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1 May 7, 2014 In This Issue (click to jump): Analysis of Trends in Health Spending Spotlight on Medicare Advantage Enrollment Oncology Drug Trend Report S&P Predicts Shift from Job-Based Coverage to Exchanges Balancing Benefits of Medical Innovations with Rising Health Care Costs Highest Readmissions and Associated Costs, by Payer Report: Nurse Practitioners Could Save California $1.8 Billion by 2025 Choosing Wisely Surveys Doctors about Unnecessary Care Task Force Issues Price Transparency Guidelines Lessons from New Hampshire s All-Payer Claims Database Analysis of Trends in Health Spending 2013 An IMS Institute for Healthcare Informatics analysis of health care spending in 2013 finds Americans are using more health care overall, with specialist visits outnumbering primary care visits for the first time. Bucking the trend from the past four years, patient visits increased by 2.7% in 2013, scheduled inpatient hospital admissions by 10.5%, and prescriptions filled by 1.6%. The authors suggest patients may have delayed planned or needed medical care in prior years and that a recovering economy may account for the growth in these areas. Visits to the emergency room remained flat, with the decrease in hospital admissions via the ER being offset by overall increases in ER day visits. The report also finds Americans are not just using more health care but paying more for it as well. Highdeductible health plans now account for 20% of individuals with employer-based coverage, and deductibles were 1.5 times higher in 2013 than in More than three-quarters of health plans have any deductible and more than half of those have a deductible of $1,000 or more. By contrast, patients are paying less for prescriptions, with half costing $10 or less and nearly one in four being fully covered with no co-pays. At the same time, pharmaceutical innovations and patent protections are driving drug costs more than in previous years. Prescriptions for all Americans including the healthy and untreated now average 12 per person per year, but seniors use five times the number of prescriptions as adults Spotlight on Medicare Advantage Enrollment An updated data spotlight from the Kaiser Family Foundation shows a 1% increase in California s Medicare Advantage (MA) enrollment from 2013 to 2014, to 38% of all Medicare beneficiaries. California and four other states tied for 5 th place ranking behind Minnesota (51%), Hawaii (46%), Oregon (43%), and Pennsylvania (39%). With more than 2 million seniors, California accounts for the greatest number of MA enrollees and more than 13% of total enrollment nationwide. Nationwide enrollment in Medicare Advantage grew nearly 10% from 2013 to 2014, to more than 15.7 million seniors. The penetration rate in MA compared to fee-for-service also rose two percentage points from a nationwide average of 28% last year to 30% this year. CAHP s publications, including the Research Review, are available online. Contact Sunshine Moore, Senior Policy Analyst/Writer, with any questions about the Research Review or to be added to the policy unit s distribution list.

2 The MA program has grown 41% since enactment of the Affordable Care Act. At the same time, average monthly premiums for MA plans have dropped 20% from $44 in 2010 to $35 in Out-of-pocket expenses, however, have risen over the same period: the share of enrollees with deductibles higher than $5,000 nearly doubled from 24% in 2013 to 44% in Nearly two-thirds of MA members are in enrolled in HMOs, but local PPOs are gaining ground over private fee-for-service plans in the non-hmo market. In California, three health plans account for nearly 70% of statewide MA enrollment. Oncology Drug Trend Report A global drug trend report from the IMS Institute for Healthcare Informatics discusses innovations in cancer care with a special chapter dedicated to oncology trends in the United States. It also includes a relative value analysis of cost versus treatment outcomes for several cancer drugs and an analysis of the future biosimilars market in the US. One of the key findings is that the average cost of branded oncology treatment has doubled over the past decade from $5,000 to $10,000 per month. Total oncology spending in the US reached $37.2 billion in Care settings are exerting conflicting pressure on treatment costs in the United States. More patients are being treated in outpatient settings such as doctors offices, yet more and more physicians and physicians groups are being acquired by hospital systems which tend to inflate costs. Accountable Care Organizations are also influencing costs through more coordinated care, but costs are higher in outpatient hospital facilities than in physicians offices. The report also points to higher patient cost-sharing as a driver of overall oncology treatment costs because patients are more likely to discontinue recommended treatments (such as hormone therapy) when out-of-pocket expenses are higher. S&P Predicts Shift from Job Based Coverage to Exchanges A report from Standard & Poor s estimates 90% of the 500 companies included in its index could shift employee health benefits to the new health care marketplaces by The firms included in the S&P employ 138 million workers, or 20% of the workforce employed at companies with 50 or more employees. Such a shift could save the companies $690-$800 billion by 2025, according to the report, and could save all US companies with 50 or more workers $3.25 trillion if they followed suit. The trend would have considerable impacts for individuals, however, and would increase costs to the federal government for subsidies through the exchanges. State Medicaid programs would also be impacted if low-income workers lost their job-based coverage. Balancing Benefits of Medical Innovations with Rising Health Care Costs A RAND report, entitled Redirecting Innovation in US Health Care: Options to Decrease Spending and Increase Value, points to advancements in medical technology as the leading driver of health care costs and identifies policy recommendations to change the way the US approaches innovation in health care. The authors cite the following factors that increasing health spending without conferring major health benefits: lack of certain scientific knowledge about diseases, costs and risks of FDA approval, limited rewards for products that reduce spending, treatment creep (when a medical product that provides substantial benefits to some patients is used on others for whom there are little to no benefits), and the medical arms race. The authors provide ten policy recommendations in two categories that are intended to lower spending without losing health advantages and to encourage higher spending only when new products confer significant advantages. To reduce costs and risks of invention and FDA approval, policies should: 1. Enable more creativity in funding basic science; 2. Offer prizes for inventions; 3. Buy out patents; 4. Establish a public-interest investment fund; and,

