Health Care Current: December 22 2015 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: December 22, 2015
Consumerism and affordability: Two sides of the same coin
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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Consumerism and affordability: Two sides of the same coin
I’ve been impressed of late with the high volume and optimistic tone of industry thought leadership on the rise of consumerism in the US health care system. At the same time, I’ve also been immersed in analyses and forecasts surrounding the nature and inflation of health care costs in the US.
Unfortunately, I’m concerned that the health care industry is not yet adequately probing and linking the relationship between these two issues and associated trends. The increasing role and responsibility of consumers in health decision-making and purchasing, and the lumpy but inexorable rise in medical and other health care costs, should be viewed as two sides of the same coin.
Health economists and health services researchers have been probing this linkage for many years. They use the term “elasticity” to describe how consumer demand responds to price increases. Historically, the research consensus tended to rate consumers’ health care spending as generally “inelastic.”1 Under this perspective, a consumer with acute appendicitis would seek and receive an appendectomy, regardless of price. However, more recent and targeted research and economic analysis suggest that health care demand is actually quite elastic – and that consumers commonly make health care purchasing decisions considering cost.2
I am reassured by what I see as an emerging economic and academic consensus that confirms what I already see in spades in the marketplace today. That is, the broad industry trends towards consumerism – characterized by higher consumer cost sharing, enhanced consumer engagement and decision support, and more shifting of purchasing responsibility from employers and other health insurance sponsors to individuals – is increasing the price sensitivity of consumers and influencing their behaviors.
Ironically, given the name of the statute, the Affordable Care Act (ACA) has heightened certain concerns about affordability.3 In particular, there are growing indications that the high deductibles and other out-of-pocket requirements of the most popular public exchange benefit designs are causing difficult financial and medical care tradeoffs for many Americans. This issue is not confined to ACA products, but also includes the mounting share of employer-sponsored and individual plans with higher costs for the consumer. The Commonwealth Fund’s Affordability Index found that 25 percent of privately insured adults had “unaffordable” health care costs in 2014 and 2015.4
More focus needs to be on the issues of affordability. Costs are once again at a higher trajectory, after several years of historically low health care cost inflation rates. Certain categories of medical expenses can pose particular problems for consumer affordability, including prescription drugs and specialty pharmaceuticals. These affordability challenges are likely to mount as technologic and scientific advances introduce more effective but higher-cost clinical and therapeutic innovations into the marketplace.
While the US health care system needs greater engagement of consumers, we don’t want price sensitivity to lead to avoidance of necessary care.
I am pleased that many health plans are specifically focused on this critical industry and public health concern. They are engaging with providers, employers, public policymakers, and other stakeholders to gain a better understanding of affordability issues and to develop meaningful and collaborative responses. My hope now is that more stakeholders, both public and private, begin to view consumerism and affordability as two sides of the same coin, and take action accordingly.
PS. We will not publish a Health Care Current on December 29, 2015. We will return in the new year with our next issue on January 5, 2016.
1 “Is Health Care Demand Elastic?” by Jason Shafrin, Healthcare Economist, 22 July 2009.
2 “The Elasticity of Demand for Health Care: A Review of the Literature” RAND white paper prepared for the Department of Defense, 2005.
3 Deloitte 2015 Survey of US Health Care Consumers.
4 Commonwealth Fund Affordability Tracking Survey, July-August 2015.
By Greg Scott, Vice Chairman and US Leader, Health Plans, Deloitte LLP
Premiums for many HIX plans grew more than 10 percent
Many consumers purchasing health insurance in the health insurance exchanges (HIX) will see premium increases greater than 10 percent, according to a USA Today analysis of the Robert Wood Johnson Foundation’s (RWJF) HIX Compare datasets. The analysis shows that premiums for silver-level plans – mid-level benefit plans with approximately 68 percent of all federal HIX enrollment – increased by more than 11 percent on average. Premiums for gold-level benefit plans increased by an average of nearly 14 percent.
Other points from the analysis include:
- Average deductibles for family coverage increased dramatically in some states, including Washington state (+76 percent), Mississippi (+42 percent), and South Carolina (+37 percent)
- Alaska had the largest average premium increase at 35 percent
- Twenty-nine states have fewer gold plans than they did last year; five states are losing more than half of their gold plans
Background: The HIX Compare data set is the only nationally comprehensive, public data set that includes information on all plans offered in the exchanges for 2015 and 2016. RWJF released the data for researchers and others to conduct market analysis and create better decision support tools for consumers.
