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Health Care Reform Memo: February 11, 2013

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: State of the health care union

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

Tomorrow, the President will deliver the State of the Union (SOTU) address highlighting his goals and legislative priorities for 2013 and beyond. The choice of Lincoln’s birthdate punctuates the gravity of the nation’s situation due to complicated world events and enormous fiscal challenges at home.

SOTU is a time-honored tradition of our Republic. Article II, Section 3 of the U.S. Constitution, requires that the President “shall from time to time give to Congress information of the State of the Union and recommend to their Consideration such measures as he shall judge necessary and expedient.” George Washington was first to give the “Annual Address to Congress” on January 8, 1790, FDR gave it a new name—“State of the Union”—in 1934, and since 1947 it’s been SOTU officially.

No doubt, economic recovery, jobs, gun control, immigration reform, and national defense will be prominent themes in the President’s comments tomorrow. And, we expect, health care!

As an industry, we’re one-fourth of the federal budget, one-fifth of the average household budget, and approaching one-third of the average state’s budget. One-fifth of our population lack coverage of any kind, their cost is borne by taxpayers, and across the nation, care is uneven and highly variable in cost and quality.

In his inaugural address last month, the President called out health care costs in tandem with deficit reduction as interdependent, trans-generational challenges that must be addressed:

“We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.”— President Obama, January 21, 2013

It’s about Medicare and Medicaid for sure, but health care is more than these two programs and its transformation a necessary part of overall economic recovery and deficit reduction.

Here’s my state of the health care union assessment as the nation addresses the fiscal cliff, grand bargain, debt ceiling, and continuing resolution in the next eight weeks:

Factor Key indicators Observation1
Incentives to do the right things: to reward results, not volume, and encourage team-based care delivery that balances preventive, chronic, and episodic acute and long-term care
  • Financial incentives that reward safety, outcomes, and efficient delivery of care that’s evidence-based and appropriate
  • Rewards, recognition, and penalties aligned with financial incentives
  • Balance of full range of health services in scope: preventive, chronic, acute, long-term

                        C+
Anticipated trending
to B as value-based care becomes mainstream in purchasing relationships between payers and providers

Tools to measure and monitor the right things: valid and reliable measures of efficiency, effectiveness, and value
  • Online tools that permit individuals and their care teams to customize diagnosis and treatments based on unique signs, symptoms, risk factors, and co-morbidities
  • Mobile applications that equip consumers to engage in treatment decisions at the point of care, with full access to their complete medical history and clinical decision support tools that provide guidance about accuracy of diagnosis and appropriateness of treatments
  • Standardized forms and procedures for eligibility, claims adjudication, and administrative functions across all private plans including Medicaid and Medicare
  • Clinical and cost data that’s structured for optimal use by individuals to know what treatment options they have at what cost to them in teachable moments when decisions are made

                         B-
Anticipated trending to B+,
may be reachable when privacy and security, among other issues, are settled

Accountability for doing right things: readily accessible transparent measures that recognize exemplary performance and underperformance
  • Transparency of performance: safety, outcomes, patient/member experiences, coverage and denial decisions, scientific support for innovations, conflicts of interest (plans, biopharma, device)
  • Penalties for poor performance (providers)
  • Penalties for unhealthy behaviors (consumers)
  • Balanced funding for the entire continuum of care (policy-makers)

                         C-
Uncertain trend line
as medical liability reforms are missing in current reforms and individual accountability for healthier lifestyle not prominent in current policies

Funding to accommodate finding and accelerating access to diagnostics and therapeutics that allow discovery of the right things inside and outside allopathic models of care across the population without regard to insurance coverage, health status, ethnicity, or income
  • Public funding for access to needed services and basic research to fuel innovation in the diagnosis and treatment of medical problems
  • Private funding for innovations, research and development, growth
  • Private funding for elective services
  • Individual/household funding from discretionary resources adequate to health care needs

                         B+
Anticipated trending to B-
as fiscal pressures are expected to reduce public resources allocation, and household incomes require trade-offs between health and other essential services; funding levels are considered adequate today, but are expected to be increasingly scarce tomorrow

Structure that makes it efficient to do the right things without unnecessary paperwork, regulatory confusion, and shared responsibilities for results
  • Seamlessness in the system of finance and delivery
  • Balanced approach to preventive, chronic, acute, and long-term care services
  • Synergy bridging gaps between human services and health
  • Consistency between state and federal regulatory/legislative framework

                        D
Anticipated trending to B
as industry consolidation, clinical integration, and technologies for care coordination are expected to become mainstream

Market demand to do the right things among consumers, policy-makers, and industry stakeholders who set aside sectarian/provincial interests to consistently transform the system of care
  • Consumer demand for improved value
  • Employer demand for improved value
  • Stakeholder demand for improved value
  • Bipartisan efforts to balance care and costs, access, and innovation, public oversight and private interests

                       B-
Anticipated trending to B
as growing numbers of individuals and purchasers are expected to demand improved service, transparency, and payments linked to results

Affordability to provide goods and services at prices that are reasonable and transparent
  • Price transparency
  • Understandable relationship between costs and price
  • Costs that are aggressively managed to achieve competitive advantage
  • Consistent operational focus on radical cost reduction

                      D
No near-term trending obvious
; costs and pricing unrelated; cost and price transparency suboptimal

The state of the health care union Seamless delivery of services and resources that are evidence-based, highly valued, and cost effective across the continuum of care. There is no “health care union,” it is still a system of sectarian special interests.                         B-

1 The grades included in this assessment are based solely on the author’s knowledge and experience and are not intended to indicate an objective analysis of the state of health care in the U.S.

