked the acceleration of ESI. Then, in 1965, President Lyndon B. Johnson implemented Medicare and Medicaid in his Great Society program, offering insurance coverage similar in design to protect seniors and the poor from health costs. Since President Harry S. Truman’s efforts to reform ESI in 1945, employer based coverage has been a central feature in the ongoing debate about health reform. Efforts to shift financial responsibility to employees, transition from defined benefit to defined contribution and contract with high-performing providers based on value are strategies widely used by employers to control costs without compromising care. But despite these efforts, health costs for employers have continued to soar. In 2012, they’ll likely exceed six percent—well above the gross domestic product (GDP) (at 2.7 to 2.9 percent) and well above overall labor costs increases (two to four percent).

The bottom line: employers have mixed feelings about ESI. They understand its value in helping recruit and retain a workforce, but struggle with costs that put them at a competitive disadvantage in a global economy. They don’t know how health exchanges will play out, or whether dropping coverage altogether will hurt or help their company or industry long-term. They know their employees need tools to help navigate the system regardless of their ESI exit calculus, and they know health reform is a work in progress.

So amidst the clamor about studies of the ESI exit, the real question about employer coverage is this: long-term, does ESI contribute to a health care system that’s efficient and effective or not? That’s after all what most of health reform is about.

Paul Keckely

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

Recent studies about the potential for employer exit from health insurance as a result of ACA

Study Sponsor Methodology Conclusions Citation
CBO Micro-simulation model which based off U.S. Census Bureau Survey of Income and Program Participation (SIPP). Model builds on empirical economic research and historical behavior of employers. Assumes individual mandate, employer penalties, and tax credits for small employers will lead to uptake and lower wage employees and small businesses may drop ESI due to subsidies and Medicaid eligibility. Minor changes to ESI market; market would decrease by three million in 2014.

Newly ESI eligible: about seven to eight million

Decrease in ESI: in 2019, about six to seven million who would have been offered ESI under prior law will not be offered ESI. One to two million people who will be offered ESI will obtain coverage in exchanges.

CBO, Analysis of the Major Health Care Legislation Enacted in March 2010, March 30, 2011.

Methodology: “The U.S. Congressional Budget Office’s Analysis of Employer Responses to the Patient Protection and Affordable Care Act of 2010,” July 13, 2011.

The Lewin Group Lewin Health Benefits Simulation Model (HBSM) model based on the Agency for Healthcare Quality and Research’s (AHRQs) Medical Expenditures Panel Survey (MEPS). Base scenario includes employer database based on a representative sample of employers that was statistically enhanced to provide detailed income and demographic information.

Assumes individual mandate, employer penalties, and tax credits for small employers will lead to uptake and ESI will decrease if employees are eligible for Medicaid or exchange subsidies.
Minor changes to ESI market; market would decrease by 2.8 million in 2014.

Newly ESI eligible: about 14.4 million

Decrease in ESI: about 17.2 million are in firms that will drop coverage once employees become eligible for subsidized coverage in the exchange.

The Lewin Group, “Patient Protection and Affordable Care Act (PPACA): Long Term Costs for Governments, Employers, Families and Providers,” June 8, 2010.

Methodology: The Lewin Group, “Summary Documentation of the Health Benefits Simulation Model (HBSM),” September 22, 2010.


Mercer Survey of 2,800 employers ranging in size from ten to 10,000 employees.

Exact wording of questions, participant screening criteria, and cohort confidence intervals not publicly available.
Changes in market vary by firm size

ESI decrease for large firms: six percent of all employers with 500 or more employees and three percent of those with 10,000 or more are likely to terminate health plans and have employees seek coverage in the individual market after 2014.

ESI decrease for small firms: a fifth of small employers (with ten to 499 employees) are likely to terminate health plans, especially those with low-paid workers and high turnover (e.g. retailers).
Mercer, “Few employers planning to drop health plans after reform is in place, survey finds,” November 9, 2010.
McKinsey & Company Commissioned survey of 1,329 U.S. private sector employers.
Respondents ranged in size from under 20 to 10,000 employees and represent a cross section of employer size segments, industries, and geographies.
Thirty percent of respondents who said their companies offered ESI said they would “definitely” or “probably” drop coverage after 2014.

