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June 18, 2012 Monday memo Health reform update · 18.06.2012 · offer coverage to employees and...
Transcript of June 18, 2012 Monday memo Health reform update · 18.06.2012 · offer coverage to employees and...
Deloitte Center for Health Solutions
June 18, 2012
Monday memo
Health reform update
This week’s headlines: My take
Implementation update o Director Larsen leaving CCIIO o Study: $1 trillion at stake in Supreme Court decision o Hospitality, restaurant industry coalition seeks delay in employer penalties o Actuaries’ study: potential implications of risk mitigation programs in ACA o CMMI announces new ACO funding grants, House Committee inquires o ACO update: 65 operating today, anticipated growth o Senate Committee rejects amendment to disallow use of Preventive Health Fund for
advertising benefits of ACA o CMS: 14 million Medicare beneficiaries receive preventive services
Legislative update
o Health spending growth projected to average 5.7% annually through 2021 o Senate Appropriations Committee approves 20% increase in CMS operating budget
for implementation of ACA o House committee requests information on health IT safety o GOP senator challenges administration for advising against cancer test
State update
o CMS grants $300 million for Medicaid long-term care program enhancements in four states
o Study: state Medicaid spending to increase 3.9% in 2013 o State actions on insurance, health insurance exchanges o State oversight of health markets
Industry news
o Three national insurers announce plans to maintain ACA provisions regardless of Supreme Court outcome
o Study: employer wellness investments modest o Medicare Advantage enrollment up, premiums down o CalPERS to raise health care premiums 9.6% o FDA delays decision on HIV-prevention drug o AMA House of Delegates this week o Genetic mapping completed o Study: DSH payment reductions put safety net hospitals at risk o Drug companies seek revisions to PDUFA to protect, generic manufacturers resist o Committee report: increase oversight of drug supply chain o Study: use of imaging tests doubles, concern for radiation exposure increasing o Hospitals ask CMS to retract inclusion of medical staff on governing board
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BREAKING NEWS The Supreme Court announced five rulings this morning; of the 16 remaining, four are focused
on the Affordable Care Act (ACA):
Is the Anti-Injunction Act of 1867 applicable to ACA, i.e., is the individual mandate a ―tax‖
or penalty?
Is the individual mandate a violation of the Commerce Clause of the U.S. Constitution?
Is the mandate severable from the balance of the law?
Is the ACA requirement that Medicaid eligibility requirement for states at 138% of the
federal poverty level a usurpation of federal control over states?
These rulings are expected Thursday, June 21 or Monday, June 25. A ―special edition‖ Monday
Memo will summarize the court‘s rulings when announced.
My take
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
My oldest son, Jason, is fond of prefacing something he thinks prophetic with ―hear me now,
believe me later‖. As suspense builds around the announcement from the Supreme Court either
today, Thursday, or next Monday, June 25, here‘s my view of what‘s ahead:
The Court‘s rulings will not change the trajectory of health reform. It might alter the
course temporarily, but inevitably, the unsustainable costs of the system combined with
its value gap will drive its transformation.
If the individual mandate is thrown out, as some suspect, state-based alternatives will be
put in place quickly lest insurance companies suspend coverage or pass through higher
costs in significant premium increases. Employers will accelerate transitions from defined
benefit to defined contribution plans, and entrepreneurs will develop private health
exchanges that allow customization of risk for individuals and businesses seeking
coverage. The $113 billion in employer penalties in the ACA (2012-2022) to fund
subsidies for the health exchange eligible enrollees might increase as employers gauge
exiting benefits altogether, resulting in ―government‖ becoming the primary channel for
coverage for up to 70% of the population within ten years, summing exchanges,
Medicare, Medicaid, the Children‘s Health Insurance Program (CHIP), military health,
Federal Employees Health Benefits (FEHB) Program, the Indian Health Service (IHS),
Veterans‘ Affairs (VA), and other programs.
And the public‘s expectation for a high-performing, high-tech, high-touch health system
that pays for everything and requires little on their part will be ground zero for a new
debate likely to be featured in Campaign 2016: can the system be sustained given
benign neglect of the role consumers play in its excessive costs? Given studies that
indicate health costs are increasingly the result of unhealthy lifestyles, and unhealthy
lifestyles more prevalent in under-served, uninsured, economically challenged strata of
our society, what combination of sticks and carrots might government and industry use to
change the dangerous trajectory? And as Millennials inherit the system‘s liabilities and
inequities from glaring waste, inefficiency, and supply-driven demand, will they chuck the
whole thing in favor of something else? Does health care face an ―Arab-spring‖ of its own
as younger generations assume responsibility for its fiscal instability?
Last week, we released our 2012 consumer survey findings; once again, the results paint a
sobering picture of what lies ahead, with or without the ACA. Next month, we will release our
employer survey: equally sobering. The facts:
Consumers do not think the health system performs effectively (see Table A).
Consumers blame the industry‗s waste and ineffectiveness on many factors: they get it
(see Table B).
They want change. And the younger folks are receptive to reforms that older folks and
policy-makers are seemingly shy to consider.
