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Health Costs Recent News and Reports

Health Costs and Containment: Recent News and Reports

Updated March 2013

The costs of health services and delivery in the United States continues to be a major concern.  The $2.6 trillion total projected for 2010 is predicted to continue to climb.  The federal Affordable Care Act (ACA) and a variety of state and commercial market initiatives seek to address this trend to "bend the health cost curve."  NCSL's Health Cost Containment Project is addressing a dozen or more promising practices in a series of 2010 publications.

News Table of Contents

NCSL Resources

This compendium provides convenient access to some of the most recent reports of particular interest or use to state legislatures and other policymakers.  This list includes some of the best sources for current health cost statistics.  Some examples of recent media reports are included in below.


Disclaimer:  Reprinted material and links to third-party websites are for information only and may not reflect NCSL policy or editorial decisions.

U.S. Health Spending Projected To Reach Nearly $4.6 Trillion by 2019

U.S. health spending is projected to reach nearly $4.6 trillion by 2019, growing at an average annual rate over the next decade of 6.3 percent, according to economists at CMS. By 2019, healthcare is projected to account for nearly one of every five U.S. dollars spent, or about 19.6 percent of the gross domestic product (GDP), 0.3 percentage points higher than anticipated before reform. The report provides an initial estimate of spending brought about by the new and expanded administrative roles for the federal and state governments under health reform (inclusive of HHS, state exchanges — startup and operating expenses — and Medicaid) pegging the cost at a total of $71.1 billion. In addition to examining the effect of national health reform legislation, the report also estimates how other recent laws and regulations may impact health spending this year and beyond. These include changes to COBRA premium subsidies and Medicare physician payment rates.

The report found that:

  • Health spending in 2010 is projected to reach $2.6 trillion and account for 17.5 percent of GDP, up 0.2 percentage points from pre-reform estimates. This growth is driven in large part by the postponement of cuts to Medicare physician payments and legislative changes to COBRA premium subsidies.
  • In 2011, public and private health spending is expected to grow more slowly as reductions in Medicare physician payment rates (including a 23 percent reduction in December of 2010) come into effect and COBRA premium subsidies expire.
  • Nearly 93 percent of people will be insured by 2019, a level that is roughly 10 percentage points higher than the share of the population that was expected to be insured without the passage of national reform.
  • COBRA-related changes are projected to result in an additional 1.6 million insured and an additional $15.4 billion in spending by private health insurance in 2010. As a result, private health insurance spending is expected to grow 4.3 percent for 2010, higher than the 2.5 percent projected in February.
  • In 2014, private health insurance spending is expected to rise steeply as a projected 15.8 million people obtain private health insurance coverage through Health Insurance Exchange plans.
  • By 2019, Medicaid and the Children’s Health Insurance Program (CHIP) expenditures are projected to represent nearly 20 percent of national health spending, up from nearly 18 percent in the pre-reform estimate.

Slower growth in out-of-pocket spending is projected for 2010 as more people retain private health insurance through subsidized COBRA coverage (1.1 percentage points slower than previously estimated). In 2011, as the subsidies expire, out-of-pocket spending is expected to grow at the slightly faster rate of 3.1 percent. Out-of-pocket spending is projected to fall as the uninsured acquire health insurance coverage either through the expansion of Medicaid or exchange plans. As a result, out-of-pocket spending in 2014 is expected to decline 1.1 percent, compared to the pre-reform projection of a 6.4 percent increase. Out-of-pocket spending is expected to also grow slower than anticipated until 2017. When the excise tax on high-cost employer-sponsored plans takes effect in 2018, out-of-pocket spending is projected to grow at a rate of 9.6 percent, four percentage points faster than what CMS projected in February. 

Source: Health Affairs, September 9, 2010  http://www.healthaffairs.org/press/2010_09_09.php

  • *NEW* The health policy journal, HealthAffairs, published a blog titled Why Do Some States Spend More on Health Care? in March, 2013. "Health care spending in three states — Maine, West Virginia and Mississippi — accounts for one out of every five dollars of state GDP. Conversely, Wyoming spends less than 9 percent. If every state were like Wyoming, the United States as a whole would be spending less of its income on health care than about three-fourths of the other developed countries."

A Closer Look at State Innovation Model Testing Winning States: Payment and Delivery System Reform Analysis  (March 22, 2013)

HHS recently announced the first round of State Innovation Model (SIM) Testing Awards to six states: Arkansas, Maine, Massachusetts*, Minnesota, Oregon, and Vermont. These grants, worth between $30 – $45 million for 3 to 4 years will support states’ work on multi-payer payment and delivery system reform. This chart looks at how selected states are planning to reform their payment methods and delivery system approaches based on states’ proposals that you can find in the Health Refo(u)m web document library.

A Plan To Fix Cancer Care  -- Five major changes need to occur in the delivery of care for cancer.  March 23, 2013 - By EZEKIEL J. EMANUEL - N.Y. Times Opinion Column.


Infogrpahic - September 2012
Health Costs infographic by KFF-Source: KFF at http://jama.jamanetwork.com/data/journals/jama/24967/m_jvh120004fa.png
 

MA Healthcare Cost Containment Law Comes with Teeth

Karen Minich-Pourshadi, for HealthLeaders Media , August 13, 2012

Massachusetts, a leader in healthcare reform is now the first state in the country to set healthcare spending goals. Bill S 2400, signed into law last week by Governor Deval Patrick (D), was written to address the quality of healthcare and reduce costs through increased transparency, efficiency, and innovation.  "We are ushering in the end of the fee-for-service care system in Massachusetts," said Patrick at the signing, according to The Boston Globe.
But does this law have sharp teeth (and who stands to get bitten)? And why should financial leaders nationwide take note of this state mandate?
The law takes effect November 15, 2012 with the goal of slashing an estimated $200 billion from state healthcare costs over the next 15 years. For that to happen, hospitals and physician will have to cut their costs in half.
"This law really gets at the market leverage and negotiating power of the larger hospitals; it is very much targeting them, but it shouldn't be a surprise to the C-suite at those organizations. This type of cost containment [legislation] has been coming for a long time," says Stephen Sadowski, principal for the Boston division of ECG Management Consultant, Inc.
The law directs that healthcare costs cannot increase faster than the Massachusetts gross state product (GSP) from 2013 through 2017. From 2018-2022 the target would dip to GSP minus 0.5 and after 2023 it would resume being equal to the GSP and be open for revision by an oversight committee. For greater detail, check out the bill summary here.
There's also a $165 million surcharge which will be levied against health insurers and a $60 million surcharge will be levied against larger hospitals in order to create a trust fund. These monies will be used to finance several provisions of the law, such as the $60 million to go toward a prevention and wellness program and another $135 million for community hospital infrastructure upgrades. In addition, trust money will fund state grants for programs to reduce the rates of preventable chronic diseases such as obesity, diabetes, and asthma.