McKinsey & Company, “How U.S. health care reform will affect employee benefits”, June 2011.

Methodology: “Details regarding the survey methodology”, June 2011.


RAND RAND-developed Comprehensive Assessment of Reform Efforts (COMPARE) microsimulation model. Firms in model based on data from 2006 Kaiser Family Foundation and Health Research and Educational Trust (Kaiser/HRET) Employer Health Benefits Annual Survey. Matched firms in the Kaiser/HRET data to workers in the SIPP based on census region, firm size, industry, and whether or not the firm offers health insurance.

Modeled a baseline scenario designed to reflect ACA but excluding provisions related to tax credits for small businesses. Assumes ACA will take two years to achieve full impact.
By 2016, employer coverage offer rates would increase:

Ten or few workers: from 53 to 77 percent

11 to 25 workers: from 71 to 90 percent

26 to 100 workers: from 90 percent to nearly 100 percent

More than 100 workers: from 93 percent to close to 100 percent
RAND, “Establishing State Health Insurance Exchanges: Implications for Health Insurance Enrollment, Spending, and Small Businesses”, 2010.

Implementation update

HHS announces $500 million in ACA funding for “Hospital Engagement Contractors”

Wednesday, the U.S. Department of Health and Human Services (HHS) announced up to $500 million in ACA funding for the Partnership for Patients initiative aimed at reducing harm in hospital settings by 40 percent and reducing hospital readmissions by 20 percent over three years.

Note: ACA funding for the Partnership is $1 billion with CBO estimates of $35 billion dollars saved over ten years.

CMS report: 5.5 million Medicare beneficiaries used ACA-provided prevention benefits

Monday, the Centers for Medicare & Medicaid Services (CMS) released data indicating that five million individuals, or about 16 percent, enrolled in traditional fee-for-service (FFS) Medicare used at least one of the recommended preventive services provided for free through ACA (Section 4103).

Proposed bill would repeal employee health plan auto-enrollment requirement

Representative Frank Guinta (R-NH) introduced H.R. 2206, the Auto Enroll Repeal Act of 2011, to repeal ACA Section 1511 that requires employers with more than 200 employees to automatically enroll new full-time employees into one of the company’s health care plans while continuing the enrollment of current full-time employees.

Provider comments on ACO advanced payment initiative

Last week, the American Hospital Association (AHA) and American Medical Association (AMA) told CMS that its accountable care organization (ACO) Advanced Payment Initiative could be more attractive to providers if a portion of future shared savings could be distributed up front and funding for start-up costs made available. AMA also recommended that loans be forgiven if the savings program does not continue, or if a physician practice or ACO is forced to withdraw from the program because new requirements make it financially impossible for them to continue.

Legislative update

Bill to allow federal government to purchase drugs directly from manufacturers introduced

Monday Representatives Peter Welch (D-VT) and Jo Ann Emerson (R-MO) introduced the Medicare Prescription Drug Price Negotiation Act of 2011, which would permit HHS to negotiate Part D drug prices with pharmaceutical manufacturers. Estimated savings are $156 billion over ten years according to the bill’s sponsors.

Nurse practitioners, physician assistants, and certified nurse midwives scope of practice expansion to home care services

Tuesday, Representatives Allyson Schwartz (D-PA) and Greg Walden (R-OR) introduced legislation to allow physician assistants (PAs), nurse practitioners (NPs), nurse specialists and certified nurse midwives to order home health services for Medicare enrollees. Currently, NPs and PAs can order nursing home but not home care services.

Medicare and Medicaid fraud: bill would strengthen surveillance and multi-state collaboration

Tuesday, Senators Tom Carper (D-DE) and Tom Coburn (R-OK) introduced the Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars (FAST) Act (S. 1251) with the following eight provisions to fight fraud, waste, and abuse:

  • Prohibit and penalize fraudulent sale, purchase, and distribution of Medicare provider and beneficiary data.
  • Improve security of provider database and strengthen verification system to reduce physician identity theft.
  • Encourage states to begin prescription drug monitoring programs.
  • Require CMS to check reimbursements before paying providers to phase out “pay and chase”.
  • Encourage seniors to report abuse through Senior Medicare Patrol.
  • Use recovery audit contractor (RAC) improper payment data to prevent further overpayments.
  • Require CMS, U.S. Department of Justice (DOJ), and state Medicaid offices to share fraud data
  • Incentivize Medicare contractors to improve payment accuracy.