I don‘t know how or when the Court will issue its rulings. Four of its 21 remaining rulings are
central to the future of the U.S. health system—the individual mandate, the scope of the federal
government‘s control over state Medicaid eligibility, and the applicability of the anti-injunction and
severability technicalities.
But as Jason says, hear me now, believe me later: the transformation of the U.S. health system
is underway, and consumers along with employers will have the greatest say in how it evolves.
Stay tuned. Chapter one of U.S. health reform will end with the court‘s pronouncements. Chapter
two starts the day after regardless of its rulings.
Table A: system performance
Table B: wastefulness and fraud
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Implementation update
Director Larsen leaving CCIIO Director Steve Larsen is leaving the Center for Consumer Information and Insurance
Oversight (CCIIO) in mid-July to join UnitedHealth Group as Executive Vice President at
OPTUM. Mike Hash, currently the director of the U.S. Department of Health and Human Services
(HHS) Office of Health Reform, who will serve as interim director. CCIIO responsibilities include:
Ensuring compliance with new insurance market rules, such as the Patient‘s Bill of
Rights
Helping states review unreasonable rate increases and overseeing new medical loss
ratio rules
Providing oversight for state-based health insurance exchanges and compiling data
for www.HealthCare.gov
Administering the Consumer Assistance Program, Pre-Existing Condition Insurance
Plan, and Early Retiree Reinsurance Program
Note: Larsen’s departure is for personal reasons, but comes at a time when the Supreme
Court will announce its rulings this month that will impact state efforts to create health
insurance exchanges. If upheld, states must submit plans by the end of the year for their
exchange or risk having the federal government develop and operate their exchange .
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Study: $1 trillion at stake in Supreme Court decision
The Bloomberg Government study concluded that more than $1 trillion in revenue from 2013-
2020 is at stake if the Court strikes down all or part of the law. Four sectors would be impacted
most by the reductions:
Hospitals—$430 billion or 4.7%
Drug manufactures—$124 billion or 3.8%
Home health providers—$94 billion or 11%
Nursing homes—$87 billion or 5.9%
Source: Bloomberg Government Study, June 15, 2012 (www.BGOV.com).
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Hospitality, restaurant industry coalition seeks delay in employer penalties
Last week, the Employers for Flexibility in Health Care Coalition representing large employers in
the hospitality and restaurant industries submitted an 18-page letter to the U.S. Internal Revenue
Service (IRS) and the Centers for Medicare & Medicaid Services (CMS) urging the agencies to
issue health care regulations immediately. The coalition expressed concern that formal guidance
or rules on the employer shared responsibility requirements have not yet been issued, and
sufficient time will not be available for budget and planning processes to occur for full
implementation. They also argued that due to regulatory uncertainty, HHS should delay the
ACA‘s employer penalties until 2016, concluding, ―This transition period will help the
administration evaluate the impact of the new requirements and deter employers from reactively
dropping coverage if it is determined that revisions to the rules are necessary once all of the
provisions are effective. Such transition relief could be provided specifically for employers who
offer coverage to employees and are working to meet PPACA‘s requirements without
undermining the intent of the shared responsibility requirements of the law for employers or
individuals.‖
Note: April 5, 2012, the coalition sent a 36-page letter to the Office of Health Plan Standards and
Compliance Assistance Employee Benefits Security Administration requesting standardization
and flexible implementation around key provisions impacting the employer health benefits
coverage requirements of ACA they deemed problematic given the nature of their workforces,
e.g. 90-day waiting period for benefits, etc. (see [email protected]).
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Actuaries’ study: potential implications of risk mitigation programs in ACA
The ACA prevents health insurers from denying coverage, excluding individuals from coverage
based on pre-existing health conditions, or varying premiums by gender or health status. It also
includes three risk mitigation programs to ensure insurers are compensated fairly for risks they
bear through the new provisions. The three programs in the ACA include:
Section 1341: a transitional reinsurance program that provides additional funds to health
plans that enroll individuals with high medical spending. This provision requires the HHS
Secretary to establish federal standards for the determination of high-risk individuals, a
formula for payment amounts, and the contributions required of insurers, which must total
$25 billion over the three years.
Section 1342: a three-year transitional risk corridor program, which mitigates risks
associated with mispricing premiums when the estimated medical spending of potential
enrollees is uncertain. If a plan‘s costs (other than administrative costs) exceed 103% of
total premiums, the Secretary makes payments to the plan to defray the excess. If a
plan‘s costs (other than administrative costs) are less than 97% of total premiums, the plan makes payments to the Secretary. Note: this is intended to mitigate risks between
passage of the ACA (3/10) and full implementation of the ACA 1/14).
Section 1343: a permanent risk adjustment program that shifts funds from plans that
enroll healthy populations to those that enroll less healthy populations. Risk adjustment
applies to plans in the individual and small group markets, but not to grandfathered
health plans.
The Society of Actuaries analysis of these issued last week concludes:
Risk mitigation programs appear to reduce financial risks to health plans. At the same
time, overly restrictive premium rate limitations can lead to high federal risk corridor
payments.
Risk mitigation programs are especially important for plans in states with less restrictive
issue and rating rules prior to ACA.