(Source: Jayne O’Donnell, USA Today, “State by state data show bigger 2016 exchange premium, deductible jumps,” December 16, 2015)
Implementation & Adoption
Precision Medicine Initiative aims to have 1 million participants by 2019
Earlier this month, Francis Collins, the Director of the National Institutes of Health (NIH) said that NIH aims to enroll more than 1 million individuals in the Precision Medicine Initiative (PMI) in the next four years, beginning with nearly 80,000 next year. The NIH expects the PMI to cost $130 million in 2016, $230 million in 2017, and $330 million in 2018.
NIH recently published a request for information, seeking feedback on how it should establish the systems and processes that will be required to implement the PMI Cohort Program. For the first wave, NIH anticipates it will recruit 300,000 volunteers to begin conducting physicals and collecting biospecimens. It will do this through a PMI Cohort Program Coordinating Center.
The first set of funding opportunities are now available. The mission of the Precision Medicine Initiative is to enable a new era of medicine through research, technology, and policies that empower patients, researchers, and providers to work together toward development of individualized treatments.
Analysis: Precision medicine offers the potential for more targeted therapies and reduced adverse events. The President announced the Precision Medicine initiative in January, and funding for it was included in the spending bill that passed last week (see related story below). Dr. Francis Collins, Director of the National Institutes of Health, remarked at the annual Biotechnology Innovation Organization (BIO) International Convention earlier this year that medical knowledge is far outpacing treatment gain, and that the Precision Medicine Initiative will greatly enhance the scientific community’s ability to take precision medicine from a promise to a reality (see more in the July 21, 2015 Health Care Current).
Report: Three types of barriers inhibiting wider adoption of telehealth
Policymakers may need to address several key barriers to telehealth, according to a report released last week by the National Conference of State Legislators (NCSL). Telehealth, which includes patient education, provider consultation and training, and remote care and home monitoring, can improve access by extending the reach of existing providers and improving efficiencies. NCSL highlighted three types of barriers: coverage and reimbursement, licensure, and safety and security.
The NCSL said policymakers should consider existing definitions of telehealth and how they may limit the use of telehealth. Further, policymakers should identify gaps in access to care that telehealth could fill and whether physicians should be able to practice across state lines. More comprehensive data collection for telehealth services and balanced regulation may both protect patients and help realize the full potential of telehealth.
(Source: National Conference of State Legislatures, “Telehealth Policy Trends and Considerations,” December 2015)
Study: Private health plan spending levels do not mirror Medicare levels in many parts of the country
Last week, the New York Times highlighted findings from a new study that found that places where Medicare spending is high are not necessarily high cost areas for private health plans. Using data from the Health Care Cost Institute (HCCI), which aggregates claims from three of the largest insurers in the US, the researchers looked at private and public spending on some of the most common procedures. The researchers also found that in many places prices varied greatly by insurance source.
For example, the researchers looked at Grand Junction, Colorado, where Medicare spending is the third lowest of 306 locations. The HCCI data show that it is the area with the 42nd highest private health plan spending. The data suggest that this is common across the country, as the correlation between Medicare and private health plan spending in the 306 largest Hospital Referral Regions is low, only 0.14 (with 1.0 being 100 percent correlation). Some areas have high or low spending for both Medicare and private insurers.
The researchers found that while private health plan spending variation is largely due to different prices for inpatient procedures, in Medicare the spending variation is caused by differences in the quantity of services. The data also show that hospital prices for common procedures vary greatly across the US (up to a factor of 12), and higher hospital prices tend to be in areas with lower competition and higher hospital market power.
(Source: Kevin Quealy and Margo Sanger-Katz, New York Times, “The Experts Were Wrong About the Best Places for Better and Cheaper Health Care,” December 15, 2015; Zack Cooper, Stuart Craig, Martin Gaynor, and John Van Reenen, “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” December 2015)
Investments in digital health remain steady in 2015
Venture capital funding for digital health totaled more than $4.3 billion, matching the record numbers in 2014, according to an analysis by Rock Health. From 2013 to 2014, funding for digital health doubled. While total funding for digital health held steady at $4.3 billion in 2015, the average size of deals grew from $14.7 million in 2014 to $15.6 million in 2015. Four categories accounted for more than 40 percent of all digital health funding in 2015.
Related: Deloitte’s report, Next-generation “smart” MedTech devices: Preparing for an increasingly intelligent future, highlights the transition towards consumer driven health care in the medical technology (medtech) industry. Digital technologies like biosensors and software platforms play an important role in this move.
