Perspectives

Health Care Current: April 12, 2016

Planning ahead – for retirement and CMS payment policy changes

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Planning ahead – for retirement and CMS payment policy changes

Now that our second child is about to finish college, my husband Paul and I have shifted our financial planning strategy to focus on retirement. Just a few years ago that prospect was too far in the future to think about, but now we are having almost as much fun thinking about what we might do when we retire as what we might do if we won the lottery. Paul is the lucky one so he buys the tickets – I assume he would share the winnings with me.

I am ashamed to admit that, despite the fact that I’ve worked in health policy almost my whole career, I have not focused on health care coverage as we begin to contemplate retirement. If we were to retire at age 62 for example, we would not qualify for Medicare, so we had better get a good handle on our options.

The Deloitte Center for Health Solutions’ 2015 Survey of US Employers shows that my chances of having retiree coverage are the best if I am working for a large company in the health care industry. More than half (54 percent) of respondents to our survey said they offer retiree health benefits that cover medical costs to any former US employees that have retired from the company. But, this differs by employer size and industry:

And, it may be quickly going away. Twelve percent of employers are no longer offering retiree coverage as a strategy to manage total health care costs for their company, and 38 percent are interested in discontinuing it.

So what are the options if our employers do not offer retiree coverage?

My mind went immediately to coverage on the public health insurance exchanges. When I worked at AARP in the run up to health reform’s passage, the association was laser focused on getting better availability of coverage for people age 55 to 65 passed. The industry and policymakers have naturally focused on enrolling younger people into exchange plans to have a stable risk pool, but the question of whether older people have better options is a good one, too.

To me, the bottom line on that question is that early retirees do have options they might not have had before health reform. But, even if a 60-year-old can’t be charged more than three times what a 20-year-old pays, premiums are still likely to be expensive, especially if retirees do not qualify for subsidies. And even after paying premiums, out-of-pocket coverage is likely to be significant as the most common benefit packages contain significant deductibles and cost sharing. Some estimates project that the average couple that retires at age 62 can expect to spend $17,000 a year on out-of-pocket health care costs until they enroll in Medicare.1 According to the Kaiser Family Foundation’s Health Insurance Marketplace Calculator, a 62-year-old making $51,000 (the average US income) who does not use tobacco can expect to pay about $672 per month – adding up to more than $8,000 per year.2

The issue of retiree coverage for people who have Medicare coverage has been thrown into the spotlight lately. The US Centers for Medicare and Medicaid Services (CMS) first proposed, and will now phase in, a new payment policy for Medicare Advantage (MA) plans sponsored by employers – so called Employer Group Waiver Plans (EGWPs).

EGWPs exclusively serve employer/union groups and are either offered through negotiated arrangements between the MA health plan and employer and/or union groups or are offered by the employer and/or union directly. As of 2015, approximately 19 percent of MA enrollees were covered by these plans.3

My former colleagues at the Medicare Payment Advisory Commission (MedPAC) have been focusing in on EGWP payments for several years, noting that because of the way these plans are structured and marketed, they do not have the same competitive pressure as typical MA plans to submit low bids. MedPAC calculated that, in 2012, margins were substantially higher for EGWPs (7.2 percent) than for other plans (4.4 percent).4

In its notice of payment changes earlier this year, CMS proposed to cut payments to EGWPs. Health plans and employers quickly reacted, saying they believed the changes might weaken retiree coverage. Many stakeholders also said that employers had already committed to the benefits they are covering in the upcoming plan year and there is no time to adjust them to account for the agency's new approach. Responding to these concerns, CMS will move to the new approach of setting rates in 2017, as planned, but it will adjust bids only half way toward the new pay rates in the coming year, then cut pay the rest of the way in 2018.

