Perspectives

In health care, we've learned to expect the unexpected

Health Care Current | July 25, 2017

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

In health care, we’ve learned to expect the unexpected

By Greg Scott, Vice Chairman and US Leader, Health Plans, Deloitte LLP

“Uncertainty” is probably an overused word in our communications these days. But we haven’t found a better term to describe the political, policy, and marketplace outlook surrounding the Affordable Care Act (ACA), and ongoing efforts from Congress and the administration to repeal and replace significant chunks of that landmark statute.

As of this writing, the Senate’s effort to use the fiscal year 2017 budget reconciliation process to legislate an ACA overhaul is an unresolved mystery (see story below). Many commentators are calling the Better Care Reconciliation Act (BCRA) dead, though we’re avoiding that term for now, as we think it is premature.

We try not to count any chickens before they hatch. And that’s not a pun about the chairman of the Senate Finance Committee.

In the midst of this historic uncertainty, I am thinking about a number of interrelated topics, including a handful of observations below:

  • Traditional scenario planning is not cost-effective in this environment. Over the years, our health care practice has used classic scenario planning techniques and models to help many industry leaders plot their strategic options and position for long-term success. But the current political and policy environment is so unsettled and unpredictable that we don’t want our clients to over-invest in or over-engineer their strategic planning approaches. Don’t get me wrong – we maintain an up-to-date set of market scenarios that we use internally and with our clients on a regular basis. However, it’s generally not cost-effective right now to go into our traditional level of narrative or quantitative detail. Instead, we’re finding more value in far-ranging, lightly-facilitated conversations with client executives and boards in order to circumscribe and probe the art of the possible and associated high-level implications. This approach brings a modicum of helpful structure to support our maxim of expecting the unexpected.
  • The individual health insurance market could be entering an even more painful phase. Our financial analysis plus anecdotal observations from our client work demonstrate that the individual market continues to improve in 2017 in many meaningful respects. But our hopes for 2018 are growing dimmer by the day, taking the vantage point of consumers, insurers, and providers. The uncertainty surrounding ACA repeal and replacement is one important driver of our unfavorable outlook. Just as important is current-year uncertainty surrounding ongoing ACA administration, including cost-sharing reduction payments to insurers, enforcement of the individual mandate, management of this fall’s open-enrollment period, mixed messages to stakeholders, and more. I have the pleasure of working with 120 of the best health actuaries in the business. Every time I talk to them about the individual market, their qualitative and quantitative outlook grows more pessimistic. I think they’re right.
  • The role of Medicaid is becoming better and more widely understood. Medicaid’s importance – not just in the ACA coverage expansion, but in the US health care system overall – is finally receiving the attention that it warrants. The program has historically suffered (unfairly, in my view) from comparisons to Medicare, its 1965 Social Security Act Amendments sibling. It took the House and Senate repeal and replacement debate to bring Medicaid issues into a bright, national spotlight. Let’s hope that Medicaid’s moment in the sun is not like Andy Warhol’s proverbial fifteen minutes of fame. Medicaid is a foundational pillar of our national health care system. It deserves broader and sustained focus as the reform debate evolves.
  • Federalism maintains an ascendant trajectory. This is an issue where we’ve maintained high levels of certainty and consistency since the November 2016 elections. The administration and the Congress demonstrate clear commitment to shifting responsibility and decision rights from Washington, DC to state capitals across the country. There is of course uncertainty about whether BCRA and/or other legislation will change fundamental statutory relationships between the federal government and the states. The BCRA Medicaid per capita cap and block grant proposals are the foremost examples of such a fundamental shift. However, even in the absence of major legislative change, existing statutory authorities provide US Department of Health and Human Services (HHS) with broad latitude and powerful tools to support the shifting of discretion to states. The most important of these are Medicaid section 1115 and ACA section 1332 waiver authorities. I expect the administration’s expansive federalism will have a major impact on health policy and health care markets under any legislative scenario.
  • There is no “done.” As the Tom Hanks character decried in A League of Their Own, “There’s no crying in baseball!” And so it is in our business. There is no “done” in health reform, or in health policy, or in health care, no matter what happens in the 115th Congress. Too many intractable problems. Too much opportunity for improvement. Too important for individuals and families. Too critical for our nation. Too much to do.

