Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
What a momentous few days in Washington were observed at the end of July! On July 25, Senator John McCain (R-AZ), dealing with brain cancer, made a dramatic entrance into the Senate Chamber and delivered an impassioned plea to return to regular order and bipartisan compromise, suggesting a process that would begin with the Senate Committee on Health, Education, Labor and Pensions (HELP) under chairman Lamar Alexander (R-TN) and ranking member Patty Murray (D-WA) holding hearings and producing a bill that incorporates contributions from both sides.
McCain’s suggestion was applauded by many senators on both sides of the aisle. The Senate voted to debate repeal and replacement of the Affordable Care Act (ACA), 51-50, with Vice President Mike Pence casting the tie-breaking vote.
The following day, the Senate rejected a bill to repeal the ACA without replacement, 45-55, and in the early hours of July 28, the Senate rejected the “skinny repeal” of the ACA, the Health Care Freedom Act of 2017 (HCFA), 49-51, with Republican Senators McCain, Susan Collins (ME), and Lisa Murkowski (AK) joining the 48 Democrats to defeat the bill. The skinny repeal would have repealed the individual and employer mandates, temporarily repealed a tax on medical devices, defunded Planned Parenthood for a year, provided more money to community health centers, and given states more flexibility in complying with ACA regulations. Thus apparently ended the Republican quest to repeal and replace the ACA, as Senate Majority Leader Mitch McConnell (R-KY) conceded, “It is time to move on.”
In the wake of the HCFA’s defeat, supporters of the ACA were euphoric, but two sobering challenges facing the U.S. healthcare system—one short term, the other long term—loom like imposing mountains.
The Short-term Challenge
The immediate concern is how to stabilize the troubled ACA individual health insurance marketplaces, clearly the Achilles’ heel of the health reform law. Health insurers continue to leave in droves, with 80 departing this past year and Anthem announcing on August 7 that it will leave Nevada’s ACA marketplace in 2018. Premiums are rising many times the growth of both the Consumer Price Index and U.S. healthcare inflation. Moreover, President Donald Trump is threatening to cut off the ACA’s cost-sharing subsidies, which work to prop up the marketplaces and shield some individuals from the premium increases. Obviously, such a move by the Executive Branch would not encourage bipartisanship.
The Long-term Challenge
Even more daunting than the travails of the marketplaces is how to bend the healthcare cost curve. The ACA has not materially slowed the growth of national health expenditures, which will rise by 5.4 percent versus 2016 and reach $3.5 trillion this year. To put $3.5 trillion in perspective, it amounts to 18.3 percent of the nation’s gross domestic product (GDP) and translates to almost $11,000 per person.
Additionally, nominal national health expenditures (not adjusted for inflation) are projected to increase by an average annual rate of 5.6 percent from 2016 to 2025, almost 1.5 times as fast as the growth in nominal GDP over the same period. As a result, healthcare costs will constitute a staggering 20 percent of GDP in 2025.
Conclusion
With the stalled effort to repeal and replace the ACA, Congress still must grapple with the hemorrhaging of the health insurance marketplaces and unacceptably high rates of healthcare cost inflation. Scaling these two mountains will require the kind of bipartisan compromise and collaboration that Senator McCain so passionately advocated.
Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
On May 23, the Department of Health and Human Services (HHS) released a report on individual market premium changes from 2013 to 2017 for the 39 states using the federal government’s healthcare.gov platform. The report provided a good gauge of the affordability of the ACA marketplaces.
The HHS report found that all 39 states experienced increases in individual market premiums since 2013. Average premiums rose during the four-year period by 105 percent, which translates to an average annual premium increase of $2,928. To put the 105 percent premium hike in perspective, it was more than 20 times the growth in the Consumer Price Index (CPI) and more than eight times the nation’s healthcare inflation over the same period. While 16 states had premium increases under the national average of 105 percent, 20 states had premium increases between 105 percent and 200 percent. Moreover, three states—Alabama, Alaska and Oklahoma—saw premiums triple, rising more than 200 percent.