Grandfathered plans will reflect a relatively healthier population over time.
The individual market is expected to grow rapidly starting in 2014.
(Source: Society of Actuaries, “Design and Implementation Considerations of ACA Risk
Mitigation Programs,” 2012).
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CMMI announces new ACO funding grants, House Committee inquires
Last week, the Center for Medicare and Medicare Innovation (CMMI) announced a new
application cycle starting August, for an additional round of advance payment accountable care
organizations (ACOs). After the announcement, the Ways and Means Oversight Subcommittee
Chairman Charles Boustany (R-LA) wrote a letter to CMMI requesting information on $123 million
in innovation grants to be awarded. The letter requests that CMMI provide copies of applications,
describe the application review process and teams, and the names of officials responsible for
selecting awardees by June 27, 2012.
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ACO update: 65 operating today, anticipated growth
Key takeaways from last week‘s ACO Summit in Washington, DC:
There are currently 65 fee-for-service organizations among the three ACO initiatives --
Pioneer ACO demonstration, Shared Savings Program and the physician practice group
demonstration programs—the number is expected to double by the end of year.
CMS will begin a third cohort in January—participants will be announced after July 1.
ACOs have shown a 38% increase in the past six months—221 partnerships in 45 states
and the District of Columbia, up from 160 ACOs in 40 states in November 2011.
Hospitals were more involved as sponsoring organizations, growing from 99 to 118
ACOs as the primary backers.
Source: Jonathan Blum, CMS Medicare chief Jonathan Blum, June 7 at the ACO Summit,
Washington DC; Leavitt Partners, “Growth and Dispersion of Accountable Care Organizations:
June 2012 Update”
Note: section 3022 of the ACA, the Medicare Shared Savings program, authorizes CMS to enroll
accountable care organizations that are appropriately “clinically integrated” the opportunity to
manage Medicare fee-for-service panels and participate in savings if quality thresholds are met
for 33 core measures. The second program, Pioneer ACOs, is intended for organizations with
advance population health risk management expertise.
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Senate Committee rejects amendment to disallow use of Preventive Health Fund
for advertising benefits of ACA
Last Thursday, the Senate Appropriations Committee rejected an amendment by Sen. John
Hoeven (R-ND) to block HHS from using the Prevention and Public Health Fund to advertise the
ACA. The amendment failed 14-16 along party lines.
Note: the Prevention and Public Health Fund was created as a part of ACA (Section IV). It
stipulates that $15 billion will be available through the Fund between FY2010 and FY2019, and
$2 billion every year thereafter. During the first five years of the Fund’s existence, the yearly
amounts gradually increase to $2 billion per year ($500 million in FY2010, $750 million in
FY2011, $1 billion in FY2012, $1.25 billion in FY2013, $1.5 billion in FY2014, and $2 billion in
FY2015).
By law, the Fund must be used ―to provide for expanded and sustained national investment in
prevention and public health programs to improve health and help restrain the rate of growth in
private and public health care costs.‖
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CMS: 14 million Medicare beneficiaries receive preventive services
Last Monday, CMS reported that 14 million Medicare enrollees with at least one preventive
service during the first five months of 2012 and 32.5 million enrollees in 2011 received one or
more preventive service without any out-of-pocket payment as a result of Sections 4103, 4104,
and 4105 of ACA. To date, 1.1 million Medicare beneficiaries have received their annual wellness
visit. Prior to enactment of these provisions, beneficiaries shared the cost of many preventive services such as cancer screenings. (Source: CMS, www.cms.gov)
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Legislative update
Health spending growth projected to average 5.7% annually through 2021 New estimates released last week from the Office of the Actuary at CMS project that aggregate
health care spending in the U.S. will increase at an average annual rate of 5.7% for 2011-2021,
0.9% faster than the expected growth in the gross domestic product (GDP). The health care
share of GDP by 2021 is projected to rise to 19.6%, from its 2010 level of 17.9%. By 2021,
government spending at all levels for health care is projected to reach 50% of total national
health expenditures, with the federal government accounting for approximately two-thirds of that
share. Spending increased 3.9% in 2011, 3.9% in 2010, and 3.8% in 2009—a historic low.
The major effects of ACA—coverage expansions, private health insurance premium increases—
are expected to be felt most acutely in 2014 with an expected increase of 7.4% (vs. 5.3% without
the law), with notable increases in spending on physician services and prescription drugs by the
newly insured. For 2015-2021, the average increase will be 6.2%. During the 2010-2021 period,
ACA is projected to cut the number of uninsured individuals by 30 million, add 0.1 percentage
point to the annual growth rate in health care spending, and add $478 billion to cumulative health
spending. For the five-year period immediately after the insurance exchanges, Medicaid
expansions, and other major provisions in the reform law are implemented, however, health care
spending growth is expected to be trimmed by 0.1 percentage point.
Source: “National Health Expenditure Projections: Modest Annual Growth Until Coverage
Expands and Economic Growth Accelerates,” CMS, June 12, 2012 (scheduled to appear in the
July issue of the journal Health Affairs).
