Health Care Current: November 17, 2015

Picking the right recipe for cHealth

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.

Picking the right recipe for cHealth

My mother-in-law is awesome (I’ve had a few, so I feel qualified to judge). One of the things we share is a love of cooking. Sandy makes incredible, elaborate meals that delight our entire extended family, from babies to seniors.

My approach, by contrast, is a bit different. I have enjoyed cooking all my life, adopting a style forced upon me by circumstance. First as a weary medical student and continuing through my hectic career, I learned to put complete, healthy meals on the table, start to finish, in 30 minutes or less. No dish in my repertoire has more than five ingredients or uses more than one pot or pan (this minimizes cleanup). Holidays are no exception. My three sons and I make our entire “Manly Thanksgiving” feast in under two hours (feel free to email me for the recipes and timing spreadsheet).

When my wife and I were first married, Sandy would share her recipes with me. I instantly knew I would never make them. Invariably, they involved multiple preliminary steps (toasting, marinating). I disqualified them if they had statements like “in a separate bowl,” or “allow to cool.” No matter how delicious or healthy, her recipes for me just did not work.

We often forget this in health care. The US system is entering an era of connected health in which new devices, tools, therapeutics, and processes will transform the industry. But, we have to be mindful that unless the approach is tailored to the individual, benefits may go unrealized.

The Deloitte Center for Health Solution’s new paper, “Accelerating the adoption of connected health,” looks at the adoption of connected health (cHealth) and how it can support value-based care (VBC) goals. While we are moving toward a system where providers will be responsible for a population and payment is based on outcomes, today the health care system is still straddling two canoes. Many clinicians are still reimbursed in a fee-for-service model, even as the system moves toward more value-based reimbursement models.

Emerging technologies and devices are providing new opportunities to manage patients’ health. For example, digestible, embeddable, and wearable sensors that work like a thin e-skin can measure important health parameters and vital signs 24-hours a day. Yet, hurdles remain. There are upfront costs, data integration challenges, and privacy and security concerns.

Provider resistance to adopt new business models has been slowing cHealth adoption. For example, Deloitte’s 2014 Survey of US Physicians found that 38 percent of physicians are not convinced that monitoring patients’ conditions/adherence is a benefit of mHealth, despite a high interest in monitoring from consumers (60 percent). Privacy and security, underwhelming rates of payment for services provided via new technology platforms, inconsistent state-licensure laws, and a mixed bag of regulatory agencies with oversight of mHealth technology have combined to slow adoption rates even more.

But, some providers see the value that cHealth can add and are willing to face these hurdles head on. For these individuals and organizations, adopting cHealth strategies across all patients might not make sense. The opportunity for savings may exist in targeted high-need populations.

An aging US population and rising rates of chronic disease means increasing costs across the board. Adoption of cHealth strategies has the potential to reduce the costs certain patient populations by encouraging self-care, keeping patients out of the hospital and emergency department, increasing drug adherence, and reducing adverse drug interactions. But to properly incentivize these changes, health care organizations and clinicians should be able to share in the savings realized from cHealth strategies.

Deloitte researchers used data from the literature and input from a panel of physicians at Deloitte to estimate that using cHealth strategies, such as remote patient monitoring or telehealth for patients with congestive heart failure, could save health care organizations participating in accountable care organizations (ACOs) or global capitation payment models between $1,054 and $1,956 per patient per year.

Consumer survey data show that consumers are increasingly using personal health devices, websites, and mobile apps to track changes in their health, receive alerts, transmit health data, and pay their medical bills. Deloitte’s 2015 Survey of US Health Care Consumers shows that 74 percent of consumers with major chronic conditions are very interested or somewhat interested in monitoring technologies for health issues. The business case for adoption will need to emphasize the value cHealth can add to provider organizations’ bottom lines. But, if that’s not enough, consumers may step in.

Someday, we might see stakeholders across the health care system implementing the full spectrum of cHealth strategies across targeted populations throughout their patient journeys. Each would respect the needs and desires of each individual.

Back at my house, Sandy has figured out the best strategy for identifying recipes that she knows I’ll actually use. We have been enjoying weekly deliveries from a local farm cooperative. Last week featured fantastic golden beets, broccoli, and portabella mushrooms. Sandy saw what we had received and sent me an email with a recipe noting, “If you count salt and pepper as one ingredient, this meets your criteria.” It was delicious. My mother-in-law is awesome.