And then there's enforcement. The law calls for the formation of a commission to track healthcare costs and all healthcare entities must comply with the performance targets or face fines of as much as $500,000. The commission will use a total system metric to assess performance, and health plans must also meet the reduction targets.

Those hospitals or health systems that don't hit the targets would be publicly exposed.  But, these sums are just drops in the bucket for large health systems with millions and in some cases billions in annual revenue, especially considering these organizations could potentially lose millions once insurer contracts are renegotiated.
Unfortunately, four of the state's largest hospitals, Beth Israel Deaconess Medical Center, Massachusetts General Hospital, Brigham and Women's Hospital, and Hallmark Health declined requests for comment.  They may be still parsing through the details and working on their compliance strategies.
As perhaps they should. "When the state's Attorney General [Martha Coakley] says she feels there's plenty of enforcement authority associated with the bill, I take that as a signal that the AG intends to be active, not passive, when it comes to insuring the implementation and execution of the legislation," says Sadowski.
And it was Coakley's office that helped spark the state legislature's interest in this issue to begin with. The AG's office released reports in 2010 and 2011 indicating that costs were, to paraphrase, unequivocally uncontained.

The reason, the 2011 report notes, is that "the commercial healthcare system does not pay for care based on value. That is, wide disparities in prices are not explained by differences in quality, complexity of services, or other characteristics that might justify variations in prices paid to providers. Instead, prices reflect the relative market leverage of health insurers and health providers."
"In significant measure," the report adds, "this market dysfunction resulted from historic negotiating and contracting practices that were not challenged because the system lacked the transparent, reliable information needed to identify, measure, and correct the dysfunction."  
When S 2400 passed, Coakley released a statement saying, "Any meaningful effort to control costs must address the market leverage of providers, and this legislation ensures that our office will pay a critical role in those efforts. The bill sets forth a strong role for our office to carefully scrutinize market conduct, and then use our 93A authority [Principles of Unfairness or Deception] and other tools when appropriate to address negative impacts on the marketplace. This is a role we will continue to play in a serious and meaningful way."
Sadowski notes that this law has the potential to hurt larger hospitals' pocketbooks, as they will be losing leverage and negotiating power just as Medicare reimbursement rates decline, and many of these hospitals have a high Medicare patient mix.
"That's a double whammy and it will affect their ability to manage revenue increases per unit of service. I imagine [with this law] we'll continue to see great consolidation across the state, which is one way to drive revenue, thought not on a per-person unit increase," says Sadowski.
Already the credit rating agencies are taking notice. Last week, Moody's Investors Service noted, "The legislation is credit-negative for Massachusetts hospitals because it will limit their revenue growth and reduce their operating flexibility." Moreover, Moody's noted that while the law requires alternative reimbursement models for at least 50% of Medicaid beneficiaries (by 2014), "no specifics are provided."

Moreover, Moody's also expects new reimbursement models, such as bundled payments and shared savings, will reduce Massachusetts hospital revenues. "The state will also likely incentivize the creation of additional accountable care organizations (ACOs), a loosely defined concept that involves a hospital managing the health for a set group of people. Hospitals unable to swiftly adapt to the new models will likely lose revenues. Given that payment models have not yet been defined, it is too early to estimate the revenue impact," Moody's wrote.
S 2400 isn't all bad for large providers, though. It seeks to control medical malpractice costs by creating a 182-day "cooling off" period. This is supposed to give both sides a chance to negotiate a settlement.
Though Massachusetts may have been the first state to climb aboard the health insurance reform bandwagon, its success has been mixed.  For while an estimated 95% of the state's population is insured, the healthcare costs have also risen 6% annually.
"There wasn't anything in the initial Massachusetts reform [legislation] to 'restrain' or bend the cost curve. It really was about universal coverage," says Sadowski. "The pursuit [of universal coverage] is not the solution, [but] rather the first step. Now we have universal coverage and we need to figure out how to constrain costs. So as I look at this law and at healthcare reform elsewhere in the country I think there is still a long, arduous journey ahead for all."
Financial leaders should keep a close watch on how this law plays out at reducing costs. If it proves successful, it may become the model that other state legislatures adopt in the coming years.
 

New itemMassachusetts Group Requests Report That Predicts ACA’s “Extreme Premium Increases”

The Pioneer Institute of Massachusetts Files Request for the Administration to Release Its Report on the Impact of The Federal Health Law on Massachusetts’ Small Businesses.   The report is known to indicate that the ACA will cause "extreme premium increases" for small businesses.  Posted March 21, 2013.

Raed the full article:  www.pioneerinstitute.org/healthcare/pioneer-requests-report-that-predicts-acas-extreme-premium-increases/



Massachusetts: A Healthcare Cost Containment Law Comes with Teeth

(c) HealthLeaders Media , August 13, 2012 by Karen Minich-Pourshadi

Massachusetts, a leader in healthcare reform is now the first state in the country to set healthcare spending goals. Bill S 2400, signed into law last week by Governor Deval Patrick (D), was written to address the quality of healthcare and reduce costs through increased transparency, efficiency, and innovation.  "We are ushering in the end of the fee-for-service care system in Massachusetts," said Patrick at the signing, according to The Boston Globe.

But does this law have sharp teeth (and who stands to get bitten)? And why should financial leaders nationwide take note of this state mandate? The law takes effect November 15, 2012 with the goal of slashing an estimated $200 billion from state healthcare costs over the next 15 years. For that to happen, hospitals and physician will have to cut their costs in half. "This law really gets at the market leverage and negotiating power of the larger hospitals; it is very much targeting them, but it shouldn't be a surprise to the C-suite at those organizations. This type of cost containment [legislation] has been coming for a long time," says Stephen Sadowski, principal for the Boston division of ECG Management Consultant, Inc.