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Senate Appropriations Committee approves 20% increase in CMS operating
budget for implementation of ACA
Thursday, the Senate Appropriations Committee approved (16-14) the Labor, HHS, Education,
and Related Agencies Appropriations Subcommittee FY13 budget for CMS that provides a 20%
increase to its operating budget to implement the ACA. The bill provides $158.8 billion in
discretionary funding (1.9% increase), including $3.2 billion for CMS—a $500 million increase
over FY12. Targeted CMS increases include childcare and Head Start, disabilities and preventive
health expansion, among others. It also includes $71 billion for HHS, up from $69.6 billion
(+2.0%) last year, $100 million increase for the National Institutes of Health (NIH), $558 million
for childhood immunizations, and $610 million for health care fraud and abuse control in CMS.
The appropriations committee rejected (14-16) an amendment from Senator Richard Shelby (R-
AL) that would have prohibited HHS from hiring any new employees to carry out ACA initiatives,
as well as an amendment by Senator John Hoeven (R-ND) to block HHS from using the
Prevention and Public Health Fund to advertise the ACA.
Subcommittee Chairman Senator Tom Harkin (D-IA) stated after the bill passed 10-7 on party
lines, ―I recognize that funding for the Affordable Care Act is a big stumbling block for the other
side. But it‘s the law. So I have a responsibility as chairman of this subcommittee to ensure that
HHS has the funding it needs to implement the law.‖ Ranking Member Senator Richard Shelby
(R-AL) responded in disagreement, ―It is illogical to pour money into programs that may be ruled
unconstitutional should the Supreme Court decide to overturn Obamacare. I cannot support a bill
that provides billions of discretionary dollars to further fund a massive government expansion that
will devastate our federal budget and have catastrophic effects on our current health care
system.‖ ―Summary: Fiscal Year 2013 Labor, Health and Human Services, and Education, and
Related Agencies Appropriations Bill” subcommittee mark June 12, 2012.
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House committee requests information on health IT safety Last week, Chairwoman of the House Small Business Subcommittee on Health and Technology,
Representative Renee Ellmers (R-NC), wrote a letter to HHS seeking information on the agency‘s
plan to address the patient safety risks associated with the use of health information technology
(IT), such as electronic prescription equipment. She expressed concern that the cost to purchase
and maintain health IT systems, staff training and downtime, and requirements for meaningful
use contribute to patient injuries and deaths. The letter requests that HHS provide a detailed list
of all health IT-related errors that involve medication doses, failure to detect a fatal illness, and
treatment delays due to human-computer interactions, in addition to details on how HHS will track
health IT-related incidents, members of the health IT safety council, and any related internal
reports or investigations.
Note: in 2011, the Institute of Medicine (IOM) released a report calling for greater health IT
oversight by the public and private sectors. The report examined a broad range of health
information technologies, including electronic health records, secure patient portals, and health
information exchanges, and recommended HHS publish a plan within 12 months to minimize
patient safety risks associated with health IT and report annually on the progress being made
thereafter. (Source: IOM, “Health IT and Patient Safety: Building Safer Systems for Better Care’,
November 2011)
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GOP senator challenges administration for advising against cancer test In a Houston Chronicle op-ed last week, last week Senator Kay Bailey Hutchison (R-TX)
challenged the U.S. Preventive Services Task Force (USPSTF) decision to recommend men
forego the prostate-specific antigen (PSA) test for prostate cancer screening. Senator Hutchison
criticized the administration for giving the task force expanded powers and stated, ―The PSA is
not perfect, in part because it does not differentiate between malignant and benign cells. But it is
undeniable that it has saved lives. Before the test was available, 80% of men diagnosed with
prostate cancer were already in advanced stages; today, that number has dropped to 20% and
the death rate has declined significantly. Not only has the PSA saved thousands of lives, early
detection has saved countless men from the pain and discomfort of cancer treatment. Rather
than discounting the test wholesale, we should be directing our scientific efforts towards refining
and improving the test.‖
Note: prostate cancer is the most common cause of death from cancer for men 75 and older and
is rarely found in men under the age of 40. Risk factors that can compound men’s chances of
developing prostate cancer include being older, African American, having a family history of the
disease, and being overweight or obese. There are two ACA considerations: in ACA, the
Secretary of Health is required to review recommendations of the USPTF in determining
appropriate preventive health programs for which commercial insurance and employer-sponsored
plans must cover—most without a co-payment. And in ACA, the creation of the Patient Centered
Outcomes Research Institute (PCORI) is intended to validate the relative efficacy and value for
diagnostic and screening test as part of its overall comparative effectiveness research program,
paying close attention to ethnic and socio-economic disparities in the findings of USPTF and
other deliberative bodies.
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State update
CMS grants $300 million for Medicaid long-term care program enhancements in
four states
Wednesday, CMS announced grants of $295.6 million for ―enhanced‖ Medicaid funding to Iowa,
Georgia, Mississippi, and Missouri under the Balancing Incentives program, per Section 10202 of
ACA. The program allows states to increase access to non-institutional long-term services and
for the development of tools to help consumers assess long-term care quality. To participate in
the program, states must have spent less than 50% of their total Medicaid medical assistance
expenditures on non-institutionally based long-term services and supports in FY09.
