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Health Care Reform Memo:
April 9, 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: taxes, the federal deficit and health expenditure in the U.S.

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

This week, many Americans will participate in the time-honored tradition of filing their personal income taxes, due April 17th this year since the 15th falls on a Sunday, and the 16th is Emancipation Day, a holiday observed in DC.

It’s not pleasant for many: paying federal and state income taxes is a bit like regular doctor and dental visits—you really have no choice but it’s not something you get excited to do.

This year, the federal government will take in about $2.4 trillion and spend about $3.6 trillion—the fourth year in a row of the deficit exceeding $1 trillion. And spending for health care programs—Medicare, Medicaid, Children’s Health Insurance Program (CHIP), military health, federal employee coverage—will be almost one-fourth of the government’s outlays and a third of all government revenues from taxes paid by individuals and companies.

National Health Expenditure Projections

Source of data: National Health Expenditure Projections,

Note: the Center for Medicare & Medicaid Services (CMS) does not provide federal budget projections for 2015 and 2020.

Health care is the biggest single category in government spending. And its growth will continue as 10,000 Baby Boomers become Medicare eligible each day, and the cost of medical technology (medical inflation index) exceeds the average consumer price index by more than a third each year.

Most Americans do not view the health system’s performance favorably: in our consumer surveys since 2008, the majority rate it B- or worse, and only those in Medicare and military health programs give it higher scores. It is viewed as wasteful and inefficient; high tech, low touch. And it’s expensive, consuming 19 percent of discretionary spending in the average household… and that’s before taxes.

I do not know where all the tax dollars go. I know defense expenditures at more than $800 billion keep us safe, but I have no concept of whether that’s too much or too little. The same can be said of health care: I know it’s a big number getting bigger every day, but I can’t say for sure that it’s the right number. Countries that spend 30 percent less get comparable outcomes, even better in some instances. But in each of these, aging and economic downturns are pressing their leaders to improve the efficiency and effectiveness of their health systems.

So as I and others pay our taxes this week, I suspect we’ll not pause to reflect on the direct relationship between those taxes and the health system we enjoy. After all, it serves many who don’t pay those taxes, and it funds 70 percent of the research and development for drugs and devices that benefit taxpayers in other countries of the world.

We all pay for the health system, but some dramatically more than others, especially individuals and companies that pay federal and state income taxes. What comes to the public coffers goes out to everyone—bridges, roads, police and fire protection, schools, and health care.

I hope this week as taxes are paid, a few pundits observe that the health system, though imperfect and dramatically needing transformation, is increasingly dependent on taxpayers in addition to those with private insurance to keep it afloat. And taxpayers have a right to know their dollars in health care are appropriately invested and used wisely by the government.

Paul Keckely

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

Implementation update

Supreme Court judicial process: how it works

Last week, the U.S. Supreme Court heard oral argument on the Affordable Care Act (ACA) addressing four major legal challenges to the law. As suspense builds awaiting the Court’s ruling in late June, some background on the mechanics of the Court’s operation as laid out in Article III of the Constitution and the Judiciary Act of 1789:

How are justices appointed?

  • Justices are appointed for lifetime terms by the President of the United States and must be confirmed by the Senate. Nominees are vetted first in the Senate Judiciary Committee and recommended to the full Senate. A widely used rule of thumb is that a nominee must be thought to win at least 70 Senate votes to be considered.
  • There are nine justices: one Chief Justice and eight associate justices.
  • A justice may retain his/her position for life, unless he/she resigns, retires, or is impeached and convicted by Congress.
  • Each justice is assigned to be the “Circuit Justice” for one or more of the 13 U.S. Circuit Courts of Appeals.

Which cases are heard?