A comparable analysis of the 11 states running their own marketplaces has not yet been conducted, but from 2016 to 2017, their average approved individual market rate increase was 19 percent, over nine times CPI growth and over five times U.S. healthcare inflation.
Multiple interrelated factors have driven these premium increases, including lower-than-expected enrollment, as estimates ranging from 12 million to 15 million people—disproportionately young and healthy—who were expected to enroll in the marketplaces by the end of 2016 did not do so. Because of the lower-than-expected enrollment and relative non-participation by the young and healthy, the marketplaces have been left with an older, sicker risk pool, producing huge losses for many health plans, in spite of the previously mentioned substantial premium increases. Consequently, in 2017, 80 insurers left the ACA marketplaces while 11 entered, yielding a net decrease of 69.
The inordinate premium inflation of the marketplaces reflects a cycle that appears to be worsening, so much so that some have described it as a “death spiral.” As health insurers exit the marketplaces, competition decreases, which naturally leads to premium hikes, as well as to a narrowing of plan choices. The higher premiums and fewer choices dissuade people from signing up or cause current enrollees to drop out, further shrinking the risk pool.
If the ACA marketplaces prove to be unsustainable then access to affordable healthcare plans for millions of Americans—regardless of the availability of premium credits—will be at risk.
During the past few months, hospital organizations have lobbied for changes to the American Health Care Act (AHCA), with core concerns about possible growth of uncompensated care resulting from increases to the uninsured population and separately, the popularity of high-deductible plans with many of the insured, which raises concerns about patients’ ability to pay their hospital bills. However, as the recent HHS report compellingly points out, hospitals should not only be worried about possible ramifications of the AHCA—the serious, fundamental weaknesses of the ACA’s health insurance marketplaces constitute a clear, present and increasing challenge to hospital finances.
Guest post by Ken Perez, vice president of healthcare policy, Omnicell, Inc.
Ken Perez
The recently concluded debate about the American Health Care Act (AHCA), the Republicans’ first attempt at a Patient Protection and Affordable Care Act (ACA) replacement plan, centered largely around issues of insurance coverage and access to care.
The real turning point for the AHCA seemed to be the Congressional Budget Office’s March 13 release of its analysis of the bill, which concluded, among many things, that millions more Americans would be uninsured under the AHCA than under the ACA (14 million in 2018, 21 million in 2020, and 24 million in 2026).
After it became clear that the roughly three-dozen member Republican House Freedom Caucus—which sought a more aggressive piece of legislation that would gut the ACA—would not support the bill, House Speaker Paul Ryan concluded that the Republicans lacked the needed votes. Thus, on March 24, he pulled the AHCA from the floor. Ryan told reporters, “I don’t know what else to say other than Obamacare is the law of the land” and “We’re going to be living with Obamacare for the foreseeable future.”
With the focus mainly on coverage and access issues, a largely unasked question has been, “What will happen to value-based care?” The AHCA did not address this area, though, perhaps the Republicans intended to cover it in phase two or three of their grand plan to repeal and replace the ACA. As originally envisioned by congressional Republicans, phase two will consist of executive branch initiatives (e.g., actions by the Department of Health and Human Services and presidential executive orders), and phase three will include subsequent pieces of legislation addressing other aspects of the ACA.
