Health Care Current: January 12, 2016

Digging in: How are employers investing in health and wellness?

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.

Digging in: How are employers investing in health and wellness?

I’m approaching the end of my heavy season, which runs from October 31 through my birthday later this week. This is the period when my weight slowly inches up (literally) as I deviate from my relatively low-carb, Caveman-style diet. Leftover Halloween candy holds me over until the pies of Thanksgiving kick in. Celebrating my wife’s birthday in early December sets me up for Hanukah, Christmas, and New Year’s festivities. More cake on my father-in-law Mickey’s birthday in early January is just a warm up for the sugar extravaganza for my own. For the last several years, we have held an “Adult Ice Cream Social” on my birthday, highlighted by a table full of toppings and liqueurs. The consequences of these events are further compounded by the series of smaller events with our kids, clearing out the leftover candy, cookie dough, and caramel sauce.

Limiting my weight gain during this time is a challenge, but I work hard to keep it from getting out of control because the consequences can be so dire (diabetes, cardiovascular disease, cancer, among others). The good news is that so many diseases can be prevented or mitigated through good lifestyle choices. The bad news is that making those choices can be hard – modern life can make it harder to eat healthy, be active, and keep stress levels down.

The incidence of chronic disease has risen – this is not news – but it has piqued interest from other sources than the usual ones like friends, family, and our health care providers. Employers, for example, have invested in wellness and prevention programs to promote health and encourage employees’ healthy choices.

In a recent analysis, Employers still bullish on wellness programs, Deloitte found that employers use wellness programs to encourage health, retain and recruit employees, and reduce costs. Research has shown that unhealthy lifestyles can produce absenteeism and reduced performance at work (presenteeism). One study examining absenteeism and presenteeism among 50,000 workers at 10 employers showed that lost productivity costs are 2.3 times higher than medical and pharmacy costs. Subsequently, employer wellness programs have been on the rise.

Deloitte’s 2015 Survey of US Employers reveals that many are planning to either maintain (42 percent) or expand (34 percent) their current wellness programs in the next three-to-five years. The surveyed employers reported that wellness programs are a key part of employee recruitment and retention strategies; 88 percent of respondents reported that employees expect them to offer these programs. However, employers reported acknowledging that employees may view some components of these programs as negative, invasive, or another chore they have to fulfill. These findings point to the tension that sometimes exists around employer wellness programs.

Most surveyed employers are committed to their wellness programs, even if they are not seeing immediate return on investment (ROI) or even if they are not measuring ROI at all. Although almost all surveyed employers that offer incentives (96 percent) agree or somewhat agree that these programs help to control medical costs, fewer than half of surveyed employers (47 percent) are measuring ROI for these programs. Research demonstrates that individuals with healthier lifestyles tend to have fewer sick days and incur fewer medical costs, so employers may offer these programs in part to attract employees who value wellness and are interested in wellness-related benefits. However, there is little hard evidence to show whether the investment in wellness programs improves employee health or productivity, especially in the long-term.

Consumers are sometimes skeptical or have negative views about employer wellness program penalties. However, findings from Deloitte’s 2015 Survey of US Health Care Consumers show that almost all surveyed consumers (91 percent) view the programs as a perk and see them as a tool help improve their health. One way employers may get higher levels of participation and engagement in wellness programs is to demonstrate an overall investment in health and wellness by making it part of the culture and to structure programs so that they are not just an additional chore for employees.

One of the surprising takeaways from these studies is that people seem just as likely to participate in employer wellness programs whether they are voluntary or mandatory to receive full health benefits. This demonstrates that ultimately, people recognize the mutual interests: Employers and employees want to be healthier, reduce costs, and thrive in a culture of wellness.

I’m doing my best to blunt the impact of my heavy season. I exercise whenever I can, and like 37 percent of fitness band owners who monitor their fitness level daily,1 I track my workouts with Strava and my Fitbit, spurred on by the kudos and cheers I get from my friends. I also weigh myself daily to be sure I have not hit some astronomical number that would force me to cancel my birthday party. So far I have managed to keep my BMI in the 23’s, which puts me toward the upper range of normal.2 That’s just enough room for me to justify loading up a grocery cart with bags of candy, filling a crock pot with fudge sauce, and celebrating with my friends. A few days later, I will rededicate myself to health and fitness—at least until Valentine’s Day rolls around. In the meantime, if my colleagues want to challenge me to take the stairs or if my employer wants to subsidize the cost of my gym membership, I’m all for it.

