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Health Care Reform Memo: February 6, 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: cost containment: the federal deficit and health reform

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

Last week was a numbers week: election returns in Florida and Nevada, the Super Bowl, speculation about Facebook’s initial public offering (IPO) valuation, the Dow at its peak since 2008, and others, but the numbers that caught my attention most came from the Congressional Budget Office (CBO) last Tuesday:

For fiscal year (FY) 2012 ending September 30, the U.S. deficit will be $1.079 trillion—the fourth consecutive year of trillion-plus deficits. Just last August, the FY12 forecast had been a $953 billion deficit but the CBO update accounted a tepid economic recovery and less than optimal gross domestic product (GDP) growth.

The Politico headline Wednesday summed it up well: “Deficit forecast gloomy for years”. In its 147-page report, the CBO says the GDP for FY12 will be 2.0 percent versus its August estimate at 2.7 percent, unemployment at 8.7 percent versus its earlier prediction of 8.5 percent, and $4.7 trillion additional deficit continuing through 2017 with interest expense at decade-end of $600 billion—more than the federal government spends on Medicaid.

February 13, the President will present his budget for FY13. It will then begin its journey through the legislative processes of Congress and no doubt will be a target for political punditry.

Regardless of party stripe or philosophical bent, the facts are clear: the U.S. economy has been struggling. And health costs are a contributing factor.

Last month, the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary released its analysis of 2010 National Health Expenditures noting that spending increased 3.9 percent—lowest annual increase in 30 years. It attributed the slowdown from double digits two decades earlier to a sluggish economy with lower utilization as consumers succumb to pocketbook pressures, plus lower insurance premiums and lower costs for technologies and therapies (medical inflation). But it warned costs would likely uptick again regardless of economic recovery.

Seems to me the number one agenda item in discussing the U.S. health system is cost containment: the status quo is not sustainable, not just for those lacking insurance or small businesses, but for everyone.

In May of 2009, the Deloitte Center for Health Solutions hosted a series of meetings in Washington with leading trade association representatives and the White House Office of Health Reform. The goal: to find $2 trillion in cost reductions that would simultaneously improve population-based health and safety. I reviewed the file this weekend; it’s time to reconsider some suggestions posed in that series of meetings:

  • Could health plans, Medicare and Medicaid leverage ICD-10 investments, and accelerate administrative simplification to reduce paperwork and waste?
  • Could employers be given wider latitude to reward healthy behaviors and aggressively address irresponsible behavior by employees/retirees/enrollees?
  • Could e-prescribing be significantly accelerated to reduce medication error and avoidable admissions and re-admissions to hospitals?
  • Could the medical home methods be accelerated by states to manage dual eligibles?
  • Could incentives for physicians and hospitals be changed from volume to value-based on demonstrated appropriateness for diagnostic testing and surgery?
  • Could frivolous lawsuits against physicians, hospitals, long term care providers, and plans be eliminated through a streamlined medical court system?
  • Could funds from the Troubled Asset Relief Program (TARP) be used to reduce unnecessary acute capacity in over-bedded markets?
  • Could fraud be more aggressively detected and prosecuted?
  • Could Medicare and Medicaid be structured as managed care programs to reward coordination, efficiency, and quality?
  • Could “health” and “human services” services programs in local communities be merged to provide a seamless, comprehensive preventive health program?
  • Could the education of health professionals in the U.S. be streamlined to produce qualified individuals faster and reward competence from demonstrated lifelong learning?
  • Could patent laws be re-structured to get promising therapies and companion diagnostics to the market faster as generics while rewarding inventors?
  • Could primary care services be expanded and compensation increased to aggressively arrest increased prevalence of chronic diseases and costs associated with non-intervention?
  • Could elimination of the tax credit for employer sponsored coverage level force active consumerism into the system?
  • And could the U.S. public education system at all levels increase education about health and the health system in its core curriculum to combat widespread consumer ignorance and irresponsible behavior?

These are bold ideas: they involve risk. Some found their way into the Affordable Care Act (ACA), some did not.

Regardless of the outcome of the ACA’s constitutional challenges this year, the U.S. health system must face its cost spiral as its number one aim. Solutions must be developed based on facts and political brinksmanship set aside for the greater good.