State watch

Massachusetts AG report: global payments alone will not reduce health costs

“A shift to global payments is unlikely to control rising costs without also addressing historic health care provider price disparities and encouraging consumers to make prudent health care purchasing decisions” according to a report released Wednesday by Massachusetts Attorney General (AG) Martha Coakley. The report makes the following six recommendations to promote value-based purchasing and ensure consumer access to high quality, affordable health care:

  • Promote tiered and limited network products to increase value-based purchasing decisions.
  • Reduce health care price distortions through temporary statutory restrictions until tiered and limited network products and commercial market transparency can improve market function.
  • Encourage consumers to select a primary care provider who can assist consumers in coordinating care based on each consumer’s needs and best interests.
  • Promote coordination of patient care through primary care providers by recognizing the need to improve funding of care coordination, including the infrastructure necessary to coordinate care, and by giving providers timely access to relevant patient data regardless of their size or payment methodology.
  • Consider steps to improve the use of the all payer claims database (APCD) by both developing reports for providers and the public to guide development of patient care coordination improvements and system accountability and increasing the standardization of claim level submissions by reducing differences in how payers report payment level information
  • Develop appropriate regulations, solvency standards, and oversight for providers who contract to manage the risk of insured and self-insured populations.

State legislative activity

  • Thursday, New Jersey legislators approved a broad rollback in benefits for three-quarters of a million state workers and retirees.
  • Lawmakers in Louisiana approved legislation that would require the state’s Department of Health and Hospitals to provide detailed annual reports on a new Medicaid coordinated care program that serves 800,000 enrollees.
  • Michigan Governor Rick Snyder (R) signed the state’s 2012 budget which includes a one percent tax on all health insurance claims, excluding Medicare, federal, and vision claims, to help fund Medicaid. The tax replaces a six percent tax that state Medicaid health maintenance organizations (HMOs) currently pay.
  • Wednesday, the Ohio House of Representatives rejected a resolution that would have let voters decide whether the state should opt out of ACA requirements. Lawmakers voted 59-39 along party lines.
  • Oregon Governor John Kitzhaber (R) signed into law a bill to establish the state’s health insurance exchange.
  • Texas Governor Rick Perry (R) vetoed a bill that would have required state agencies to report on health reform implementation actions. The bill had passed the House 139-0 and the Senate 27-4 on May 29.

Industry news: consumerism in health care

Consumer view of the U.S. system: underperforming, complicated, and inefficient

U.S. adults believe the U.S. system needs improvement. The following includes key highlights from the Deloitte Center for Health Solutions 2011 survey of 15,000 adults in 12 countries including 4,000 U.S. adults released June 21:

  • Twenty-two percent give the U.S. system an A/B grade vs. 37 percent who give it a D/F. The most favorable ratings are from those enrolled in Medicare and Military health programs. Among the uninsured, ten percent give it an A/B vs. 54 percent a D/F.
  • The economic downturn has adversely impacted 72 percent of consumers who reduced purchases for health care (i.e. over the counter medications, co-payments, and premiums). The hardest hit: those with individual insurance plans (high deductible plans).
  • Twenty-six percent of adults feel financially prepared to handle health costs: highest for Military (39 percent) and Medicare (30 percent) enrollees, lowest for Medicaid (14 percent).
  • Ninety-one percent of adults with some form of health insurance feel adequately/well-insured: Military health enrollees highest (97 percent), Medicaid enrollees lowest (79 percent).
  • Of those with employer sponsored coverage, 23 percent say they could find a better insurance plan than what they get through their employer, and 64 percent say their company’s insurance program is the reason they stay with their employer (two percent changed jobs to get better health insurance and one percent stayed in their job longer to keep coverage).