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My Take

By Harry Greenspun, MD, Director, Deloitte Center for Health Solutions, Deloitte LLP


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Survey: One in four US adults had problems paying medical bills in the last year

The Kaiser Family Foundation and The New York Times surveyed adults age 18-64 to find that more than a quarter (26 percent) had problems paying medical bills over the last 12 months. While the uninsured (53 percent) had more difficulty than other groups, having insurance did not protect everyone from financial problems with medical bills. Many individuals with employer-sponsored insurance (19 percent), Medicaid (18 percent), or direct purchase (22 percent) also reported having trouble paying medical bills in the last year. Having a high deductible was a strong predictor of trouble, too. Twenty-six percent of individuals with private insurance and a high deductible had trouble, compared with only 15 percent with private insurance and a low deductible.

Respondents reported that they have used many different strategies to pay their medical bills:

Problems with medical bills often lead to other financial issues for individuals. Many reported having difficulty paying other bills and making payments for basic living necessities like food, heat, or housing.

Consumers with medical bills were more likely to take steps to learn about the cost of care. Half (49 percent) of the respondents who said they had trouble paying medical bills in the last year also reported that they checked with their doctor’s office or health plan before they had a health care visit to see how much it would cost. That compares with 34 percent of the respondents without problems paying medical bills who had checked on the cost.

(Source: Kaiser Family Foundation, “The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey,” January 2016)

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Implementation & Adoption

IRS extends employer and health plan information reporting deadlines for 2016

On December 28, 2015, the Internal Revenue Service (IRS) extended the deadlines for employers and health plans to report coverage information called for by the Affordable Care Act (ACA). For the 2015 tax year, employers and health plans have until March 31, 2016 to send employees forms that report their offers of health insurance and coverage provided. They have until February 29, 2016 for paper filings and until March 31, 2016 for electronic filing with the IRS. According to the January 4, 2016 Tax News & Views Capitol Hill Briefing, the deadline extensions apply only to the ACA information returns and statements for calendar year 2015 filed in 2016.

The Americans Benefits Council, which represents large employers, praised the change. It said that the information and reporting requirements have presented many employers with difficult technical issues and logistical complications.

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GoodRx: Prices for many drugs fell in 2015, but consumers not seeing lower out-of-pocket spending

GoodRx, a website that compares prescription drug prices, found that prices for many medications dropped in 2015. However, health care consumers have not seen significant decreases in their out-of-pocket spending on drugs.

Prices for many widely used generic drugs decreased over 2015:

  • The generic statin atorvastatin decreased 8.2 percent. 
  • The generic allergy drug montelukast decreased 19.9 percent. 
  • The antidepressant fluoxetine decreased 30.4 percent.

Despite the drops in prices for these generic drugs, prices increased for many others. Price decreases for generics have slowed over the past decade, and Americans are paying more in out-of-pocket costs as health plan deductibles and cost sharing have increased. Spending on prescription drugs, which is approaching $300 billion per year, is expected to grow 6.3 percent on average through 2024. According to GoodRx, 2016 will likely see introductions of new generic versions of expensive drugs to market, but it may also bring new costly therapies and price increases in previously inexpensive medications.

(Source: Elizabeth Davis, GoodRx, “The GoodRx Prescription Savings Blog,” December 29, 2015)

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CMS to launch RACs for Medicare Advantage

The US Centers for Medicare and Medicaid Services (CMS) announced that it may expand the Recovery Audit Contractor (RAC) Program to Medicare Advantage (MA). RACs are regionally contracted, private companies tasked with finding improper Medicare payments to providers. The ACA mandated that the RAC program be expanded to MA and Part D plans and the CMS request for information represents an initial step in implementing this requirement. However, CMS did not provide a timeline for when the program would take effect.

CMS pays MA health plans a monthly amount for each beneficiary they cover. That payment is risk-adjusted based on the medical needs of the covered individuals. Currently, CMS conducts its own risk adjustment data validation (RADV) to ensure that health plans are receiving proper payments based on risk-adjustment scores. Due to capacity constraints, however, CMS only performs 30 RADV audits per year, which accounts for only 5 percent of all MA contracts. By expanding the RAC program to MA plans, CMS hopes to audit all MA contracts.

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FDA’s CDER approved 45 novel new drugs in 2015

The US Food and Drug Administration (FDA) Center for Drug Evaluation and Research (CDER) approved 45 novel new drugs in 2015. Novel new drugs address previously unmet medical needs in conditions such as cancer, heart failure, high cholesterol, cystic fibrosis, and infectious diseases. CDER approved these drugs through New Drug Applications (NDAs) and Biologics License Applications (BLAs).

Highlights of CDER’s approvals are:

(Source: FDA, “Novel New Drugs Summary 2015,” January 2016)

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GAO: Vertical consolidation may increase volume of outpatient services

The Government Accountability Office (GAO) recently evaluated whether vertical consolidation of health care providers – for example, when hospitals acquire physician practices – contributes to Medicare volume and spending growth for hospital outpatient department (HOPD) expenditures.

