Deloitte Center for Health Solutions December 19, 2011 Monday memo Health reform update (please note, there will be no Memo on Monday 12/26) My take From Paul Keckley, Executive Director, Deloitte Center for Health Solutions Principled debate on substantive policy often falls victim to political maneuvering and sound bite-addicted news cycles. It can be confusing, sometimes comical, and appear irrational at times. And in campaign season, the noise level is amped-up. Medicare reform is a case in point. Medicare is a costly program: in 2010, $509 billion was spent on the program for seniors 65- plus, expected to increase each year. The combination of demand—76 million baby boomers become eligible in the next 18 years—and annual medical inflation increases of 3% for products and services means something has to give. It is 3.7% of our overall gross domestic product (GDP) today; it will be 6.7% in 20 years. Reining in Medicare costs while transforming the program is widely acknowledged as a necessary policy focus. Where well-intended policy-makers and pundits part company is how to “fix” Medicare. There is no easy answer. Some believe raising the eligibility age gradually over time will solve the problem by reducing demand. Some believe raising premiums paid by seniors, especially those who have higher incomes from retirement benefits or those that continue to work would offset costs. And some think the program should encourage competition between the government’s program and private sector plans by allowing seniors to use a vouchers or premium support to buy coverage on an open market. All seem to agree that incentives for providers must change from fee-for-service to value and outcomes, and all believe annual per capita cost increases for the program must be slowed with net increases at slightly above the overall GDP. I try to study Medicare closely: its fix is probably a combination of these with perhaps additional solutions not on the table currently. But it’s not likely we’ll see consensus due to the toxicity of the current political climate and confusion of consumers. Polls suggest Americans see flaws in the health system, and even bigger flaws in the political system. Improvements in both are desired, and there’s widespread recognition that “the new normal” requires bold solutions and straight talk. Ironically, our studies suggest
Transcript
Deloitte Center for Health Solutions
December 19, 2011
Monday memo
Health reform update
(please note, there will be no Memo on Monday 12/26)
My take
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
Principled debate on substantive policy often falls victim to political maneuvering and sound
bite-addicted news cycles. It can be confusing, sometimes comical, and appear irrational at
times. And in campaign season, the noise level is amped-up. Medicare reform is a case in
point.
Medicare is a costly program: in 2010, $509 billion was spent on the program for seniors 65-
plus, expected to increase each year. The combination of demand—76 million baby
boomers become eligible in the next 18 years—and annual medical inflation increases of
3% for products and services means something has to give. It is 3.7% of our overall gross
domestic product (GDP) today; it will be 6.7% in 20 years.
Reining in Medicare costs while transforming the program is widely acknowledged as a
necessary policy focus. Where well-intended policy-makers and pundits part company is
how to “fix” Medicare. There is no easy answer.
Some believe raising the eligibility age gradually over time will solve the problem by
reducing demand. Some believe raising premiums paid by seniors, especially those who
have higher incomes from retirement benefits or those that continue to work would offset
costs. And some think the program should encourage competition between the
government’s program and private sector plans by allowing seniors to use a vouchers or
premium support to buy coverage on an open market. All seem to agree that incentives for
providers must change from fee-for-service to value and outcomes, and all believe annual
per capita cost increases for the program must be slowed with net increases at slightly
above the overall GDP.
I try to study Medicare closely: its fix is probably a combination of these with perhaps
additional solutions not on the table currently. But it’s not likely we’ll see consensus due to
the toxicity of the current political climate and confusion of consumers.
Polls suggest Americans see flaws in the health system, and even bigger flaws in the
political system. Improvements in both are desired, and there’s widespread recognition that
“the new normal” requires bold solutions and straight talk. Ironically, our studies suggest
Medicare enrollees are the most satisfied with the status quo compared to others with
insurance of some sort; and clear differences exist when comparing Medicare solutions
preferred by Gen Y to older adults.