The current debt of the U.S. is approaching 72.5 percentage of our gross domestic product (GDP)—up from 36 percentage in 2007 and fast-moving toward 77 percentage by the end of the decade per the U.S. Congressional Budget Office (CBO) report last week. For the current fiscal year (FY 2013) which ends September 30, the CBO projects a deficit of $845 billion, or 5.3 percentage of GDP—below the peak in 2012 of $1.1 trillion, but the fifth consecutive year of deficits approaching or above $1 trillion. The report did note that Medicare and Medicaid increased “only” 3 percentage, however, it is nonetheless daunting when contrasted to overall GDP—the CBO estimates that Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), and other federal health care subsidies enacted by the Affordable Care Act (ACA) will amount to almost 5 percentage of the GDP this year and 6.2 percentage in 2023.

So here’s the bottom line: the government is spending more than it can afford if the economy is to thrive and achieve full employment (95 percentage) and a rate of growth that rewards innovators and risk takers in the world’s strongest economy. Health care spending—at 5.7 percentage year-over-year growth for the next decade per the CBO—is a major contributor to the government’s spending problem. And dollars spent on health care—whether appropriately or not—compete with dollars for defense, education, and infrastructure. They’re not secure in a lock box where competing priorities have no keys. Our system of health has failed to deliver optimal value to its customers—employers, individuals. The data’s clear:

Note: figures are rounded and may not total; where applicable, ‘don’t know/no opinion’ values are not shown.

Sources:

  1. 2012 Deloitte Survey of U.S. Employers: Opinions about the U.S. health system and plans for employee health benefits, Deloitte Center for Health Solutions and Deloitte Consulting LLP, June 2012
  2. 2012 Survey of Health Care Consumers in the United States, Deloitte Center for Health Solutions, June 2012
  3. Physician perspectives about health care reform and the future of the medical profession, Deloitte Center for Health Solutions, December 2011

There’s plenty of money in the system, but even more plentiful the strong opinions of its stakeholders about how it should be spent. And too frequently, each has a view that’s noticeably assertive about of its own efficiency while pointing fingers at others portrayed as wasteful or fraudulent.

Let’s have that discussion. Let’s create a national blue ribbon panel to come up with fresh solutions that the legislative process is unable to tackle due to the realities of politics and lawmaking. It would include employers, providers (including physicians, long-term care providers, nurses, and technicians), scientists, device manufacturers, plans, retailers, food manufacturers, and consumers; its agenda straightforward—to develop meaningful solutions that can be implemented within the context of the law (it’s not going away) that accelerate better care at lower cost while building on a private system favored by the majority of Americans—young and old.

I teach in the health policy program at Georgetown. The students are given the task of probing a targeted solution focusing on what needs to be done, then how and who. It impresses me how quickly they identify solutions—their “WHAT.”

But “how” is the students’ greater challenge and what makes the difference in their grade. Unlike much of the recent debate about reform that pits sector against sector, the Millennials’ “how” always seem to embrace new technologies and innovative processes. They progress from WHAT, to HOW, then WHO in that order. Too frequently in the health reform journey of the past four years, the discussion has started with WHO and progressed no further.

I believe we’re at the tipping point: it’s worth the effort. It starts with agreement about “what,” then “how”—“who” comes last. The health care system state of the union is not strong. It can do better. And we can afford to do no less and we have little time to waste.

Paul Keckely

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

Implementation update

CBO budget and economic outlook—new health care projections: spending, coverage assumptions, and cost of ACA

Last week, the CBO released its budget and economic outlook for FY 2013 to FY 2023, updating its August 2012 forecast. Highlights:

Health care spending (from CBO unless otherwise noted)

  • National health expenditures grew at an annual rate of 4.3 percentage in 2012 vs. 3.9 percentage annually from 2009 to 2011. (Source: Centers for Medicare & Medicaid Services [CMS])
  • Medicare spending increased 3 percentage, or $16 billion, in FY 2012—a slower rate of growth than any seen since 2000. CBO predicts Medicare outlays will increase 4 percentage or $21 billion, in FY 2013 inclusive of a 2 percentage reduction in Medicare spending per sequestration (unless Congress intervenes).
  • Health care prices in December 2012 increased 1.7 percentage vs. December 2011—the lowest year-over-year growth since February 1998. The 12-month moving average at 2.0 percentage was the lowest since December 1998. (Source: U.S. Bureau of Labor Statistics [BLS] data, Altarum Institute)
  • Health care employment increased by 23,000 in January 2013—similar to the 24-month average of 24,000. Totals for 2011-2012 health care jobs added were 598,000. (Source: BLS data, Altarum Institute)
  • Major health care programs (i.e., Medicare, Medicaid, and CHIP) will represent 6.2 percentage of GDP in 2023, up from 5 percentage in 2013.
  • A ten-year freeze on the sustainable growth rate (SGR) would raise Medicare spending by $138 billion, down from the November projection of $243.7 billion.

