Health Care Current: December 2, 2014

The impact of rising out-of-pocket health care spending

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

Feeling the pinch: The impact of rising out-of-pocket health care spending

It’s the time of the year again when calendars are filled with social events as friends and families gather at dinner tables and attend holiday parties. It’s also a time of year when cost and spending are top-of-mind for many families – the cost to prepare the Thanksgiving meal, the cost to travel to see family and friends, the cost to prepare for other holiday activities and gift giving. Amid this holiday spending, many expenditures sneak up that were not part of the planned budget: additional meals at the airport, paying for overnight shipping so a gift arrives in time and that last minute gift for the cousin you always forget to include on your list. At the end of the holiday season, you’ve exceeded your initial budget due to these “hidden costs” not originally planned for.

This unexpected spending reminds me of a similar issue faced by health care consumers. The issue of cost and out-of-pocket (OOP) liability in health care is a significant one, even for people who have insurance through Medicare or their employer. This shouldn’t be surprising; Deloitte’s 2013 Survey of U.S. Employers found that employers who experienced increased health care costs in the last three years estimate they passed on around 26 percent of the total increase to employees through cost-sharing mechanisms.1 Some individuals who are obtaining insurance coverage through the health insurance marketplaces are seeing higher deductibles than those in employer-sponsored plans.2 At a meeting I recently attended, one of the participants pointed out that because many of the marketplace plans have large deductibles, some employers are using this as “cover” to add or increase deductibles in their own benefits packages.

The Deloitte Center for Health Solutions recently took a deep dive into the topic of OOP spending in our report, “Dig deep: Impacts and implications of rising out-of-pocket health care costs.” This analysis found that OOP spending for traditional medical services (i.e., those captured in the National Health Expenditure Accounts) is only the beginning. Consumers also encounter high cost-sharing for services like nutritional supplements and complementary and alternative medicine—services that are generally covered less frequently by insurance. Even during the recession, when overall health care spending slowed, spending for these types of services continued to rise.

This analysis of “hidden costs” also calculated how much time people spend caring for loved ones (often older adults and children) that need help with activities of daily living; this can also add significantly to consumers’ spending on health care or add to debt.

When you add these hidden costs together, the number is substantial: as much as $672 billion (19 percent of total health care spending) is estimated to be hidden from the National Health Expenditure Accounts.

View the full infographic

This is clearly affecting consumers in a real way. Deloitte’s 2013 Survey of Health Care Consumers found that nearly half (48 percent) of all consumers experienced an increase in their OOP spending for health care. And nearly 40 percent of respondents had financial difficulty paying for their health care expenses in the previous 12 months. Only one in five consumers felt that they are financially prepared for the future health care costs they might face.3

Will health care return to days of broader benefits? On the one hand, I think that if value-based care can fulfill the promise of bending the cost curve and if incentives like value-based benefit design that reduce cost sharing to increase adherence and improve outcomes work, payers might be a bit more open to considering it. On the other hand, shifting more of the cost sharing to employees can be effective at lowering employers’ health care spending.

Consumers’ increasing exposure to cost sharing is also having profound effects on the health care industry.

Hospitals are now investing in ways to inform patients with scheduled procedures of both the expected costs of and ways to pay for the most expensive types of hospital services. In the past, patients with insurance coverage could expect their policies to cover most of their costs and the amount of cost sharing that the patient would be billed after the fact was relatively small. Now, with increasingly large deductibles, the amount of revenue at stake is large enough for hospitals to invest in technology and human capital that help patients pay for their share of their bills.

Life sciences companies are feeling the pinch as well. Both deductibles and cost sharing – which can be especially high for specialty drugs – can make consumers unable or unwilling to use these therapies. Currently, many drug companies offer help in paying for drugs through coupons and other programs. Looking around the corner, life sciences companies could begin offering drugs in packages with other services (e.g., disease management) to get to better outcomes. If life sciences companies are able to show high value through these packages, it may increase the likelihood of more comprehensive coverage by payers.

Health plans are offering high deductible benefit designs in response to demands from employers to lower costs and in public marketplaces due to cost-sharing structure requirements. Many of the major health plans offer directories and tools to help enrollees navigate network rules and benefit design to find good value, but these tools are in relatively early stages. Network directories can be hard to keep up to date when physicians can decide on a weekly basis whether they want to take more of a particular plan’s patients. Figuring out what prices apply for a particular plan and benefit design can also be challenging, especially when the particular set of services a patient will end up getting is not always entirely predictable.