The law directs that healthcare costs cannot increase faster than the Massachusetts gross state product (GSP) from 2013 through 2017. From 2018-2022 the target would dip to GSP minus 0.5 and after 2023 it would resume being equal to the GSP and be open for revision by an oversight committee. For greater detail, check out the bill summary here.

There's also a $165 million surcharge which will be levied against health insurers and a $60 million surcharge will be levied against larger hospitals in order to create a trust fund. These monies will be used to finance several provisions of the law, such as the $60 million to go toward a prevention and wellness program and another $135 million for community hospital infrastructure upgrades. In addition, trust money will fund state grants for programs to reduce the rates of preventable chronic diseases such as obesity, diabetes, and asthma.

And then there's enforcement. The law calls for the formation of a commission to track healthcare costs and all healthcare entities must comply with the performance targets or face fines of as much as $500,000. The commission will use a total system metric to assess performance, and health plans must also meet the reduction targets.  Those hospitals or health systems that don't hit the targets would be publicly exposed.  But, these sums are just drops in the bucket for large health systems with millions and in some cases billions in annual revenue, especially considering these organizations could potentially lose millions once insurer contracts are renegotiated.

Unfortunately, four of the state's largest hospitals, Beth Israel Deaconess Medical Center, Massachusetts General Hospital, Brigham and Women's Hospital, and Hallmark Health declined requests for comment.  They may be still parsing through the details and working on their compliance strategies.   As perhaps they should. "When the state's Attorney General [Martha Coakley] says she feels there's plenty of enforcement authority associated with the bill, I take that as a signal that the AG intends to be active, not passive, when it comes to insuring the implementation and execution of the legislation," says Sadowski.

And it was Coakley's office that helped spark the state legislature's interest in this issue to begin with. The AG's office released reports in 2010 and 2011 indicating that costs were, to paraphrase, unequivocally uncontained. The reason, the 2011 report notes, is that "the commercial healthcare system does not pay for care based on value. That is, wide disparities in prices are not explained by differences in quality, complexity of services, or other characteristics that might justify variations in prices paid to providers. Instead, prices reflect the relative market leverage of health insurers and health providers."

"In significant measure," the report adds, "this market dysfunction resulted from historic negotiating and contracting practices that were not challenged because the system lacked the transparent, reliable information needed to identify, measure, and correct the dysfunction."    When S 2400 passed, Coakley released a statement saying, "Any meaningful effort to control costs must address the market leverage of providers, and this legislation ensures that our office will pay a critical role in those efforts. The bill sets forth a strong role for our office to carefully scrutinize market conduct, and then use our 93A authority [Principles of Unfairness or Deception] and other tools when appropriate to address negative impacts on the marketplace. This is a role we will continue to play in a serious and meaningful way."

Sadowski notes that this law has the potential to hurt larger hospitals' pocketbooks, as they will be losing leverage and negotiating power just as Medicare reimbursement rates decline, and many of these hospitals have a high Medicare patient mix. "That's a double whammy and it will affect their ability to manage revenue increases per unit of service. I imagine [with this law] we'll continue to see great consolidation across the state, which is one way to drive revenue, thought not on a per-person unit increase," says Sadowski.

Read the full article in HealthLeaders .


Insurers and HHS Join to Cut Health Care Fraud  - July 26, 2012

Obama and Insurers Join to Cut Health Care FraudMajor private insurers and HHS officials announced a new collaboration to "crack down on health care raud ny sharing and comparing claims data."  New York Times, July 26, 2012.

 

Study: Health care costs on rise - May 2012

May 24, 2012, HCCI  (Excerpt and link)

A new study from the Health Care Cost Institute found that costs rose 3.3 percent in 2010 even though people actually used fewer services in many categories. Spending grew not because there were a lot of unnecessary procedures and treatments but rather because the services themselves got more expensive.

The HCCI got four of the nation’s largest insurers — Aetna, Humana, Kaiser Permanente and UnitedHealthcare — to fork over massive amounts of records about what’s driving spending among people under age 65. This first study is based on a review of 3 billion claims for people with employer-sponsored insurance filed in a single year.

Expanding Consumer-Directed Health Plans Could Help Cut Overall Health Care Spending

 

May 7, 2012 Rand

If consumer-directed health plans grow to account for half of all employer-sponsored insurance in the United States, health costs could drop by $57 billion annually—about 4 percent of all health care spending among the nonelderly, according to a new RAND Corporation study.

Consumer-directed health plans, which include high deductibles and personal health accounts, are a market-based approach that many employers have adopted to address health care spending. Such plans now account for about 13 percent of all employer-sponsored health coverage.

Aggressive expansion of such plans is not without risks, however. Increasing adoption of high-deductible plans also could reduce use of recommended preventive and other high value health care services, according to findings published in the May edition of the journal Health Affairs.

"Continued pressures to cut costs, combined with incentives in the federal Affordable Care Act, make the 50 percent enrollment level plausible over the coming decade," said study leader Amelia M. Haviland, a statistician at Carnegie Mellon University and RAND, a nonprofit research organization. "But given the limited information available to consumers regarding costs and quality, we need to carefully examine whether additional up-front patient costs will diminish the quality of health care."

 

'Tiered' Insurance Confounds Consumers, Docs In Mass.

Tiered insurance is being offered by various companies in Massachusetts as a way to meet employers' demands for cheaper insurance premiums.
Source: Kaiser Network News 1/20/2012

Firms to Charge Smokers, Obese More for Healthcare

© 2011 Reu.ters Health  11/8/2011

Like a lot of companies, Veridian Credit Union wants its employees to be healthier. In January, the Waterloo, Iowa-company rolled out a wellness program and voluntary screenings. It also gave workers a mandate -- quit smoking, curb obesity, or you'll be paying higher healthcare costs in 2013. It doesn't yet know by how much, but one thing's for certain -- the unhealthy will pay more.