Expect the unexpected.

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In the News

Senate introduces new strategy to repeal ACA

Earlier this month, the Senate cancelled its vote on the Better Care Reconciliation Act (BCRA), which sought to phase out several key provisions of the ACA, including Medicaid expansion, and cap federal Medicaid payment to states (see the June 27, 2017 Health Care Current). On July 19, the Senate released a new bill, the Obamacare Repeal Reconciliation Act of 2017, which would repeal the ACA’s coverage provisions starting in 2020. It is similar to the reconciliation bill that passed both houses of Congress in 2015 and was vetoed by President Obama.

Generally, it would:

  • Repeal the individual and employer mandates
  • Repeal all ACA imposed taxes
  • End Medicaid expansion after two years
  • Repeal exchange subsidies
  • Retain guaranteed issue and essential health benefit regulations
  • Block funding for Planned Parenthood for one year
  • Repeal the prevention and public health fund
  • Repeal the small-business tax credit for certain small employers
  • Repeal limits on contributions to flexible spending accounts
  • Appropriate funds to the HHS for cost-sharing subsidies through 2019
  • Repeal cost-sharing subsidies beginning in 2020

The Congressional Budget Office (CBO) released a cost estimate of the new bill, which was similar to its estimate for the 2015 bill. The CBO projects that it would result in 32 million more uninsured Americans and a deficit reduction of $473 billion over ten years.

(Source: “H.R. 1628, Obamacare Repeal Reconciliation Act of 2017” CBO, July 20, 2017)

Administration funds cost-sharing subsidies for July

The White House said it will fund the ACA’s cost-sharing reduction program in time for July amid long-term uncertainty of the program. It has not indicated whether it will continue making payments over the long term.

House v. Price, the lawsuit filed by House Republicans during the Obama administration that called the program into question, is ongoing (see the May 2, 2017 Health Care Current).

CMS proposes cuts to off-campus departments in 2018 PFS rule

On July 13, the US Centers for Medicare and Medicaid Services (CMS) issued proposed rules governing updates and other Medicare payment issues for the Physician Fee Schedule (PFS), the Medicare Shared Savings Program (MSSP), the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Centers (ASCs) to start January 2018. The updates emphasize the potential to lower out-of-pocket drug costs for beneficiaries (see the 340B story below), reducing reporting burdens on clinicians, and expanding telehealth.

Proposed changes to PFS: The Medicare program establishes the PFS to calculate physician and other clinicians’ payment rates. Payment under the PFS is based on Relative Value Units of care multiplied by a conversion factor to determine the payment rate. For 2018, CMS is proposing a PFS conversion factor of $35.99, a .31 percent increase over the 2017 PFS conversion factor of $35.89.

The rule proposes changes to site-neutral payment policies where certain services provided in off-campus hospital departments are paid under the PFS instead of the OPPS (see the July 12, 2016 Health Care Current). The earlier rule was implemented to reduce the disparity between payments for services provided by the same entity at different points of care. Now, CMS pays certain off-campus outpatient facilities half of hospital rates, which the proposed rule would cut to 25 percent. According to the agency, the pay cut would encourage fairer competition between hospitals and physician practices and save the program money: it estimates it could save Medicare $25 million in 2018.

CMS also proposed adding five Medicare telehealth services to the PFS including:

  • Lung cancer screening
  • Complex psychotherapy services (e.g., use of interpreters or communication devices)
  • Health risk assessments
  • Care planning for chronic management
  • Psychotherapy for crisis

Proposed changes to OPPS:

Proposed changes to ASC:

CMS is requesting comment on all the proposed changes in the rules to be submitted by September 11, 2017.