  • The Court’s term starts the first Monday in October and final opinions (i.e., decisions) of the term’s cases are issued at end of June or early July of the following year.
  • 8,000-10,000 petitions go on the Court's docket each term; only 1 percent (85-100 cases) are heard by the Court in each term, based on deliberation by the justices.
  • Cases must address one of the following:
    • The constitutionality of a law
    • The laws and treaties of the U.S.
    • Issues with ambassadors and public ministers
    • Disputes between two or more states

What’s the process for arriving at a ruling?

  • Justices hold a private conference in the days following oral argument to discuss and vote on the issues: applicability of Anti-Injunction Act (AIA) to ACA, constitutionality of the individual mandate, whether the mandate can be severed from the rest of ACA, and whether the Medicaid coverage expansion coerces states to expand their Medicaid programs.
  • Five votes are needed for a majority ruling.
  • The associate justices will select or the Chief Justice will assign the writing of the Court’s judgment on each issue.
  • The court doesn’t announce in advance the exact date it will release its opinion.

What are some of the possible outcomes of the ACA challenges?

  1. The entire ACA is upheld and implementation moves forward.
  2. The individual mandate is ruled unconstitutional, but the rest of the law upheld; if this is the ruling, it will be up to Congress to revise the law and key federal agencies to issue guidance and rules. In this scenario, Congress might remand the mandate to states to enact separate legislation intended to achieve increased participation in the insurance market similar to the Massachusetts mandate or allow waivers if states develop alternative incentives.
  3. The entire law is ruled unconstitutional and struck down. All related rules could potentially be invalidated. Congress would likely start fresh, with popular provisions of ACA (e.g., insurance industry oversight, health exchanges) addressed in new legislation, and others remanded to states.

Note: the Supreme Court decision is final, only the Supreme Court can overturn its case, which it has done ten times in its history. Congress may also amend the Constitution, which would impact Supreme Court cases.

Texas Circuit Court considers physician ownership constraint in ACA

Late last month, the U.S. Court of Appeals for the Fifth Circuit in Houston heard oral argument on the constitutionality of ACA Section 6001, which prohibits physician-owned hospitals without a Medicare provider agreement prior to December 31, 2010 to participate in Medicare. During oral argument, Justice Jerry Smith, asked the U.S. Department of Justice (DOJ) to provide a letter to him explaining the DOJ’s position on judicial review, given statements by senior administration officials discouraging “judicial activism” by the Supreme Court.

In a three-page letter sent Thursday to the court, Attorney General Eric Holder affirmed that “The longstanding, historical position of the United States regarding judicial review of the constitutionality of federal legislation has not changed and was accurately stated by counsel for the government at oral argument in this case a few days ago. The Department has not in this litigation [Physician Hospitals of America v. Sebelius, No. 11-4063 1], nor in any other litigation of which I am aware, ever asked this or any other Court to reconsider or limit long-established precedent concerning judicial review of the constitutionality of federal legislation.” Holder also states that the President’s comments are “fully consistent” with principles (See President Obama’s comment in “Quotable”).

Note: the issue in question in Texas is the right of physicians to own and operate hospitals to which they refer patients. In ACA, limitations are placed on their ownership after January 2011.

CMS releases 2013 payment rule for Medicare Advantage and Prescription drug plans

Monday, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) released the 2013 Final Rule and Rate Announcement/Final Call Letter for Medicare Advantage (MA, Part C) and Medicare Prescription Drug (Part D) plans per ACA (Sections 1101, 2602, 3301, 6005, 6405, 10328). Comments are due June 11, 2012. Highlights include:

For both Part C and Part D programs:

  • 5 star quality rating system: codifies CMS’s authority to terminate MA and Part D sponsors that do not achieve at least a 3-star plan rating for three consecutive years starting in 2015.

