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Health Care Reform Memo: May 3, 2010

Deloitte Center for Health Solutions publication


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

Debt reduction commission begins work; Medicare, Medicaid, Social Security key considerations

Tuesday, the 18 member bipartisan Deficit Reduction Commission began work on its blueprint for reducing the projected $9.3 trillion debt (2009-2019). The group includes 12 members of Congress — six from each party — and six White House appointees —  four Democrats and two Republicans. The Commission will meet each Wednesday in three working groups — taxes, entitlement spending and other spending — and as a full group monthly. Its recommendations are due December 1 and must be approved by 14 of the Commission’s 18 members. Changes in Medicare, Medicaid and Social Security are a key focus.

State high-risk pool deadline Friday; control of premiums paid by enrollees the sticking point

The Patient Protection and Affordable Care Act (PPACA) authorizes $5 billion to states to set up temporary high-risk pools to cover uninsured people with pre-existing conditions from July 1, 2010 through January 1, 2014 when subsidies, exchanges, Medicaid expansion, et al start. To be eligible, a person must not have had insurance for at least six months, but it excludes those already enrolled in the risk pools operated in 35 states. The appropriation for the states limits their ability to charge premiums to enrollees above standard rates, so the dilemma for states is the additional financial liability for the 200,000 anticipated to join the programs. Most states charge 25-100 percent more than standard rates for their state risk pools, so participation in the federal subsidy carries financial risk. Late Friday night, 12 states reported they would not participate in the temporary program.

Rate increase requests scrutinized by state regulators

In California, WellPoint, Inc.’s request for a rate increase for its 700,000 individual policy holders was withdrawn and will be resubmitted in May after its actuarial assumptions were challenged by state regulators. In Massachusetts, regulators to denied requests for 235 of the 274 increases in the small-group market, and in Colorado, regulators are examining rate hikes there by a WellPoint unit and by Aetna Inc.

Study: Small group subsidies might not increase coverage

A study by The U.S. Chamber of Commerce and the National Federation of Independent Business released Wednesday concluded small business tax credits will not increase group coverage. Credits are available to firms with 10 or fewer employees who offer average wages of $25,000 or less up to employers with as many as 25 employees and average wages of up to $50,000 annually.

ONC: Standardize eligibility and enrollment for PPACA

Last week, Office of the National Coordinator for Health Information Technology (ONC) director David Blumenthal asked its Standards Committee to streamline federal and state systems for enrollment in health insurance benefits under PPACA. The task is to standardize eligibility and enrollment data electronically across health and human services programs in local, state and federal government.

Therapeutic cancer treatment approved by FDA: Breakthrough

Thursday, the FDA approved Dendreon Corp’s Provenge, a three-dose therapeutic vaccine that assists the immune system to fight the tumor in patients with prostate cancer. It is regarded as a breakthrough in that traditional methods — chemotherapy/surgery — did not reverse the condition. The company faces commercialization hurdles with Provenge, including the cost of the drug: $93,000 for the three doses recommended.

Hospital transparency: Two areas of focus in PPACA

In PPACA, hospital transparency and quality are a focus. Two specific areas are targeted:

  1. Avoidable readmissions: Avoidable readmissions cost $25 billion annually. Starting in 2012 when readmission rates for all hospitals will be public, Centers for Medicare and Medicaid Services (CMS) will penalize hospitals for avoidable readmissions (within 30 days) for heart failure and pneumonia. In 2014, four new conditions will be added.

  2. Preventable Infection: Currently, hospitals are paid to report infection rates along with other metrics (satisfaction, et al). Starting in 2012, hospitals will be paid based on performance in infection controls, and in 2015, hospital performance for errors and infection control will be public record and Medicare will pay 1 percent less to hospitals with higher rates of avoidable infection (30,000 deaths annually from hospital-acquired infection).

Medical loss ratio (MLR) provisions in PPACA: Complicated

PPACA sets an 85 percent MLR minimum for the percentage of premiums in the large group market and 80 percent for the small group and individual markets (higher in certain states with special provisions). What qualifies as a clinical service that improves quality is the challenge: Call centers to assist patients in self-care? Patient education? Credentialing of physicians? Network management and outcome measurement? Ancillary services, et al? And the denominator in the PPACA equation — premiums paid — excludes federal and state taxes and regulatory fees that will invariably increase the MLR percentages used by most state departments of insurance (National Association of Insurance Commissioners). So the technical definition of MLR will be a key focus — how to reconcile the differences between NAIC specifications and PPACA requirements, and how insurance companies are to capture and report MLR in exchanges and compliance to PPACA reporting requirements.