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Study: state Medicaid spending to increase 3.9% in 2013
State Medicaid spending is forecast to increase 3.9% in fiscal year 2013, which starts July 1 for
most states—down from 20.4% the previous year, as states no longer received extra money from
the federal government because of the stimulus law, the American Recovery and Reconstruction
Act (ARRA). The Medicaid spending growth rate will likely outpace the growth of overall general
fund expenditures, and, during the past ten years, Medicaid growth has exceeded the increases
in all other categories of state spending. (Sources: “Fiscal Survey of the States” June 12, 2012
National Governors Association, National Association of State Budget Officers)
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State actions on insurance, health insurance exchanges
To date, 15 states and the District of Columbia have indicated they intend to set up a state-run
health insurance exchange per Section 1311 of ACA, while 17 others have no plans per the
Center on Budget and Policy Priorities. Announcements last week:
Monday, the Rhode Island House of Representatives approved legislation to bring the
state's health insurance laws in compliance with President Obama's federal health care
law regarding medical loss ratios, essential health benefits, etc.
Tuesday, Hawaii Governor Neil Abercrombie issued a ―declaration letter‖ to CCIIO
verifying that Hawaii is establishing a state-certified health insurance exchange, the
Hawaii Health Connector. ―Hawaii is actively pursuing the establishment of a State-
Based Exchange through the Connector.‖ The establishment of the Connector meets the
provisions of ACA. The letter ensures Hawaii‘s exchange will be locally controlled rather
than federally operated.
Delaware announced it will utilize the federal partnership exchange offered by HHS as a
result of its small population. Delaware officials have been meeting with other small
states to discuss concerns on making exchanges financially sustainable. Only 35,000
people are projected to enter the state‘s exchange in 2014, rising to no more than 50,000
to 60,000 people by 2019. The state will handle health plan management, in-person
consumer assistance, the navigator program, and education and outreach efforts of the
exchange while the federal government will be responsible for eligibility and enrollment.
Georgia will begin allowing out-of-state health plans to sell insurance to residents on July
1, however, no insurance companies have applied to participate. The bill‘s sponsor,
Representative Matt Ramsey (R-GA), believes that insurers have yet to shown interest due to uncertainty surrounding the U.S. Supreme Court‘s decision regarding the ACA.
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State oversight of health markets
The average state spends 26% of its operating budget for its health care activity, mainly for
Medicaid and CHIP programs, and state employee health benefits. In addition, states oversee
licensing for health professionals, management of public health programs, regulation of
commercial insurance, and more. Among announcements last week:
New York legislators unanimously approved a bill requiring physicians to issue electronic
prescriptions within three years. The state health department will publish regulations by
December 31, 2012 for electronic prescriptions including narcotics, steroids, and opioid
analgesics like hydrocodone. The bill also requires pharmacists to report filling painkiller
prescriptions to a database in ―real time‖ with patient and prescriber names, and
physicians to check patient records before writing new prescriptions. Health officials will
be permitted to disclose drug registry information with the attorney general's Medicaid
Fraud Control Unit and medical examiners. In addition, the legislation will allow for the
reclassification of drugs for tighter restrictions. Governor Andrew Cuomo (D) has publicly
promised to sign the bill into law.
Note: the New York State Department of Health currently collects pharmacy prescription
information every 30 to 45 days for the state registry, but pharmacists are not permitted
to check these records.
The Massachusetts Senate unanimously passed legislation that would require the state
Department of Public Health to establish minimum standards for facilities with dementia
care units. Current law allows nursing homes to advertise specialized Alzheimer‘s and
dementia care units, even though workers may not have specialty training. The House
approved the bill last month.
Iowa's state employees will be required to pay 20% of their health care costs under a
demand Gov. Terry Branstad will make during union negotiations this year costing state
workers $46.3 million a year. Most state employees currently pay nothing in health care
premiums.
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Industry news
Three national insurers announce plans to maintain ACA provisions regardless of
Supreme Court outcome Last week, UnitedHealth, Aetna, and Humana announced they will continue to maintain popular
benefits of ACA regardless of the U.S. Supreme Court decisions later this month. The three will
continue to offer coverage for dependent‘s until age 26 and require no copayments for certain preventive services. Note: per the Health Research and Education Trust, in 2011, provisions for
compliance with ACA added 1.5% to health insurance premium costs against overall premium
cost increases averaging 9%.