Part C “Medicare Advantage Plans”:

  • 2013 payments: MA payments (Part C) will increase by an average 3.1 percent for 2013. Part D (Prescription Drug Discount Program) deductibles will increase 1.6 percent (from $320 in 2012 to $325) and enrollee out-of-pocket limits will increase $50 to $4,750.
  • Coding adjustment: CMS will continue to apply a 3.41 percent coding adjustment to MA enrollee risk scores to account for coding differences between MA plans and Medicare Part A (i.e., inpatient hospital) and Part B (i.e., physician) providers.
  • Part C durable medical equipment: authorizes CMS to allow MA plans to limit durable medical equipment (DME) to specific "preferred" brands and manufacturers, while meeting requirements to ensure enrollee access to all DME in categories specified in the Social Security Act.

Part D Prescription Drug Discount Program (enacted in Medicare Modernization Act 2003):

  • Overprescribing in the long term care: in the proposed rule, CMS stated it was considering requiring long term care (LTC) consultant pharmacists to have no affiliations with LTC facility pharmacies, pharmaceutical manufacturers, and distributors to ensure “that consultant pharmacist decisions were objective, unbiased, and in the best interest of nursing home residents.” CMS also “strongly” encourages the LTC industry to voluntarily adopt methods to increase transparency such as: (1) separating LTC consultant contracting for dispensing and other pharmacy services; (2) paying fair market rates for consultant pharmacist services; (3) disclosing to LTC consultant pharmacists affiliations that could lead to conflicts of interest; (4) and implementing methods that will decrease inappropriate prescribing.
  • Part D coverage gap (“donut hole”): codifies Part D coverage gap program. Per ACA Section 1101, in 2013 Part D enrollees in the coverage gap will pay 47.5 percent of the costs for covered brand-name drugs and 79 percent of the cost for generic drugs. Part D enrollees in the coverage gap not receiving the low income subsidy will pay less every year until 2020 when they will pay 25 percent for covered brand-name and generic drugs, closing the donut hole.
  • Pharmacy benefit managers: requires Part D plans and their contracted pharmacy benefit managers to report Part D transaction data following standards for privacy and security of enrollee information, allowing disclosure data in a de-identified applications.
  • Benefits for dual eligibles: allows Part D special need plans serving dual eligibles (individuals eligible for both Medicare and Medicaid services) that meet certain integration and performance standards to provide additional supplemental benefits beyond what MA plans are allowed to offer.
  • Daily cost-sharing rate requirement: creates a daily cost-sharing rate requirement to be included in drug utilization management and CMS’s Fraud, Abuse and Waste Control Program. Allows enrollees to consult with their prescribers on whether a less-than-30 day subscription is appropriate. Allows Part D plans to apply a lower, pro-rated cost-sharing amount when the prescription is dispensed, lowering enrollee costs for trial fills or less-than-30 day fills.

Note: prior to ACA’s passage average payments to MA plans were 13 percent higher than payments to traditional Medicare fee for service (FFS) plans (MedPAC). LTC industry will face pressure to implement methods to manage drug utilization and to address inappropriate prescribing. Of 48 million Medicare enrollees, Part C enrollment is 11 million; Part D is 28 million.

Legislative update

Senators urge quick action on physician sunshine implementation

Last week, Sens. Chuck Grassley (R-Iowa) and Herb Kohl (D-Wis.), sponsors of the Physician Payments Sunshine Act, sent a letter to CMS acting Administrator Marilyn Tavenner urging the agency to issue the final implementation rule by June, so that data collection and reporting on financial transactions between health care providers and the drug, device, and group-purchasing industries can begin.

Background: the Physician Payments Sunshine Act was incorporated into ACA, requiring 1,150 drug, device, biologics, and medical-supplies manufacturers to report "transfers of value" made to physicians and teaching hospitals.

CMS missed the October 1, 2011 statutory deadline for implementing the act and the legislation's listed March 31, 2012 start date.