The report predicts that four shifts could drive growth and opportunities in the medtech industry:
- From acute to preventive care, specialists to self-care, and hospital to home care will depend on consumers with remote access to data through smart devices managing their own conditions
- From monitoring single biometric indicators to multiple indicators, processed through artificial intelligence, will help release new insights into health
- From intuitive approaches based on population-based evidence to precision-based health care tailored to the individual patient’s characteristics will allow physicians to harness information from intelligent algorithms to inform decisions
- From specialized silos of medical knowledge to more centralized and accessible knowledge centers will allow clinicians to provide more sophisticated care
Congress passes tax extender, funding bills that delay or freeze significant ACA provisions
Last week, Congressional lawmakers agreed to a $1.8 trillion omnibus spending bill that funds the federal government through September 2016 and a $680 billion tax extender bill that has several implications for the health care industry. The bills were combined into one package before it was sent to President Obama, who signed it into law December 18 (H.R. 2029, the Consolidated Appropriations Act, 2016). The package includes three provisions that have important implications for the health care industry:
The bill gives $2 billion more to the NIH budget, which will increase to $32 billion. This includes $350 million for Alzheimer’s research. The US Food and Drug Administration (FDA) will receive $133 million more than last year, including $2.4 million for the Precision Medicine initiative. The bill also cuts funding for the Agency for Healthcare Research and Quality (AHRQ), from $364 million to $334 million. The bill increases funding for combating antibiotic-resistant bacteria by nearly $300 million to $774 million.
On the Hill & In the Courts
Federal Reserve raises short-term interest rates for the first time since 2006
The Federal Reserve announced last week that it is increasing the short-term interest rate to above zero for the first time in seven years. The 0.25 percentage point increase indicates the Fed’s growing confidence in the US economy’s recovery as household spending increases and the unemployment rate falls. The short-term rate is expected to reach 1.38 percent by the end of 2016 and 2.38 percent by the end of 2017.
Analysts expect not-for-profit hospitals to see higher borrowing costs because there will be an influx of borrowers taking action before the Fed’s rate adjustment. The short-term interest rates for a majority of the health systems have been held low because investor demand has exceeded the debt issued by hospitals. As a result, many hospitals may choose to refinance debt, finance capital projects, and borrow for mergers and acquisitions now to avoid paying higher rates on what they borrow later.
NIST asks for feedback on cybersecurity framework
Earlier this month, the National Institute of Standards and Technology (NIST) released a request for information seeking feedback on the Framework for Improving Critical Infrastructure Cybersecurity. The Framework was originally published in 2014, and aims to coordinate standards, procedures, and processes around cyber risk. It was created through a private-public partnership between the federal government, industry, and consumer advocate groups. NIST is considering whether the Framework should be updated, and asks for feedback in several areas.
This comes shortly after Moody’s Investors Service published research that suggests cyberattacks against health care organizations could cause their credit ratings to drop. Financial institutions, health care organizations, educational institutions, and retail companies are at the highest risk for experiencing a large-scale cyberattack that might harm the organization’s reputation and financial standing because organizations in these industries typically hold large amounts of personal data on individuals and customers. Cyber risk is a significant concern among health care organizations, as one breach can impact millions of health care records at once.
Related: Congress included language that supports cybersecurity initiatives at the US Department of Health and Human Services (HHS) in last week’s omnibus spending bill. HHS will be required to create a task force on cybersecurity that will look at how private organizations prevent cyberattacks and barriers in doing so, how organizations in other industries handle cybersecurity threats, ways to share information to prepare for and respond to digital threats, and challenges with securing medical devices on connected networks.
Broadband adoption rates vary across metropolitan areas
Large variation in broadband connectivity rates exists among demographic groups and metropolitan areas according to a recent report by Brookings. Using data from the US Census Bureau and the 2013 and 2014 American Community Survey, the researchers discovered that 87 million households – three-quarters of all US households – had a broadband Internet connection in 2014. However, multiple factors (e.g., income, educational attainment, and telecommuting) all affect broadband adoption rates in metropolitan areas.
Broadband adoption varies substantially across the 100 largest metropolitan areas. In general, these largest areas have higher adoption rates (77.8 percent) than the country as a whole (75.1 percent), but the rates vary up to 30 percentage points. Areas with a large tech workforce like San Jose (88.2 percent), Seattle (84.8 percent), and Boston (82.7 percent), had much greater rates of connectivity than areas like Lakeland (64.1 percent), Greensboro (64 percent), and McAllen (58.1 percent).
Analysis: Americans use high-speed Internet connections to shop, learn, communicate, apply for jobs, work, and receive health care services. Digital technologies’ potential to improve health care and health care services may remain unrealized until all individuals have a broadband connection. While broadband connectivity measures are not often considered in the context of improving health outcomes and reducing costs of health care, it is a prerequisite for many technologies that can provide more cost-effective and higher-quality care – including video consultations, remote patient monitoring, and electronic health record utilization.