The credit union, which has more than 500 employees, is not alone. In recent years, a growing number of companies have been encouraging workers to voluntarily improve their health to control escalating insurance costs. And while workers mostly like to see an employer offer smoking cessation classes and weight loss programs, too few are signing up or showing signs of improvement. So now more employers are trying a different strategy -- they're replacing the carrot with a stick and raising costs for workers who can't seem to lower their cholesterol or tackle obesity. They're also coming down hard on smokers. For example, discount store giant Wal-Mart says that starting in 2012 it will charge tobacco users higher premiums but also offer free smoking cessation programs.

Tobacco users consume about 25% more healthcare services than non-tobacco users, says Greg Rossiter, a spokesman for Wal-Mart, which insures more than 1 million people, including family members. "The decisions aren't easy, but we need to balance costs and provide quality coverage." For decades, workers -- especially with large employers -- have taken many health benefits for granted and until the past few years hardly noticed the price increases. But the new policies could not only badly dent their take home pay and benefits but also reduce their freedom to behave as they want outside of work and make them resentful toward their employers. And the programs could be especially burdensome for low-income workers, who are more likely to fail health assessment tests and less likely to have access to gyms and healthier fresh produce, says Harald Schmidt - a research associate at the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania.

"We want to use provisions to help people and not penalize people for factors beyond their control," Schmidt says. "Poorer people are often less healthy and this constitutes a potential double whammy. They are likely to face a higher burden in insurance premiums." "It's not inherently wrong to hold people responsible," says Lewis Maltby, president of the National Workrights Institute, a research and advocacy organization on employment issues based in Princeton, New Jersey. "But it's a dangerous precedent," he says. "Everything you do in your personal private life affects your health."

Overall, the proportion of large and mid-sized companies using penalties is expected to climb in 2012 to almost 40%, up from 19% this year and only 8% in 2009, according to an October survey by consulting firm Towers Watson and the National Business Group on Health. The penalties include higher premiums and deductibles for individuals who failed to participate in health management activities as well as those who engaged in risky health behaviors such as smoking.  "Nothing else has worked to control health trends," says LuAnn Heinen, vice president of the National Business Group on Health, which represents large employers on health and benefits issues. "A financial incentive reduces that procrastination."  The weak economy is contributing to the change. Employers face higher health care costs in part because they're hiring fewer younger healthy workers and losing fewer more sickly senior employees.

The poor job market also means employers don't have to be as generous with these benefits to compete. They now expect workers to contribute to the solution just as they would to a 401(k) retirement plan, says Jim Winkler, a managing principal at consulting firm Aon Hewitt's health and benefits practice. "You're going to face consequences based on whether you've achieved or not," he says. And those that don't are more likely to be punished. An Aon Hewitt survey released in June found that almost half of employers expect by 2016 to have programs that penalize workers "for not achieving specific health outcomes" such as lowering their weight, up from 10% in 2011.

The programs have until now met little resistance in the courts. The 1996 Health Insurance Portability and Accountability Act (HIPAA) prevents workers from being discriminated against on the basis of health if they're in a group health insurance plan. But HIPAA also allows employers to offer wellness programs and to offer incentives of up to 20% of the cost for participation. President Barack Obama's big health care reform, the 2010 Patient Protection and Affordable Care Act, will enable employers beginning in 2014 to bump that difference in premiums to 30% and potentially up to 50%.

Employers do, however, also need to provide an alternative for workers who can't meet the goals. That could include producing a doctor's note to say it is medically very difficult, or even impossible, to achieve certain goals, says Timothy Jost, a professor at the Washington and Lee School of Law. For example, a worker with asthma may not be able to participate in a company exercise program.  These wellness programs typically include a health risk assessment completed online, and on-site free medical screenings for things such as blood pressure, body mass index, and cholesterol.

The programs, while voluntary, often typically offer financial benefits -- including lower insurance premiums, gift cards and employer contributions to health savings accounts. For example, workers at the railroad company Union Pacific get $100 in their health savings account for completing the health assessment, $100 if they don't use tobacco and $100 if they get an annual physical (tobacco users also can get the $100 if they participate in a tobacco cessation program).

Like Wal-Mart, more employers are coming down harder on individuals who have voluntarily identified themselves as tobacco users, often during their health risk assessment. As yet, very few employers identify smokers through on-site medical screenings.
- Read full text at Medscape (free password rewquired)

 

 

Reuters Health Information  

 

Recession Over, But Employment-Based Health Coverage Still Down. Fall 2011

 

The recession officially ended in December 2009, but the percentage of Americans with employment-based health insurance has not rebounded, according to a recent study by the nonpartisan Employee Benefit Research Institute (EBRI).

Examining data on a month-by-month basis from December 1995 to July 2010 from the Census Bureau’s Survey of Income and Program Participation, EBRI found that 56.1 percent of all wage and salary workers ages 18‒64 had employment-based coverage in their own name in May 2009, and coverage slightly declined through August 2009.

Although there was a small increase in coverage from August to December of 2009, that turnaround did not last. As of April 2010, the percentage of workers with own-name employment-based coverage was back down to 56.2 percent.

Between December 2007 and December 2009, the percentage of workers with coverage as a dependent increased from 16.6 percent to 17 percent, and reached 17.5 percent in July 2010. It appears that the increase in dependent coverage somewhat offset the decline in coverage that workers received through their own job.

The full report can be found in the October EBRI Notes, "Tracking Health Insurance Coverage by Month: Trends in Employment-Based Coverage Among Workers, and Access to Coverage Among Uninsured Workers, 1995‒2010," available online here

 

The Cost of Health Care: A New York Times Opinion Series.  Fall 2011

Less Than $26 Billion? Don't Bother.   Ezekiel J. Emanuel (c) NY Times "Less Than $26 Billion" online

Everyone — conservative and liberal — agrees that $2.6 trillion a year is too much to spend on health care, and that we have to cut costs. But they don’t agree on who is to blame or what is to be done.

Everett Dirksen, the Republican senator from Illinois, reportedly said, “a billion here, a billion there, and pretty soon you’re talking about real money.” But health care spending in the United States typically increases by about $100 billion per year. Cutting a billion here or there from something that large is undetectable. In health care, you have to be talking about tens of billions of dollars before you are talking about real money. A useful threshold for savings is 1 percent of costs, which comes to $26 billion a year. Anything less is simply not meaningful. 
-  Read the full article - New York Times: 11/3/2011 online; print edition 11/6/2011.