Medicare expenditures for services provided in the HOPD setting have grown rapidly in recent years, with spending higher in parts of the country with more vertical consolidation. From 2007 to 2013, the number of consolidated hospitals grew from approximately 1,400 to 1,700 (121 percent growth), while the number of vertically consolidated physicians increased from 96,000 to 182,000 (189 percent growth). The percentage of evaluation and management (E&M) office visits performed in HOPDs was generally higher in counties with higher levels of vertical consolidation in 2013.

Medicare pays more for a service if it is provided in a HOPD instead of a physician office. For example, in 2013 a mid-level E&M office visit was $51 higher on average in an HOPD than in a physician office. This payment difference has led policymakers to question whether the growth in HOPD expenditures is driven by a shift in services from physician offices to HOPDs. An additional concern is that beneficiary cost-sharing is higher for services billed as HOPD visits.

GAO recommends that Congress pass legislation to equalize payment rates between physician offices and HOPDs for E&M services. The Medicare Payment Advisory Commission (MedPAC) has recommended a similar site-neutral policy for certain E&M clinic visit services.

(Source: GAO, “Medicare: Increasing Hospital-Physician Consolidation Highlights Need for Payment Reform,” December 18, 2015)

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On the Hill & In the Courts

Network adequacy a focus of CMS draft 2017 letter to issuers in the federal exchange

On December 23, 2015, CMS issued its draft 2017 letter for health plans participating in the federally facilitated exchanges. Health plans that wish to sell plans through the federal exchanges may apply between April 11 and May 11, 2016. CMS will publish rate filings by May 25 so that consumers and other stakeholders may review them before they are finalized.

One of the key policies in the guidance concerns network adequacy. CMS outlined guidelines it will use to evaluate networks for issuers in states that do not have their own standards. CMS will require states to use time and distance standards to measure network adequacy in exchange plans and will conduct adequacy reviews in certain states (which will be determined at a later date). CMS plans to publish network adequacy ratings for QHPs for consumers; the rating will be based on other QHPs available in the same county. To do this, CMS will calculate the ratio of providers in the plan’s network to the total number of providers. This will give CMS a provider participation rate (PPR). CMS will then give QHPs one of three ratings:

CMS estimates that approximately 68 percent of plans will fall under the standard rating, and only 16 percent would fall under the basic rating. The network adequacy guidance comes shortly after the National Association of Insurance Commissioners (NAIC) published a new network access and adequacy model law. Many state insurance commissioners said that CMS did not consider the model law in this guidance.

CMS also said in the letter that it will require health plans to submit 2017 premium rates for review, regardless of whether they increase, decrease, or stay the same over the previous year. CMS will look at several factors when it reviews premium rates:

  • Health plan data and actuarial justification that it provides with the filing
  • Recommendations from state regulators, especially those related to comments on excessive or unjustified rate increases
  • Premium growth rates inside and outside of the exchanges

CMS will send the final letter to issuers during the first quarter of this year.

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Congress’ last minute changes to Medicare includes blanket meaningful use hardship exemption

Congress changed several Medicare policies when it passed the Patient Access and Medicare Protection Act in late December 2015. Lawmakers expedited the bill through both chambers before they departed for winter recess. The bill includes policy changes that Congress did not include in the omnibus spending bill that passed at the end of the year (see the December 22, 2015 Health Care Current).

Reaction: Several stakeholder groups, including the American Medical Association, American Association for Homecare, American Society for Radiation Oncology, and a number of durable medical equipment suppliers, praised the legislation. The blanket hardship exemption benefits physicians struggling to meet the meaningful use requirements. It also relieves CMS from processing on a case-by-case basis the numerous hardship applications that were expected.

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Lawmakers ask CMS how it can counter increasing drug prices

A group of Democratic Senators sent a letter to the acting administrator of CMS, Andy Slavitt, last month, asking what the agency plans to do to counter rising drug prices. Policymakers and presidential candidates have given this issue much attention recently, but there has been little legislative action. The Senators said that CMS can use its authority to make changes more quickly.

The lawmakers asked whether the Center for Medicare and Medicaid Innovation (CMMI) might examine potential alternative payment policies, including increasing competition. They also asked whether CMS might use comparative effectiveness research to tie payments to the increased value of new drugs. Finally, lawmakers asked about helping Medicaid managed care plans with increasing drug prices.

The letter to CMS also touched on helping consumers and providers make more informed decisions based the costs of prescription drugs. The lawmakers expressed concern about the affordability of drugs in high-deductible plans in the exchanges. The senators challenged CMS to continue to build upon and improve recent tools to help consumers compare drug coverage and cost-sharing within exchange plans.

Related: Mark Merritt, the President and CEO of the Pharmaceutical Care Management Association (PCMA) testified before the Senate Special Committee on Aging on price increases for prescription drugs. He had three recommendations:

  • Expedite generic drug approval, a process that currently takes more than three years. 
  • Establish an abbreviated new drug application fast track for generic drugs competing with off-patent brands, and create new incentives for manufacturers to enter these markets. 
  • Create and monitor a list of off-patent drugs with little or no competition, those most likely to see dramatic price increases.