Note: For more information, contact Nancy Litwinski, Director, Deloitte’s National Health Care Practice, who sits on the NAIC Advisory Committee, working with administration officials to clarify the MLR specifications.


Deloitte Center for Health Solutions to release third annual Survey of Health Care Consumers on May 4

Tomorrow, the Deloitte Center for Health Solutions will release the findings of its third annual Survey of Health Care Consumers. Last year's survey found that consumers did not understand the health system and gave it low ratings. Since last year's survey was conducted, there has been significant attention to the health care reform debate. To see if consumers' understanding and rating of the health care system has changed – as well as review all of the findings around consumers’ behavior, attitudes and unmet needs – visit www.deloitte.com/centerforhealthsolutions tomorrow.

Q and A

Q: With so much attention to obesity and unhealthy lifestyles, how does PPACA encourage preventive health and personal accountability?

A: PPACA amends the Public Health Service Act (PPACA sec. 1001) by requiring that group and individual insurance plans cover specified preventive health services (those rated A and B by the U.S. Preventive Services Task Force) with no cost sharing effective September 23, 2010. Plans may offer services in addition to these, and deny those not included.

Q: With regard to the “Cadillac plan tax” on high-value employer-sponsored plans that exceed $10,200 for individuals and $27,500 for families, does PPACA accommodate areas of the country where health costs are higher than others?

A: Yes, in states the Secretary of Health and Human Services (HHS) deems “high cost,” a formula is used to calculate the costs so that costs across all 50 states are comparable for purposes of the tax (sec. 10901).

Q: It seems PPACA includes increased responsibility for the Department of HHS. How much?

A: PPACA references “the Secretary of Health and Human Services” obligations under the bill more than 1,000 times. The larger role for HHS is a central feature of the bill.

PPACA employer impact: Report now available

Employers in all industries and sizes need to think about the impact of PPACA on employee health benefit plans. A new report – “Smart First Steps for Employers” -- is now available from Deloitte’s employer health reform team (please see attachment below)

Quotable

“Choices regarding Medicare, Social Security and other spending programs cannot be made in a vacuum but must be combined with decisions about how much revenue the government will raise and how it will raise it.” 

— Federal Reserve Chairman Ben Bernanke comments at the National Commission on Fiscal Responsibility and Reform, Washington, DC, Tuesday, April 27, 2010

“[The National Health Service has] developed very good and very disciplined, scientifically grounded, policy-connected models for the evaluation of medical treatments from which we ought to learn.” “The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open. And right now, we’re doing it blindly.” 

— Don Berwick, Director-nominee, CMS, commenting on the National Health Service in the UK, “Rethinking Comparative Effectiveness Research,” Biotechnology Healthcare, June 2009

Fact file

  • GDP growth in 1Q 2010: +3.2 percent – the 3rd consecutive quarter of GDP growth. (Source: U.S. Dept of Commerce)
  • $7 billion per year — the net savings achievable from administrative simplification in the U.S. health system. Physicians spend 12 percent of their net revenues and 4 hours per week on avoidable paperwork and administration. (Source: Commonwealth Fund-funded study by Bonnie B. Blanchfield, C.P.A., Sc.D., James L. Heffernan, M.B.A., Bradford Osgood, Rosemary R. Sheehan, M.B.A., and Gregg S. Meyer, M.D., M. Sc. “Saving Billions of Dollars—and Physicians’ Time—by Streamlining Billing Practice,” Health Affairs, April 29, 2010)
  • Ratio-- U.S. physicians’ median income to average employee compensation in OECD countries: U.S.--5.5; Germany--3.2; Australia-- 2.2; Switzerland--2.1; France--1.9; Sweden--1.5; UK--1.4. (Source: Organisation for Economic Co-operation and Development, 2009)
  • 28 percent of home care aides were over age 55. Employment in home care will increase from 3.2 million to 4.3 million 2008-2018. (Source: PHI National)
  • 900 million office visits to physicians in 2009; half to primary care physicians who represent only 30 percent of physicians in office practice settings. (Source: CMS)
  • States filing documents to repeal PPACA to date: 18. (Source: Politico)
  • Hospital median pension assets as percent of obligations: 2008--90.4 percent 2009--82.9 percent, 2010--68.6 percent. (Source: Standard and Poor’s)
  • 24 percent of cardiologists frequently do cardiac catheterizations to protect against liability. (Source: Circulation: Cardiovascular Quality and Outcomes)
  • FY11 budget for U.S. Department of Health and Human Services (not including Medicare and Medicaid): $81.3 billion—up from $79.6 billion in FY10. The biggest single item: The National Institutes of Health--$33 billion, up from $32 billion in FY10. (Source: Office of Management and Budget)
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 www.deloitte.com/us/healthreform/whatnow today.

 

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