Senate HELP committee seeks comments about “breakthrough” treatments legislation

The Senate Health, Education, Labor and Pensions (HELP) Committee seeks comments on draft legislation which may be included in the prescription drug user fee agreement expected to pass this year. The draft legislation adds a new category of “breakthrough” treatments that would receive additional attention from the FDA and would increase the FDA’s access to outside experts to consult on rare diseases. The Senate HELP committee will also meet with stakeholders who submit written comments. Submitted comments should accompany meeting requests, with comments due April 11, 2012.

Lawmakers request more oversight of Medicare from CMS on fraud and abuse

Tuesday, Senate Finance Committee members Orrin Hatch (R-UT) and Tom Coburn (R-OK) and House Ways and Means members Wally Herger (R-CA) and Charles Boustany (R-LA) sent a letter to acting CMS administrator, Marilyn Tavenner, requesting information on how CMS identifies “nominee owners” and “shell companies”. The letter cited a recent case in which an individual fraudulently billed over $20 million from Medicare.

Note: “nominee owners” are individuals and organizations establishing false storefronts and “shell companies” and operating paper-only firms. In a press release on Wednesday, HHS and DOJ highlighted new tools through the ACA which address fraud to include: 20-50 percent longer sentences for crimes that result in over $1 million in losses; expansion of contractors who police fraud, waste, and abuse of Medicare and Medicaid; an additional $350 million over ten years in funding for anti-fraud efforts; and increased collaboration between HHS and DOJ through the Health Care Fraud Prevention and Enforcement Action Team (HEAT).

House Republicans investigate regulations for wireless medical technology

Tuesday, six GOP House members sent a letter to the U.S. Food and Drug Administration (FDA) and the Federal Communications Commission (FCC) requesting information about plans to regulate wireless medical technology (e.g., mobile medical applications and other wireless medical devices) aimed at helping consumers manage their own health care.

Note: telecom companies are actively pursuing health care industry partnerships for the development of applications that link consumers to their medical records via mobile applications. Issues around the privacy and security of personal health information notwithstanding, interactions between clinicians, labs, pharmacies, hospitals and consumers are viewed as growth markets in the industry.

State update

Report: state implementation of insurance market and coverage reforms

The Commonwealth Fund released a report highlighting state implementation on ACA’s insurance and coverage market reforms also known as the Patient’s Bill of Rights (ACA Sections 1001, 1003, 1101, 1155, 1201, 1312) from January 1, 2012 to January 1, 2012.

Specific state actions include:

Early market reforms Legislative/regulatory action on at least one item
Prohibition on lifetime dollar limits CA, DC, IN, LA, MI, NH, NJ, OR, UT, WA, WI
Restrictions on annual dollar limits CA, DC, IN, LA, MI, NH, NJ, OR, UT, WA, WI
Dependent coverage to age 26 CA, DC, IN, LA, MI, NH, NJ, OR, UT, WA, WI
Prohibition on rescissions CA, DE, IN, LA, MI, NH, NJ, OR, UT, WI
Preventive services without cost-sharing CA, DE, DC, IN, LA, MI, NH, NJ, OR, UT, OR, WA, WI
No exclusion of preexisting conditions under age 19 CA, DE, DC, IN, LA, MI, NH, NJ, OR, UT, WA, WI
Access to emergency services DC, IN, LA, MI, NH, OR, UT, WA, WI
Choice of primary care provider/pediatrician DC, IN, LA, MI, NH, UT, WA, WI
Access to OB/GYN care DC, IN, LA, MI, NH, OR, WI
Legislative/regulatory action on all CT, HI, IA, ME, MD, NE, NY, NC, ND, SD, VT, VA
No action AZ

Source: Keith K, Lucia KW, Corlette S. “Implementing the Affordable Care Act: State Action on Early Market Reforms.” The Commonwealth Fund. March 2012.

Note: fifteen states (AL, AR, CO, FL, GA, IL, KY, MA, MN, MO, MT, NM, PA, SC, & TX) have issued bulletins or other new subregulatory guidance advising insurers on early market reforms. Eleven states (AK, ID, KS, MS, NV, OH, OK, RI, TN, WV, & WY) have taken no action but are currently reviewing insurance policy forms to ensure they comply with reform measures.