To access the 2011 Survey of Health Care Consumers Global Report, please click here.

CHPA: self-care could save $5 billion annually

Monday, the Consumer Healthcare Products Association (CHPA) released a report finding that U.S. consumers could avoid approximately 50 million in unnecessary visits to primary care physicians and $5.26 billion per year with increased self-care, including use of over-the-counter (OTC) medicines. The study also found that 89 percent of consumers believe OTC medicines are an important part of their overall family healthcare.

Social security solvency

The American Association of Retired Persons (AARP) announced last week it was open to changes in the program that would extend its solvency by increasing the wage cap to bring more revenue into the program. It does not favor cuts to benefits nor an increase in the age of eligibility. Note: AARP has 36 million members and is a major proponent for policies protective of senior’s interests.

Industry news: technology enabled health care

2011 Medicare EHR Incentive Program update

July 3, 2011 is the last day that eligible hospitals can begin their 90-day reporting period to demonstrate meaningful use for the 2011 Medicare Electronic Health Records (EHR) Incentive Program which provides bonus payment to eligible providers for demonstrating “meaningful use” of electronic health records. Other upcoming dates include:

  • September 30, 2011: reporting year ends for eligible hospitals and critical access hospitals (CAHs) for 2011 Medicare EHR program
  • October 3, 2011: last day for eligible professionals to begin their 90-day reporting period for calendar year (CY) 2011 for Medicare EHR Incentive Program
  • November 30, 2011: last day for eligible hospitals and critical access hospitals to register and attest to receive an incentive payment for fiscal year (FY) 2011
  • December 31, 2011: reporting year ends for eligible professionals
  • February 29, 2012: last day for eligible professionals to register and attest to receive an incentive payment for CY 2011

NLM launches tool to link patient portals and EHRs to consumer health information

The National Institutes of Health (NIH) National Library of Medicine (NLM), the world’s largest medical library launched MedlinePlus Connect, a free web tool that allows health organizations and providers to link patient portals and EHR systems to its consumer health information website Individuals using portals or EHRs that have implemented MedlinePlus Connect can access health information on MedlinePlus that is directly related to their diagnoses, medications, and lab tests. Also, MedlinePlus Connect may help providers meet one of the criteria for meaningful use of certified EHR technology since MedlinePlus Connect helps EHRs identify patient-specific education resources.

Ambulatory EHR market: $3 billion

CapSite projects a $3 billion market for ambulatory practice management and EHR systems through 2013. Half of the surveyed practices are independent and half are hospital-owned. Sixty-three percent of responding practices expect to replace their current practice management (PM) system with an integrated PM/EHR. (Source: Capsite “U.S. Ambulatory Electronic Health Record and Practice Management Study”)

Supreme Court strikes down prescription drug data-mining regulation

Thursday, in a six to three decision, the U.S. Supreme Court ruled that Vermont's law that disallowed pharmacies from selling physician prescribing information to drug companies violated constitutional protections on free speech even though lawmakers drafted it with the goal of preventing pharmaceutical companies from using direct marketing to convince doctors to prescribe more-costly drugs to patients. The majority opinion written by Justice Anthony Kennedy concluded that “[s]peech in aid of pharmaceutical marketing…is a form of expression protected by the Free Speech Clause of the First Amendment.”

Industry news: delivery system integration, efficiency and effectiveness

AMA annual meeting highlights: support for individual mandate and health plan report cards

At its annual House of Delegates meeting last week in Chicago, AMA voted 326 to 165 to continue support of the individual mandate. Delegates also approved policy positions repealing the Independent Payment Advisory Board (IPAB) (ACA Section 3401) and the non-discrimination in health care provision for non-physician providers (ACA Section 1001);enacting medical liability reform, antitrust reform, and a long-term solution to the sustainable growth rate (SGR), which determines Medicare payment rates; and increasing use of health savings accounts (HSAs). AMA also released its fourth annual insurer’s report card, finding an average claims-processing error rate of 19.3 percent, an increase of two percent from last year. The errors represent an extra 3.6 million in erroneous claims payments accounting for an estimated $1.5 billion in unnecessary administrative costs.