Merritt explained that lack of competition, especially for older, off-patent drugs that treat smaller populations, has led to unlimited pricing power for certain drug manufacturers.

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Only six states have received federal funds for Medicaid data mining

Modern Healthcare reports that few state Medicaid fraud control units have applied for federal funding to support data mining. In 2013, the US Department of Health and Human Services (HHS) issued a rule that allows fraud control units to apply for funding to purchase tools to mine Medicaid data for fraudulent payments. HHS and CMS aimed to reduce improper payments through the program.

However, to date, fraud units in only six states – California, Indiana, Louisiana, Michigan, Missouri, and Oklahoma – have applied for and received permission to conduct data mining. Several other states have indicated they may pursue funding and are looking into ways that they may benefit from data-mining efforts. Meanwhile, Medicaid improper payment rates have increased over the last several years, growing from 5.8 percent ($14.4 billion) in 2013 to 9.78 percent ($29.12 billion) in 2015.

Background: The HHS rule allows Medicaid fraud control units to purchase data mining tools through a waiver. Fraud units must explain through a proposal how they coordinate efforts with state Medicaid agencies, verify that they comply with state-specific Medicaid regulations, and train fraud unit staff on how to use the advanced computer-analysis required for data mining. Forty-nine states and the District of Columbia have fraud control units, which are overseen by the HHS Office of Inspector General.

(Source: Virgil Dickson, Modern Healthcare, “HHS wants more states to data-mine for Medicaid fraud,” December 16, 2015)

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Around the Country

CMS approves $6.2 billion California Medicaid transformation waiver

CMS approved California’s $6.2 billion Medi-Cal 2020 Medicaid waiver as a part of the state’s effort to redesign care delivery for its Medicaid program. The 1115 Medicaid waiver, authorized through 2020, replaces an earlier waiver that expired October 31. It includes:

  • $3.3 billion to support public hospitals’ maintenance or launch of delivery-system reform initiatives
  • $236 million to help pay hospitals for uncompensated care, which only covers one year rather than the five originally requested
  • $740 million for a dental care initiative 
  • $2.9 billion for a the Global Payment Program, an initiative that combines disproportionate share hospital payments and uncompensated care for the first year of the demonstration to pay for services for the uninsured
  • $3 billion in funding for a pilot targeting high-risk, high utilizing Medicaid populations

The state department of health, CMS, and stakeholders still need to finalize details of pilot and demonstration program included under the waiver. The agreement will guide the California Medicaid program’s provision of care services to its 12.8 million members, roughly a third of the state, for the next five years.

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Robots and drones may help older individuals remain independent for longer

Researchers at the University of Illinois recently received a grant from the National Science Foundation to explore strategies to design small autonomous drones and ground robots to perform simple household tasks. While drones and small robots are still a novelty to many, researchers say that in the next several years, they may be able to assist older individuals who have chronic conditions and want to stay in their homes as long as possible. Some of the tasks the team is envisioning in the Automation Supporting Prolonged Independent Residence for the Elderly (ASPIRE) project include retrieving medication from another room, household cleaning, and other tasks that could reduce the risk of falls in older adults who live alone.

With the shift from volume to value and emerging technologies that enable remote monitoring, home health is poised for growth in the coming years. According to the US Census Bureau, the 65 year and older population will increase at five times the rate of the rest of the population until 2040. Baby boomers – the customers of the future – are even more inclined than previous generations to remain at home when they need chronic or long-term care.

The ASPIRE team consists of engineering, computer science, and psychology researchers. The project builds on prior work that shows miniaturized drones, which are less costly to develop than humanoid robots, are capable of avoiding collisions and navigating a dynamic environment. Prior research has shown that consumers prefer that drones are quiet, made of soft materials, and travel at a safe speed. A key initial goal of the project is to study people’s attitudes about robots and drones to gain additional understanding of strategies to design robots and drones that people are comfortable around.

Analysis: From a consumer perspective, this research is a compelling example of how the future of health care is being transformed by emerging technologies. Drones and small robots in the home could decrease downstream costs by reducing disability, increasing productivity, and increasing quality of life. Robotics has entered the world of care delivery, particularly in surgery where there is the first patient-side robotic laparoscopy platform. Some patients may also start to see robots in the hospital setting, automating certain administrative activities such as food delivery.

Deloitte’s 2014 publication, “Home health care: New opportunities and challenges for care provided inside the home,” explores the potential for health care organizations to identify ways to both reduce costs and meet the demands of the health care consumer of the future. Health care organizations are leveraging new models of care, value-based payment strategies, and emerging technologies to engage patients, improve health, and reduce costs.

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Breaking Boundaries

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