Regardless, employer coverage for active and retired workers remains an attractive benefit. Recent Congressional Budget Office (CBO) projections indicate that employer coverage is still a major contributor to overall health coverage and is likely to only gradually erode over time. But, findings like those in our employer survey that show retiree coverage is an area for economizing and the increasing emphasis the federal government has on containing costs suggests that retiree coverage might erode more quickly than coverage for active workers.

Paul and I will take health coverage into account in our retirement planning. We definitely will put plenty aside to pay for health care – whether buying coverage ourselves or for the likely significant out-of-pocket costs we will face even if we have coverage.

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Sources
1 Susan Garland, Kiplinger, “A Reality Check on Health Care Costs for Early Retirees,” June 13, 2014, http://www.kiplinger.com/article/retirement/T027-C022-S003-reality-check-health-care-costs-early-retirees.html#ddvIM3AtcwDbK6j7.99
2 Kaiser Family Foundation, “Health Insurance Marketplace Calculator,” http://kff.org/interactive/subsidy-calculator/
3 CMS, “Fact Sheet: Medicare Advantage Payments to Medicare Employer Retiree Plans,” April 4, 2014, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-04-04-3.html
4 Ibid

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My Take

By Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP

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Study: Patient satisfaction is linked to improved clinical outcomes

A recent Cooper University Health Care study found that better patient experience at a hospital can lead to a more favorable clinical outcome. Researchers analyzed patient experience using CMS risk-adjusted star ratings data for more than 3,000 US hospitals. The patient experience data came from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey and clinical outcomes data from Hospital Compare.

The study found that an increase in a hospital’s star rating for patient experience is associated with better clinical outcomes in two areas: hospital complications and readmission rates.

Analysis: Health care experts say that better patient experience can lead to better outcomes. For example, more effective provider-patient communication around discharge planning may decrease the likelihood of readmission. And, better patient experience may inspire patient confidence in and adherence to a discharge plan. Deloitte’s 2015 Survey of US Health Care Consumers, Health care consumer engagement: No "one-size-fits-all" approach, discusses these and other actions that providers and patients can take to lead to more satisfying care experiences and better health outcomes.

(Source: Stephen Trzeciak, John P. Gaughan, Joshua Bosire, and Anthony J. Mazzarelli, Journal of Patient Experience, “Association Between Medicare Summary Star Ratings for Patient Experience and Clinical Outcomes in US Hospitals,” March 2016)

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Implementation & Adoption

More employees seek wage growth over better health benefits

Results from a recent Employee Benefit Research Institute survey suggest that many employees are unsatisfied with the current ratio of their wages to benefits. The survey of 1,500 workers found that from 2012 to 2015, the percentage of workers who said they would prefer fewer health benefits and higher wages doubled, increasing from 10 percent to 20 percent. The shift may also be due to a shift in the employee population: More baby boomers are entering retirement, leaving the workforce with more young adults, who often value health insurance less.

Overall, half of surveyed individuals said they are either extremely satisfied (12 percent) or very satisfied (38 percent) with their current employee health benefits. An additional 41 percent responded that they are somewhat satisfied with their benefits. However, fewer workers report being satisfied with their current benefits than was the case several years ago, decreasing from 74 percent in 2012 to 66 percent in 2015. Increasing rates of high-deductible plans may be a major contributor to this. Fourteen percent of workers say they would accept lower wages for more health benefits, while 44 percent report that they would give up some of their wage increase to maintain their current health benefits.

Most employees value having different plan options; 80 percent report that it is extremely important or very important that their employer offers multiple options, and 17 percent report that having options is somewhat important. Four in ten of the respondents are extremely interested or very interested in having more choices.

(Source: Employer Benefit Research Institute, “Views on Employment-based Health Benefits: Findings from the 2015 Health and Voluntary Workplace Benefits Survey,” March 2016)

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Study: Few physicians are prepared to discuss health care costs with patients

Through an analysis of nearly 2,000 physician-patient conversations, a recent Health Affairs study found that physician behavior may discourage patients from initiating conversations about the cost of care. Researchers discovered two main issues: Some physicians fail to acknowledge that patients had cost concerns, and other physicians acknowledge the concerns, but do not act to resolve the cost concerns for their patients.