Spending More Doesn't Make Us Healthier

If you have heard it once, you have heard it hundreds of times. “The United States spends too much on health care.” This is not a partisan point. You can hear this from Republicans as well as Democrats. “We know that our families, our economy and our nation itself will not succeed in the 21st century if we continue to be held down by the weight of rapidly rising health care costs,” President Obama said in 2009. Representative Paul D. Ryan, Republican of Wisconsin, agrees: “There is no serious dispute — on either side of the aisle.”

Unfortunately, few people really understand how much we spend on health care, how much we need to spend to provide quality care, and the difference between the two. Do we spend too much? Would cutting costs require rationing, or worse, death panels?
-  Read the full article - New York Times: 10/26/2011 online; print edition 10/31/2011.

 Two Health Plans Pay Millions to Settle Federal, State Lawsuits - March 2011

Two insurers in separate cases agreed in February to pay millions to the federal government and their respective states to settle allegations that they defrauded Medicaid.

Ohio Medicaid managed care company CareSource and its corporate entities have agreed to pay $26 million to resolve False Claims Act allegations, the Department of Justice said Feb. 1. And Blue Cross Blue Shield of Illinois will pay a total of $25 million to settle claims that it wrongly terminated insurance for private-duty skilled nursing care for medically fragile, technologically dependent children. Both insurers denied the charges.

The feds allege that Dayton, Ohio-based CareSource caused Ohio Medicaid to make payments for screenings and assessments the company never provided. The conduct occurred between January 2001 and December 2006, the feds say. Specifically, the complaint alleges that “large numbers of” special-needs children never received baseline assessments, and that the company falsely represented that the assessments were done and that case management services were being performed.

CareSource allegedly submitted false data to the state so it appeared the firm was providing the required services so it could improperly retain incentives from Ohio Medicaid and to avoid penalties, according to DOJ.

The whistleblowers, Laura Rupert and Robin Herzog, worked for CareSource as telephonic case management queue nurses tasked with conducting baseline assessments. They filed the suit in 2006 and will receive a total of $3.1 million from the settlement.

CareSource did not admit liability in the settlement. The parties agreed to settle to avoid the delay, uncertainty, inconvenience and expense of litigation.

“In the end, we chose to reach the financial settlement, bringing the matter to a close, and continuing to focus on our mission of making a difference in the lives of underserved people by improving their health care,” CareSource President and CEO Pamela Morris said in a statement.

State Share Could Have Been Bigger

The state will get $10 million from the deal, but Ohio Attorney General Mike DeWine (R) said it could have gotten more if the state had its own false claims law. “If we had that in place, our percentage of the settlement would have gone up 10%,” he told the Columbus Dispatch. Ohio lawmakers have introduced bills in the past, but none have been approved, the newspaper reports.

Under the Deficit Reduction Act, states that enact false claims acts modeled on the federal law can receive up to 10% of the recovery from a state Medicaid judgment or settlement.

Meanwhile, the feds allege that the Illinois Blues plan wanted to shift medically fragile children into a program designed to provide home care for children at risk of institutionalization rather than covering private-duty skilled nursing care. The feds explain that the children’s specialized care should have been covered by the insurer under the terms of their existing insurance policies, but instead they were shifted into the Medicaid program for home and community-based services.

- Excerpt reprinted from The AIS MEDICAID COMPLIANCE NEWS, (c) 2011
Full article http://aishealth.com/archive/nmcn0311-06 (subscription required)

Matchmaker targets self-insured businesses, health care providers

 March 28, 2011 CONCORD, N.H.
Self-insured businesses looking to cut out the middleman when it comes to health care have a new way to solicit bids directly from doctors or hospitals.

Created by a doctor, a lawyer and a former benefits manager, Open Health Market is an online matchmaker of sorts: Employers submit requests for proposals for a category of medical services and procedures — knee surgeries, for example, or cardiac care. Health care providers then submit competing bids, which are then evaluated by the employer.

If an employer accepts a bid, the savings could then be passed along to employees in the form of incentives to go with the new provider, such as a waived deductible, said Don Crandlemire, the Concord lawyer who created the site along with Dr. Leonard Fromer of Los Angeles and Peter Hayes, former benefits manager at Scarborough, Maine- based Hannaford Bros. supermarkets.

Crandlemire and his partners won't get involved in structuring any deals; they just handle the introductions. The employer decides whether to pursue negotiations with any of the bidders. "It brings buyers and sellers closer," he said. "The further apart a buyer and seller are in a market, the more inefficient that market is."

Nearly 60 percent of U.S. workers who have health insurance are covered by employer-funded plans, according to the Kaiser Family Foundation.

Read more:
Matchmaker targets self-insured businesses, health care providers - The Denver Post http://www.denverpost.com/search/ci_17714766#ixzz1HyHqghDj

U.S. Healthcare Costs Up 6%, But Growth Slowing: Standard & Poors Reports

John Commins, for HealthLeaders Media , January 21, 2011

The average per capita cost of healthcare services covered by commercial health plans and Medicare programs rose 6.27% in the 12 months ending in November 2010, but the rate of growth continues to decelerate, Standard & Poor's said Thursday.

The S&P Healthcare Economic Indices monthly estimate for November showed that medical inflation slowed 0.41% when compared with the 6.68% growth reported for the 12-month period ending in October 2010 – a deceleration trend that's been in place since May, said David M. Blitzer, chairman of the Index Committee at Standard & Poor's. "We are continuing to see a downward trend in the annual growth rates across all indices," Blitzer said. 

Healthcare cost increases continue well above the rate of inflation in the larger economy, which grew 1.1% for the 12-month period ending in November as measured by the Consumer Price Index. Most of that growth was fueled by energy costs, the Bureau of Labor Statistics reports.

Blitzer speculated that some of the reduced rate of growth in healthcare costs may be attributed to the recession and the slow recovery. "People are being tight with their money and that includes spending on healthcare," he said. "Some healthcare is discretionary, some is not. Some is sort of adjustable in that you may be able to resolve the problem cheaper but not as effectively."