This week marks the start of the 4th year I’ve written this Memo. On February 2, 2009 as the American Recovery and Reconstruction Act (ARRA) was passing, I wrote: “The stimulus program is only Chapter One of health reform. Chapter Two will be about the more substantive health reforms likely to include tricky issues like individual mandates, employer pay or play, comparative effectiveness implementation, insurance market reform, and costs.”

The book on U.S. health reform is not yet written. ACA is a chapter. The market will write others. What’s clear is that the affordability of health care—costs—is a theme that will run through each. It’s time to get serious about costs. To avoid the discussion is to guarantee the demise of the system’s strengths and the certainty of a two tiered system long-term: one for those that can afford it, and a second for those that can’t.

Paul Keckely

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

Implementation update

HHS requests U.S. Supreme Court to extend argument on Anti-Injunction Act on ACA challenge

Friday, the U.S. Department of Health and Human Services (HHS) petitioned the U.S. Supreme Court to add 30 minutes to the its scheduled one hour opening argument March 26 re: the applicability of the Anti-Injunction Act (AIA) to the ACA.

Note: AIA prevents individuals from suing over a tax until the tax has been paid. The individual mandate is effective 2014, thus individuals would not start paying the penalty for not obtaining health insurance until after 2015.

March 26-28, the Supreme Court has scheduled 5.5 hours of oral arguments on the four ACA challenges: anti-injunction act applicability, individual mandate, severability, and Medicaid expansion requirements.

Update: essential health benefits guidance

Tuesday was the last day for comments to HHS on its initial essential health benefits (EHB) bulletin dated December 16, 2011, in which states are required to set a “benchmark” for coverage in the EHB package based on standards that would vary in each state. ACA Section 1302 requires EHB to include services in ten defined benefit categories and requires coverage equivalent to a typical employer plan in a state.

Note: several health care trade organizations argue the need for uniformity across states; others are pushing for state flexibility.

HHS: ACA saved $2.1 billion for Medicare prescription drug costs

Thursday, HHS released a report indicating 3.6 million Medicare enrollees saved $2.1 billion on their prescription drugs in 2011. The report forecasts that the average Medicare enrollee who hits the “donut hole” will save $4,200 by 2021. Last year, 3.6 million seniors hit the “donut hole” and saved an average of $604 on their medications.

Bill to exclude brokers’ commissions in the medical loss ratio calculation introduced

Thursday, Senator Mary Landrieu (D-LA) introduced the “Access to Independent Health Insurance Advisers Act of 2012” (S. 2068) that would exclude agents’ and brokers’ commissions from the medical loss ratio (MLR) calculation per Section 1001.

Note: Senate legislation re: medical loss ratio differ from the House version in three areas: inclusion of broker commissions in MLR calculations, scope—whether applicable to other than individual and small-group market commissions, and expansion allowances for MLR waivers. Differences in the two will be resolved in forthcoming joint conference committee.

Representative introduces bill to repeal PCORI

On January 25, Representative Brett Guthrie (R-KY) introduced a bill (H.R. 3827) that would repeal the Patient-Centered Outcomes Research Institute (PCORI) and comparative effectiveness research (CER).

Note: PCORI per Section 6301 of ACA is responsible for implementing the CER program that will provide industry stakeholders and the public readily accessible information about the evidence supporting the full range of diagnostic and treatment options. Physicians are concerned it will infringe on their clinical autonomy. Other critics argue it will lead to government control of treatment decisions including end of life acre and rationing.

For more information on CER, see Deloitte Center for Health Solutions’ study, “Comparative Effectiveness Research in the United States: Update and implications,” June 27, 2011.

House votes to repeal CLASS Act

Wednesday, the U.S. House of Representatives voted (267-159) to repeal the Community Living Assistance Services and Support (CLASS) program, per ACA Section 8002. Republican members were joined by 28 Democrats in the majority vote.

Note: CMS announced last year that it would halt implementation of the CLASS program because actuaries found that it is not actuarially sound. The CBO indicates it will reduce revenues in ACA funding $75 billion over ten years.

The bill now goes to the Senate where it is expected to pass.