AAMC report: medical student enrollment trends

The American Association of Medical Colleges (AAMC) released results of its 2010 survey of enrollment trends for 125 Liaison Committee on Medical Education (LCME)-accredited medical schools. Highlights include:

  • Medical school enrollment increased 13.2 percent as of the 2010-11 academic year and is projected to increase by 27.6 percent by 2015.
  • First-year enrollment for doctors of medicine (M.D.) and doctors of osteopathic medicine (D.O.) in 2015-16 is projected to be 26,403, 35 percent above the 2002-03 enrollment.
  • More schools in 2010 (52 percent) than in 2009 (39 percent) were concerned with their ability to maintain or increase enrollment due to economic considerations.
  • There is greater concern with the supply of qualified primary care preceptors compared to specialty care preceptors (78 percent and 54 percent).
  • Seventy-five percent of schools reported instituting or considering initiatives to encourage primary care.

Industry news: evidence-based care

The NPC report: employers support CER

Tuesday, the National Pharmaceutical Council (NPC) released a white paper on employer perspectives on comparative effectiveness research (CER). Key findings include:

  • Seventy-seven percent of employers were at least “somewhat familiar” with a presented definition of CER; 13 percent “not at all familiar”.
  • Fifty-two percent expect CER to have a “strong” or “very strong” potential to improve health benefits decisions.
  • Fifty-three percent think it is “important” or “very important” to include productivity outcomes like absence, disability, and work performance in CER.
  • Seventy-six percent indicate the Patient-Centered Outcomes Research Institute (PCORI) will be a “trusted source” of CER information.

Industry news: federal oversight, coordination and collaboration

GAO report: FDA should enhance its oversight of medical device recalls

Wednesday, the Senate Special Committee on Aging released a Government Accountability Office (GAO) report finding that the Food and Drug Administration (FDA) should “routinely assess information on device recalls, develop enhanced procedures and criteria for assessing the effectiveness of recalls, and document the agency’s basis for terminating individual recalls” to improve oversight of medical device recalls.

Note: from 2005 through 2009, firms initiated 3,510 medical device recalls, an average of just over 700 annually. The FDA classified the majority of recalls, almost 83 percent, as either class II (devices with a moderate health risk) or that the probability of serious adverse health consequences was remote.

Post market surveillance: FDA

Silicone breast implants approved in 2006 have not been linked to increased cancer risk, reproductive problems, and rheumatoid arthritis per the FDA last week.

Note: The FDA banned silicone implants in 1992 but allowed market re-entry in 2006. In the U.S., 400,000 women have the procedure annually.

New FDA plan to police food imports

Monday, the FDA announced new procedures to increase food importation surveillance. The volume of shipments into the U.S. has increased 15 percent annually for the past decade to 24 million this year. The focus will be inspections in foreign ports and stiffened international punitive food safety laws but no additional resources for inspections in the U.S.

Industry news: health insurance transformation

White House announces new appeals process for health plan enrollee denial of coverage

Wednesday, HHS Secretary Sebelius announced updated procedures whereby a health plan enrollee may appeal a denial in a state where a process is not available to consumers. The new rule stipulates that an enrollee may appeal if the denial is based on medical judgment but not if based on a mistaken diagnosis code or disagreement about use of out of network providers. It also gives patients two months to file an appeal instead of four months, the previous standard.

Amended interim final rule on insurance appeals provides additional state flexibility

Thursday, the U.S. Departments of HHS, Labor (DOL), and the Treasury (DOT) published an amended interim final rule implementing the requirement that group and individual health insurance plans adopt standardized processes for internal appeals and external reviews. Under the rule, consumers have the right to information about why a claim or coverage has been denied, to appeal to the insurance company if coverage was rescinded, and to an independent third-party for review of the insurer’s decision (also known as an external review).

The amended rule extends the transition period for state external review processes to January 1, 2012 in order to give states an opportunity to continue to implement the16 minimum consumer protections published in the previous July 2010 interim final rule. The protections are based on the Uniform Health Carrier External Review Model Act written by the National Association of Insurance Commissioners (NAIC) and if provided by a state external review process, will apply in lieu of a federal external review process.