Here are a few examples of the range of issues the researchers found:

Not addressing cost concerns can be harmful if a patient decides to avoid important preventive care, forgo needed medical treatments, or stop taking medication due to financial constraints. An earlier analysis of physician-patient conversations found that physicians discussed medical costs with patients about 30 percent of the time. That study also found that doctors and patients brainstormed ways to make treatment plans more affordable only 40 percent of the time.

Analysis: A recent report from the Deloitte Center for Health Solutions, Preparing the doctor of the future, discusses how the field of medicine is evolving and how physicians may have to evolve with it. Consumerism in health is on the rise, changing some of the ways physicians will interact with the health care system. For example, physicians may need to be more customer-friendly, accessible, and transparent and provide services and interactions when and where consumers desire them. Physicians of the future may need many new skills, such as business acumen and effective data analytics and HIT tools. Moreover, physicians may need enhanced communication skills, especially as more consumers ask about the cost of care.

(Source: Peter Ubel, et al. Health Affairs, “Study Of Physician And Patient Communication Identifies Missed Opportunities To Help Reduce Patients’ Out-Of-Pocket Spending,” April 2016)

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Despite high burnout rates, more physicians say they would choose medicine as a career again

Findings from the annual Medscape Physician Lifestyle Report show that more physicians would choose medicine as a career if they had to choose again than they did two years ago. This is despite burnout rates being as high as 46 percent. The report also analyzed physician compensation over time by gender, location, and practice type and looked at how the Affordable Care Act (ACA) and specific payment models have affected physician practices.

More physicians (64 percent) said they are likely to choose the same path again, but the number of specialists who feel this way is lower (45 percent). The surveyed physicians said treating patients and their relationships with patients are the most rewarding elements of their job.

(Source: Carol Peckham, Medscape, “Compensation: Are Physicians Better Off Now Than 6 Years Ago?” April 1, 2016)

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CMS lowers average Medicare Advantage payment increase and delays changes to employer-based retiree plans

Last week, CMS finalized revisions to payment and other policies for Medicare Advantage (MA) plans in the final 2017 notice for MA and Part D. CMS lowered the normalization factor, which is how CMS adjusts the risk adjustment methodology to ensure that the average patient has a risk score of 1.0. This caused the projected average payment increase for health plans to decrease from 1.35 to 0.85 percent.

CMS finalized several additional changes:

Reaction: Few stakeholders predicted that CMS would change payment policies to EGWPs in the proposed rule, so many were surprised about the policy change. Many employers and employer groups submitted comments to tell CMS that they had already finalized benefit plans for the upcoming year, and there would not be time to adjust for the change if it went into effect in 2017. Many lawmakers in Congress said that CMS should not reduce payments to EGWPs because this would jeopardize retirees’ coverage. Approximately 19 percent of MA enrollees are in an EGWP plan as of 2015. The Medicare Payment Advisory Commission (MedPAC) has said that margins for these plans are significantly higher than for others – an average of 7.2 percent compared with 4.4 percent. CMS is giving health plans and employers additional time to adjust for these payment changes in future benefits.

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On the Hill & In the Courts

MedPAC finalizes recommendations for a unified payment system for post-acute care providers

Last week, MedPAC met to finalize recommendations for the key design features of a unified payment system for post-acute care (PAC) providers in Medicare. The Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 requires MedPAC to recommend to Congress a PAC unified payment model and to identify considerations for the industry of transitioning to such a model. MedPAC will publish these in its June 2016 report.

MedPAC developed recommendations for a model for CMS. Key elements are:

  • Medicare payments for PAC services would link to patients’ conditions rather than to the site where care is delivered.
  • A common unit of service with a number of payment adjustments would more accurately tailor payments for certain services to patient characteristics.
  • Payments would likely be higher for more medically complex patients and lower for patients in need of less intensive, rehabilitative care.