Legislative update

CBO projects $1.079 trillion deficit for FY12

Tuesday, the CBO released its budget projections for FY12 through FY22, projecting a $1.079 trillion deficit for FY12 (year ending September 30, 2012). Measured as a share of the nation’s GDP, a shortfall of 7 percent is projected, 2 percent below the FY11 deficit. Per the CBO baseline projection, deficits will decline to $200 billion averaging 1.5 percent of GDP over the 2013–2022 period, assuming the 2001 and 2003 tax cuts and the payroll tax holiday expire in 2013, spending cuts per the Budget Control Act of 2011 (averaging $109 billion/year including a 2 percent Medicare cut) are implemented, and physician pay is cut per the sustainable growth rate (SGR) formula (27.4 percent scheduled March 1, 2012). If these three assumptions are not included in the baseline budget, the CBO estimates deficits would average 5.4 percent of GDP from 2013 to 2022 and public debt would increase to 94 percent of GDP in 2022—the highest since 1946.

Key assumptions in CBO projections:

Focus CBO projections
Overall economy
  • The economy will recover slowly, with real GDP growing 2% this year and 1.1% next year.
  • Economic activity will quicken after 2013 but remain below the economy’s potential until 2018.
  • The unemployment rate will remain above 8% in 2012 and next year, due to weakness in demand for goods and services. As economic growth picks up after 2013, the unemployment rate will gradually decline to around 7% by the end of 2015, before dropping to near 5.5% by the end of 2017.
Affordable Care Act
  • The ACA will cost $54 billion more than expected between 2012 and 2021, the result of repeal of the CLASS Act (reducing $76 billion in premiums) and correction of the modified adjusted gross income formula used to calculate Medicaid eligibility (the Medicaid glitch) netting revenue increase of $22 billion).
  • If physician payment rates remain at current levels through 2022, Medicare spending (net of premiums) will be $9 billion higher in 2012 and $316 billion (or about 5%) higher from 2013 to 2022.
  • Medicare’s Hospital Insurance Trust Fund (hospitals and post-treatment care service providers paid under Medicare Part A) will be insolvent in 2022 vs. 2024 in its August projection.
  • Medicare spending (excluding receipts from premiums) increased 8% in 2011 and are projected to be about 8% in 2012.
Federal spending on Medicaid
(does not include state matching funds)
  • The Federal Medicaid spending match will be $605 billion in 2022—2.5 % of GDP, compared with 1.7% in FY12.
  • Federal Medicaid spending will increase by $24 billion from 2012 to 2021 due to medical inflation and higher enrollment.
  • The Federal spending match will decrease 5% in 2012 as states become responsible for a higher share of total costs than in recent years.
  • Total Medicaid spending will increase in 2013 and increase rapidly in 2014, 2015, and 2016 due to ACA.

Source: CBO, “The Budget and Economic Outlook: Fiscal Years 2012 to 2022,” January 2012.

FDA improvements sought to address drug shortages

Tuesday, legislation was introduced in the House to expedite the U.S. Food and Drug Administration (FDA) review of medications, improve communication within the agency and with stakeholders about possible shortages, and increase Drug Enforcement Administration quotas for medications in short supply.

CBO: war savings calculation, target for SGR fix proponents

Tuesday, the CBO released its budget outlook for 2012 noting savings of $838 billion over ten years for planned reductions in defense spending. SGR fix advocates estimate a permanent fix would cost $316 billion and are pushing administration officials to earmark war savings to the SGR. Last week, several hospital trade groups sent a letter to Congress suggesting a permanent fix to the SGR necessary and encouraging further cuts to hospitals would hurt job growth and debilitate hospitals. In their letter Wednesday, the groups said, “H.R. 3630 as passed by the House in December jeopardizes access to care for all patients by cutting more than $20 billion in hospital payments. Cuts of this magnitude will mean fewer nurses, longer waits for emergency care and decreased access to new treatments… America's hospitals encourage you to look elsewhere to pay for changes to the sustainable growth rate.”

GOP physicians ask AARP for Medicare reform details

In a letter Wednesday, GOP physicians Rep. Phil Gingrey (R-Ga.) and Sen. Tom Coburn (R-Okla.), reached out to the AARP requesting “concrete details” for re-structuring Medicare to achieve fiscal solvency.

Rubio seeks EHB exclusion for religious organizations

Sen. Marco Rubio (R-FL) introduced the “Religious Freedom Restoration Act of 2012” last week to exclude provisions in the August 1, 2011 HHS directive that EHB must include free sterilization and all FDA-approved contraceptives, including drugs that many believe induce abortions. His bill calls for an exemption for those religious organizations including charities, hospitals, schools, or soup kitchens that hire or serve individuals who do not share their religious tenets.