On March 16, 1999, the National Bipartisan Commission on the Future of Medicare issued
its recommendation featuring premium support to permit seniors to choose from several
private plans or continue with traditional Medicare. A central feature of its plan was the
creation of the Medicare Board to oversee changes to the program independent of the
political process. Seniors were to pay 12% of premiums, with provisions to allow low-income
seniors a full subsidy. Parts A (hospital) and B (physician) were to be combined, and a new
prescription drug feature added with subsidies up to 135% of the federal poverty level
(FPL). And the government’s Medicare program was required to operate at breakeven while
competing with the private sector. Overtime, the rate of Medicare cost growth was estimated
to decrease from 7.6% annually to 1.5%.
I watched the televised hearings from start to finish. The final vote: ten ayes, seven nays.
The result: no action.
Fast forward: the situation’s the same though the economic environment more problematic.
Maybe the idea of the Medicare Board akin to the Federal Reserve deserves fresh thinking.
It was similarly recommended in Tom Daschle’s “Critical: What we can do about the Health
Care Crisis” (2008) as a way to advance Medicare reform.
On all sides of the Medicare debate, the intent is honorable. All parties recognize the need
to protect health coverage for seniors: it’s regarded a moral imperative in our society.
What’s difficult are the particular elements of reform that balance quality, safety, and
adherence to evidence-based practice with the solvency of the program and its cost to
future generations.
Medicare is too big to fail. It might be too important to be “owned” by the political process,
especially now. Whether through a new independent board or statesmen-like deliberation by
Congress, it requires urgent attention and honest debate based on facts, not fear,
pandering, and political posturing.
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This week’s headlines: My take
Implementation update - Congress approves appropriations bill to avert government shutdown; Senate passes
payroll tax cut extension - HHS issues essential health benefits bulletin - HHS announces funding for new hospital patient safety program under CMMI - CMS announces Pioneer ACOs recipients - FDA investigates impact of drug promotion
Legislative update - Legislative overrides of the SGR - Democrat coalition releases principles for innovation in the U.S. health care system - Bill to extend stay of foreign-born physicians introduced
State update - State roundup
Industry news - Study: physicians concerned about future of medical practice, unintended results of ACA - Report: FDA increasingly dependent on states for food inspection oversight - Report: harm to medical research subjects requires government action
- AHRQ launches online resource to help providers with EHR implementation - HHS recovers $2.9 billion in health care fraud in FY2011 using advanced analytics - USDA provides $30 million funding for telehealth services in rural areas - CMS announces results for a value-based purchasing for dialysis services; 30% miss
targeted threshold for quality
Quotable
Fact file
National Health Reform: what now?
Subscribe to the Health Care Reform Memo
Deloitte Center for Health Solutions research
Deloitte contacts
Implementation update
Congress approves appropriations bill to avert government shutdown;
Senate passes payroll tax cut extension Friday, Congress approved an omnibus appropriations bill to fund federal government
operations through September 2012 at a cost of $1.043 trillion. The bill includes two cuts to
the Patient Protection and Affordable Care Act (ACA): rescinding $400 million from the
Consumer Operated and Oriented Plan (CO-OP) program and cutting $10 million from the
Independent Payment Advisory Board (IPAB). It also includes a $700 million cut to U.S.
Department of Health and Human Services (HHS) discretionary funding to $69.7 billion for
fiscal year (FY) 12. However, the bill increased funding for a few agencies—$241 million for
the Centers for Medicare & Medicaid Services (CMS) and $299 million for the National
Institutes of Health (NIH).
And Saturday, the Senate signed off on a two-month extension of the payroll tax that also
included a two-month reprieve for physicians who would have been subject to a 27.4% pay
cut per the sustainable growth rate (SGR) formula as well as reimbursement raises for
ambulance services, mental health reimbursements, the Qualifying Individual (QI) program,
the outpatient “hold harmless” provision, and transitional medical assistance, which provides
Medicaid benefits for low-income families who are transitioning from welfare to work. To pay
for these, increased fees will be charged for various government-sponsored programs like
Fannie Mae and others—the only area where Democrats and Republicans could agree,
thus negating a longer-term agreement. The deal reached Friday also requires the
Administration to approve/reject a permit to begin construction of the Canada-Texas
Keystone XL oil pipeline. Next—the House will take up the extension this week.