Although the growth in the rate of healthcare costs has slowed since May, Blitzer said that's not necessarily a permanent trend.

"It's encouraging but I don't think it's earth shattering. We see movements every month and the 12 month changes go up and down," he said. "There is nothing in this report that says that healthcare costs are only going to go up with the rate of inflation. Healthcare continues to account for more and more of the economy. It'd be nice if we could stabilize that and spend the money for other things."

The November S&P indices also found that:

  • Claim costs associated with hospital and professional services for patients covered under commercial health plans rose 7.79% over the year ending in November, down from 8.19% for the year ending in October 2010.
  • Medicare claim costs for the same services rose 3.74% from the previous year -- the lowest annual growth rate for Medicare claims costs since June 2007, when the rate of growth was 3.55%. In the year ending October 2010, Medicare claims costs rose 4.18%.

"Since May 2010, most of the indices annual growth rates have declined month-to-month," Blitzer said. "Commercial and Medicare indices showed annual deceleration of 0.40% and 0.45%, respectively, compared to October. Likewise, the hospital and professional services indices annual rates decelerated by approximately 0.40% each in November compared to the previous month."

Blitzer said growth rates for services covered by Medicare are approaching new lows. "The Medicare composite posted an annual growth rate of +3.74% in the 12-months ending in November. The lowest rate was +3.47% in December 2006," he said. "Looking even closer at the sub-indices, we see that the annual growth rates for Medicare services provided at hospitals has, in fact, hit the lowest rate in the six-year history for these data, +2.71%."

The S&P indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year.

Source:   (c) 2011. John Commins is an editor with HealthLeaders Media.

U.S. Healthcare Cost Rate Increases Reach Highest Levels in Five Years

Rate of Increase Rises Significantly as Companies Struggle to Keep up with the Rapidly Evolving Health Care Landscape

Due to recent higher medical claim costs, an aging population and changes brought about by healthcare reform, employers can expect 2011 healthcare cost increases to be at their highest levels in five years, according to an analysis by Hewitt Associates. Next year, Hewitt projects an 8.8 percent average premium increase for employers, compared to 6.9 percent in 2010 and 6.0 percent in 2009. According to the analysis, the average total healthcare premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209 or 22.5 percent of the total healthcare premium. This is up 12.4 percent from 2010, when employees contributed $1,966 or 21.8 percent of the total healthcare premium. Average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to be $2,177 in 2011 — a 12.5 percent increase from 2010 ($1,934). These projections mean that in a decade, total healthcare premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees' share of medical costs — including employee contributions and out-of-pocket costs — will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.

The analysis also found that:

  • In 2010, there were average cost increases of 7.8 percent for health maintenance organizations (HMOs), 6.9 percent for point-of-service (POS) plans and 6.3 percent for preferred provider organizations (PPOs).
  • In 2011, Companies will have average cost increases of 8.5 percent for PPOs and POS plans. Companies will see an average cost increase of 9.4 percent for HMOs. That means from 2010 to 2011, the average cost per person for major companies will increase from $8,671 to $9,408 for PPOs; $9,373 to $10,254 for HMOs; and $9,747 to $10,575 for POS plans.

According to a recent Hewitt survey of 600 large U.S. companies, employers have grown increasingly concerned about rapidly rising healthcare costs. Almost all (95 percent) of companies say managing costs is a top business issue. To mitigate these costs, employers continue to take a number of proactive steps, which include: increasing employee cost sharing, managing dependent eligibility and subsidies, aggressive vendor management and consolidation and improving employee health. 

Source: Hewitt Associates, September 27, 2010 - Excerpt from announcement:
 http://www.hewittassociates.com/Intl/NA/en-US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=9106

Family Health Premiums Rise 3 Percent to $13,770 in 2010

Workers on average are paying nearly $4,000 this year toward the cost of family health coverage — an increase of 14 percent or $482 — above what they paid last year, according to the benchmark 2010 Employer Health Benefits Survey released by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET).

The study found that:

  • The jump occurred even though the total premiums for family coverage, including what employers themselves contribute, rose a modest 3 percent to $13,770 on average in 2010.
  • The amount employers contribute for family coverage did not increase.
  • Preferred Provider Organizations (PPOs) continue to dominate the employer market, enrolling 58 percent of covered workers. Average PPO family premiums topped $14,000 annually in 2010.

Many employers are also raising the annual deductibles workers must pay before their health plans begin to share most healthcare costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, according to the survey. Among small firms (3-199 workers), 46 percent face such deductibles. According to Kaiser President and CEO Drew Altman, Ph.D., "With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles and other cost-sharing. This may be helping to stem the rapid rise in premiums that was seen in the early 2000s, but it also may mean employer coverage is less comprehensive." 

Source: Kaiser Family Foundation, September 2, 2010   - http://www.kff.org/insurance/090210nr.cfm

HHS Issues Civil Money Penalty for Privacy Rule Violations

(C) HealthLeaders Media , February 23, 2011

The Office for Civil Rights (OCR), HIPAA privacy and security enforcer, has issued its first civil money penalty to a covered entity for violations of the HIPAA Privacy Rule, according to a press release posted today on the Department of Health & Human services (HHS) website.

The OCR fined Cignet Health, of Prince George’s County, MD, $4.3 million for the violations, which also marks the first time federal regulators have used the new monetary penalty structure under the Health Information Technology for Economic and Clinical Health (HITECH) Act.   Cignet violated the rights of 41 patients when it denied them access to their medical records, which they requested between September 2008 and October 2009, according to HHS. Further, Cignet did not respond to OCR’s demands to produce the records and did not cooperate with investigations.

The violations are considered “willful neglect”, and fall under the most egregious penalty scale under HITECH, according to Rebecca Herold, CISSP, CIPP, CISM, CISA, FLMI, of Rebecca Herold & Associates, LLC, in Des Moines, IA.  The penalty amount demonstrates the significance of “willful neglect” violations by entities who are “not actively trying to get into compliance and stay in compliance,” Herold says. Further, it shows the importance of having policies and procedures in place to follow during an OCR investigation.  This should also serve as an example and provide good motivation for all covered entities and business associates to get into compliance, and maintain compliance, with HIPAA and HITECH,” Herold says. “[Privacy and security officers] need to show this news report to their CEOs and CFOs to prove that penalties not only can occur, but that they have now started, and with quite a big, financially painful bang.”
-Dom Nicastro is a senior managing editor at HCPro, Inc. in Danvers, MA.