Every few weeks I hear about new companies that are rising to the challenge of creating products and programs that hold some promise of supporting consumers who are savvy and active purchasers of health care. These stories make me optimistic that technology, data transparency and usability of search tools will improve so that people can make the best choices about how to spend their own money and get the best care for the money they spend. Wider use of decision aids could go beyond finding the best price for a given service. I hope that these tools will not only help people find the best price for a given treatment but will also help them better understand the potential risks and benefits and the full array of treatment options available to them.

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1 Deloitte Center for Health Solutions, 2013 Survey of U.S. Employers
2 HealthPocket, “2015 Obamacare Deductibles Remain High But Don’t Grow Beyond 2014 Levels,” November 20, 2014
3 Deloitte Center for Health Solutions, 2013 Survey of Health Care Consumers

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My Take

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





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Nearly half a million individuals enrolled in marketplace plans during the first week

Last week, the U.S. Department of Health and Human Services (HHS) released updated figures on enrollment so far in the health insurance marketplaces for the second open enrollment period, which ends on February 15, 2015. As of November 21, more than 462,000 individuals signed up for health plans through the federally facilitated marketplace (FFM). Nearly half (48 percent) are new enrollees.* 44 percent of individuals who submitted applications to the FFM – more than 1 million consumers – selected a plan for the 2015 benefit year. HHS’s brief update on enrollment figures also included information about health plan selection and use of, the website that Spanish-speaking health care consumers can use to enroll in health insurance plans:

  • More than 101,000 calls were completed with representatives who speak Spanish
  • Spanish-speaking consumers had an average wait time of 10 seconds to speak with a representative at the call center; the average wait time on is approximately 3 minutes
  • More than 95,000 individuals accessed during this time period

In the announcement, the agency said that the Centers for Medicare & Medicaid Services (CMS) will be releasing updated figures and estimates weekly. This announcement follows the House of Representatives Oversight Committee’s request that CMS Administrator Marilyn Tavenner and Jonathan Gruber, a professor at the Massachusetts Institute of Technology, testify on December 9. Tavenner will be asked about the initial enrollment figures that CMS provided, which overstated enrollment by including people who enrolled in dental plans in the total figure.

*Note: According to the report, HHS defines new enrollees as: “those consumers who are selecting a plan for the first time or whose plan selection in 2014 was terminated, because, for example, they failed to pay their premium or gained coverage through employer-sponsored insurance. In addition, because Oregon and Nevada consumers now use the Federally Facilitated Marketplace platform, they are considered new enrollments.”

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Implementation & Adoption

CMS says it is considering changes to the Medicare star rating system, including for plans enrolling dual eligibles

Earlier this month, CMS issued a request for comments on the Medicare star ratings programs. CMS said it had several goals in considering changes: 1) making sure the measures used in the star rating system are in line with true organizational performance, 2) maintaining stability over time for payments resulting from the system and 3) giving organizations advance notice regarding changes to the measures and other aspects of the program. CMS proposed changes for 2016 and beyond:

  • Care coordination: CMS acknowledged that it does not currently have a good way to measure care coordination in the star rating system and that current measures are limited to data from beneficiaries through the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey. CMS requested feedback from stakeholders that might help develop a strong measure of care coordination, as the agency believes that high-performing plans will be able to effectively coordinate care.
  • Pre-determined thresholds: CMS proposed to remove the pre-determined thresholds for the 2016 star ratings. Health plans must meet these levels in order to qualify for certain star ratings in the system, but CMS has found that health plans show greater improvement in MA and Part D quality measures without the threshold levels. CMS also proposed an alternative to the pre-determined thresholds, whereby CMS would add a measure that identifies improvement trends.
  • Medication therapy management (MTM): CMS proposed adding a new MTM measure – whether certain beneficiaries complete a comprehensive medication review – to the 2016 star ratings.
  • Dual eligibles: CMS is focused on creating a new star rating system for health plans that are working to coordinate care for dual eligibles (individuals who are enrolled in Medicare and Medicaid). Health plans enrolling dual eligibles have raised concerns that it is unfair to be held to the same standards as plans that do not; care for the dual population is challenging as this population includes people who are among the sickest and account for high health care spending in both Medicare and Medicaid.

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CMS extends deadlines for hospitals to report Meaningful Use, Hospital Inpatient Quality

Last Monday, CMS announced that it was updating the Meaningful Use attestation deadline for eligible hospitals. These hospitals will now have until December 31, 2014 (the prior deadline was November 30, 2014). CMS indicated in the announcement that the goal of this extension is to allow more hospitals time to submit the required data to the Meaningful Use program, receive payments out of the incentive program, and avoid the penalty for non-reporting that will occur on October 1, 2016. In the same announcement, CMS delayed the reporting deadline for the Hospital Inpatient Quality Reporting program until December 31, 2014. Hospitals must now submit clinical quality measures through the portal, Quality Net, by the new dates. These new deadlines do not apply to hospitals that only participate in the Medicaid electronic health record (EHR) incentive program.