Related: The Medicare PFS rule would also expand the Medicare Diabetes Prevention Program (MDPP), a demonstration program that provides intensive lifestyle intervention to Medicare beneficiaries at risk for developing type 2 diabetes (see the July 12, 2016 Health Care Current). Slated to begin in 2018, the rule allows MDPP providers to furnish services nationally, receive payments under a value-based purchasing model (based on beneficiary engagement, attendance, and weight loss), and offer incentives to beneficiaries. While the program is scheduled to begin January 2018, the 2018 PFS proposes an April 1 start date, which would allow additional organizations to enroll before beginning to furnish MDPP services.

New payment rates propose changes to 340B formula

CMS proposed changing the formula it uses to pay hospitals for Medicare Part B drugs – these are drugs administered by a physician in an outpatient setting. The 340B program allows hospitals serving low-income populations to purchase certain outpatient drugs at a discount from retailers and manufacturers. The rule proposes changing the rate from the average sales price (ASP) plus six percent to the ASP minus 22.5 percent (see the Reg Pulse Blog, A renewed focus on the future of the 340B program).

Based on analysis by the Medicare Payment Advisory Commission (MedPAC), the discount hospitals receive when purchasing drugs through the 340B program is, on average, equal the ASP minus 22.5 percent. CMS would pay hospitals the amount they incur rather than allowing them to profit. According to the agency, the payment cuts could result in savings for drug costs for seniors.

On July 18, the House Committee on Energy and Commerce’s subcommittee on Oversight held a hearing to discuss the 340B program. Witnesses included leadership of the HHS Health Resources and Services Administration (HRSA), the Government Accountability Office (GAO), and the Office of Inspector General (OIG). Lawmakers discussed whether Medicare payment reductions to hospitals would help to lower overall drug costs and other aspects of the program. According to hearing testimony, the 340B program does not target the discounts to low-income populations. Further, HRSA, which administrates the program, does not have information on how 340B hospitals use the savings from the 340B discounts.

Related: Study find 340B does not increase drug prices
A recent study from Dobson DaVanzo & Associates found that the 340B program is unlikely to be a major driver of drug spending in the US. The report measured the total amount of drug spending in the US, the total amount of rebates and discounts received through all channels, and calculated how the 340B program affected overall drug pricing. As shown in the graph below, the report found that in 2015:

  • Total 340B discounts accounted for 1.3 percent of net drug spending. The baseline 340B discount, or the minimum amount required by statute was even a smaller share of the total: 0.9 percent in 2015.
  • 340B discounts accounted for 4 percent of specialty drug spending.
  • Discounts received through the 340B program accounted for 3.6 percent of the $170.2 billion in total discounts and rebates provided by manufacturers.
  • Drug manufacturers spent four times more money on advertising than on total 340B discounts.

(Source: Dobson DaVanzo & Associates, “Assessing the Financial Impact of the 340B Drug Pricing Program on Drug Manufacturers,” July 17, 2017)

House Ways and Means Committee approves Medicare Advantage SNP bill

On July 13, the House Ways and Means Committee approved HR 3168, which reauthorizes Medicare Advantage Special Needs Plans (SNPs). In order to become law, the bill would have to pass both the House and the Senate.

More than two million Medicare beneficiaries are enrolled in SNPs, including low-income older Americans and many people with chronic illnesses. This bill aims to improve care coordination and access to individuals covered by SNPs.

The legislation would provide for a five-year reauthorization of Dual Eligible SNPs and Chronic Condition SNPs, and would permanently reauthorize Institutional SNPs. Other provisions of the bill focus on increased integration of Dual Eligible SNPs, care management requirements for Chronic Condition SNPs, quality measurement at the plan level for SNPs, a Government Accountability Office (GAO) study on state-level integration between Dual Eligible SNPs and Medicaid, and expanded supplemental benefits for chronically ill Medicare Advantage enrollees.

New CDC director lays out priorities including fighting infectious disease, strengthening early-childhood development

The new director of the Centers for Disease Control and Prevention (CDC), Brenda Fitzgerald, MD, has made fighting of infectious disease through preventing antibiotic resistance a priority. Other priorities include improved tracking of emerging infections and strengthening early-childhood development.