Reactions:
Bill Copeland, National Health Industry Practice Leader, Deloitte: ―Health insurance plans had to
make major changes to their offerings within 180 days of passage of the Affordable Care Act
while simultaneously looking ahead at the long-term implications of health insurance exchanges,
the individual mandate and employer penalties. These announcements illustrate the ever-
changing dynamics of this sector as it navigates in a complex regulated environment while
continuing to serve its customers—individuals, employers, states, and federal plans.‖
America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni: ―Health plans‘ top
priorities are providing peace of mind and continuity of coverage to their beneficiaries. No matter
what the Supreme Court decides, individuals and families should rest assured that their current
coverage will remain in effect. While every health plan will make its own decision, many will
maintain important patient protections, including the new rescissions standard. In addition,
consumers and employers will continue to have the option of purchasing coverage that includes
many of the benefits they have today, such as allowing dependent children to stay on their
parents‘ policies until age 26. Health plans also will continue to lead on delivery system reforms
that promote prevention and wellness, help patients and physicians manage chronic disease, and
reward quality care.‖
Ethan Rome, Executive Director, Health Care for America Now, Huffington Post, “Don't Be
Fooled By the Big Insurance Companies,” June 12, 2012: ―What the insurance companies didn't
say – and what they won't do – is the real story. They aren't saying they will stop discriminating
against people with pre-existing conditions as the law requires beginning in 2014. That would be
a big deal, because that part of the law will stop 129 million people with chronic conditions like
diabetes, high blood pressure and asthma from being over-charged or being denied coverage.
They also have not offered to keep covering children with pre-existing conditions – a provision
which has already taken effect and insurers have fought.‖
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Study: employer wellness investments modest Employers on average spend 2% of their total health care dollars annually on wellness programs
Per Section 10408 of ACA, $200 million is authorized for workplace wellness grants to small
businesses though the funds were not appropriated. The administration has taken $10 million
from the controversial Prevention and Public Health Fund to attempt to portion out some money
to small employers. However, it's unclear if large employers will make similar investments on their
own. (Source: National Business Group on Health)
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Medicare Advantage enrollment up, premiums down Medicare Part C (Medicare Advantage) plan enrollment increased 10% last year to 13.1 million
seniors (27% of total Medicare enrollment) while the average monthly charge fell $4 to $35—
down from $44 in 2010. ACA cuts to the program were projected to save $136 billion over ten years. (Sources: Kaiser Family Foundation, Congressional Budget Office)
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CalPERS to raise health care premiums 9.6% The California Public Employees' Retirement System (CalPERS) plans to raise its health
insurance premiums to its 1.3 million members by an average of 9.6%—more than twice the rate
hike that took effect for this year.
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FDA delays decision on HIV-prevention drug Last week, the U.S. Food and Drug Administration (FDA) announced it would delay by three
months the decision to approve or deny a drug for the prevention of human immunodeficiency
virus (HIV). The FDA‘s decision had been expected last Friday, but the agency decided to delay
the decision to give time for review of the new plan from manufacturers to limit the risks to
healthy individuals taking the new drug. According to Gilead Sciences, the drug, when taken
daily, reduces the risk of infection by more than 90%. The FDA will now make its decision by
September 14.
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AMA House of Delegates this week
Support for a Medicare premium support program will be a major item for consideration in this
week‘s House of Delegates. The American Medical Association‘s (AMA) Council on Medical
Service, which recommends policy for the organization, unanimously agreed to withdraw an
earlier recommendation to back a premium support model for Medicare. The AMA version would
have had premium support coexist with traditional Medicare. Other priorities for AMA:
replacement of the sustainable growth rate formula for physician payments, and malpractice
reform.
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Genetic mapping completed Wednesday, the NIH announced completion of its $173 million project to use genetic mapping to
understand bacteria that contribute to infections—micro-organisms that outnumber human cells
10:1. (Source: Nature, 242 research subjects, five years, 80 research organizations)
Note: NIH funding for basic research leading to genotypically associated disease recognition is
key to the development of personalized therapeutics.
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Study: DSH payment reductions put safety net hospitals at risk Per Section 2551 of ACA, which sets reductions in the Medicaid disproportionate share (DSH)
payments to hospitals, ―could put many safety net hospitals in financial turmoil‖. DSH payments
will be reduced by a total of $18 billion from 2014 to 2020. Today, DSH payments total around
$11.5 billion—the reduction assumes that the number of uninsured that will decrease over the
next decade will make up for these lost revenues. (Source: National Association of Public
Hospitals)
Note: Section 3133 of PPACA includes provisions to initially cut Medicare DSH payments by 75%
beginning in federal fiscal year 2014. These reductions are anticipated to total $22.1 billion over
ten years based on Medicare Payment Advisory Commission (MedPAC)'s findings that only 25%
of hospitals' Medicare DSH payments are actually justified by the cost of providing care to
indigent patients. The law also mandates that specified portions of these savings will result in
additional payments to providers based on a realigned payment system of better allocated
reimbursement of their remaining uncompensated care costs.
Section 2551 of PPACA includes provisions to cut Medicaid DSH payments by $14 billion over
ten years, also beginning in fiscal year 2014. These Medicaid DSH allotment reductions will not
be tied directly to increases in levels of insurance coverage. Rather, they will be based on the
state's number of uninsured and how the state treats hospitals with high Medicaid and
uncompensated care volumes.
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Drug companies seek revisions to PDUFA to protect, generic manufacturers resist The Generic Pharmaceutical Association, AARP, and 16 other trade groups are at odds with
major pharmaceutical manufacturers who want to strip out a provision of the Senate‘s
Prescription Drug User Fee Act (PDUFA) bill that would give generic companies quicker access
to samples of brand name drugs. Background: the FDA can impose Risk Evaluation and
Mitigation Strategies (REMS) on certain drugs with special risks. About 86 drugs are in the REMS
program now, and the requirements range from additional safety instructions to providers to very
stringent restrictions on who can gain access to the drugs at all.