The fate of value-based care is an important topic because U.S. healthcare costs continue to escalate and outpace general inflation—increasing 5.8 percent and reaching $3.2 trillion in 2015, equal to almost $10,000 per person per year. In addition, the ACA mandated five major healthcare delivery reforms promoting value-based care:
The Hospital Value-Based Purchasing (VBP) Program
The Hospital-Acquired Condition Reduction Program (HACRP)
The Medicare Shared Savings Program (MSSP)
The national pilot program for payment bundling
The Hospital Readmissions Reduction Program (HRRP)
Moreover, the ACA provided funding of $10 billion over 10 years for the Center for Medicare and Medicaid Innovation (CMMI), which was tasked with testing and evaluating various payment and service delivery models involving, in most cases, voluntary provider participation, with only a few models being mandatory.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
During the 2016 presidential campaign, Democratic candidate Hillary Clinton reiterated the longstanding Democratic pledge to allow Medicare to negotiate drug prices and demand higher rebates for prescription drugs. In response, and aware of the general public’s mounting concern about rising prescription drug prices, Donald Trump shifted to the left and repeatedly called for Medicare to directly negotiate drug prices. For example, at an MSNBC town hall on Feb. 17, 2016, Trump said, “If we negotiated the price of drugs, Joe, we’d save $300 billion a year.”
However, none of Trump’s three most substantive policy statements issued in the fall of 2016—including the healthcare section of the Trump-Pence Campaign website, his “Contract with the American Voter,” and his healthcare plan issued two days after the election—mentioned the challenge of rising drug prices or the idea of Medicare negotiating drug prices with pharmaceutical companies.
On Jan. 31, 2017, President Trump met with a group of pharmaceutical industry executives, including the CEOs of Amgen, Celgene, Eli Lilly, Johnson & Johnson, Merck, and Novartis, as well as Stephen Ubl, head of the Pharmaceutical Research and Manufacturers of America (PhRMA).
While during the meeting Trump called drug prices “astronomical” and said, “We have to get prices down for a lot of reasons … for Medicare and Medicaid,” he stopped short of the aforementioned negotiation of drug prices by the federal government. Trump pressed the pharmaceutical companies to bring drug manufacturing and production back to the United States. In return, Trump pledged to work to reduce corporate taxes, support deregulation, and streamline the FDA to expedite drug approvals. One can interpret those broad statements as a draft outline of the deal with pharma that will be struck by the Trump administration.
Where would such a deal leave the drug pricing issue? While Trump clearly expressed concern about high drug prices, the drug makers can offer him something else that he may want even more: jobs for U.S. workers that come from boosting production at existing plants and opening new plants on U.S. soil. Imagine the photo ops!
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
A recent poll conducted by Monmouth University concluded that “fully 70 percent of American voters say that this year’s presidential campaign has brought out the worst in people.”
Undoubtedly and sadly, in this era in which fact-checking of candidate statements is essential, a majority of Americans believe that all politicians lie or at least that they lie often.
That prevailing sentiment is what made former President Bill Clinton’s candid riff about the Affordable Care Act at an Oct. 3 Democratic rally in Flint, Mich. so extraordinary. He stated, “…the current system works fine if you’re eligible for Medicaid, if you’re a lower-income working person, if you’re already on Medicare, or if you get enough subsidies on a modest income that you can afford your healthcare. But the people who are getting killed in this deal are small business people and who make just a little bit too much to get any of these subsidies. Why? Because they’re not organized. They don’t have any bargaining power with insurance companies. And they’re getting whacked. So you’ve got this crazy system where all of a sudden 25 million more people have healthcare, and then the people out there bustin’ it sometimes 60 hours a week end up with their premiums doubled and their coverage cut in half. It’s the craziest thing in the world.”
Unlike the ACA’s expansion of Medicaid, which has been blocked by 19 states that have declined to go along with the law, the health insurance exchanges have been operational for a number of years in all fifty states and the District of Columbia.
So how are the health insurance exchanges of this “crazy system” really doing and, to Clinton’s point, what’s happening to people who don’t qualify for subsidies?
Clinton was generous in saying that the “system works fine” for those who get subsidies. State regulators have used terms such as “near collapse,” “emergency situation,” “meltdown,” and “financial death spiral” to describe the condition of their exchanges. In total, the health insurance exchanges are way over budget, serve fewer people, and show signs of being unsustainable, which pushes health plans to cost shift by raising premiums for non-exchange insurance policies, especially employer-sponsored health insurance. The population paying for those policies include the people Clinton described as “bustin’ it sometimes 60 hours a week.”