Impact of CBO update on the ACA (from CBO)

Changes in coverage assumptions:

  • Medicaid and CHIP: 12 million will be added to the program by 2022—an increase of 1 million from August 2012 baseline projections but below original 16 million projected in March 2010 before Supreme Court ruling that expansion is optional for states (results in lower Medicaid outlays by federal government of $93 billion)
  • Employment-based: 7 million fewer will be covered by an employer in 2022 vs. 4 million less projected in August 2012
  • Health insurance exchanges (HIXs): 25 to 26 million will be enrolled in the HIXs by 2022 vs. 24 million projected in August 2012 (results in increased subsidies through HIXs of $32 billion)
  • Uninsured: 27 million will gain health insurance by 2022, down from 30 million projected in August 2012

Changes in revenues associated with ACA:

  • Revenues from penalties: net cost of the ACA provisions: $1.165 trillion between 2013 and 2022—same as the August 2012 baseline estimate
  • Penalty payment changes: penalty payments by employers projected to be $13 billion higher than 2012 baseline estimates, and penalty payments by individuals projected to be $10 billion lower
  • Revenues from excise taxes: the excise tax on high premium health insurance plans is projected to be $9 billion less than 2012 baseline estimates

10-year effect on the federal deficit, FYs 2013-2022 (billions of dollars)

ACA provision August 2012 February 2013 Difference
Medicaid and CHIP outlays $643 $550 $(93)
Exchange subsidies $1,015 $1,047 $32
Small-employer tax credits $22 $23 $1
Gross cost of provisions $1,680 $1,620 $(60)
Penalty payments by uninsured individuals $(55) $(45) $10
Penalty payments by employers $(117) $(130) $(13)
Excise tax on high premium insurance plans $(111) $(102) $(9)
Other effects on tax revenues and outlays $(231) $(178) $53
Net cost of coverage provisions $1,165 $1,165 $-

(Source: CBO, “The Budget and Economic Outlook: Fiscal Years 2013 to 2023,” Table A-2, February 2013)

Report: IRS did not receive adequate funding to implement ACA

According to a recent report from the U.S. Department of Treasury (DOT) Inspector General for Tax Administration, the U.S. Internal Revenue Service (IRS) did not receive adequate funding from the U.S. Department of Health and Human Services (HHS) to pay for the additional full-time employees needed to implement the ACA. The FY 2013 IRS budget included no additional workers vs. the 856 full-time employees (FTEs) funded by HHS dedicated to the ACA implementation in FY 2012. Other findings:

  • The IRS FY 2012 budget totaled $11.8 billion, which is a 2.1 percentage decrease from FY 2011—second consecutive budget reduction.
  • The total IRS workforce fell 9 percentage (5,000 employees) from FY 2010 to FY 2012.
  • 40 percentage of IRS employees will be retirement eligible by FY 2017; more than a third of its senior management and nearly 20 percentage of nonexecutive managers are currently eligible for retirement.

Background: more than 40 provisions of the ACA pertain to IRS relating to tax reporting responsibilities, intermediaries (i.e., employers and insurers who help administer), and administrators (i.e., HHS, other federal agencies, and states). The FY 2012 budget request for IRS included $473 million and more than 1,200 FTE staff for ACA implementation.

Commission on long-term care appointed

In the American Taxpayer Relief Act (ATRA) of 2012 (H.R. 8), the fiscal cliff deal passed January 1, 2013, the Community Living Assistance Services and Support (CLASS) Act (Sections 8001 and 8002 of the ACA) was replaced with a new 15-member Commission on Long-Term Care tasked to create a national plan to address long-term care services in the U.S. Three Commissioners were to be appointed by President Obama and 12 by the House and Senate (50/50 Republican/Democrat appointees made by leadership). President Obama, U.S. Senate Minority Leader Mitch McConnell (R-KY), and U.S. House Majority Leader John Boehner (R-OH) have not yet announced nominations.

  • U.S. Senate Majority Leader Harry Reid (D-NV) nominated Judy Feder, Georgetown Professor; Laphonza Butler, Service Employees International Union (SEIU) United Long-Term Care Workers’ Union President; and Javaid Anwar, M.D., Nevada.
  • U.S. House of Representative’s Minority Leader Nancy Pelosi (D-CA) nominated Bruce Allen Chernof, M.D., SCAN Foundation; Judith Stein, Center for Medicare Advocacy, Inc.; George Vradenburg, Alzheimer’s activist.

Costs of ACA calculated

Last week, staff from the U.S. House Ways and Means, Education and the Workforce, and Energy and Commerce committees released a 16-page report outlining costs associated with ACA implementation in 157 areas. Per the 16-page “ObamaCare Burden Tracker” the total burden associated is 127.6 million hours. Highlights:

  • Credit for small employer health insurance premiums: 40.2 million hours. Note: per the ACA, certain small employers are eligible to receive tax credits to supplement the cost of health insurance premiums.
  • 340B drug pricing program forms: 14,504 hours. Note: the ACA expanded the 340B drug pricing program to make more safety-net providers eligible for drug discounts.
  • Application for coverage in the pre-existing condition insurance plan: 59,833 hours. Note: the ACA created a program for individuals who could not access health insurance because of a pre-existing condition. The program serves as a gap until 2014 insurance market regulations go into effect that prohibit health insurance issuers from discriminating against individuals based on health status.

Background: the hours cited in the tracker were collected from the OMB website; by law, agencies must calculate the paper burden associated with certain regulations impacting providers, administrators, consumers, etc.

(Source: House Ways and Means, Energy and Commerce, Education and Welfare Committees’ “ObamaCare Burden Tracker,” released February 6, 2013)

Basic health plan implementation delayed to 2015

Last week, CMS announced the implementation of basic health program (BHP) will be delayed until January 2015—one year after its original start date. Reasoning: states have enough on their plates beginning January 1, 2014 and CMS expects there to be a learning curve in 2014 that will inform the BHP federal regulatory process and state’s decisions about whether to participate in the BHP.

Background: the BHP was enacted by Section 1311 of the ACA and will allow states to administer a public health insurance program for individuals between 133 percentage and 200 percentage of the federal poverty level (FPL) who would otherwise be eligible to purchase health insurance coverage through a HIX. States will receive 95 percentage of the federal subsidy that the individual would have received if they had purchased coverage through a HIX. Proponents of the program believe that the BHP will reduce the cost of insurance for low-income uninsured individuals; opponents argue that the BHP will undermine the HIX market.