HHS awards $72 million to states for child home visit programs

Tuesday, HHS announced that it awarded about $72 million in ACA funding to ten states for the Maternal, Infant, and Early Childhood Home Visiting Program (MIECHV) created under ACA Section 2951 to expand or establish their home visiting program. Awards were provided to states that demonstrated successful early childhood systems for pregnant women, parents, caregivers, and children from birth-to-eight years of age and to states that are creating new home visiting programs. States that received grants included: CO, CT, IA, KY, MN, NJ, PA, TN, VA, WA.

State round-up

  • CMS approved Arizona’s Medicaid Section 1115 waiver to design a new program to cover children up to age 19 whose families have incomes too high for Medicaid but lower than 175 percent of the federal poverty level (FPL). Arizona was also approved to set up a new Safety Net Care Pool to pay for the uncompensated costs for hospitals and other health providers.
  • Thursday, Maryland’s General Assembly passed the Health Benefit Exchange Act of 2012 creating that state’s health insurance exchanges for the individual and small business group market. The legislation addressed the exchanges operations and models, what types of health plans can be offered, and purchasing and cost reduction strategies.
  • Colorado’s Medicaid program is accepting enrollment applications for individuals newly eligible under its coverage expansion until mid-May when it will randomly select 10,000 of the 50,000 eligible under the new criteria. New eligibles must be 19-64, not have a Medicaid dependent child, ineligible for other Medicare or Medicaid categories, and at or below 10 percent of the FPL. The state is also phasing-in hospital-provider fees.
  • Monday, Ohio submitted a proposal to CMS for approval to implement a pilot program to coordinate care the state’s 115,000 dual eligibles. The new program seeks to reduce use of unnecessary health tests and emergency department use, prevent medication errors, and improve health outcomes. If approved, the program would start January 1, 2013.
    Note: the state currently spends 64 percent of Medicaid long term care expenditures on nursing home services while 36 percent is spent on home and community based services—a number that the state hopes to more evenly split.
  • Tuesday, HHS approved Hawaii’s plan to limit Medicaid hospital coverage to 30 days starting July 1, 2012, except for children, pregnant women, older adults, those with cancer, and the blind and disabled. HHS disapproved Hawaii’s proposal to limit hospital coverage to ten days for most adult Medicaid enrollees.
    Note: CMS is still considering Arizona’s proposal to limit Medicaid hospital coverage for adults to 25 days. The following states limit stays to 30 days or less: Alabama (26), Arkansas (24), Florida (45), and Mississippi (30).

Industry news

Medical societies weigh in on unnecessary tests, seek to educate consumers

Nine U.S. specialty societies representing 374,000 physicians developed lists of "Five Things Physicians and Patients Should Question” as part of the Choosing Wisely campaign launched by ABIM (American Board of Internal Medicine). Consumer Reports, AARP, the Leapfrog Group, and Wikipedia are among organizations that have signed on to support the program intended to prompt discussion between physicians and patients about necessary treatments and tests.

Highlights of the list:

  •  Warnings against unnecessary diagnostic imaging (overuse) are prominent: e.g., physicians should not perform positron emission tomography, computed tomography, and radionuclide bone scans in the staging of early prostate cancer with a low risk for metastasis;
  • Underuse recommendations are rare: physicians not to diagnose or manage asthma without spirometry.

Most of the 45 questionable services involve some form of testing, e.g., “avoid nonsteroidal anti-inflammatory drugs in individuals with hypertension, heart failure or chronic kidney disease from all causes, including diabetes” and “don't initiate chronic dialysis without ensuring a shared decision-making process between patients, their families, and their physicians."

Medicare pays $6.6 million for physician reporting

In 2011, Medicare paid a combined $6.6 million in incentive payments to participants in the Physician Quality Reporting System (PQRS) and a separate electronic-prescribing program. PQRS is included in ACA (Sections 3002, 10327).