Originally, the federal government was supposed to spend $136 billion from 2015-2019 on health insurance exchange subsidies. However, as more states than expected opted to have the federal government run their exchanges and because of the higher-risk pool of individuals participating in the exchanges—which led to premium hikes—the Congressional Budget Office (CBO) in August projected $278 billion in federal outlays for health insurance exchange subsidies for that period, leading to an overspending or budget deficit just for the subsidies of $142 billion for 2015-2019, a staggering amount, considering that it would basically cancel out the projected 10-year budget surplus for the entire health reform law. With even greater average premium hikes expected for 2017—24 percent for the non-group market—the CBO’s projection is clearly conservative and will certainly be revised upward.
Many states are reporting individual market rate hikes in 2017 well above the aforementioned national average. Minnesota’s approved increases range from 50 to 67 percent. Blue Cross Blue Shield of Tennessee will raise its rates by 62 percent. Golden Rule Insurance Co. in Kentucky received approval for a 47.2 percent rate increase, while Wellmark in Iowa will raise its rates by 42.6 percent. In Delaware, Highmark Blue Cross Blue Shield received approval for a 32.5 percent average rate increase, and Utah’s individual exchange health plans will rise on average 30 percent.
Guest post by Ken Perez, VP of healthcare policy, Omnicell, Inc.
Ken Perez
Quality expert W. Edwards Deming was famous for many concepts, including the Deming Wheel or Deming Cycle, more formally known as the PDSA (Plan-Do-Study-Act) Cycle. It is a systematic series of steps for gaining valuable learning and knowledge for the continual improvement of a product or process.
The Centers for Medicare and Medicaid Services’ August 25 release of 2015 quality and financial performance results for Medicare accountable care organizations (ACOs) reflected the application of the PDSA Cycle by the participating organizations as well as CMS in its continued development and refining of its ACO programs.
At a high level, in 2015, the 404 reporting ACOs—392 in the Medicare Shared Savings Program (MSSP) and 12 in the Pioneer ACO Model—achieved $466 million in savings. A bit more than half of the ACOs (210 or 52 percent) held costs below their benchmark, and slightly less than a third (125 or 31 percent) generated savings above a minimum savings rate (MSR) and met quality performance standards, thus meriting shared savings.
As is common with most statistics and especially any material news coming out of Washington, D.C. nowadays, there were widely divergent interpretations of these results.
On the cheery side, CMS chief medical officer Patrick Conway, M.D., rhapsodized, “Accountable Care Organization initiatives in Medicare continue to grow and achieve positive results in providing better care and health outcomes while spending taxpayer dollars more wisely.”
In contrast, Clif Gaus, CEO of the National Association of ACOs, in an email message to FierceHealthcare, struck a negative tone in his appraisal of the results, sharing that his organization “was disappointed not to find stronger financial results that reflect the extensive financial and personal contributions invested by ACOs” and he also said that CMS and Congress must “take swift and decisive action to solidify the foundation of the Medicare ACO program.”
Despite these obviously divergent views, certainly neither Conway nor Gaus would disagree with the idea that the ability to learn is a critical success factor in ACO performance.
A deeper analysis of the data bears this out. As noted by CMS, more-experienced ACOs were more likely to generate savings above their MSR. In performance year 2015, 42 percent of ACOs that started in 2012 generated savings above their MSR. This compares with 37 percent for ACOs starting in 2013, 22 percent for 2014 starters, and 21 percent for 2015 starters.
The value of learning from experience was also reflected in the quality results. MSSP ACOs that reported quality measures in both 2014 and 2015 improved on 84 percent of the measures common to both years.