Rate review rule in final review at OMB

The U.S. Office of Management and Budget (OMB) is reviewing a final rule from HHS that will provide guidance on provisions in the ACA related to the health insurance market, including amendments to the requirements for states to operate rate review programs.

Background: the rate review program was enacted by Section 1001 of the ACA and implemented in 2011 to monitor health insurance premium rate increases above 10 percentage. If the rate of increase is greater than 10 percentage, the health insurance issuer must seek approval from the state in which the plan is being administered or from HHS if the state does not have a rate review program in place. According to HHS, nine states have passed legislation to enhance rate review, 17 states have proposed rate review legislation, and 40 states have enhanced consumer protections.

Legislative/regulatory update

Permanent SGR fix proposed

Wednesday, Representatives Allyson Schwartz (D-PA) and Joe Heck (R-NV) introduced the Medicare Physician Payment Innovation Act (H.R. 574) to change the way Medicare providers are paid by eliminating the SGR system and replacing it with a new payment delivery model. (Note: similar legislation was introduced last year but was not passed.) Thursday, House Republicans also released their proposal to repeal the SGR.

Background: the ACA cuts Medicare spending $716 billion for FY 2010 to FY 2019. As part of ATRA, Congress canceled a 26.5 percentage Medicare pay cut for doctors scheduled to be implemented January 1 and replaced it with a one-year payment freeze. CBO said the legislation sets up a 25 percentage cut in January 2014, unless lawmakers again intervene. In last Tuesday’s CBO update, the cost of Medicare pay cuts to physicians was lowered from $243.7 billion to $138 billion for FY 2013 though FY 2023. It said its lower cost estimate is primarily due to lower spending for physicians’ services in recent years with Medicare spending increasing at 3 percentage in FY 2012—the lowest annual rate since 2000.

The net result of the decrease: opportunistic legislative proposals to permanently fix the SGR:

Concept SGR Repeal and Reform proposal, by House Ways & Means and Energy & Commerce Committees1 Medicare Physician Payment Innovation Act (H.R. 574), introduced by Representatives Allyson Schwartz (D-PA) and Joe Heck (R-NV)2
Repeal the SGR

Fully repeal, eliminating the 25% rate cut to physicians in 2014 and any future cuts called for under the formula
Proposal includes three phases of reform:

  • Phase I: repeal SGR and provide a period of predictable, statutorily-defined payment rates
  • Phase II: reform Medicare’s fee-for-service (FFS) payment system to better reflect the quality of care provided
  • Phase III: further reform Medicare’s FFS payment system to also account for the efficiency of care provided

Fully repeal, eliminating $300 billion debt to the Medicare program

Includes 5-year transition period to replace scheduled cuts before the new payment system is in place in 2018

 

 

Replacement formula Establishes a period of payment rates that are predictable and statutorily-defined

Provides positive annual payment updates of 0.5%

Years 2014 to 2017, provides 2.5% annual increase for primary care, prevention, and care coordination services provided by clinicians for whom 60% of their Medicare allowable charges are for those same services

Reimbursement Provides options from which physicians can choose to fit their practice

Requires CMS to issue a menu of no fewer than four health care delivery and payment model options by October 1, 2016

CMS will also be allowed to select from models in development outside of the agency

Measures Allows physicians to determine clinically meaningful quality and efficiency measures

Provides two options for physicians who demonstrate a commitment to quality and efficiency to participate in a new alternative FFS system; physicians must either:

  1. Adhere to list of cost, quality, and outcome measures defined in conjunction with medical societies
  2. Be exceptional clinicians who demonstrate achievements as measured by the Value-Based Modifier relative to their peers
Incentives Rewards physicians in the program who deliver high-quality and efficient care

Beginning January 1, 2018, physicians who practice within an approved model will be able to earn higher reimbursements for achieving gains in quality, effectiveness, and gains

Those who remain in the traditional FFS model will be subject to reduced updates in both primary and non-primary care services

Oversight Requires CMS to provide timely feedback and data to physicians Directs the Secretary of the HHS to update payments between 1% and the Medicare Economic Index (MEI) annually beginning 2023

Sources:
1Overview of SGR Repeal and Reform Proposal
2Medicare Physician Payment Act of 2012

My take: as noted in prior Monday Memos, the SGR is a fundamentally flawed method of payment for physicians, and as such deserves re-thinking and a fresh start. But the discussion should not be limited to physicians only: the health care workforce supply-demand imbalance is particularly acute in primary care. To address the shortage, expansion of scope of practice for nurse practitioners and advanced practice nurses; inclusion of dental, nutritional, and psychological care; expanded use of technologies that facilitate coordination and patient monitoring; and a precise focus on consumer self-care should be added to the discussion. It’s not just about physician pay; it’s about the care and caring processes of health care professionals working in tandem with consumers.

For more information about the SGR, download Understanding the SGR: Analyzing the “Doc Fix” from the Deloitte Center for Health Solutions.