Representatives introduce bill to increase health care access in rural areas

Wednesday, Representatives Cathy McMorris Rodgers (R-WA) and Mike Thompson (D-CA) introduced the “Rural Hospital and Provider Equity Act (R-HOPE) of 2012” to protect and expand access to high quality health care in rural communities. The legislation would increase Medicare and Medicaid disproportionate hospital payments to rural hospitals, improve lab services payments in rural hospitals, continue geographic reclassification for specific hospitals in less populated states, ensure adequate representation of rural communities on the Medicare Payment Advisory Commission (MedPAC), increase rural health clinic reimbursements, and extend several expiring Medicare incentive payments for rural hospitals.

Note: 75 million (25 percent) Americans live in rural areas; 10 percent of physicians practice in rural settings.

Representatives introduce legislation to amend 510(k) drug review process

Tuesday, Representative Edward Markey (D-MA) introduced the “Safety of Untested and New Devices Act (SOUND Act)” to disallow the FDA rejection of new devices through the 510(k) device pathway to “ensure that a medical device is not marketed based on a determination that the device is substantially equivalent to a predicate device that has been recalled, corrected, or removed from the market because of an intrinsic flaw in technology or design that adversely affects safety, and for other purposes.”

Note: the 510K process in the FDA is drawing increased scrutiny from legislators who argue it has been lax in reviewing submissions resulting in safety issues with certain medical devices that should not have been approved.

State update

State round-up

Wednesday, a federal judge in California issued an injunction blocking a 10 percent reduction in Medicaid reimbursements to doctors. California sought and received CMS permission for the reimbursement cuts to help fill its budget deficit that stands at $9 billion. CMS projected that the 10 percent Medicaid payment cuts would save California $623 million. California’s governor is seeking approval to reduce Medicaid payments by almost an additional $850 million.

Connecticut is projected to need 9,000 additional home care workers by 2016 to provide long-term care at home or in the community: Connecticut’s population age 65 and over will increase 64 percent while the population under age 65 will decrease.

Monday, a Florida state Senate committee voted against the Health Care Consumer Protection bill that would require ambulatory care centers, diagnostic-imaging centers, and physicians to publish out-of-pocket prices for commonly provided health care services (already required for urgent care centers). This bill was previously passed by a Florida state House committee.

Wednesday, Louisiana implemented the Bayou Health initiative that transitions 180,000 residents in the southeast region of the state from the state Medicaid program to managed care, including a shared savings and enhanced primary care case management model. When implemented statewide, the program will cover 800,000 and cost $2.2 billion annually.

Utah State Representative Paul Ray (R) proposed a bill to allow Medicaid to charge higher copayments for Medicaid enrollees who use tobacco. Per Ray, Medicaid enrollees who smoke increase health care costs in Utah by $104 million each year. Note: Medicaid enrollees have a 60 percent on average higher smoking rate than the general population (American Lung Association).

Industry news

Study: insurance fee cost Medicaid $38.4 billion

Last week, Medicaid health insurance companies released a study by Milliman concluding the fee levied against insurance companies starting in 2014 in the ACA (Section 9009) will cost state Medicaid programs $38.4 billion ($13.6 billion for states and $28.4 billion for the federal government) over ten years as a result of the state’s shared funding responsibility with federal funds.

Note: per ACA, health insurance companies will pay an annual fee starting calendar year 2014 as follows: $8 billion (2014), $11.3 billion (2015), $11.3 billion (2016), $13.9 billion (2017), $14.3 billion (2018) and thereafter indexed to the rate of premium growth for the prior year.

HHS: Medicare Advantage premiums down 7 percent, enrollment up 10 percent

HHS Secretary Sebelius announced Wednesday that Medicare Advantage average premiums fell $33.97 in 2011, to $31.54 in 2012, and enrollment increased 11.7 million in 2011 to 12.8 million in 2012. Her report also noted that the average Medicare beneficiary has 26 Medicare Advantage plan choices. Part C premiums fell by 16 percent and enrollment increased 17 percent since passage of the ACA in March 2010.

GAO: prices for medical devices vary widely, not transparent

Friday, the Government Accountability Office (GAO) released its analysis of device pricing variation in 31 hospitals done at the request of Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee. The key finding: prices for the same device vary widely and are not transparent to physicians, employers, or consumers. The report noted that contracts between hospitals and manufacturers and/or group purchasing organizations often preclude disclosure of terms and limit transparency. It also noted that as hospitals employ more physicians, they would be in a stronger position to engage employed physicians in gainsharing arrangements to encourage use of cheaper but equally effective devices.