Dr. Fitzgerald has expressed interest in continuing the CDC’s work to help other countries build infectious-disease fighting capabilities. She also has highlighted the opioid abuse epidemic, and would like to focus on children's early brain development.

Prior to this role, Fitzgerald, an obstetrician-gynecologist, served as Georgia's public health commissioner since 2011.

HHS OIG to audit incentive payments made to hospitals adopting EHRs

The OIG will audit CMS’s incentive payments to hospitals for meaningful use of electronic health records (EHRs) in fiscal year 2017. A previous OIG audit found that state agencies overpaid hospitals by $66.7 million and that hospitals could be overpaid $13.2 million in the future from inaccuracies in hospitals incentive payment calculation.

A total of $14.6 billion in Medicare EHR incentive payments were made to hospitals between January 2011 and December 2016. The audit of Medicare EHR incentive payments to hospitals comes after the audit on inappropriate incentive payments to clinicians in the meaningful use program (see the June 20, 2017 Health Care Current). According to the recent OIG audit, CMS made a total of $729 million in inappropriate EHR incentive payments to clinicians in the meaningful use program.

Breaking Boundaries

Early digital health innovations in treating depression

Researchers are finding some early successes in using digital health techniques to treat depression.

Depression is a global health problem: More than 300 million people struggle with clinical depression world-wide. Barriers to treatment for these patients include cost, time, stigma, and access. In many areas of behavioral health, the relationship between the patient and the therapist is seen as essential to effective care. But a growing body of research, including a meta-analysis of studies involving internet-based cognitive behavioral therapy (CBT), is demonstrating that digital therapies – combined with coaches who are available by text or phone – might be as effective as evidence-based traditional face-to-face therapy in treating some people with depression.

One study funded by the National Institutes of Health (NIH) tracked 99 patients with moderate depression and found that 90 of them completed an eight-week study that included access to treatment apps plus text support from trained coaches. Those who completed the course experienced a significant decrease in their symptoms, with 75 percent categorized as being in full remission. Most participants interacted regularly with the app over the eight-week period, and on average interacted with the coach twice a week.

A study by the UK National Health Service involving 1.2 million referrals for depression and anxiety showed that computerized CBT administered to people with depression yielded a recovery rate of 58 percent, compared with 54 percent for those who received face-to-face therapy.

Some of the researchers involved in these studies note that stepped care approaches may help build the evidence base for new tools and identify patients who could benefit from them. Stepped care might start with a brief in-person assessment of a patient who shows signs of depression, so that therapists can identify any behavioral or health concerns. Then, depending on severity, the therapist could provide patients with a self-help book or access to web-based education. The next step could be a computer-assisted intervention. Patients who do not feel they are being helped could move toward in-person treatment.

Analysis: Mobile apps for depression have evolved over the past few years to be more tailored to the individual. Individuals typically enter information about their moods and behaviors into the app, which then offers suggestions or prompts alternative ways to think through a situation or perspective, and health tips. Stakeholders expect that in the future, apps will continue to be more tailored, and incorporate augmented reality, virtual reality, and gaming. Crowdsourcing is also a strategy some apps use. A new app called Koko uses a messaging chatbox combined with machine learning that allows the user to put in a negative thought or scenario, such as a perceived failure, and send it out to other people experiencing similar situations. The crowd can provide different ideas, solutions, and support much like a therapist could.

Though new digital health apps are coming onto the market rapidly, researchers have only systematically evaluated a few. These tools have great potential to help improve health of individuals and communities. However, data and evidence on safety and efficacy are needed before health plans will pay for them and physicians will recommend them to their patients and integrate them into their practice. For consumers, with the many apps on the market, the challenge is knowing which ones work best. Standardized quality rating systems that can help consumers start to make sense of the options might help build use.

(Source: David C. Mohr et al, IntelliCare: An eclectic, skills-based app suite for the treatment of depression and anxiety, Journal of Medical Internet Research, January 5, 2017)

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