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Committee report: increase oversight of drug supply chain Senator Jay Rockefeller (D-WV) and Representative Elijah Cummings (D-MD) issued a letter to
House and Senate leaders reporting the findings of their six-month drug shortage investigation.
The report highlights ―gray market‖ distribution supply networks in which rogue companies buy,
sell, and transfer drugs, marking up prices at each stage. The letter encourages Congress to
consider whether legislative proposals to modify the current federal law on pharmaceutical supply
chain security would adequately address the identified risks.
Note: in May, Representative Cummings introduced the Gray Market Drug Reform and
Transparency Act of 2012, which would prohibit wholesalers from purchasing prescription drugs
from pharmacies and enhance information and transparency regarding drug wholesalers
engaged in interstate commerce.
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Study: use of imaging tests doubles, concern for radiation exposure increasing The use of diagnostic imaging in the U.S. doubled from 1996 to 2010 and were similar for those
with Medicare, private fee for service and HMO coverage. In the 15-year study period, enrollees
underwent a total of 30.9 million imaging examinations—1.18 tests per person per year; annual
increases were highest computed tomography (CT), magnetic resonance imaging (MRI), nuclear
medicine, and ultrasound: CT examinations, (+7.8% annually), MRI (+10%) and ultrasound
(+3.9%). The study also found that that increased utilization of CT scans resulted in an increase
in enrollee exposure to radiation—the percent of enrollees who received high (>20-50 mSv) or
very high (>50 mSv) radiation exposure during a given year nearly doubled. The researchers
concluded that the increase in imaging utilization was driven improvements to technology that
have led to expansion of clinical applications, patient- and physician-generated demand, defensive medical practices, and medical uncertainty. (Source: Smith-Bindman, Rebecca et al,
Journal of American Medical Association, “Use of Diagnostic Imaging Studies and Associated
Radiation Exposure for Patients Enrolled in Large Integrated Health Care Systems, 1996-2010”,
June 2012)
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Hospitals ask CMS to retract inclusion of medical staff on governing board The American Hospital Association (AHA), the National Association of Public Hospitals and
Health Systems, and the Association of American Medical Colleges (AAMC) wrote letters to CMS
in response to the hospital and critical access hospital (CAH) Medicare & Medicaid Conditions of Participation final rule published in May (see Monday Memo, May 14, 2012), expressing concern
about a new requirement that a hospital governing body must include a member or members of
the hospital‘s medical staff. They argue that investor-owned hospitals have the right and
responsibility of the investors to select members who govern the organization and that many
public hospitals that directly elect board members would not be able to meet the new
requirement. The letters also claim that CMS‘s inclusion of these policy changes only in the final
rule violates the federal Administrative Procedure Act, which promotes public participation in the
rulemaking process to facilitate more informed agency decision making by establishing notice
and comment procedures.
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Quotable ―Those who know don‘t talk. And those who talk don‘t know.‖—Justice Ruth Bader Ginsburg
speaking at the American Constitution Society in Washington DC, June 15, 2012
―We protect the freedom of religion because we think it is wrong to coerce belief. Thomas More's
story shows what can happen when those protections break down.‖—John Garvey, president of
Catholic University, Wednesday, June 13, 2012 U.S. Conference of Catholic Bishops in Atlanta
discussing Catholic lawsuit against ACA contraception coverage requirement
―You know, regardless of what they do, it‘s going to be up to the next president whether to repeal or replace Obamacare, or to replace Obamacare. I intend to do both...‖—Mitt Romney, Orlando,
June 12, 2012
―This morning, Mitt Romney promised that if he‘s elected, insurance companies will be able to
discriminate against Americans with pre-existing conditions, charge women higher premiums
than they charge men for the same coverage and kick young adults off their parents‘ plans when they graduate high school or college.‖—Obama campaign, June 12, 2012
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Fact file
Health care prices: in April 2012, up 1.9% compared with April 2011—above a 14-year low of 1.8% recorded in February 2012. (Source: Altarum Institute’s Health Sector
Economic Indicators)
Health employment: increased by 33,000 jobs in May 2012 of 69,000 private sector jobs
added for the month. (Source: Bureau of Labor Statistics)
Health status of uninsured: unemployed Americans are less likely to practice good health
habits than are those who are employed, scoring a 59.1 on the organization‘s Healthy
Behaviors Index, while those employed full-time or voluntarily part-time scored 62.9.