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My Take

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


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More than 540,000 enrolled in HIX coverage during first week of open enrollment

According to the US Centers for Medicare and Medicaid Services (CMS), the first week of 2016 open enrollment drew more than 540,000 individuals to enroll through This is an 81,000 increase over the first week of 2015 open enrollment. The figures reflect enrollment numbers from the 38 states that use Hawaii, which migrated to the federal exchange in June, was the last state to join the other states using the federal platform.

Two-thirds of enrollees were return visitors seeking to renew their existing public health insurance exchange (HIX) plans. The remaining third were new to the marketplace and selected a plan for the first time. The US Department of Health and Human Services (HHS) predicts that a total of 10 million individuals will be enrolled in a HIX plan by the end of 2016.

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Implementation & Adoption

Analysis projects shortfall for health plans from 2015 risk corridors

HIX health plans are projected to receive only a portion of the risk corridor payments for 2015, according to a recent Standard and Poor’s Rating Services analysis. A review of data from 2014 and the first half of 2015 revealed that health plans have paid in only 10 percent of what all health plans expect to receive.

Two issues are keeping CMS from paying all of the risk corridor requests: The ACA did not initially mandate budget neutrality for the risk corridor program, but Congress modified the rule to require the risk corridor to be budget neutral. Additionally, health plans have spent more than they expected, due to issues like setting prices in a new market. Risk corridor payment shortfalls will likely affect premiums for consumers as insurance companies continue to experience increased pressure on their margins. This news comes as 12 Consumer Operated and Oriented Plans (CO-OPs) have dropped out of the exchanges, many citing lower than expected risk corridor payments as a main cause. In 2016, only 11 CO-OPs will offer plans on the exchanges.

HHS may seek additional sources of funding for the risk corridors if the deficit remains after the end of 2016. With Congressional approval, a portion of the $1 billion in excess funds from the ACA’s reinsurance program could be redirected to make risk corridor payments.

Background: The risk corridor program aims to provide stability in the individual health insurance exchanges in 2014, 2015, and 2016. The analysis comes shortly after CMS announced that insurers would only receive 12.6 percent of the risk corridor payments they requested for 2014 (see the October 13, 2015 Health Care Current).

(Source: Standard & Poor’s Rating Services, “The ACA Risk Corridor Will Not Stabilize the US Health Insurance Marketplace In 2015,” November 5, 2015)

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NAIC proposes provider network adequacy standards

Last week, the Health Insurance and Managed Care (B) Committee at the National Association of Insurance Commissioners (NAIC) agreed to a new network access and adequacy model law. This is the first time the model has been updated by the group since 1996. NAIC members will vote on the model this week. If it passes, each member will need to decide whether their state should adopt the model and whether to adopt it through its regulatory or legislative process.

The model encompasses many network and access issues that have concerned state and federal regulators, health plans, providers, and consumer advocates, especially since the start of the exchanges.

The Robert Wood Johnson Foundation (RWJF) recently reviewed provider networks for silver level plans in the exchanges to find that half of the 1,065 unique plans had narrow networks (see the September 1, 2015 Health Care Current). Narrow networks have become increasingly common to control health care costs and keep premiums low.

Analysis: The Deloitte Center for Health Solutions 2015 Survey of US Health Care Consumers found that 19 percent of surveyed HIX enrollees identified limited networks as a reason that they are dissatisfied with their current plan. At the same time, stakeholders have identified addressing affordability as a key challenge, and plans that restrict networks in exchange for lower prices may be part of the solution for a growing number of consumers. According to the survey, up to 60 percent of insured consumers are now willing or somewhat willing to accept a smaller network of hospitals or a smaller network of doctors for a lower price, and just over half (52 percent) express some willingness to accept a network that does not include their current primary care provider.

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Study: Impact of tax subsidies for health insurance on purchase decisions

New research from the Urban Institute and RWJF evaluated how consumers selected plans on and found that individuals with higher incomes, but still eligible for a subsidy, were the least likely to enroll in a plan.

Individuals with incomes between 100 and 400 percent of the federal poverty level (FPL, approximately $11,770 to $47,080 in 2015) are eligible for premium tax credits through the exchanges. The tax credits get smaller as income gets larger. In the 37 states that run federally facilitated exchanges in 2015, 79 percent of individuals between 100 and 150 percent of the FPL selected a plan on the exchange. Meanwhile, only 14 percent of individuals with incomes between 300 and 400 percent of the FPL selected a plan on the exchange. In June 2015, only 35 percent (8.6 million) of the estimated 24 million individuals eligible for tax credits had enrolled in a plan.

Researchers also looked at the large differences between states that did and did not expand Medicaid. Individuals in non-expansion states with incomes below 150 percent of the FPL were more likely to enroll (97.8 percent vs. 79.0 percent).