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HHS issues essential health benefits bulletin
Friday, HHS issued an informational bulletin to provide guidance to states in defining
“essential health benefits” (EHB) for evaluating health plan compliance with ACA.
Background: per ACA Section 1302, all health insurance plans must provide coverage for
“essential health benefits” in ten categories: ambulatory patient services, emergency
services, hospitalization, maternity and newborn care, mental health and substance use
disorder services (including behavioral health treatment), prescription drugs, rehabilitative
and habilitative services and devices, laboratory services, preventive and wellness services
and chronic disease management, pediatric services (including oral and vision care).
New guidance: A state must choose a health insurance plan as its baseline for assuring that
all plans provide essential health benefits coverage to its enrollees. The baseline plan
should represent a small employer package with all ten categories of EHB included selected
from.
One of the three largest small group plans in the state by enrollment
One of the three largest state employee health plans by enrollment
One of the three largest federal employee health plan options by enrollment
The largest HMO plan offered in the state’s commercial market by enrollment
A state can modify coverage within each of the ten categories so long as the value of
coverage in that category is not reduced. If a state selects a plan that does not cover all ten
categories of care, it will have the option to examine other benchmark insurance plans,
including the Federal Employee Health Benefits Plan, to determine the type of benefits that
will be included in the EHB package.
The guidance addressed only coverage, not cost sharing, such as deductibles, copayments,
and coinsurance, which will be covered in subsequent bulletins.
Note: the bulletin is not a rule or typical guidance document, but HHS is still encouraging
public comment (due by January 31, 2012). Cost-sharing features will be developed in
separate rules.
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HHS announces funding for new hospital patient safety program under CMMI Wednesday, HHS announced $218 million for 26 Hospital Engagement Networks under the
Center for Medicare & Medicaid Innovation (CMMI) per ACA Section 3021 to facilitate
improvements in patient safety and reduce hospital acquired conditions.
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CMS announces Pioneer ACOs recipients
Pioneer accountable care organizations (ACOs) involve a two-sided risk model with higher
levels of savings and risk than under the Medicare Shared Savings program (ACA Section
3022). Typically, clinically integrated provider organizations with experience in population
health management and risk contracting were targeted by the Pioneer program, which will
be overseen by CMMI.
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FDA investigates impact of drug promotion
Per ACA Section 3507, the HHS Secretary must assess the impact of drug promotional
materials on decisions by physicians and consumers and recommend policy changes. Last
week, the U.S. Food and Drug Administration (FDA) released a draft report, “Quantitative
Summary of the Benefits and Risks of Prescription Drugs: A Literature Review”, and is
seeking comment before February 13.
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Legislative update
Legislative overrides of the SGR Friday’s override of the SGR in favor of a two-month extension is the 16th extension since
2002, usually bundled with other legislation or continuing resolutions including five
extensions in 2010.
Year SGR
payment
update
Enacted
update
Law
2002 -4.8% -4.8%
2003 -4.4% 1.4% Consolidated Appropriations Resolution of
2003 (CAR, P.L. 108-7)
Note: update was 1.7% but was effective on
3/1/ 2003, so the average update for the year
was 1.4%.
2004 -4.5% 1.5% Medicare Modernization Act of 2003 (MMA,
2007 -5.0% 0% Tax Relief and Health Care Act of 2006
(TRHCA, P.L. 109-432)
Jan - Jun
2008
-10.1% 0.5% Medicare, Medicaid, and State Children's
Health Insurance Program (SCHIP)
Extension Act of 2007 (MMSEA, P.L. 110-
173)
Note: physicians who voluntarily reported on
certain quality measures from 7/1/2007 –
12/31/2007 were eligible for a 1.5% payment
bonus in 2008 per TRHCA.
Jul - Dec
2008,
-10.6%
reduction
from June
2008 level
0% (0.5%
from 2007
level)
Medicare Improvement for Patients and
Providers Act of 2008 (MIPPA, P.L. 110-275)
Note: physicians who voluntarily reported on
certain quality measures during 2008 were
eligible for a 1.5% payment bonus in 2009
per MMSEA.