Moody’s: rough year ahead for not-for-profit hospitals

Last week, Moody’s released its outlook for non-profit hospitals, remaining negative for four reasons:

  1. Downward pressures on hospital revenue. Payments by Medicare, Medicaid and commercial payers will cut margins.
  2. Uncertainty as a result of health reform. “Fiscal year 2013, which starts October 1, 2012, will be a telling year of the health care reform law, assuming it stands in the Supreme Court. FY13 is when several new aspects of the healthcare reform law will begin, including bundled payment programs and penalties for hospitals that have high 30-day readmission rates for acute myocardial infarction, heart failure, and pneumonia. Additionally, hospitals have to gear up further for ICD-10 by October 1, 2013, and the potential of tens of millions of people that could be added to insurance rolls by January 1, 2014, if the individual mandate passes.”
  3. Sluggish economic recovery. “The sluggish economy means spending will not increase dramatically and bad debt is likely to increase as employment stagnates, consumers delay care and out-of-pocket responsibilities for consumers increase.”
  4. Liquidity, balance sheet challenges. “Pressure on not-for-profit balance sheets is high compared with historical levels due to investment volatility, growing pension obligations, more exposure to non-cancellable operating leases, an increase of capital spending funded with cash reserves.”

Note: not mentioned by Moody’s but relevant to hospital sustainability, three additional factors: (1) as hospitals employ more physicians, capital & operating resources will be deployed to support clinical integration and cut/delay other revenue producing investments, (2) unrestricted gifts to NFP hospitals have slowed due to the economic downturn, and (3) supply chain costs are increasing.

Later this month, the Deloitte Center for Health Solutions will release a summary of interviews with 24 major health system CEOs, addressing their plans for the “new normal”. Findings of these interviews are consistent with Moody’s forecast. Top concerns for health system CEOs (number of mentions in 24 interviews):

  • Physician alignment and integration into leadership roles (23)
  • Reduction in operating costs to respond to cuts from payers (21)
  • Integration of non-acute services to become a system of care (20)
  • Management in uncertainty as a result of health reform, payer consolidation, fiscal constraints (20)
  • Implementation of health information technologies and integration into evidence-based care (13)
  • Building new/non-conventional relationships with commercial health plans to share risk and savings (12)
  • More directly engagement with employers and consumers (8)
  • Re-design of current acute clinical programs to be responsive to innovation in diagnostics and therapeutics (8)
  • Engagement with consumers in wellness, preventive health, and personal accountability (8)
  • Protection or enhancement of the brand and reputation of the system (7)

The bottom line: health system CEOs believe market pressures inclusive of but not limited to requirements of the ACA threaten their solvency and sustainability. While acknowledging unknowns in the ACA, they are seemingly more vexed by increased pressures on revenues and operating margins—the result of many factors.

IRS releases proposed regulations for taxable medical devices

February 3, 2012, the Internal Revenue Service (IRS) issued proposed regulations addressing the Medical Device Excise Tax enacted in ACA Section 9009 as amended by Section 1405. This provision adds a 2.3 percent excise tax on medical devices beginning January 1, 2013, designed to raise up to $20 billion in revenues over ten years. The proposed rules propose to define taxable devices as all devices listed under a single product code listing in conjunction with the FDA device listing requirement. Exempt products include exports, components for further manufacture, eyeglasses, contact lenses, hearing aids, and other medical devices generally purchased by the general public at retail for individual use (the “retail exemption”) as prescribed by the Secretary (of the Treasury). Comments on the rule will be accepted until May 7, 2012. The IRS is also accepting outlines of related topics to be potentially discussed at a public hearing on the topic that will occur May 16, 2012.

Note: the Advanced Medical Technology Association (AdvaMed) has asked for this medical device tax to be repealed and predicted a 43,000 job loss to occur if this provision is implemented. For more information on the medical device tax, see the attached document.

FDA and device industry recommend $595 million in drug user fees

Wednesday, the FDA announced it reached an agreement with the medical device industry to collect $595 million in prescription drug user fees over five years, plus adjustments for inflation.