In non-expansion states, individuals between 100 and 138 percent of the FPL can qualify for tax credits if there is not an affordable plan offered. In states that have expanded Medicaid, only legal immigrants below 138 of the FPL and not otherwise eligible for Medicaid are eligible for tax credits. At higher rates of income selection, rates are almost identical at the various income levels for expansion and non-expansion states.

(Source: Matthew Buettgens, Genevieve M. Kenney and Clare Pan, “Variation in Marketplace Enrollment Rates in 2015 by State and Income,” October 2015)

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Study: 85 percent of Medicare Part D plans have a preferred pharmacy network

Approximately 85 percent of stand-alone Part D prescription drug plans (PDP) will have a preferred pharmacy network in 2016, according to recently released data from CMS on Medicare Part D plans. Despite a drop in the overall number of PDPs, from 1,001 in 2015 to 886 in 2016, the percentage of plans offering a preferred network remains stable compared with last year. Sixty-two plans will operate 754 regional PDPs across the nation. This is up from 56 plans offering preferred network plans in 2014, and only 16 plans in 2013.

Background: Medicare Part D PDPs with a preferred pharmacy network provide consumers with financial incentives (e.g., lower cost-sharing requirements) to use certain pharmacies. Consumers may still use non-preferred pharmacies, but then pay higher out-of-pocket costs for their prescriptions. Health plans can reduce costs and have greater control with preferred pharmacies. However, many pharmacies dislike the model because most of the cost reductions come from a decrease in their revenue. In 2014, the Medicare Payment Advisory Commission (MedPAC) said that preferred pharmacy networks should result in cost reductions due to increased competition. However, the Commission is concerned that the model may harm enrollees’ access to pharmacies they prefer to go to.

(Source: Drug Channels, "EXCLUSIVE: In 2016, 85 percent of Medicare Part D plans have a preferred pharmacy network,” October 2, 2015)

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Senate lawmakers send letter to CMS, OCR questioning practices and policies around medical identity theft

Last week, members of the Senate Health, Education, Labor, and Pensions (HELP) and Finance Committees sent a letter to Acting Administrator of CMS Andy Slavitt and Director of the Office for Civil Rights (OCR) at HHS Jocelyn Samuels to request information about how CMS and HHS are working to prevent, track, and correct medical identity theft that occurs as a result of data breaches. The lawmakers wish to understand:

  • How CMS and HHS provide support to law enforcement officials when a data breach and medical identity theft occurs 
  • What services CMS offers to beneficiaries when they suspect they are victims of medical identity theft
  • Whether OCR and CMS or any other federal agency track publicly reported cases of medical identity theft 
  • How the recent increase in breaches at health care organizations affects the Medicare and Medicaid programs (e.g., the need to notify beneficiaries)
  • Whether HHS tracks how medical identity theft affects individuals medically and financially
  • Whether HHS tracks how breaches at non-covered entities (e.g., Office of Personnel Management) impact medical identity theft

Data breaches have had a growing impact on US health care organizations. Automation and greater diversity in the kinds of data that are being collected and stored have made health care organizations attractive targets. Malicious actors seek many forms of information, from theft of identities to theft of intellectual property. To date, OCR has tracked at least 1,385 breaches of health care organizations—health plans, providers, and business associates.

A recent Forrester report found that electronic health records (EHRs) can go for $50 and health credentials can go for $10 on the black market. Health information is often much more valuable than other personal information such as credit card numbers. Moreover, there are fewer consumer protections and methods for recovering losses after personal health information has been compromised. The lawmakers requested responses to their questions by November 24, 2015.

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On the Hill & In the Courts

CMS announces 2016 premiums and deductibles for Medicare Parts A and B

CMS recently confirmed that Medicare enrollees’ Part B monthly premiums for outpatient hospital services will vary depending on their eligibility for the “hold harmless” provision. This comes shortly after Congress passed a two-year budget deal to prevent the 50 percent increase that one-third of enrollees were facing next year (see the November 3, 2015 Health Care Current).

A majority of Part B beneficiaries will pay the same monthly premium as they did last year. One-third will have to pay a higher monthly premium because they do not qualify for the “hold harmless” provision. The provision does not cover first-time Part B enrollees, dual eligibles, individuals paying an additional income-related premium, and beneficiaries not collecting Social Security benefits. Contributions from high income beneficiaries and cost-sharing programs will help to mitigate the increase in monthly premiums.