Industry news: correlation of health cost containment and economic recovery

Federal forecast for weaker recovery

Wednesday, the Federal Reserve Bank Board of Governors voted to hold the line on interest rates based on its assessment that the GDP would grow at a rate of 2.7 to 2.9 percent in 2011 versus earlier forecasts of three percent. In 2012, the Federal Reserve Bank forecasts 3.3 to 3.7 percent growth compared to 3.5 to 4.2 percent previously forecasted with unemployment falling from 9.1 percent today to 7.8 to 8.2 percent.

Industry news: growth and innovation

Business analytic tool applied to HIV/AIDS

Clinical researchers at the Ragon Institute are touting the use of random-matrix theory to identify and target the mutability of the HIV virus by charting the paths of its amino acids. The research should lead to predicting which HIV/AIDS patients do not require medication for treatment. Previously, the mathematic model had been used to find the root causes of stock market volatility. (Source: “New Math in HIV Fight”, Wall Street Journal, June 21, 2011)


“Moving forward means bulldogging the regulatory process to assure that the provisions of the Affordable Care Act are implemented in ways that benefit physicians and their patients… We respect that people of equal good will, of equal intelligence, in equal possession of the facts and of equal loyalty to a group or position may form far different opinions about the course we take. But to the vast majority of the public, our patients, and the press, and in government, the AMA speaks for doctors in this debate.”

 – Cecil Wilson, MD, President, AMA House of Delegates annual meeting, June 18, 2011

“When it comes to Medicare, the bad news for Republicans is that they clearly haven’t convinced people that Rep. Paul Ryan’s controversial plan to change how it works is a good idea. For Democrats, meanwhile, the bad news is that very few people think the status quo on Medicare is good enough either. The bad news for all of us is that the temptation to resort to demagoguery rather than solutions to Medicare’s problems remains alive and well.”

 – “In Battle over Medicare, New Prescription Needed,” Wall Street Journal, June 21, 2011

“By sitting down and discussing critical elements of the health reform law together, it is our hope the President will begin to understand that this law evokes an expansive new bureaucracy put directly between patients and the care recommended by their doctors.”

 – Guest Editorial by Representatives Phil Roe (R-TN), Scott DesJarlais (R-TN), and Larry Bucshon (R-IN) (GOP Doctors’ Caucus), “GOP Doctors Eager to Talk Health Care with Obama,” Rollcall, June 21, 2011

“Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The CBO has estimated that only seven percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized exchange policies in 2014. However, our early 2011 survey of more than 1300 employers…found that reform will provoke a much greater response. Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014. Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.”

 – “How Health U.S. Health Care Reform will affect Employee Benefits,” McKinsey Quarterly, June 15, 2011

“The gap between the U.S. and the ten countries in the world that have the best life expectancies—places like Australia, Canada, Sweden and Japan—is widening. There’s really no reason we can't keep pace with those other countries. We spend more on health care. We have the best health research in the world. That was a real shock.”

 – Dr. Christopher Murray, Population Health Metrics, June 15, 2011

“The ACO concept is well meaning, and we hope it works, but we suspect it will go the way of diagnostic-related groups, HMOs, the sustainable growth rate, and every other top-down government plan to cut health spending since the 1970s. We also hope ACOs work because if they don’t, the liberal fallback to cut costs are harsher price controls and the political rationing of care. Seniors will wish they had Paul Ryan’s choices.”

 – “The Accountable Care Fiasco,” Wall Street Journal, June 20, 2011

“Despite whispers, no big changes in health care till after 2014...the year state health exchanges open. Companies will see how they work before making major moves. To avoid alienating workers, they’ll proceed with caution. Until then, expect more changes around the margins: higher deductibles, increased copays and a continued emphasis on wellness and prevention programs. One thing to watch: will businesses opt out of health coverage? Paying a penalty for not covering workers would be less costly than providing coverage. No one will want to be the first to end coverage, but if one firm quits, others will follow. If nothing else, key changes will come before an excise tax starts in 2018. The government plans a 40 percent levy on insurance benefits that it deems excessive.”