2009 Not
provided
1.1%
(2009)
MIPPA
Jan 1 -
Feb 28,
2010
-21.3% 0% Department of Defense Appropriations Act
(P.L. 111-118)
Mar 1 -
31, 2010
Not
provided
0% Temporary Extension Act (P.L. 111-144)
Apr 1 -
May 31,
2010
Not
provided
0% Continuing Extension Act (P.L. 111-157)
Jun 1 -
Nov 30,
2010
Not
provided
2.2% Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010
(P.L. 111-192)
Dec 1–
31, 2010
Not
provided
0% (2.2%
from Jan–
May, 2010
level)
Physician Payment and Therapy Relief Act of
2010 (P.L. 111-286)
2011 Not
provided
0% Medicare and Medicaid Extenders Act (P.L.
111-309)
Source: Congressional Research Service, “Medicare physician payment updates and the
sustainable growth rate (SGR) system”, November 30, 2011 based on CMS data
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Democrat coalition releases principles for innovation in the U.S. health care
system
Monday, the 48-member New Democrat coalition co-chaired by Representatives Allyson Y.
Schwartz (D-PA) and Kurt Schrader (D-OR) released its principles to support innovation in
the U.S. health care system. Principles include:
Structure Medicare payments to reward quality and value while reducing costs:
gradually phase out the SGR and provide physicians a transition period to adapt to a
new payment and delivery model. Also have the CMMI test and CMS deploy
alternative delivery and payment models (e.g., ACOs, bundled payments, medical
homes, global payments, partial risk-adjusted capitation, multi-payor options) to the
fee-for service model made available to providers in the near future.
Facilitate cooperation between public and private sectors to increase efficiency
and improve care: allow multi-payer demonstrations that have shown progress to
expand these practices to traditional Medicare fee-for-service beneficiaries and allow
private payers to invest in infrastructure for smaller practices seeking to create or
participate in innovative delivery models. Also, coordinate with public and private
sectors to identify consistent standards and improve consistency in data collection,
quality reporting, and analysis across Medicare shared savings programs.
Modernize the FDA approval process to foster innovation, growth through
competition, and access: ensure that the FDA has the funding, Congressional
support, and resources to carry out its mission and keep up with a rapidly changing
industry defined by complex science. Engage industry stakeholders to better assess
the cost of the drug approval process and ensure that user fees are being spent to
advance safe and effective products to the market. Also, build on successful practices
through FDA's 510(k) approval process, and support new avenues of timely drug
reviews of innovative products, and establish more explicit and transparent guidelines
for drug and device manufacturers.
Promote widespread adoption of interoperable health IT systems across health
care settings: foster a health information technology (IT) marketplace where small
provider practices and hospitals can invest in and become meaningful users of health
IT systems. Also ensure that meaningful use standards are not strictly focused on
inputs, but also focused on outcomes and provide incentives to Regional Extension
Centers to find providers who need guidance on becoming meaningful users of
electronic health records (EHRs).
Note: current laws via ACA (3/10) or the Health Information Technology for Economic and
Clinical Health Act (HITECH) (2/09) appear to address the four goals. The coalition appears
to want protection of delivery system reforms for which funding might be in jeopardy as a
result of budgetary pressures.
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Bill to extend stay of foreign-born physicians introduced
Monday, Senators Kent Conrad (D-ND) and Jerry Moran (R-KS) introduced a bill (S.179) to
permanently extend the “State 30 program” that permits U.S. trained foreign-born doctors to
remain in the U.S. longer if they practice in rural and underserved communities for at least
three years. The program, started in 1994, has brought 9,000 doctors to rural and
underserved communities across 50 states.
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State update
State roundup Colorado legislators voted Thursday to apply for $18 million federal grant to establish a
health insurance exchange, noting the current application gives the state more flexibility to
implement the exchange. Separately, the state concluded it will need an additional 83 to
141 primary care providers (i.e., physicians, nurse practitioners, physician assistants) to
provide care for the additional 510,000 individuals who will become insured under the ACA’s
coverage expansion provisions (e.g., Medicaid coverage expansion, health insurance
exchanges) in 2014 per a study by the Colorado Health Institute (CHI).