  • “Held harmless” beneficiaries will pay the same monthly premium as last year ($104.90)
  • Beneficiaries not eligible for the “hold harmless” provision will pay a higher monthly premium ($121.80)
  • The annual deductible for all beneficiaries will be $166 in 2016

In the same announcement, CMS announced premiums and deductibles for Part A:

  • Approximately 99 percent of the Medicare beneficiaries in Part A do not have to pay a premium because they paid into Medicare for at least 40 quarters during their working years
  • The annual deductible for Part A will slightly increase to $1,288 ($1,260 in 2015)
  • After 60 days in the hospital, Part A enrollees will pay a daily coinsurance of $161 ($157.50 in 2015)

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CBO: Social Security, Medicare, and Medicaid are 48 percent of federal spending

The three largest entitlement programs – Social Security, Medicare, and Medicaid – make up almost half of total federal spending, according to a recent Congressional Budget Office (CBO) analysis. Social Security makes up almost a quarter (24 percent) of federal outlays, and Medicare and Medicaid represent 15 percent and 9 percent, respectively. Combined, these three programs account for 9.9 percent of the US gross domestic product – the highest share to date.

Total spending associated with these three programs increased by $120 billion last year, growing from $1.65 trillion in 2014 to $1.77 trillion in 2015. Medicare spending grew by $34 billion, largely due to increases in payments to hospitals under Part A (4 percent) and the prescription drug benefit under Part D (17 percent).

Medicaid, the smallest of the three programs, had the largest spending increase from 2014 to 2015, mostly due to Medicaid expansion. Medicaid spending increased from $301 billion in 2014 to $350 billion in 2015. Spending on exchange subsidies also doubled, from $13 billion in 2014 to $27 billion in 2015. In contrast, spending on military activities, including the US Department of Veterans Affairs, fell for the fourth consecutive year.

(Source: CBO, “Monthly Budget Review: Summary for Fiscal Year 2015,” November 6, 2015)

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MedPAC continues work on unified post-acute care payment system

At its public meeting in November, MedPAC discussed the progress it has made on recommending a new payment system for post-acute care (PAC) providers in Medicare. The Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 requires MedPAC to recommend to Congress a PAC payment model and considerations for the industry of transitioning to such a model. MedPAC must report their findings to Congress by June 2016.

MedPAC is reviewing a model that would tie Medicare payments for PAC services to patients’ conditions rather than site of care. Medicare could align incentives across PAC settings by using a common measure of resource use – Medicare spending per beneficiary (MSPB). A MSPB measure would evaluate payments made throughout an episode of care, including the PAC stay and 30 days post discharge.

MedPAC said that this model, which is still based on fee-for-service payments, should not be the end point for unifying PAC services across sites of care. While MedPAC sees a common measure of resource utilization as a good first step, over time Medicare would need to take more steps to achieve a fully unified PAC payment system. These include developing a common set of PAC requirements on staffing, physician and nurse practitioner presence, frequency of assessments, care and discharge planning, and more.

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Colorado set to vote on single-payer system next year

Last week, Colorado Secretary of State, Wayne Williams announced that ColoradoCare, a proposal to make a single payer health care system in the state, received enough signatures to be placed on the ballot in 2016. The proposal would create a new 10 percent payroll tax – 6.67 percent from employers and 3.33 percent from employees – to fund government provided, universal health insurance coverage in place of a commercial insurance market. The plan would increase state taxes an estimated $25 billion.

ColoradoCare would be a resident-owned, non-governmental health care financing system. It would collect premiums from residents based on income, and health insurance would be provided regardless of financial circumstance. Colorado would set up the program by applying for a Section 1332 waiver, which allows states to redesign their health systems for the exchange population or the entire state. If the General Assembly and CMS approve, it would transfer the resources of the state’s exchange, Medicaid, the Children’s Basic Health Plan, the medical portion of Workers’ Compensation, and available ACA funding to ColoradoCare.

Background: The ACA created the Section 1332 waiver program to allow states to opt out of certain provisions of the law. Initially, Congress intended the 1332 waivers for states like Vermont, which passed universal health care in 2011. However, three years later, the state decided the proposal was too expensive and decided not to pursue that option. If Colorado is successful, it would be the first state to use the waiver program to opt out of ACA requirements and replace it with universal health coverage.

As discussed in the November 3, 2015 Health Care Current, states are pushing for guidance on the 1332 waivers. Many states have begun to consider these waivers as they seek to modify how they implement the ACA. For example, Hawaii recently became the first state to draft a 1332 State Innovation Waiver for public comment. States may use the 1332 waiver for many purposes. Some of the alternatives that are currently being discussed in addition to the single payer system are creating a public option to compete with commercial health plans, developing a basic health program, expanding premium tax subsidies above the current limit, and eliminating the individual mandate in favor of a user fee.