Background: The Physician Quality Reporting System (formerly known as the Physician Quality Reporting Initiative) is a voluntary reporting program that gives incentive payments to practices with eligible professionals who satisfactorily report data on quality measures for covered Physician Fee Schedule (PFS) services furnished to Medicare Part B FFS beneficiaries. Individual eligible professionals and group practices who meet the criteria for satisfactory submission of quality measures data qualify to earn a Physician Quality Reporting incentive payment equal to 0.5 percent of their total estimated Medicare Part B PFS allowed charges for covered professional services furnished during that same reporting period. In 2010, 269,000 eligible health care professionals participated in the PQRS, up from 210,000 in 2009 and 153,000 in 2008.

NQF announces additional quality measures

Last week, the National Quality Forum (NQF) Board of Directors approved 14 quality measures on perinatal care, addressing issues such as childbirth, pregnancy, post-partum care, and newborn care; 12 quality measures on renal care, focusing on chronic kidney disease, end stage renal disease and dialysis; and four new measures on health care resource use and costs focused on care costs associated with asthma, chronic obstructive pulmonary disease, hip/knee replacement, and pneumonia care.

Study: paying 10 percent more for primary care could help lower Medicare costs 2 percent

ACA Section 5501 provides a temporary 10 percent Medicare payment increase for primary care visits. The Commonwealth Fund study used a simulation model to predict the budget impact of making the 10 percent primary care payment increase permanent, concluding it would “increase primary care visits by 8.8 percent, and raise the overall cost of primary care visits by 17 percent; however, these increases would yield more than a 6:1 annual return in lower Medicare costs for other services (inpatient and post-acute care)… the net result would be a nearly 2 percent drop in Medicare costs.”

MedPAC focus on dual eligibles

Thursday and Friday the Medicare Payment Advisory Commission (MedPAC) met to discuss Medicare payment and system reform. Thursday, MedPAC discussed care coordination for dual eligibles, but did not vote on the topic. Friday, MedPAC discussed the differences in private-sector payment rates.

Note: in June, MedPAC will send its biannual report to Congress with recommendations for reforming Medicare payment; report is likely to include coordination for dual eligibles and possible redesign of the physician fee schedule. The report is expected to include an analysis of challenges of Medicare in rural areas, update on Medicare’s electronic health records incentive payment programs, and recommendations for care coordination of dual eligibles in the Program of All-Inclusive Care for the Elderly (PACE) voted on last fall.

Study: prescription drug use increases for young adults; total health care spending on medicines increases

An IMS study found a 2 percent increase in the number of prescriptions for young adults aged 19 to 25, a 3.1 percent decrease for seniors, and an increase in total health care spending on medicines (to $320 billion) in 2011. The increase is attributed in part to the extended eligibility of a dependent on parent’s health insurance up to 26 years old in ACA Section 1004. Major areas of increased use: attention deficit hyperactivity disorder (ADHD) treatments, antidepressants. (Source: IMS Institute for Healthcare Informatics “The Use of Medicines in the United States: Review of 2011” April 4, 2012)

U.S. Surgeon General seeks comment on ways to address medication overuse

HHS and the U.S. Surgeon General seek comments from stakeholders about the causes, impact, and potential solutions associated with prescription medication non-adherence in adults with chronic conditions. They seek input on evidence of interventions that improve adherence. The information will be considered by the Office of the Surgeon General in developing evidence-based science and best practices to improve medication adherence.