In addition to the SGR, other health care legislative activities last week:

  • Medical device: Representative Erik Paulsen (R-MN) introduced the Protect Medical Innovation Act (H.R. 523) to repeal the 2.3 percentage excise tax on medical devices that went into effect January 1, 2013 per the ACA.
  • Medicaid: Representative Gerry Connolly (D-VA) introduced H.R. 467 to redistribute federal funds declined by states opting out of Medicaid expansion (Section 2001 of the ACA) to states choosing to provide those Medicaid benefits.
  • Pharmaceuticals: Representative Bill Keating (D-MA) introduced H.R. 486 to incentivize the development of abuse-deterrent drugs. Senator Amy Klobuchar (D-MN) introduced S. 214 to prohibit brand name drug companies from compensating generic drug companies to delay entry of a generic drug into the market, known as “pay-for-delay.” Representative David McKinley (R-WV) introduced the Patients’ Access to Treatments Act of 2013 (H.R. 460) to limit cost-sharing requirements applied to prescription drugs in a specialty drug tier to the dollar amount associated with prescription drugs in a non-preferred brand drug tier.
  • Medicare: Representative Alan Grayson (D-FL) introduced H.R. 500 to allow any citizen or permanent resident of the U.S. to buy into Medicare.

CMS proposes rule to reduce regulatory burdens for providers

Last week, CMS issued a proposed rule to eliminate “excessively burdensome, obsolete, or unnecessary” regulations placed on providers participating in Medicare. This rule would impact Ambulatory Surgical Centers (ASCs), Critical Access Hospitals (CAHs), transplant centers, etc. Highlights:

  • To be eligible to provide radiology services, ASCs would no longer be subject to the requirements of full hospitals
  • Qualified dietitians would be eligible to order patient diets in a hospital setting
  • Transplant centers would no longer have to report certain types of data to CMS, as CMS receives the information from other sources
  • CAHs would no longer be required to develop patient care policies with members of the community ( i.e., non-staff members)

Background: President Obama issued an Executive Order requiring all federal agencies to conduct retrospective reviews of existing regulations to determine which regulations are no longer necessary.

Tavenner nominated to top CMS post

Friday, the White House re-nominated Marilyn Tavenner to be administrator of CMS. The move was expected, as Tavenner’s nomination expired at the end of the last Congress.

My take: a number of trade associations—the American Medical Association (AMA), Federation of American Hospitals (FAH), American Hospital Association (AHA), and others—quickly affirmed her nomination. I suspect she will be confirmed by the Senate.

CMMI announces bundled payment program for kidney dialysis

Last week, the Center for Medicare and Medicaid Innovation (CMMI) began accepting applications from Medicare providers to participate in a new shared savings program to treat end-stage renal disease (ESRD). The program would run from 2013 to 2016. Letters of intent will be accepted until March 15 and applications until May 1.

Background: through the Comprehensive ESRD Care Model, CMMI seeks to identify ways to improve the coordination and quality of care for beneficiaries in this population, while lowering total per-capita expenditures to the Medicare program.

State update

CMS guidance to states: Medicaid cost sharing for newly eligible

Last Wednesday, CMS clarified how increased federal matching rates would apply to Medicaid expansion populations starting in 2014 and how Medicaid expansion applies to pregnant women.

Background: ACA allows states, beginning in 2014, to extend Medicaid coverage to single adults younger than 64 with income of up to 133 percentage of the FPL (effectively 138 percentage because of a 5 percentage income disregard allowed in ACA). In Medicaid expansion, two types of increased federal medical assistance percentages (FMAPs) will be available to states:

  1. A “newly eligible FMAP” will be available to states that decide to participate in Medicaid expansion. This FMAP will cover all state expansion costs (100 percentage match) from 2014 through 2016; provide a 95 percentage match in 2017; 94 percentage match in 2018; 93 percentage match in 2019; and 90 percentage match in 2020 and beyond.
  2. “Expansion state FMAP”: before Congress enacted ACA in March 2010, some states had already expanded their Medicaid coverage to adults with higher incomes. For Medicaid enrollees that fell in this group, CMS said another FMAP (“expansion state FMAP”) will be available: the regular (non-newly eligible) FMAP rate increased by a “transition percentage,” which will result in a lower FMAP than the newly eligible FMAP. The transition percentage will increase gradually, however, so that by 2019 it will equal the newly eligible FMAP.

A key feature of the Medicaid expansion in the ACA was the eligibility of childless, non-pregnant adults. The CMS guidance also addressed whether states need to track women enrolled in the Medicaid expansion group who become pregnant. Per CMS guidance, if a woman indicates on an initial application that she is pregnant, she would be enrolled in a state's pre-existing Medicaid coverage as a pregnant woman rather than in the newly eligible group. States are not required to track the pregnancy status of women already enrolled in the newly eligible group.

State round-up: HIX

States that do not plan to operate their own exchange must submit their plans to operate a state-partnership exchange by February 15, 2013 or default to a federally-facilitated exchange. To date, 17 states—12 led by Democratic Governors, four led by Republicans and one Independent —and the Democratic mayor of D.C. have announced plans to operate state-based exchanges:

State-based exchange State-partnership exchange Undecided/Federally-facilitated exchange
CA, CO, CT, DC, HI, ID, KY, MA, MD, MN, NM, NV, NY, OR, RI, UT, VT, WA AR, DE, IA, IL, MI, NC, WV AK, AL, AZ, FL, GA, IN, LA, KS, ME, MO, MS, MT, ND, NE, NH, NJ, OH, OK, PA, SC, SD, TN, TX, VA, WI, WY

Note: updated February 10, 2013.

  • Mississippi will not implement a state-based exchange. CMS officially denied the state's proposal Friday because the state's application was not signed by Governor Phil Bryant (R). In a letter to the state, Gary Cohen, Director of the Center for Consumer Information & Insurance Oversight (CCIIO), encourages Mississippi to submit an application on February 15, 2013 to participate in a state-partnership exchange.