The commissioners said that a number of regulatory complexities need to be addressed before moving to this new payment system. MedPAC staff said that the goal should be to have regulations also move from setting specific to patient defined. The Commission has not established set recommendations for how to transition to this unified payment system, but staff is considering blended payments – Medicare would pay providers partially through their existing Prospective Payment Systems (PPS) payments and partially though the unified PAC PPS.

Background: In 2013, nearly half of all Medicare beneficiaries who stayed in an acute care hospital were discharged into a PAC setting. The majority receive this care in four different settings: skilled nursing facilities, inpatient rehab facilities, long-term care hospitals, and home health agencies. Medicare pays for services in each of these settings using a different PPS, each with different units of service and case-mix adjusters. A unified payment system for PAC services would change this.

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FDA publishes draft guidance for biosimilar labeling and approves the second biosimilar for the US market

At the end of March, the US Food and Drug Administration (FDA) issued draft guidance for labeling biosimilars – products that have highly similar properties to an already-approved biological product and have been shown to have no clinically meaningful differences from the original product.

The guidance aims to help manufacturers of biosimilars develop draft labeling in their biosimilar product applications. Some of the main takeaways from the agency’s guidance includes:

  • Biosimilar drug manufacturers should avoid including clinical study information that was used to demonstrate similarity between the biosimilar and the reference product. However, the data on the label should describe the clinical data that supports safety and efficacy of the referenced product. 
  • The label should indicate if the biosimilar has not been approved for the same uses as the reference product.
  • The label should refer to the nonproprietary name designated by the FDA for the reference product when sharing information about clinical studies or data that came from studies using the reference product.

The guidance includes an example to illustrate to applicants how to correctly label biosimilar products. The FDA will solicit feedback from stakeholders, including patients, providers, and health care leaders, for comments and suggestions for improvements.

Related: Shortly after publishing this guidance, the FDA approved the second biosimilar for the US market. The biosimilar for the reference product, infliximab, is approved for use in patients with all of the same indications as the reference product: moderate to severe cases of Crohn’s disease, ulcerative colitis, or rheumatoid arthritis, and patients with spinal arthritis, psoriatic arthritis, or chronic severe plaque psoriasis.

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States move to define and regulate telemedicine

West Virginia became the latest state to enact a range of telemedicine practice standards and remote prescribing rules when Governor Earl Ray Tomblin signed House Bill 4463 into law. The House and Senate approved the bill unanimously.

Telemedicine rules and reimbursement are regulated in a piecemeal way. Medicare, Medicaid, private plans, and states have varying definitions, utilization, and fee schedules for physicians who use electronic information and telecommunications technologies to deliver care to remote or underserved areas.

The West Virginia law defines telemedicine and requirements for licensure. Clinicians using telemedicine need to be licensed in the state but can have informal out-of-state consultations or second opinions as long as the West Virginia-licensed clinician remains the primary care provider. The law requires the patient and clinician to have a pre-existing relationship, though the relationship can be formed by a phone call or an email. The law permits remote prescribing, excluding for pain-relieving controlled substances, without a prior in-person exam.

This law comes as other states legislate on telemedicine. Washington Governor Jay Inslee signed Senate Bill 6519, which includes three primary provisions related to telemedicine:

  • Establishes a collaborative group of stakeholders and legislators hosted by the University of Washington telehealth services department to develop recommendations for how to identify best practices, expand access, and improve coverage and payment for telemedicine in the state by July of this year. 
  • Relaxes certain regulatory standards to apply the state’s telemedicine parity law to services furnished at home. 
  • Includes provisions to regulate telemedicine services, requiring safe and effective care, while ensuring patient privacy and security.

Missouri and Alaska state legislatures have also been working on passing telemedicine legislation, and the District of Columbia has proposed requiring physicians to be licensed in the state of the patient's location as well as the physician’s location.