Note: Congress established the drug user fee program ten years ago to collect fees from life science companies to fund the FDA’s drug and device approval process. The program was reauthorized with the Medical Device User Fee Act of 2007 (MDUFA II) and will expire on September 30, 2012. Some of the FDA’s funding is through the annual appropriations process and is therefore subject to annual cuts. As a result, the FDA is expected to increase industry user fees, thus forcing increased costs for device and drug manufacturers that are passed through in supply chain costs to providers and consumers.

Medical practices: ICD-10 Version 5010 conversion creating payment glitches

Wednesday, the Medical Group Management Association (MGMA) and the American College of Medical Practice Executives (ACMPE) sent a letter to HHS asking the administration to correct payment disruptions that medical practices are experiencing due to the transition to electronic claims processing system known as Version 5010. The groups requested that the compliance deadline be extended from January 1, 2012 to June 30, 2012.

National Quality Forum endorses resource use and costs quality measures

Tuesday, the National Quality Forum (NQF) endorsed four measures on health care resource use and costs that are expected to be used broadly in the industry:

  1. 1557: Relative Resource Use for People with Diabetes (National Committee for Quality Assurance)
  2. 1558: Relative Resource Use for People with Cardiovascular Conditions (National Committee for Quality Assurance)
  3. 1598: Total Resource Use Population-based per member per month Index (HealthPartners)
  4. 1604: Total Cost of Population-based per member per month Index (HealthPartners)

Note: NQF is an important NGO (non-government organization) in that its determination and validation of quality measures is usually incorporated into legislation. These measures indicate cost and resource efficiency will be a focus of measures going forward in addition to measures of safety, outcomes, and patient experiences.

Prior authorization of power mobility devices and recovery audit prepayment review demonstrations to start June 1, 2012

Friday, CMS announced that the Prior Authorization of Power Mobility Devices (PMDs) Demonstration and the Recovery Audit Prepayment Review Demonstration, which were delayed from their initial January 1, 2012 start date, are expected to be implemented on June 1, 2012.

CBO: federal worker benefits better than private employers

A CBO report released Monday concluded that average benefits (e.g., health insurance, retirement benefits, paid vacation) for federal workers with no more than a high school diploma were 72 percent higher than their private-sector counterparts. Average benefits for bachelor's degree were 46 percent higher, and workers with a professional degree/doctorate received roughly the same level of average benefits in both sectors. On average, the benefits earned by federal civilian employees cost 48 percent more than the benefits earned by private sector employees with certain similar observable characteristics. (Source: CBO, “How does the compensation of federal civilian employees compare with that of employees in the private sector?” January 2012)

FDA approves “first ever” drugs for cystic fibrosis, basal skin cell cancer

Last week, the FDA announced approvals of two drugs first in their therapeutic application: a new drug approved through the FDA’s expedited review process that treats basal cell skin cancer that has spread to other parts of the body, and a new biologic that treats cystic fibrosis by targeting the genetic mutation in a small minority of cystic fibrosis patients who have breathing disorders.

Study: state nursing workload mandates reduce RN overtime slightly

State-mandated caps on nurses' mandatory overtime hours have reduced overtime hours for new registered nurses (RN), per the RN Work Project, a ten-year longitudinal study of newly licensed RNs in 34 states funded by the Robert Wood Johnson Foundation. Key finding: in 2010, in the 16 states that had rules restricting mandatory overtime hours for nurses (Arkansas, California, Connecticut, Illinois, Maryland, Minnesota, Missouri, New Jersey, New Hampshire, New York, Oregon, Pennsylvania, Rhode Island, Texas, Washington, West Virginia), RNs were 59 percent less likely to work mandatory overtime than their colleagues in unregulated states. Overall, 11.6 percent of nurses worked mandatory overtime in a typical work week, averaging 6.1 hours. In the states regulating overtime, RNs worked an average of 50 fewer minutes per week than their colleagues in states without overtime regulations.

HHS OIG: data inconclusive about physicians opting out of Medicare

The HHS Office of Inspector General (OIG) study of 7,900 physicians who opted out of Medicare between 1998 and 2011 sought to analyze why physicians dropped Medicare in their practices. It concluded the data was inconclusive to determine a cause: “Specifically, we cannot determine the characteristics of physicians who opt out of Medicare, the trend in the number of opted-out physicians, and why physicians choose to opt out of Medicare. (Source: HHS OIG, “Lack of Data Regarding Physicians Opting Out of Medicare”, Report OEI-07-11-00340, January 26, 2012)