Medicaid expansion update

Twenty-three states and D.C. have said they will expand or are in support of expanding their Medicaid programs; 15 states have indicated they are highly unlikely to expand their program:

Announced or Governor in support of expansion Not participating or highly unlikely to participate Undecided or undeclared  
AR, AZ, CA, CO, CT, DC, DE, HI, IL, MA, MD, MI, MN, MO, MT, ND, NH, NM, NV, OH, OR, RI, VT, WA AL, GA, IA, ID, IN, LA, ME, MS, NE, OK, SC, SD, TX, UT, VA AK, FL, KS, KY, PA, NC, NJ, NY, TN, WI, WV, WY

Sources: PoliticoPro, February 10, 2013 and State Reform, February 7, 2013

Note: states do not have a deadline to make a decision on Medicaid expansion and may opt in or out of participation at any time. This chart was compiled using publicly available information (as of February 10, 2013) and is subject to change.

  • Ohio Governor John Kasich (R) included Medicaid expansion funding in his budget proposal released last week. The Governor has requested the Obama administration allow his state to provide coverage via the subsidized exchange market for the highest income portion of the eligible population, 100 percentage to 133 percentage of the FPL. Expansion of the program is expected to provide insurance for an additional 456,000 Ohioans and generate a $1.4 billion net gain for the state budget by 2022.
  • Wednesday, Governor of Michigan, Rick Snyder (R) announced his support for Medicaid expansion.
  • Friday, the Florida Hospital Association released a poll of 600 registered voters finding that that more than six of ten Florida voters support the expansion of Medicaid eligibility in the state.

State round-up

  • Mississippi House members passed legislation allowing insurers to compensate specialists who use telemedicine to provide long-distance consultation to rural doctors.
  • Texas recovered $1.01 billion in Medicaid fraud over the past ten years; 60 percentage was returned to the federal government.

Industry update

Survey: ACA’s major impact on how larger employers handle part-time employees

The ADP Research Institute survey of larger employers (companies with 1,000 or more employees) concluded that the ACA will have the biggest impact on how employers structure health care benefits for part-time employees. Findings:

  • Part-time employees make up 23 percentage of the total workforce; 15 percentage of these part-time employees are eligible for benefits with slightly more than half (53 percentage) choosing to participate.
  • 68 percentage of the total full-time workforce is covered by their employers’ health plan vs. 8 percentage of part-time employees.
  • Purchasing behavior is significantly different among part-time workers who are single vs. married. Single employees make up 52 percentage of the part-time associates who are eligible for benefits. Only 46 percentage of those, however, elect health coverage.
  • Very large employers (>5,000 lives) paid 14 percentage less for coverage on average than employers with 1,000 to 2,499 lives.
  • Employers in manufacturing incurred health premiums that were 13 percentage higher than average. Professional services and health care and social assistance industries also incurred health premiums well above average. By contrast, the accommodation and food services industry reported premiums 25 percentage lower than the average.

(Source: ADP Research Institute, “ADP’s 2012 Study of Large Employer Health Benefits: Benchmarks for Companies with 1,000+ Employees,” 2013)

My take: in our 2012 Survey of U.S. Employers, cost was the major issue. Most employers were not clear on how the ACA reduces health costs, and unfamiliar with its elements that move the delivery system’s incentives away from FFS to value. Most want to keep coverage for their employees: 9 percentage (representing 3 percentage of the civilian work force) said they would consider dropping coverage in the next one to three years. But they also express strong interest in the potential role HIXs might play as a channel for coverage. For more information, download the 2012 Deloitte Survey of U.S. Employers: Opinions about the U.S. health care system and plans for employee health benefits from the Deloitte Center for Health Solutions.

Three updates on information-driven health care

VA and DOD will not use a single EHR system

The U.S. Department of Veteran Affairs (VA) and U.S. Department of Defense (DOD) announced last week they would not pursue a plan to create a single integrated electronic health record (EHR) system, estimated to cost between $1.4 and $5.2 billion, and will focus on a more affordable immediate solution to share health data.

Background: in October 2012, the U.S. Government Accountability Office (GAO) released a report concluding that collaboration in the provision of health care services between the DOD and VA was ineffective, and recommended that the departments develop performance measures related to access, quality, and costs; implement information technologies to enhance administrative and clinical coordination; and address policy and workforce barriers hindering collaboration. The VA and the DOD serve over 15 million individuals (including 1.1 million who receive care from both departments), approximately 100 hospitals, and 1,000 clinics.

AHRQ, CMS launch EHR for pediatrics

Last week, the Agency for Healthcare Research and Quality (AHRQ) and CMS announced a new EHR format for processing health information about children—an EHR format that tracks child-specific data elements and recommendations including: prenatal and newborn screening tests, vaccines, growth data, special needs, and child abuse reporting. The proposed EHR format provides guidance on structures that permit interoperable exchange of data, including data collected in school-based, primary, and inpatient care settings. Pennsylvania and North Carolina will participate in a pilot demonstration to test the format, and CMS plans to integrate the format into future EHR Standards and Meaningful Use certification requirements.

Background: the 2009 Children’s Health Insurance Program Reauthorization Act (CHIPRA) authorized the children’s EHR format to improve care for children, especially those enrolled in Medicaid and CHIP. The format is designed for EHR developers and providers who wish to augment existing systems with additional features or to build new EHR systems.