Background: The latest data from CMS indicate that more than 43,000 eligible professionals and 1,900 eligible hospitals have attested to Meaningful Use during the 2014 reporting period. This announcement comes after CMS announced in early October that it was extending the hardship exemption application for eligible providers and hospitals (see the October 14, 2014 Health Care Current).

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Poll: Respondents unwilling to share non-medical data with providers; show low concern over data privacy

Earlier this month, NPR-Truven Health Analytics released findings on their latest poll of more than 3,000 U.S. residents on health care-related issues. The results found that three in four, or 74 percent of the respondents, said that their physician used an EHR system. Younger respondents were less likely to report that their physicians used EHR systems: 64.1 percent of patients younger than 35 had a physician that uses an EHR compared with 90 percent of individuals 65 and older. The poll also found that when it comes to sharing medical data, 67.6 percent of respondents were willing to share their data with health care researchers anonymously. However, when asked if they would be willing to share their credit card purchases or social media information with physicians, hospitals and/or insurers, their willingness dropped to 22.1 percent, even if providing this information might improve their overall health. Most people did not care who had their data but were somewhat less comfortable with it being held by insurance companies than physicians.

(Source: NPR-Truven Health Analytics, “Health Poll: Data Privacy, November 2014)

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Biosensing wearables go to court

Last week, an article in the Atlantic chronicled the details of a court case that is leveraging a self-tracking device to build support for a personal injury claim in Canada. The lawyers in the case are using the device to support the plaintiff’s claim that she was injured on the job and has suffered long-term consequences to her health as a result of that injury. The lawyers are relying on an analytics firm to compile the data and analyze the individual’s activity levels against those of the general population. They claim that the data will show her activity level is lower than that of the average person her age who is employed in a similar profession. While this case is one example where a consumer is using the data to her potential advantage, use of this type of data in the courts might raise concerns among other industry stakeholders. Consumers may worry that health plans will use the data from these devices to deny claims. Alternatively, other uses might become more popular if people begin to be aware of and trust the data more.

As Dr. Harry Greenspun explained in “Welcome to the age of biosensing wearables,” the wearables industry has exploded in recent years; according to Rock Health, venture funding of biosensing wearables is up to five times the amount it was in 2011. Wearables include devices that can track heart rhythms, oxygenation, glucose, blood pressure and more. As the Atlantic article explained, many consumers are excited to use these devices, but some may have concerns if they begin to see more cases where their data is used in court or by health plans and other health care organizations. Dr. Greenspun explained that in order for consumers to begin using these devices for broader health applications – rather than just for fitness and wellness – the devices will likely need to be more convenient and interoperable. Consumers also may call for additional privacy protections. Furthermore, just as health care providers question the accuracy and reliability of these devices, the justice system may have to as well.

(Source: Kate Crawford, Atlantic, “When Fitbit Is the Expert Witness,” November 19, 2014)

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On the Hill & In the Courts

CMS moves to use CED process with greater frequency

On November 20, CMS issued guidance to update stakeholders on its current thinking on the use of coverage with evidence development (CED) through the national coverage determination process. Medicare does not cover experimental or investigational items or services, but the CED process is used to allow coverage of new products and procedures earlier so that beneficiaries may benefit from promising technologies even as the program collects data on efficacy and safety. Ongoing coverage of products and services under the CED process is conditional on additional evidence (from clinical studies or additional clinical data) showing the technologies work. In the initial CED guidance issued in 2005, CMS indicated that the agency would use the process infrequently, but CMS’s latest guidance signals a change in that thinking – CMS now is indicating it will begin relying on the process more frequently. CMS said a primary reason behind this decision is that companies are increasingly presenting technologies early in the development process for approval under the CED process and are specifically requesting that CMS use the CED process for their products. In light of this trend, CMS indicated that it is impractical to continue using the process “infrequently.”

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New Hampshire submits Medicaid “private option” plan to expand coverage to 45,000 new eligible enrollees

On November 20, New Hampshire Governor Maggie Hassan announced that the state had submitted a Section 1115 waiver to CMS for the state’s Health Insurance Premium Payment (HIPP) program, a mandatory Medicaid “private option” approach for new enrollees. This comes after the state legislature passed a bill on March 27, 2014 to pursue an alternative Medicaid expansion approach (see the April 1, 2014 Health Care Current). The law also expanded Medicaid coverage to adults that earn up to 133 percent of the federal poverty level (FPL) through a state plan amendment; the expansion was intended to be temporary while the alternative option was crafted and approved by the state.