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Around the Country

Report examines health disparities across the US

A new report looks at smoking prevalence, uninsured rates, obesity, poverty measures, and many other measures to evaluate health disparities across the US and within states. RWJF and the University of Wisconsin Public Health Institute released the report to highlight factors that state leaders may want to consider to as they work to improve health within their states.

Highlights from the report include:

Researchers also looked at population size and the difference in premature mortality risk between each county’s age-adjusted mortality rates to calculate excess deaths in each state. Any death before the age of 75 was considered premature. To estimate the total for each state, researchers tallied the number of excess deaths for each county within the state or within all states. This approach addresses both the size of the gap in mortality rates and the population living with that state. The numbers vary across states, from an estimated 600 avoidable deaths per year in Wyoming to 16,000 avoidable deaths per year in California.

(Source: Bridget Catlin, Marjory Givens and Julie Willems Van Dijk, “County Health Rankings Health Gaps Report 2015,” University of Wisconsin Population Health Institute, November 2015)

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New Jersey passes biosimilar substitution law

Joining a growing number of states to embrace language put forward by the pharmaceutical industry, New Jersey Governor Chris Christie signed a bill into law that allows pharmacists to substitute interchangeable biosimilars without informing the prescriber before the change. The law requires pharmacists to notify the prescriber within five days of making a change, but the notification does not need to be sent before the switch. The Biotechnology Industry Organization (BIO) and Generic Pharmaceuticals Association (GPhA), trade groups representing the biologic and biosimilars industries, both agreed to this language.

As discussed in the October 20, 2015 Health Care Current, these state laws will only apply once the US Food and Drug Administration approves interchangeable biosimilar products. To date, no manufacturer has submitted an interchangeable biosimilar application.

Background: As explained in the June 2, 2015 Health Care Current, many groups are concerned about the high cost of biologic drugs. The hope is that biosimilar versions of drugs will cost much less than their reference products. Though the majority of laws passed in the states still require provider or patient notification, the GPhA continues to oppose legislation that would mandate prescriber notification.

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Researchers make strides to reduce antibiotic resistance

Researchers are zeroing in on a way to track the genetic signature of a patient’s immune response to infection, which could have major implications for reducing overuse of antibiotics. A team at the Duke Center for Applied Genomics and Precision Medicine is developing a diagnostic tool to track the body’s response, based on a hypothesis that certain changes in gene activity could indicate the type of infection that is triggering the immune system’s response. The body’s response may not be adequate to identify exactly what pathogen is involved, but could be useful in predicting what class of illness it is, which could help avoid use of antibiotics for viral infections.

For six years, the Duke team has collected blood samples from more than 300 patients who presented with symptoms of a bacterial or viral infection. Retrospectively, they were able to determine which patients had which kind of infection and use the blood samples to analyze the genes expressed in the immune cells. They were able to show that the gene-expression patterns reliably distinguished between bacterial and viral or non-infectious illness. The team is now focusing on the next challenge: translating what they have found in the lab into a useful clinical tool. Because it will take a long time and many resources to validate the diagnostic tool, the team is working with industry partners to develop a platform that can expedite the complex process of measuring the genes of interest.

Analysis: This fall, the Center for Disease Dynamics, Economics, and Policy published a comprehensive report on antibiotic overuse based on data from scientific literature and national and regional surveillance systems. The report showed that global antibiotic use grew by 30 percent between 2000 and 2010. Much of this growth is attributed to countries such as South Africa and India, where antibiotics are widely available over the counter and sanitation in some areas is poor. Antibiotic use in livestock is also growing in the US and around the world.

A study published last month shows that the rise of antibiotic-resistant bacteria is reducing effectiveness of antibiotic prophylaxis in preventing infections for chemotherapy and the 10 most common surgical procedures in the US. If researchers have better strategies to identify infections that could be translated into clinical decision-support tools, it may be possible to reduce the use of unnecessary antibiotics.

The White House’s National Action Plan for Combating Antibiotic-Resistant Bacteria, released this spring, aims to address this problem by engaging a diverse group of stakeholders including public health agencies, agricultural industry leaders, regulators, and veterinarians. The action plan lays out the following goals:

(Sources: Viviane Callier, “Diagnostic developers target antibiotic resistance,” Nature News, October 9, 2015; Secretary Sylvia Mathews Burwell, Secretary Tom Vilsack, Secretary Ash Carter, “Our plan to combat and prevent antibiotic-resistance bacteria,” White House blog, March 27, 2015)

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Breaking Boundaries

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