Guest post Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
On May 3, BMJ (formerly the British Medical Journal) published an analysis of prior research on medical errors by a team led by Dr. Martin Makary, a professor of surgery at Johns Hopkins University School of Medicine. Startlingly, the analysis concluded that more than 250,000 Americans die annually and nearly 700 perish daily from medical errors. Based on the Centers for Disease Control and Prevention’s (CDC’s) official list of the top causes of death, that figure would place medical errors as the third leading cause of death, behind only heart disease and cancer, which each took about 600,000 lives in 2014, and ahead of respiratory disease, which caused over 147,000 deaths.
The kind of medical mistakes that can be fatal range from surgical complications that go unrecognized to errors regarding the doses or types of medications administered to patients.
The Johns Hopkins analysis received widespread media coverage, with the New York Times, NBC News, NPR, Time, U.S. News & World Report and the Washington Post, among others, all reporting the study’s findings.
This is certainly not the first time that medical errors have attracted the attention of the mainstream media.
The Institute of Medicine’s landmark report, To Err is Human: Building a Safer Health System, released in November 1999, concluded that 44,000 to 98,000 Americans died each year because of preventable mistakes in hospitals. Moreover, the report estimated the annual costs of medical errors at $17 billion to $29 billion.
It was estimated that more than 100 million Americans were aware of the general conclusions of the IOM report, thanks to ample media coverage, which conveyed the idea that medical errors were more prevalent and costly than previously thought. Despite all the publicity about medical errors as a result of the IOM report, it would appear that the U.S. healthcare system is not any safer more than 16 years later.
No one knows the precise toll of medical errors, largely because the coding system used by CDC to record death certificate data does not capture items such as communication breakdowns, diagnostic errors, and poor judgment, all of which can cost lives.
In terms of the economic cost of medical errors, a study sponsored by the Society for Actuaries and conducted by Milliman in 2010 concluded that medical errors in 2008 cost the United States $19.5 billion—$17 billion (87 percent) of which was directly associated with added medical costs (inpatient care, ancillary services, prescription drug services, and outpatient care). The remainder was due to increased mortality rates and days of lost productivity from missed work, based on short-term disability claims.
Adjusting for the increase in the U.S. population from 2008 to 2016, the current year’s cost of medical errors is estimated at $20.8 billion. Continue Reading
Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
Ken Perez
At two recent healthcare conferences run primarily for provider organizations, speakers spent a considerable amount of time highlighting the sharply increased U.S. spending on prescription drugs in 2014 (+12.5 percent versus 2013) and 2015 (+7.8 percent versus 2014)—about double overall healthcare cost inflation for those two years. In 2015, prescription drugs accounted for one-sixth of all the money spent on personal healthcare services. While drug spending growth is expected to moderate in the coming years, the attendees at the conferences were left with the lingering impression that pharmaceutical companies may have gotten away with inappropriate levels of profiteering in recent years.
Of course, that impression was made—and some would say cemented—last year when Martin Shkreli, former CEO of Turing Pharmaceuticals, famously hiked the price of Daraprim, a 62-year-old treatment for parasitic infections, by 5,455 percent overnight from $13.50 a tablet to $750. Similarly, Michael Pearson, outgoing CEO of Valeant Pharmaceuticals, raised by 1,800 percent the prices of two drugs used to treat cancer-related skin conditions: Targretin gel, a topical treatment for cutaneous T-cell lymphoma, and Carac cream, used to treat precancerous skin lesions called actinic keratosis. A 2012 report by Ipsos Public Affairs concluded that the U.S. pharmaceutical sector had a “net negative” favorability score with consumers, and the much-publicized actions of Shkreli and Pearson three years later obviously did not improve the public’s view of pharma.
As expected, the aforementioned price hikes by Turing and Valeant were denounced by numerous presidential candidates, and drug prices became a popular political football. Both former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders have made lowering prescription drug costs significant planks of their respective policy platforms. They both advocate allowing Medicare to negotiate drug prices with pharmaceutical companies. Sanders goes even further—to the brink of outright drug price controls—pledging to require pharmaceutical companies to publicly disclose information regarding drug pricing and research and development costs—with the obvious implication that there should be some reasonable relationship between the two.