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Around the Country

25 million Americans have at least three types of unhealthy behavior

Unhealthy behavior and resulting chronic diseases are among the costliest health conditions in the US, according to America's Health Rankings. The group recently published an analysis that found that poor health behavior is associated with higher health costs. It considers five “unhealthy” behaviors: smoking, excessive drinking, insufficient sleep, physical inactivity, and obesity.

Approximately 71 percent of total health care spending is associated with care for Americans with multiple chronic medical conditions. Additionally, beneficiaries with multiple chronic conditions account for 93 percent of Medicare fee-for-service spending. The report explains that unhealthy behavior, lower-socioeconomic status, and high disease prevalence makes improving public health difficult.

Key takeaways:

Adults with the unhealthiest behavior tend to be less educated and lower income than those with healthier behavior. Unhealthier people were more likely to live in the South and Midwest.

Researchers used data from the Behavioral Risk Factor Surveillance System, which uses telephone-administered surveys to collect data on health-related risk behavior, chronic health conditions, and use of preventive services.

Related: A separate report released late last month by Oregon State University and the University of Mississippi found that less than three percent of adults have four types of healthy behavior: a good diet, moderate exercise, healthy body mass index, and a smoke free lifestyle. The results were based 4,745 people from the National Health and Nutrition Examination Survey, which includes several measures for behavior in addition to self-reported information.

(Sources: America’s Health Rankings, “Spotlight: Impact of unhealthy behaviors,” United Health Foundation, March 2016; Paul Loprinzi, Adam Branscum, June Hanks and Ellen Smit, “Health lifestyle characteristics and their join association with cardio vascular disease biomarkers in US adults,” Mayo Foundation for Medical Education and Research, March 2016)

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New era in diabetes prevention and management

Through a Centers for Medicare and Medicaid Innovation (CMMI) grant, researchers showed that the US Centers for Disease and Control and Prevention’s (CDC) National Diabetes Prevention Program (National DPP) is improving outcomes and saving costs in Medicare beneficiaries with prediabetes. Nearly 30 million Americans have type 2 diabetes; 86 million have prediabetes, which can lead to diabetes. People with prediabetes have elevated blood sugar that is not high enough to be classified as type 2 diabetes.

The National DPP is a lifestyle intervention program that runs for 12 months and includes 16 weekly core educational sessions led by trained staff followed by monthly maintenance sessions. The National DPP provides a supportive, small group environment to promote healthier eating habits and increase physical activity, with goals of reducing body weight by 5 to 7 percent and increasing physical activity to 150 minutes per week. The program is available online or in-person and is based on a 2002 randomized clinical trial that demonstrated that intensive lifestyle intervention was effective and successfully reduced risk for developing diabetes by 58 percent for the entire study population. For those over the age of 60, risk for diabetes was reduced by 71 percent.

CMMI’s research showed that during a 15-month period, Medicare saved $2,650 for each person enrolled. Last month, CMS released the study results along with a statement by the US Department of Health and Human Services (HHS) that it is exploring strategies to incorporate the National DPP into Medicare. The calendar year 2017 Medicare Physician Fee Schedule proposed rule, expected out this summer, will have more information about how CMS could expand the program.

Analysis: DataUSA, a comprehensive visualization of US public data, is a collaborative project between MIT Media Lab, Data Wheel Inc., and Deloitte. Users can drill down on certain data by region or topic to help them create stories, charts, and graphics. Last month, Sarah Thomas, Research Director at the Deloitte Center for Health Solutions published Dangerous running mates, which delves into the relationship between obesity and diabetes.

Given the prevalence of diabetes around the country, the recent announcement that Medicare may cover the National DPP could translate to opportunities for many digital health startups in diabetes prevention. Digital health has the potential to provide tailored, real-time, evidence-based, actionable data to consumers and clinicians, which could translate to helping the US rewrite the story of diabetes and obesity prevalence down the road.

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Breaking Boundaries

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