Note: half of the prescriptions dispensed in the U.S. are not taken as prescribed, costing the health care system at least $100 billion annually in additional medication use and visits to the physician, emergency room, and hospitals. (Source: National Consumers League and Duke University Medical Center, “Medication Adherence: Making the Case for Increased Awareness,” 2011)

PhRMA and NGA partner to reduce prescription drug abuse

Monday, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the National Governors Association (NGA) announced a partnership aimed at reducing prescription drug abuse by expanding the state prescription drug monitoring program and implementing privacy safeguards; assessing barriers to change including legislation, regulations, and information exchanges; identifying best practices in treatment; reviewing various access points such as online pharmacies; and coordinating educational efforts ways to dispose of medication properly.

Note: in 2010, seven million Americans over the age of 12 reported using prescription drugs in the last month for non-medical reasons. The three most commonly cited types of drugs associated with inappropriate use include opioids, central nervous system depressants, and stimulants.

IOM releases recommendations for integrating primary care and public health

The Institute of Medicine (IOM) released a new report recommending the Centers for Disease Control and Prevention (CDC) and the Health Resources and Services Administration (HRSA) to integrate primary care and public health through policy, funding, and other means. Recommendations include:

  • Linking staff, data, and funds at the regional, state, and local levels
  • Creating common research and learning networks to evaluate models of public health integration and primary care, relay best practices, and involve stakeholders at the national and regional levels
  • Developing the necessary workforce to support primary care and public health

Per the report, implementing these recommendations would require national leadership, community engagement, and shared data and analyses. ACA also supports integration through affordable care organizations (ACOs) and patient-centered medical home models. (Source: Institute of Medicine, “Primary Care and Public Health Exploring Integration to Improve Population Health,” 2012)

Note: these recommendations were made based on published papers and case studies in Durham, NC, New York City, and San Francisco.

FDA approves new cancer orphan drug for soft tissue sarcoma

The FDA recently granted orphan status for the drug TH-302, a treatment for soft tissue sarcoma developed by Threshold Pharmaceuticals Inc. If the drug gains FDA approval, Threshold will have up to seven years of market exclusivity. Earlier in March, the European Union granted TH-302 orphan drug status, allowing them ten years of market exclusivity.

Note: the American Cancer Society predicts soft tissue sarcoma to be diagnosed in 11,280 people, and 3,900 are predicted to die from the disease in the U.S. during 2012. Orphan drug status is given to drugs that treat illnesses affected fewer than 200,000 people in the U.S.


“I’m actually continuing to be confident that the Supreme Court will uphold the law. The reason is because in accordance with precedent out there, it’s constitutional. That’s not just my opinion by the way, that’s the opinion of legal experts across the ideological spectrum, including two very conservative appellate court justices that said this wasn’t even a close case.

I think it’s important — because I watched some of the commentary last week — to remind people that this is not an abstract argument. People’s lives are affected by a lack of availability of health care, the unaffordability of health care, their inability to get health care because of a pre-existing condition. The law that’s already in place has already given 2.5 million young people health care that wouldn’t have otherwise happened. There are tens of thousands of adults with pre-existing conditions who have health care right now because of this law. Parents don’t have to worry about their children not being able to get health care because they can’t be prevented from getting health care as a consequence of a pre-existing condition. That’s part of this law. Millions of seniors are paying less for prescription drugs because of this law. Americans all across the country have greater rights, protections with respect to their insurance companies and are getting preventative care because of this law. So, that’s just the part that’s already been implemented. That doesn’t even speak to the 30 mil people who stand to gain coverage once it’s fully implemented in 2014. I think it’s important the American people understand and I think the justices should understand that in the absence of the individual mandate you cannot have a mechanism to ensure that people with preexisting conditions can actually get health care….

We are confident that this will be over, this will be upheld. I’m confident this will be upheld because it should be upheld. And again, that’s not just my opinion, that’s the opinion of a whole lot of constitutional law professors, academics, and judges and lawyers who examined this law, even if they’re not particularly sympathetic to this particular piece of legislation.”