Survey: implementation deadlines, infrastructure major challenges for CIOs

A survey of 100 CIOs in provider settings concluded that network security issues, infrastructure upgrades, and Meaningful Use implementation top their list of concerns:

  • 56 percentage were “somewhat confident” in their ability to prevent a privacy or security breach on their network
  • 76 percentage of respondents are planning to upgrade their network infrastructure in the next two years
  • 24 percentage reported using cloud-based computing, much lower than other industries
  • 17 percentage believe mobile health (mHealth) will have a significant impact on the health care industry
  • 80 percentage of respondents agree that EHR-based systems will improve patient care
  • More than 60 percentage suggested that EHR and Meaningful Use mandates are a “good idea” to support better quality patient care

(Source: Level 3 Communications, “CIO Outlook on Healthcare IT for 2013,” February 2013)

Note: next week the Center for Health Solutions will release “Health System Chief Information Officers: juggling responsibilities, managing expectations, building the future.” In this study, Senior Advisor for Health Care Transformation and Technology Harry Greenspun, M.D., explores the issues that keep CIOs awake at night, looking at both near- and long-term issues and challenges ahead.

FDA releases guidance on Alzheimer’s trial designs

The U.S. Food and Drug Administration (FDA) issued draft guidance for pharmaceutical manufacturers who plan to develop drugs for treatment of early stage Alzheimer’s, outlining clinical outcome measures for various stages, potential strategies for demonstrating clinical efficacy, and how disease modification might be demonstrated for these populations. Comments will be accepted until April 9, 2013.

Background: the 2011 National Alzheimer's Project Act established a National Plan for Alzheimer's disease and related dementias (ADRD). With input from a public-private Advisory Council on Alzheimer's Research, Care and Services, it provides recommendations to HHS for priority actions to expand, coordinate, and condense programs to improve the health outcomes of people with ADRD and reduce the financial burden of these conditions on those with the diseases, their families, and society. It is projected the Alzheimer’s population will triple to 13.8 million in the next 40 years (see research summary below).

Research snapshots

New industry and peer-reviewed studies of note to health system transformers…

Alzheimer’s projected to triple in U.S. by 2050

Objective: “To provide updated estimates of Alzheimer disease (AD) dementia prevalence in the U.S. from 2010 through 2050.”

Methodology: “Probabilities of AD dementia incidence were calculated from a longitudinal, population-based study including substantial numbers of both black and white participants. Incidence probabilities for single year of age, race, and level of education were calculated using weighted logistic regression and AD dementia diagnosis from 2,577 detailed clinical evaluations of 1,913 people obtained from stratified random samples of previously disease-free individuals in a population of 10,800. These were combined with U.S. mortality, education, and new U.S. Census Bureau estimates of current and future population to estimate current and future numbers of people with AD dementia in the U.S.”

Key findings: “In 2010, there were 4.7 million individuals aged 65 years or older with AD dementia, 0.7 million were between 65 and 74 years, 2.3 million were between 75 and 84 years, and 1.8 million were 85 years or older. The total number of people with AD dementia in 2050 is projected to be 13.8 million, with 7 million aged 85 years or older. The number of people in the U.S. with AD dementia will increase dramatically in the next 40 years unless preventive measures are developed.”

(Source: Hebert, et al, American Academy of Neurology, “Alzheimer disease in the United States [2010-2050] estimated using the 2010 census,” February 6, 2013)

My take: among the most challenging issues in our society is the balance of caring for our seniors while addressing coming younger generations. Advances in the diagnosis and treatment of dementia will no doubt be a key focus, as will hospice care that’s still used less than half the time at the time of death. (A recent study found that 42 percentage of Medicare patients were using hospice care at the time of death in 2009—up from 22 percentage in 2000.) Medicare already spends 27 percentage of its budget in the last year of a senior’s life, so it’s time for a national discussion about care and caring for seniors and their children and grandchildren. It’s not just about the seniors themselves.

Death rates in acute care decreasing

Objective: “To describe changes in site of death, place of care, and health care transitions between 2000, 2005, and 2009.”

Methodology: “A retrospective cohort study of a random 20 percentage sample of FFS Medicare beneficiaries, aged 66 years and older, who died in 2000 (n = 270,202), 2005 (n = 291,819), or 2009 (n = 286,282). A multivariable regression model examined outcomes in 2000 and 2009 after adjustment for sociodemographic characteristics. Based on billing data, patients were classified as having a medical diagnosis of cancer, chronic obstructive pulmonary disease, or dementia in the last 180 days of life.”
Key findings: “Among Medicare beneficiaries who died in 2000 and 2005 compared with 2009, a lower proportion died in an acute care hospital, although both ICU use and the rate of health care transitions increased in the last month of life. The proportion of deaths in acute care hospitals decreased from 32.6 percentage to 26.9 percentage to 24.6 percentage respectively. However, intensive care unit (ICU) use in the last month of life increased from 24.3 percentage to 26.3 percentage to 29.2 percentage. Hospice use at the time of death increased from 21.6 percentage to 32.3 percentage to 42.2 percentage, with 28.4 percentage using a hospice for 3 days or less in 2009. Of these late hospice referrals, 40.3 percentage were preceded by hospitalization with an ICU stay. The mean number of health care transitions in the last 90 days of life increased from 2.1 to 2.8 to 3.1 per decedent .The percentage of patients experiencing transitions in the last 3 days of life increased from 10.3 percentage to 12.4 percentage to 14.2 percentage.”

(Source: Teno et al, “Change in end-of-life care for Medicare beneficiaries site of death, place of care, and health care transitions in 2000, 2005, and 2009,” JAMA, February, 2013)

My take: end of life care is a sensitive subject in today’s social and political environment. The ACA did not address end of life care directly, other than through the CLASS Act provision that’s been taken out. A discussion about long-term care inclusive of end of life is a necessary part of health reform and timely.