Cigna’s Results Suggest Americans Are Using Less Health Care

October 29, 2010 - Wall Street Journal Blog
Cigna, the heath insurer's, third quarter earnings announced October 29, 2010, provide the latest evidence that Americans are cutting back in their use of medical services. (Here’s the company’s take.)

For Cigna and other insurers, that’s a good thing: they don’t have to pay as many claims as they would if Americans were going to the doctor more. Many health care companies started to see this unusual slowdown in usage earlier this year, as the WSJ wrote about here.

Just what’s behind it is hard to say, but it’s probably not an apple a day. More likely, it’s a reflection of Americans’ reluctance to spend money on medical care amidst an economic downturn and more health plans that require them to pay a greater share of the bill. Others are losing their jobs and their coverage altogether, and for most the government subsidies for COBRA, the program that lets the jobless keep their benefits, have run out.

For Cigna’s customers, most of whom are big corporations that are self insured, that translates into a reduction in medical costs. Cigna lowered its forecast for medical cost growth this year to 7.5% from a previous estimate of 8%. 

How Many of the U.S. Nonelderly Population Have Health Insurance?     (11/15/2010)

The percentage of nonelderly individuals (under age 65) in the United States who have health insurance dropped last year, from 82.6 percent in 2008 to 81.1 percent in 2009, according to recent data published by the nonpartisan Employee Benefit Research Institute (EBRI).

At the same time, the share of nonelderly Americans who were uninsured grew to almost 19 percent in 2009. This was up from 17.4 percent in 2008 and above 18 percent for the first time. EBRI notes the recent economic recession and persistent high employment were the main factors.

Full results of the EBRI research are published in the September EBRI Issue Brief, online at http://bit.ly/9fxsMO

Here are the key findings on health insurance coverage in America:

  • 18.9 percent of individuals were without health insurance in 2009. This number was up from 17.4 percent in 2008 and above 18 percent in for the first time. As a result, nearly 1 in 5 individuals under the age of 65 did not have health insurance in 2009.
  • 59.0 percent of the nonelderly had employment-based health coverage in 2009, down from 61.1 percent in 2008.
  • More than 214 million nonelderly individuals had health insurance in 2009, down from 217 million in 2008.

·         The number of uninsured increased from 45.7 million in 2008 to 50 million in 2009.

Nonelderly Population With Selected Sources of

Health Insurance Coverage, 2008–2009

 

2008

2009

 

(percentage)

Total

100%

100%

Employment-based Coverage

61.1

59.0

Own name

31.4

29.9

Dependent coverage

29.7

29.1

Individually Purchased

6.3

6.3

Public

19.4

21.1

Medicare

2.9

2.8

Medicaid

14.9

16.7

Tricare/CHAMPVA

3.0

3.1

No Health Insurance

17.4

18.9

Source: Employee Benefit Research Institute estimates of the Current Population Survey, March 2009–2010 Supplements.

Note: Details may not add to totals because individuals may receive coverage from more than one source.

Fast Facts from EBRIis issued by the nonpartisan Employee Benefit Research Institute to highlight benefits information that may be of current interest.

Employment-based Health Coverage Still Dominates, But Slow Decline Continues   (9/22/2010)

 

The ranks of Americans with employment-based health insurance declined by more than 2 percentage points last year, according to a new analysis by the nonpartisan Employee Benefit Research Institute (EBRI). EBRI’s calculations from recently released data from the U.S. Census Bureau show that employment-based coverage remains the dominant source of health insurance, but continues to erode. Overall, the percentage of individuals under age 65 with employment-based coverage declined from 61.1 percent in 2008 to 59 percent in 2009 — its lowest level in the 15-year period between 1994 and 2009. The decline between 2008 and 2009 accelerated a long-term trend that has occurred during most years since 2000. Conversely, those in this group who did not have health insurance increased to 18.9 percent in 2009, up from 17.4 percent in 2008.

The study also found that:

  • Employment-based health benefits remain the most common form of health coverage in the United States. In 2009, 59 percent of the nonelderly population had employment-based health benefits, down from 68.4 percent in 2000 and 61.1 percent in 2008.
  • Public program health coverage expanded as a percentage of the population in 2009, accounting for 21.1 percent of the nonelderly. Enrollment in Medicaid and the State Children’s Health Insurance Program increased, reaching a combined 44.1 million in 2009, and covering 16.7 percent of the nonelderly population, significantly above the 10.5 percent level of 1999.
  • Individually purchased health coverage was unchanged in 2009 and has basically hovered in the 6–7 percent range since 1994.

"These trends are due to job losses resulting from the recent recession and the slow economic recovery, fewer workers being eligible for health insurance coverage, and more workers with coverage choosing to drop it," said Paul Fronstin, author of the EBRI report. "With unemployment remaining high, these trends are almost certain to continue when the data are released for 2010." Fronstin noted that fewer individuals are likely to be working this year (which means fewer with access to health benefits in the work place), and that federal COBRA subsidies that were meant to stem the erosion in employment-based coverage expired during the summer of 2010. "Coupled with uncertainty about the economy, the future of job security, and prospects for health reform, an increasing number of workers are likely to forego health coverage when it is available," said Fronstin. 

Source: Employee Benefit Research Institute, September 22, 2010 - http://www.ebri.org/pdf/PR.890.22Sept10.Uninsured.pdf

Fraud and Abuse within Health Reform Law   (12/8/2010)

Health Reform Law Has Far-Reaching Impact on Compliance World

Reprinted from REPORT ON MEDICARE COMPLIANCE, Featured Story, Dec. 8, 2010 .

The health reform law has 32 sections on health care fraud and abuse and program integrity, and its impact on provider operations is starting to be felt.  The new law “makes significant amendments to existing criminal, civil and administrative anti-fraud statutes, most of which went into effect March 23, 2010,” said Dallas attorney Frank Sheeder, with Jones Day.