Thursday, HHS denied Florida’s medical loss ratio (MLR) waiver request concluding there
was insufficient evidence that an MLR requirement of 80% would destabilize Florida’s
individual health insurance market. Florida had requested a phase-in of the MLR: 68% in
2011, 72% in 2012, and 76% in 2013.
Note: 17 states have sought MLR adjustments. CMS has granted waivers to Georgia, Iowa,
Kentucky, Maine, New Hampshire, and Nevada; denied waivers for Delaware, Florida,
Indiana, Louisiana, and North Dakota; and waiver decisions for Kansas, Michigan,
Oklahoma, and Texas are pending. North Carolina and Wisconsin are waiting to hear if their
applications are complete so the review process can begin.
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Industry news
Study: physicians concerned about future of medical practice, unintended
results of ACA
In 2011, the Deloitte Center for Health Solutions conducted a survey with a nationally
representative sample of 500 physicians stratified by location, specialty, and practice
setting. Among key findings of the first report:
The majority of doctors (73%) are not optimistic about the future of medicine and
believe (69%) that the “best and brightest” who might consider a career in medicine
will think otherwise.
27% believe ACA is likely to reduce costs by increasing efficiency, and 33% feel it is
likely to decrease disparities.
80% believe it is likely that access to primary care providers will decrease as demand
from newly insured in ACA increases.
Surgical specialists (57%) are much more likely to support ACA repeal compared to
primary-care providers (38%) and non-surgical specialists (34%).
There is a disparity among generations: 59% of 50 to 59 year-olds feel ACA is a step
in the wrong direction while only 36% of 25 to 39 year-olds share this sentiment.
To access the first report from this survey entitled “Physicians’ Perspectives about Health
Care Reform and the Future of the Medical Profession”, please click here
(www.deloitte.com/us/physiciansurvey).
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Report: FDA increasingly dependent on states for food inspection oversight Wednesday, HHS’s inspector general released a report indicating that more than half of the
FDA’s 2009 food manufacturing plant inspections were conducted by state officials—up
from 42% from 2005. In the 41 states where the FDA authorized 2,170 state inspections by
419 inspectors in 2009, eight had not completed 10% or more of their inspections, and 130
inspections had not begun. Inadequate oversight by the FDA was cited as a major issue
attributed by the agency to its limited funding.
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Report: harm to medical research subjects requires government action Thursday, the 208-page “Presidential Commission for the Study of Bioethical Issues” was
released encouraging improved protection for subjects used in federally funded studies.
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AHRQ launches online resource to help providers with EHR implementation Wednesday, the Agency for Healthcare Research and Quality (AHRQ) released a free
online resource, “Guide to Reducing Unintended Consequences of Electronic Health
Records”, to help physicians and hospitals troubleshoot problems with EHRs and get
information on using EHRs.
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HHS recovers $2.9 billion in health care fraud in FY2011 using advanced
analytics Tuesday, the Vice President Biden and the Department of Justice announced that the U.S.
Department of Justice (DOJ) recovered over $5.6 billion in fraud in 2011, including $2.9
billion for health care fraud. In the news conference, officials noted that expanded use of
Medicare Fraud Strike Forces using advanced Medicare data analytics tools recovered $7
for every dollar spent on this effort.
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USDA provides $30 million funding for telehealth services in rural areas The U.S. Department of Agriculture (USDA) will provide over $30 million to 34 states
through its Distance Learning and Telemedicine Program for 100 distance learning and
telemedicine projects.
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CMS announces results for a value-based purchasing for dialysis services;
30% miss targeted threshold for quality Thursday, CMS released the first results of a new federal value-based purchasing program
for dialysis facilities that treat end-stage renal disease (ESRD) patients. 70% of the facilities
evaluated will not receive a payment reduction; the remaining 30% will receive reductions
ranging from 0.5% to 2%, depending on their final performance score.
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