Quotable

“While some people will find registering for health insurance as easy as booking a flight online, vast numbers who are confused by the myriad choices will need to sit down with someone who can walk them through the process. Enter the navigators, an enormous new workforce of helpers required under the law (ACA). In large measure, the success of the law and its overriding aim of making sure that virtually all Americans have health insurance depends on these people. But the challenge of hiring and paying for a new class of workers is immense and is one of the most pressing issues as the Obama administration and state governments implement the law.”

— N.C. Aizenman, The Washington Post, “For insurance exchanges, states need navigators,” February 6, 2013

“If you ask me to describe the rising philosophy of the day, I’d say it is data-ism. We now have the ability to gather huge amounts of data. This ability seems to carry with it certain cultural assumptions—that everything that can be measured should be measured; that data is a transparent and reliable lens that allows us to filter out emotionalism and ideology; that data will help us do remarkable things—like foretell the future….In sum, the data revolution is giving us wonderful ways to understand the present and the past. Will it transform our ability to predict and make decisions about the future? We’ll see.” 

David Brooks, The New York Times, “The Philosophy of Data,” February 5, 2013

“At this level of debt relative to our GDP, our country would be incurring costs and bearing risks of a sort that we have not had in our history except for a few years around the end of the second World War. At the same time, bringing debt down relative to GDP requires reductions in services that we are getting from the government, or higher taxes paid to the government.”

Douglas Elmendorf, Director, CBO, February 5, 2013

“[Conservatives warn that] the IPAB (Independent Payment Advisory Board) is really a `death panel’ that will sit in judgment over Americans’ health claims, denying costly care to the old and weak...Sounds scary. Except the IPAB doesn’t have anything close to that power. The law (ACA) says it (IPAB) has no authority to ration care or cut benefits for Medicare recipients. It can’t touch reimbursements to hospitals until 2020. Instead, it’s expected to find savings by eliminating fraud and reducing payments to private insurance companies that work with Medicare and prescription drug providers…”

Devin Leonard, Bloomberg Business Week, “The Boring Awful Life of a Death Panelist,” January 27, 2013

Fact file

  • OTC flu season sales: for week ended January 26, 2013, sales of over-the-counter products to treat upper respiratory illness increased 24 percentage to $189.1 million vs. $152.4 million a year earlier; sales of cold and flu medicines increased 42 percentage, sales of drops and sprays 31 percentage and cold medication 23 percentage. (Source: The Wall Street Journal, “Flu is Tonic for Drugstore Sales,” February 6, 2013)
  • Restaurants and obesity: restaurants that increased lower calorie servings experienced a 5.5 percentage increase in same store sales based on data from 21 fast food and sit down restaurant chains monitored 2006-2011. (Source: The Wall Street Journal, “Low-Cal Items Fuel Restaurant Sales,” February 7, 2013)
  • 2012 Congressional vote: Democrats won the popular vote by 1.4 million in House races, and Republicans won control of the House by 234-201. (Source: The New York Times, “The Great Gerrymander of 2012,” February 10, 2013)
  • College graduation: 52 percentage of students with a Bachelor of Arts/Bachelor of Science are in jobs requiring a degree or higher; 37 percentage a high school degree, and 11 percentage some college. (Source: John J. Heldrich Center for Workforce Development, May 2011)
  • Smoking and mental illness: people with mental illnesses are 70 percentage more likely to smoke than those without; 36.1 percentage of adults with mental health disorders smoke vs. 21.4 percentage without a mental health disorder; adults with mental health issues smoke one-third of all cigarettes in the U.S.; 46 million adults have a mental illness—20 percentage of population. (Sources: CDC; Substance Abuse and Mental Health Administration; “Vital Signs: Current Cigarette Smoking Among Adults Aged ≥ 18 Years with Mental Illness–United States, 2009-2011,” February 5, 2013)
  • Retail health insurance: Florida Blue operates 11 retail sites in malls/shopping areas. (Source: The New York Times, “Health Insurance Companies Get in Shape for 2014,” February 1, 2013)
  • Retirement happiness: major factors in happiness—physical health 55 percentage, financial independence 23 percentage, other factors 22 percentage. (Source: ING survey of 1011 adults 18 and older)
  • Anxiety by age group: 39 percentage of Millennials (age 18-33) say their stress level is up this year over last—the highest age cohort. The average stress level for all adults is 4.9 on a 10-point scale: 20 percentage of Americans report extreme stress, and 44 percentage moderate; 63 percentage tried to reduce their level of stress in the last year, top stressors are money (69 percentage), work (65 percentage) and economy (61 percentage). (Source: American Psychological Association survey of 2020 adults 18+ in 2012)
  • Alzheimer’s: the numbers of Alzheimer’s patients will triple by 2050 from 4.7 million to 13.8 million: 1 in 3 adults older than 85 (7 million), 1 in 6 75-84 (5.4 million) and 1 in 77 65-74 (1.3 million). (Source: Neurology, February 6, 2013, based on analysis of 10,802 Chicago residents from 1993-2011) Note: the population 65+ will double between 2010 and 2050 from 40.3 million to 88.5 million)
  • U.S. birth rate: 2.07 vs. replacement rate of 2.1—falling since 1980; China 1.64, Japan 1.32, Germany 1.36, France 1.97, India 2.73, Russia 1.44. (Source: United Nations)
  • Snack foods in schools: $2.3 billion spent annually. (Source: National Academy of Sciences)
  • Physician social networking: 82 percentage of physicians interact with other physicians via social networking; only 8 percentage use it to engage with patients. (Source: The Wall Street Journal, “Should Doctors and Patients be Facebook Friends,” February 4, 2013)
  • Long-term care insurance: average age of individual buyers was 59 years in 2010, down from 68 years in 1990. (Source: AHIP)

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