“During the coming decade and over the longer term, the aging of the population and rising costs for health care will continue to exert significant pressure on the federal budget. The number of people age 65 or older will increase by about one-third between 2012 and 2022—from 14 percent of the population to 17 percent—substantially raising the cost of Social Security, Medicare, and Medicaid. In addition, the Affordable Care Act, enacted in 2010, will significantly increase the number of nonelderly people receiving assistance through federal health care programs. Of the total federal outlays for Medicare, Medicaid, the subsidies offered through new health insurance exchanges, and related programs that CBO projects for 2022, about half will go to benefits for people over age 65, about a quarter will go to benefits for blind and disabled people, and about a quarter will go to benefits for nonelderly people who are not blind or disabled. CBO projects that the costs per enrollee for Social Security and the major health care programs also will continue to rise, albeit at different rates because of differences in the laws that govern them. Altogether, spending on those programs will increase at an average annual rate of nearly 7 percent between 2013 and 2022, a pace that will outstrip growth in nominal GDP. Combined outlays for all of those programs, which will account for 45 percent of noninterest outlays in 2012, will constitute 60 percent of noninterest outlays in 2022, CBO projects. Moreover, those trends will persist after 2022. Because of the aging of the population and rising costs for health care, the set of budget policies that were in effect in the past cannot be maintained in the future.”

 —CBO, “The Budget and Economic Outlook: Fiscal Years 2012 to 2022,” January 31, 2012

“For the fourth year in a row, Washington faces a $1 trillion-plus deficit and just servicing the debt will soon cost as much as paying for Medicaid, the federal-state program for the poor and disabled. Those were two grim predictions in a 147-page report from the Congressional Budget Office, which Tuesday stepped into the 2012 campaign like some stern Aunt Cassandra—coming down from the attic to lecture the protagonists. ‘It’s not just the economy stupid, it’s the debt.’”

 —Politico, “Congressional Budget Office reports another $1 trillion deficit”, originally published January 31, 2012, updated February 1, 2012

“The CBO’s latest alarm bell couldn’t be more ominous. For years, politicians from both political parties have failed to be honest with the American people about the size and scope of the debt threat. The CBO’s report today confirms that it is past time for serious leaders to put aside politics and start forging solutions.”

 —Congressman Paul Ryan (R-WI) Tuesday, January 31, 2012

“Biopharmaceutical development, which has led to more than 300 new medicines in the last decade, requires significant investment – an average new medicine can exceed $1 billion and take 12 to 15 years to develop. Advancements in regulatory science, greater predictability, and communication, and a commitment to single-cycle review all represent incentives that can help spur that investment. We urge Congress to pass PDUFA-V legislation that reflects the performance goals letter in order to preserve those provisions that would boost innovation while promoting patient access and allowing FDA to continue its essential mission.”

 —PhRMA, statement regarding the reauthorization of the Prescription Drug User Fee Act (PDUFA), February 1, 2012

Fact file

  • January 2012 unemployment: 8.3 percent from 8.5 percent in December 2011; health care industry job growth—31,000; the industry will add additional 5.6 million jobs by 2020. Manufacturing is predicted to lose 73,000 jobs by 2020. (Source: U.S. Department of Labor)
  • Heart disease and strokes account for $1 out of every $6 spent in the U.S. health care system. (Source: HHS)
  • From 1993 to 2005, in communities where health department funding increased, for every $10 increase in local health department spending there was a 7 percent decrease in deaths from infectious disease. (Source: Robert Wood Johnson, Public Health Services and Systems Research Service)
  • In 2010, inappropriate medical care contributed to the deaths of 15,000 Medicare enrollees. (Source: Bara Vaida, “Doctor, Did You Check Your Checklist?” Kaiser Health News and Washingtonian, January 30, 2012)
  • Hospital errors affect 1 in 7 hospitalized. (Source: HHS, OIG)
  • Health data breaches in the U.S. increased 97 percent in 2011. (Source: Redspin, “Breach Report 2011, Protected Health Information,” February 2012)
  • Not-for-profit hospitals spend 11.3 percent of total expenses on benefits to their community: 5.7 percent for direct benefits to patients in financial need through free care, financial assistance, and spending to fill in the gaps from Medicare underpayments. (Source: Ernst & Young and The American Hospital Association)
  • Since 1948, every President with an approval rating above 50 percent was re-elected. President Obama’s current approval: 51 percent. (Gallup, New York Times/CBS Poll January 30, 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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