The HIPP, if approved, would transition individuals who enrolled in the program as a result of the state’s Medicaid expansion and enroll newly eligible beneficiaries into plans on the FFM. HIPP, similar to the “private option” in Arkansas, would use federal funds to provide financial assistance to Medicaid expansion enrollees for buying health plans on the FFM. According to the state, an estimated 45,000 Medicaid enrollees will be added to the FFM. Adding more potential eligibles to the FFM may draw more insurers into the New Hampshire market. If the new waiver is approved on or before March 31, 2015, enrollment would start in October 2015, with coverage starting on January 1, 2016.

Background: New Hampshire submitted a state plan amendment to receive approval for its Medicaid expansion program, the Voluntary Bridge to Marketplace Program, after the bill passed the state legislature and was signed into law. The state received CMS approval and began enrolling adults between 19 and 65 years of age who earned up to 138 percent of FPL on July 1, 2014. As of November 19, the voluntary program had enrolled about 23,975 newly eligible Medicaid beneficiaries, all of whom would be required to transition into the HIPP program if it is approved.

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Around the Country


Rhode Island’s state-based marketplace seeks state funds for FY2016

HealthSource RI (HSRI), Rhode Island’s state-based marketplace (SBM), recently submitted a fiscal year (FY) 2016 budget proposal to Governor Lincoln Chafee. HSRI is expected to have operations costs of up to $27.68 million in FY2016. The Affordable Care Act provided SBMs federal funds to help states create their own marketplaces, but starting January 1, 2015 all SBMs are expected to be self-sufficient. Similar to four other states (Vermont, New York, Maryland, and Kentucky), Rhode Island does not currently have a dedicated revenue stream in place to fund operations, but has identified three different approaches that the state might combine to fund the marketplace going forward:

  • Use of federal grants or reimbursements to administer benefits (e.g., the federal government pays a large portion of states’ costs for administering Social Security; a similar process could be adopted here)
  • Implement a broad-based claims assessment
  • Generate revenue by offering tools and products to other states or private sector entities, by allowing advertising on HSRI web site, and through private-public partnerships

Christine Ferguson, HSRI Director, wrote an accompanying letter that outlines the major successes that Rhode Island has had to date, including exceeding enrollment expectations during the first open enrollment and interagency collaboration and leadership.

Background: By the end of the first open enrollment period, more than 27,000 individuals (double the number expected) had purchased coverage through HSRI. The Small Business Health Options Program (SHOP) in Rhode Island has also seen steady enrollment growth. Three health plans are now offering plans on the SHOP during the second open enrollment period; two plans offered coverage last year. Rhode Island also had very small premium rate increases.

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New tool aims to make tracking clinical trial regulations easier

The National Institutes of Health's (NIH) National Institute for Allergy and Infectious Diseases (NIAID) has launched a new website – ClinRegs. The website will help trial sponsors save time and effort in planning and implementing clinical research and ease the effort of complying with complex clinical trial regulations around the world.

The website has a database of country-specific clinical research regulatory information, and users can look up clinical data on 12 of the most popular countries for clinical research, including the U.S., U.K., China, and Brazil. NIH plans to add more countries in the near future.

The site organizes clinical trial information into key topic areas and users can see a side-by-side comparison of regulations. For example, a user could choose to compare the clinical trial regulations of India with those of the U.S. and could find a brief explanation of each country's regulatory authority, the scope of each country's authority over pharmaceutical products, in-depth information about how each trial is overseen, what to include in clinical trial applications, the responsibility of trial sponsors, the rights of patients and more.

The website is designed for the public and researchers to identify and analyze hard-to-find regulatory information quickly. Maintaining up-to-date regulatory requirements of one country can be challenging, and understanding the regulatory requirements of several countries at once, which is necessary when conducting global trials on a product, presents even more challenges. The goal of the website is to serve as a central resource for this information, and over time, build up a user community of regulatory and research professionals who can help keep the website accurate and updated.

Analysis: Drug approval regulatory agencies from around the world have similar missions: to enable safe and effective pharmaceuticals to reach the market while protecting public health. However, they carry out this mission differently – and these differences can significantly impact when patients get access to new medications. Efforts to both harmonize requirements and cut down on the variation that drug sponsors must go through to get a drug approved in different countries have been ongoing. Although organizations such as the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) have made progress in developing common standards over the years, there is still work to be done to make the approval process less burdensome and variable. Tools such as the NIH’s ClinRegs may help stakeholders navigate the regulatory landscape and draw attention to elements of the process that could be further harmonized and clarified.

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Breaking Boundaries


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