Federal statutes and regulations provide subsidies that are administered by the Federal Communications Commission (FCC) to support efforts to close these connectivity gaps, but some policy experts say they have been underutilized because they are too hard to use. A report from Health Affairs explains that less than a quarter of the approximately 11,000 providers eligible for rural broadband connectivity grants participate in the program. Much of this may be due to the difficult application process and relatively small subsides compared to the costs of the program. Many also say they have not kept pace with changes in health care delivery and broadband technology.
Public and private sector employers can play a role in increasing broadband connectivity. Broadband quality and development patterns depend on local infrastructure and subsequently impact adoption rates. Additionally, encouraging telecommuting is correlated with increased broadband connectivity’s rates. For example, in cities like Washington, DC and San Jose, which have some of the country’s heaviest traffic, broadband adoption rates are among the highest in the country.
(Source: Adie Tomer and Joseph Kane, “Broadband adoption rates and gaps in US metropolitan areas,” Brookings, December 2015; Mohit Kaushal, Kavita Patel, Margaret Darling, Kate Samuels, and Mark McClellan, “Closing the rural health connectivity gap: How broadband funding can better improve care” Health Affairs, April 2015)
Around the Country
Report highlights strategies to strengthen state prescription drug monitoring programs
Making prescription drug monitoring program (PDMP) databases more user friendly, improving data integrity, and enabling proactive alerts could strengthen state prescription drug monitoring and prevent doctor shopping (the practice of seeing multiple doctors in order to get multiple prescriptions of controlled substances), according to a new Pharmaceutical Researchers and Manufacturers of America (PhRMA) backed report by the Network for Excellence in Health Innovation (NEHI). The report comes shortly after a recent analysis found that 25 percent of primary care doctors in states with PDMPs did not know they existed. Greater physician and prescriber engagement may help improve the efficacy of PDMPs.
In June 2015, NEHI convened a forum to address challenges and opportunities related to PDMPs. All but one state now operate a PDMP to monitor the dispensing of controlled substances, like opioids, central nervous system depressants, and stimulants. The forum participants identified barriers to successfully incorporating PDMP data into physicians’ clinical practices and identified four major areas of opportunity to strengthen PDMP use by physicians.
(Source: Valerie Fleishman and Thomas Hubbard, “Physicians and PDMPs: Improving the use of prescription drug monitoring programs,” The Network for Excellence in Health Innovation, December 2015)
Innovative strategies to increase access to behavioral health services
A study published this month from the University of Missouri School of Medicine shows patients and providers are very satisfied with telehealth – the use of video conferencing in health care. Telehealth has been used for years and is growing in popularity in rural areas because of health care access issues that the more than 50 million Americans who live in rural areas often face.
The researchers surveyed patients, physicians, and on-site equipment coordinators served by the Missouri Telehealth Network. The network offers several different clinical specialty services, including behavioral health, dermatology, and care for autism, at more than 200 sites across Missouri. Survey questions covered topics such as ease of use, quality of care, and acceptance as an alternative form of health services. Eighty-three percent of the 286 patients surveyed felt they received skilled care during their telehealth visit, and 78 percent agreed they would use the service again. Sixty-seven percent of the 12 site coordinators surveyed said that telehealth appointments were easy to coordinate, while 86 percent of 21 physicians surveyed were satisfied with the care they were able to provide patients via telehealth.
Examples from around the country: Carolinas Health System in North Carolina is taking a proactive approach to solving the problem of long-waits and access issues for behavioral health care. The health system is enabling patients to access behavioral health specialists (e.g., psychiatrists, counselors, or licensed clinical social workers) through their primary care physician’s office. The program also includes a health coach who follows up with the patient. The patient’s primary care physician is also able to complete consults via the electronic medical record with a psychiatrist or pharmacist with expertise in behavioral health. In Utah, Intermountain Healthcare is connecting primary-care providers with on-site behavioral health specialists; and in four Illinois hospitals, Advocate Health Care launched a program that enables mental health teams at a central location to provide around-the-clock virtual and telephone consultations and screenings.
Analysis: Deloitte’s 2015 Survey US Health Care Consumers found that consumers’ interest in health technologies still exceeds their use, but the gap is slowly closing. Consumers are interested in communicating electronically with providers, and one in five consumers using medical care has done so. Rates of conferring with doctors via email, texting, or video have doubled in the last two years, suggesting digital communication between consumers and providers may continue to increase. Interest in communicating with providers electronically is lowest among seniors and the lowest-income group.
(Sources: Mirna Becevic et al, “User satisfaction with telehealth: Study of patients, providers, and coordinators,” Health Care Manager, November/December 2015; Kathleen C. Thomas et al, “County-level estimates of mental health professional shortage in the United States,” Psychiatric Services, October 2009)