(Source: Gallup)
Primary care: by 2015, workplace clinics will serve 10% of the American population
under the age of 65. Employers save $1.60 to $4 for every dollar they invest in a worksite
clinic. (Sources: Fuld & Co survey of Fortune 500 employers, Government Finance
Officers Association)
Supply driven or demand driven: the number of ultrasound examinations doubled, the
number of CTs tripled, and the number of magnetic resonance imaging scans
quadrupled from 1996 to 2010. The rates of utilization were the same for Health
Maintenance Organizations (HMOs) and traditional fee-for-service payment models. (Source: Journal of the American Medical Association)
Academic research compensation: even after adjustment for differences in specialty,
academic rank, leadership positions, publications, and research time, there remained an
absolute difference of $13,399 per year between the sexes. Before adjustment, the
overall average salary for men was $200,433 or 16.3% higher than women, whose
average salary was $167,669 (P=0.001). (Source: Journal of the American Medical
Association, June 13, 2012)
Small employer health insurance tax credit: 170,000 small business employers claimed
the tax credit in 2010—fewer than the 1.4 to 4 million estimated to be eligible for the
credit. The cost of these claimed credits was $468 million, and most employers were
limited to partial percentage credits because of the average wage or full-time equivalent
requirements. 28,000 employers claimed the full credit percentage. One factor limiting
the credit‘s use is the fact that most small employers do not offer health insurance.
(Source: Government Accountability Office, “Factors Contributing to Low Use and
Complexity,” May 2012)
Physician hospital call coverage compensation: in 2011, 43% of family physicians,
internists, pediatricians, and obstetrician-gynecologists received compensation for
hospital call coverage—up from 39% in 2010. Median daily compensation for primary
care physicians was $234 ($100 for family physicians who do not deliver infants). 80% of
surgical specialists surgeons were paid with neurosurgeons highest at $1,740 per day.
(Source: Medical Group Management Association, “Medical Directorship and On-Call
Compensation Survey: 2012 Report Based on 2011 Data,” 2012)
Employer-sponsored insurance: 86% say they will continue or are likely to continue to
provide employer-sponsored health insurance in 2014; 1% of the respondents indicated
they would not provide health insurance to their employees in 2014 and would direct them to the health exchanges to find coverage. (Source: International Foundation of
Employee Benefit Plans, 2012)
Massachusetts health care costs: 14% of sick adults in the state indicated they were
unable to get health care they needed—7 of 10 indicated financial reasons as the cause. (Source: Harvard School of Public Health, “Poll: Many Sick Americans Experience
Significant Financial Problems And Report Their Care Is Not Well-Managed,” May 2012)
Self-employed cost of health care coverage: 85% of respondents to a recent survey
indicated that rising health coverage costs have been detrimental to them, their families,
and their businesses over the past three years. Even if the ACA lowers their costs, more
than 65% of the self-employed and businesses with ten employees or fewer aren‘t sure if
they‘ll provide health coverage. (Source: National Association for the Self-Employed,
“Access to Health Coverage and Attitudes on Health Reform: A Self-Employed
Perspective,” June 2012)
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Subscribe to the Health Care Reform Memo
Health Care Reform Memo — The weekly Health Care Reform Memo is available for
subscription. Please visit www.deloitte.com/us/healthmemos/subscribe. First, confirm your
sector(s) of interest. Then, select the Health Care Reform Memo as one of your Email
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Upcoming life sciences and health care Dbrief webcasts Anticipating tomorrow's complex issues and new strategies is a challenge. Stay fresh with Dbriefs
– live webcasts that give you valuable insights on important developments affecting your
business.
July 24, 1:00 PM ET: Health Cost Management and Health Benefits Plans: What Are Employers Planning? (link to Dbriefs page)
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Deloitte Center for Health Solutions research
Coming soon: The voice of the hospital C-Suite: Responding to the ―new normal‖
Meeting the challenge: Maximizing the value of employer provided health care
State Medicaid Program Management: Update and considerations
Currently available: Deloitte 2012 Survey of U.S. Health Care Consumers: The performance of the health care
system and health care reform—June 2012. Available online at
www.deloitte.com/us/2012consumerism
Health Care Reform: Center Stage 2012 Perspectives from consumers, physicians and
employers—June 2012. Available online at www.deloitte.com/us/healthcarecenterstage2012
Watchful preparation: Strategic considerations in anticipation of the Court’s rulings on the
ACA —June 2012. Available online at www.deloitte.com/us/WatchfulPreparation
Value-based pricing for pharmaceuticals: Implications of the shift from volume to value —
June 2012. Available online at www.deloitte.com/us/ValueBased
The new health care workforce: Looking around the corner to future talent management —
March 2012. Available online at www.deloitte.com/us/healthcaretalentmanagement
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Deloitte contacts Paul H. Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions
Harry Greenspun, M.D., Senior Advisor, Health Care Transformation and Technology, Deloitte
Center for Health Solutions ([email protected])
Jessica Blume, U.S. Public Sector National Industry Leader, Deloitte LLP
Bill Copeland, U.S. Life Sciences and Health Care National Industry Leader, Deloitte LLP
Rick Wald, Director, Human Capital, Deloitte Consulting LLP ([email protected])
Mitch Morris, M.D., National Leader, Health Information Technology, Deloitte Consulting LLP
Andrew Vaz, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP
George Serafin, Managing Director, Health Sciences Governance Regulatory & Risk Strategies,
Deloitte, LLP ([email protected])
To receive email alerts when new research is published by the Deloitte Center for Health Solutions, please register at www.deloitte.com/centerforhealthsolutions/subscribe.
To access Center research online, please visit www.deloitte.com/centerforhealthsolutions.
To arrange a briefing for your team, contact Jennifer Bohn ([email protected]).
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