For example, providers must disclose and return overpayments within 60 days of identification. “The statute specifically provides that once an overpayment is identified, providers must report and repay the overpayments within 60 days or they can be subject to liability under the False Claims Act,” Sheeder said Nov. 8 at a health reform conference sponsored by the Health Care Compliance Assn. There is debate about the meaning of the word “identify,” which is making compliance with the new requirement a challenge. Does the 60-day clock start when there’s a whiff of an overpayment? Or when the hospital finishes its internal investigation and precisely quantifies the overpayment?

“You have to [report] the date of service, the amount and the code, so how can you do that until you investigate?” Sheeder says. Sometimes the other choice may be “making a premature disclosure when you don’t know the true amount of the overpayment.” He says “the government is aware of the issue and of the concerns.”  Sheeder suggests that hospitals develop a policy and procedure to make the overpayment return process smoother, especially with the stakes being so high. Providers are required to notify HHS, their state, and Medicare administrative contractor or carrier of the overpayment. Providers should define the word “identify” in their policies and develop a form that can accompany repayments, since an explanation for the undeserved money is required by the health reform law.

If the 60-day deadline is unrealistic in a given situation, “drop a letter to CMS saying that you are working on it and will get back to them,” he says. If the cause of the overpayment was a dumb error, such as a misplaced decimal point, be sure to clarify that.  The health reform law also made it easier for law enforcement to nail providers for fraud, waste and abuse, including improper hospital-physician relationships.

For example, it will be easier for the Department of Justice to prosecute anti-kickback cases because the health reform law relaxed the intent requirement. And a violation of the anti-kickback statute now constitutes a false or fraudulent claim under the False Claims Act, Sheeder says. DOJ has been bootstrapping anti-kickback violations into FCA cases, but now the dots have been connected in the new law.  The federal health care fraud offense created by HIPAA in 1996 was also beefed up. For one thing, the intent requirement was amended, Sheeder says. Prosecutors no longer have to prove providers had actual knowledge of the health care fraud statute or specific intent to violate the statute. And the health reform law made kickbacks a violation of the health care fraud statute, which is often used to punish offenses against commercial payers.

The health reform law also mandated a Stark-only self-disclosure process.

Net Effects of the Affordable Care Act on State Budgets

Commissioned by First Focus and authored by Urban Institute researchers Stan Dorn and Matthew Buettgens, this report assesses how state budgets will fare as a result of the Affordable Care Act. The report’s findings shed new light on potential savings for state Medicaid budgets which, even in a worse-case scenario, would outweigh costs associated with the health reform law. The analysis shows that savings could range between $40.6 billion to as high as $131.6 billion during 2014-2019. More...

More News from States

 

Massachusetts tackles health care costs

February 28, 2011 by Stateline Staff Writer
 
 
One of the most familiar criticisms of the new national health care law is that it doesn’t do much to contain costs. And that’s true: The primary goal is to provide universal access to health insurance. Cost controls are supposed to come later.  

“Later” has arrived now for Massachusetts’ statewide plan, enacted in 2006 and similar in many ways to the federal one. Some 98 percent of all adults and nearly 100 percent of all children are covered, but costs have spiraled out of control. Massachusetts spends 40 percent of its budget on health care and median-income families are expected to spend one-third of their paychecks on health care by 2016.
Now, after five years, Massachusetts is getting very serious about the cost problem. Democratic Governor Deval Patrick has proposed a sweeping bill designed to rein in health care expenses that are among the highest in the country. “Massachusetts led the nation on health care reform,” Patrick boasted the day he unveiled the bill, “and is poised to lead again on health care cost containment.” Patrick said he understands why his predecessors “decided to put cost control off to another day — because if you think access was hard, wait until you take on cost control.”
 
Patrick’s bill encourages voluntary adoption of medical pricing practices that stress quality of care over the number of procedures performed. But at its heart are strict price restrictions on hospitals and other medical providers. The health industry does not like those. Although it has pledged cooperation with the governor on the cost-control problem, passage of the legislation is far from assured.  Any meaningful reform would have to do two things at once, says health care policy expert Robert Berenson, of the Urban Institute. It’s important to move to a more cost-effective payment model, he says, but the savings won’t get passed along to consumers unless the state restrains the fees doctors and hospitals are able to negotiate. “Everyone has a big stake in making this work,” Berenson adds. “If it doesn’t, the whole thing could fall apart.”

 

 

Nebraska: Costs of health care law adding up
Sen. Jeremy Nordquist of Omaha, chairman of the Health Committee of the National Conference of State Legislatures, said he expects that lawmakers will have many questions about the budget requests. State agencies listed nearly $21 million in costs related to federal health care in their budget requests for the two-year period beginning next July 1.
Omaha World-Herald- October 18, 2010

Colorado: Regulators: Health reform not behind steep hikes
Denver Post, Nov 10, 2010

Colorado regulators have done the math on health insurance premium hikes and are warning insurers and consumers that blaming steep increases on health care reforms is a convenient myth.  While insurers and politicians said new benefits and consumer protections were helping drive premium hikes of 10 percent to 30 percent for 2011, the actual requests for such new items in mandatory rate filings often required no increase at all.

The impact of the new benefits amounted to a 5 percent increase for some small-group new policies but topped out at 1.2 percent in large-group renewals, the state insurance division said.  The real driver of big insurance hikes remains high inflation for hospital care, doctor fees, new medical devices and increased testing, regulators and consumer advocates said.

Read morehttp://www.denverpost.com/search/ci_16569466

Colorado: Health-insurance costs projected to rise 14.4 percent next year

Denver Post, Oct. 29, 2010

"The rate of increase we're seeing is a real serious concern from a business climate and competitiveness standpoint," said Bill Lindsay, president of Lockton Benefit Group-Denver.   The estimated increase is based on a nonscientific survey of 143 Colorado businesses conducted by Lockton, a major insurance brokerage firm.

Health-insurance costs are soaring along with profits for insurance firms. The five largest U.S. health-insurance companies recorded combined profits of $12.2 billion in 2009, up 56 percent from the previous year, according to an analysis this year of financial statements by a coalition of liberal advocacy groups and labor unions.

 

 

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