 – The Kiplinger Letter, June 17, 2011

“More than a year after the Affordable Care Act became law, there is still unrest in the house of medicine. Across the country, many physicians feel under assault, burdened by administrative and technology requirements, confused by new delivery models and terrified at the prospect of increasing patient loads without sufficient support…The Affordable Care Act achieved historic victories on behalf of America's patients. It expanded coverage to millions, and it eliminated some of the worst abuses of the health insurance system. Now, Congress must address the issues that threaten physicians.”

 – Dr. Peter Carmel, new President, AMA in inaugural address Tuesday, June 21, 2011 at the AMA House of Delegates annual meeting

“It can be difficult to distinguish between for-profits and not for profits. Both have to treat the same populations in emergency situations. With few exceptions, both provide a sliding scale of payments to help people without insurance pay for their care. Both must make a margin to fund capital improvements and rising labor costs. But right now, requirements for maintaining at least federal nonprofit status are generous. Hospitals are required to file forms with the IRS that detail their community benefit spending, but no arbiter at that or any other government agency makes taxation decisions based on those filings.”

 – “Non Profit Hospitals: Will Margin Change Mean Mission Change?,” HealthLeaders, June 2011

“There is clearly a tremendous amount of uncertainty about how employers and employees will respond to PPACA and the Reconciliation Act, and there is little direct evidence on the issue up to now. Models of the insurance system are based on observed differences in behavior in response to more modest changes in incentives, but last year’s legislation is much more sweeping in its nature.”

 – CBO, Analysis of the Major Health Care Legislation Enacted in March 2010, March 30, 2011

Fact file: special focus on insurance coverage

  • Average per capita costs of health care services covered by commercial coverage and Medicare increased 5.77 percent from March 2010 to March 2011— the lowest annual increase in six years. Medicare increased 2.78 percent and commercial coverage increased 7.57 percent. (Source: Standard and Poor’s Healthcare Economic Composite Index)
  • U.S. health care prices increased 0.1 percent from April 2011 to May 2011; selling prices overall increased from May 2010 to 2011: medical and diagnostic laboratories (+0.7 percent), nursing care facilities (+ 0.3 percent), residential mental retardation facilities (-0.7 percent), hospital prices (+1.6 percent), physician office prices (+1.7 percent), nursing care facility prices (+2.9 percent), home health care services (+0.3 percent), and medical and diagnostic laboratories (+0.6 percent). (Source: Bureau of Labor Statistics Producer Price Indices)
  • As of January 2011, more than 11.4 million Americans were covered by HSA-eligible high deductible health plans (HDHPs), a 14 percent increase from the prior year. The fastest growing market for HSA plans was large-group coverage (+26 percent) followed by individual market coverage (+15 percent). In the individual market, 2.4 million people are enrolled in HSA plans, 2.8 million are enrolled in HSA/HDHP coverage in the small-group market, and 6.3 million are covered in the large-group market. Forty-nine percent of all HSA/HDHP enrollees in the individual market (including dependents) were age 40 or over and 51 percent were under age 40. (Source: America’s Health Insurance Plans [AHIP] 2011 Census of the Health Savings Account)
  • Dual eligibles now constitute 39 percent of Medicaid spending. (Source: CMS)
  • Thirty-three percent of employees are seriously considering leaving their jobs, up from 29 percent five years ago. (Source: Mercer)
  • Health insurers have an average claims-processing error rate of 19.3 percent, up by 3.6 million claims, or two percent points from last year. The errors added an estimated $1.5 billion in unneeded administrative costs. (Source: AMA Study June 20, AMA House of Delegates, Chicago)
  • Between December 2007 and August 2009, employment-based health coverage decreased from 60.4 percent to 55.9 percent. By the end of the U.S. recession (December 2009) coverage was up to 56.6 percent. (Source: Employee Benefit Research Institute)
  • In 2009, 33.6 percent of employers with fewer than 10 workers offered health insurance coverage, compared to 99.2 percent of those with 1,000 or more workers. Health insurance offer rates for all employers have decreased from 59.3 percent in 2000 to 55.0 percent in 2009. (Source: Robert Wood Johnson Foundation)
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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