 — President Obama, April 2, 2012

Fact file

  • Family coverage 2012: the typical cost of an employer plan for a family of four will hit $20,000—7 percent above 2011 (the fifth consecutive year increases have been 7-8 percent or higher) vs. $9,235 in 2002. (Source: Milliman, “2011 Milliman Medical Index: Healthcare costs for American families double in less than nine years,” May 2011)
  • Physician compensation ratios: U.S. vs. Peer, based on per capita income averages for developed systems of care, i.e., UK, Germany, etc. Primary care physician income: 4.1 (U.S.) vs. 2.8 (Peer developed systems); specialists: 6.5 (U.S.) vs. 3.9 (Peer developed systems). (Source: McKinsey & Company, “Accounting for the Cost of U.S. health care: A new look at why Americans spend more,” December 2008)
  • Hospital adverse events: 1 of 7 (13.5 percent) of hospitalized Medicare patients had an adverse event (44 percent preventable); 0.6 percent had a serious event (reportable); 1.5 percent had an adverse event that resulted in avoidable death (15,000). Adverse events are 3.5 percent of all Medicare spending. (Source: Office of the Inspector General, “Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries”, November 2010)
  • During a 12-month study of surgical inpatient record reviews, 14.6 percent of hospital surgical patients had an adverse event—44 percent increased length of stay or readmission rates and 8.7 percent required a life-saving intervention. (Source: Griffin et al, Quality & Safety in Health Care, “Detection of Adverse Events in Surgical Patients,” 2008)
  • Hospitals in 21 states are required to report surgical site infections; ten states post publicly. (Source: Journal for Healthcare Quality “Variation in Surgical Site Infection Monitoring and Reporting by State,” March 2, 2012) Note: publicly reporting states include California, Colorado, Massachusetts, Missouri, New York, Ohio, Oregon, Pennsylvania, South Carolina, and Vermont.
  • The U.S. uninsured rate for adults ages 18-25 years is 24 percent; prior to extending dependent coverage to 26 years old in ACA Section 2714, the uninsured rate was 28 percent in this age group. (Source: Gallup-Healthways Well-being Index, “Uninsured, by Age Group,” April 3, 2012)
  • Severity adjusted cost of chemotherapy: 24 percent less in a physician’s office vs. hospital outpatient department. Annual chemotherapy treatment costs 53 percent more if provided in hospitals than in physician offices. (Source: Avalere Health, LLC, “Total Cost of Cancer Care by Site of Service: Physician Office vs. Outpatient Hospital,” March 2012)
  • Between 2010 and 2011, doctor visits decreased 4.7 percent, while emergency room visits increased 7.4 percent. (Source: IMS Institute for Healthcare Informatics, “The Use of Medicines in the United States: Review of 2011,” April 2012)
  • Access to community oncology physician-owned practices: 21 percent decrease in past year. 241 clinics have closures in past five years. (Source: Community Oncology Alliance, “Community Oncology Practice Impact Report,” April 4, 2012).
  • Excessive alcohol use causes over 80,000 deaths per year and 2.3 million years of productive life lost at cost of $223.5 billion to the U.S. (Source: CDC)
  • Death rates per disease in U.S. for every 100,000: heart disease (186), lung cancer (80), diabetes (21.8), and car accidents (12.9)—32,885 people died from car accidents in 2010 which calculated to 1.1 fatalities for every 100 million miles traveled in 2010; lowest level since 1950. In 31 percent of car accident deaths, speeding was a factor and in 32 percent, drunk driving was involved. (Source: CDC, Kaiser Family Foundation)
  • 105 million Americans benefited from elimination of the lifetime limit in ACA. The breakdown per insurance market: 70 million in large groups, 25 in small, 10 in individual. (Source: HHS, “Under The Affordable Care Act, 105 Million Americans No Longer Face Lifetime Limits on Health Benefits,” March 2012)
  • Health care employment increased with 26,000 jobs in March. Physician offices and hospitals each added 8,000 jobs. (Source: Department of Labor, “Employment Situation Summary,” March 2012)
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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