3 5. Expedite FDA reviews and approvals. To increase market rewards: 1. Reform Medicare payment policies; 2. Reform Medicare coverage policies; 3. Coordinate FDA approval and CMS coverage processes; 4. Increase demand for technologies that decrease spending; and, 5. Produce more and more-timely technology assessments. Highest Readmissions and Associated Costs, by Payer A statistical brief from the Healthcare Cost and Utilization Project identifies the conditions resulted in 3.3 million hospital readmissions nationwide in 2011 at a cost of $41.3 billion. Specifically, the brief breakds down conditions, readmissions, and costs by payer, as shown in the charts below: Uninsured 200,000 6% 600,000 18% Total Readmissions Medicaid 700,000 21% Medicare 1.8 million 55% Uninsured $1.5 billion 4% Medicaid $7.6 billion 18% Associated Costs $8.1 billion 20% Medicare $24 billion 58% The brief also identifies the conditions that lead to the highest readmissions and associated costs by payer: Payer Top Three Conditions Total Readmissions Total Costs Medicare Congestive heart failure; sepsis; pneumonia 300,000+ $4.3 billion Medicaid Mood disorders; schizophrenia/ psychosis; complications of diabetes 100,000+ $840 million Maintenance chemotherapy/ radiotherapy; mood disorders; complications due to surgery/ medical care 60,000+ $785 million Uninsured Mood disorders; alcohol related disorders; complications of diabetes 28,000+ $185 million Report: Nurse Practitioners Could Save California $1.8 Billion by 2025 A white paper from the Bay Area Council Economic Institute finds California could increase access to care and save $1.8 billion in over the next ten years if nurse practitioners (NPs) were allowed to practice independently of physicians. The report points to 3.3 Californians who enrolled in Medi-Cal or Covered California in 2014, the state s primary care physician shortage, and challenges with access to care in rural and underserved communities and finds expanding NPs scope of practice would result in a 24% increase

4 in total NPs practicing statewide (or 4,000 additional providers) and a 10% increase in preventive care visits statewide (or 2 million additional visits) while lowering costs by an average of $16 per preventive visit. The authors note that patients report higher satisfaction with NPs than with physicians and that NPs are more likely to serve younger, female, and non-white patients, individuals with disabilities, and dual eligibles and to practice in rural areas and counties designated as Health Professional Shortage Areas. Choosing Wisely Surveys Doctors about Unnecessary Care Results of a survey from the Choosing Wisely campaign show three out of four doctors believe their peers prescribe an unnecessary test or procedure at least once a week and that unnecessary care represents a serious problem in the health care system. The most common reasons cited for ordering unnecessary tests or treatments are: fear of being sued (52%), just to be on the safe side (36%), and to reassure patients of their own assessments (30%). Nearly half of doctors reported encountering patients requesting an unnecessary test at least once a week, and more than half of doctors go ahead and order those tests. While 95% of physicians always or often discuss with patients the reasons not to have a procedure or test they view as unnecessary, only four in ten always or often include costs as part of such discussions. Interestingly, only 5% of survey respondents said financial incentives influence whether they order more testing, and only 5% believe the fee-for-service system plays a role in decision-making. When asked about policies that could reduce unnecessary tests and treatments, 91% of doctors agreed malpractice reform would be somewhat or very effective and 78% supported having more time with patients to discuss alternatives. While 85% of respondents said having evidence-based guidelines in a doctorfriendly format would be an effective tool, only 21% of doctors surveyed were aware of the Choosing Wisely campaign s lists of procedures and treatments doctors and patients should question. Those who were aware of the campaign were more likely to have reduced unnecessary care in the past year compared to those who had not heard of it (62% vs. 45%). Task Force Issues Price Transparency Guidelines A report from the Healthcare Financial Management Association Price Transparency Task Force assesses the value of price transparency in health care and provides a set of guiding principles to be used in the development of transparency initiatives. Namely price transparency policies should: empower purchasers to make meaningful comparisons prior to receiving care; be easy to use and to communicate to stakeholders; be paired with other information regarding value/quality; provide enough information to determine the total price of services and what is included for that price; and, require the commitment and active participation of all stakeholders. The policy recommendations include frameworks for both covered and uninsured individuals. The Task Force supports health plans serving as the primary source of price information for their members, providing them with: total estimated price; provider s network status and, if needed, how to locate an innetwork provider; member s out-of-pocket costs; and, other relevant information such as outcomes, safety, and patient satisfaction scores. For uninsured patients and patients seeking out-of-network services, the Task Force recommends having providers and hospitals be the primary source of price information. In this case, providers should communicate: estimated prices for standard procedures and information on possible complications or other additional costs; preservice estimates prior to receiving treatment; what is and is not included in the price; and, other relevant information such as outcomes, safety, and patient satisfaction scores.

5 The report promotes greater use of high-value providers and price transparency tools for fully insured employers and encourages self-funded employers and third-party administrators to identify data that will help shape benefit designs, manage health care costs, and provide price transparency tools to their employees. It also calls on referring clinicians to help patients find providers that offer the right mix of cost and quality according to patients circumstances. The Task Force also published a consumer guide to health care price transparency, which explains the linkages between cost and quality, prices charged based on coverage status, in-network versus out-ofnetwork charges, and the significance of billing and procedure codes. It includes a list of questions patients can discuss with their doctors prior to elective surgery, prior authorization procedures, reconciling price estimates with medical bills, and definitions of common terms such as balance billing, coinsurance, and deductible. Lessons from New Hampshire s All Payer Claims Database A California HealthCare Foundation analysis of New Hampshire s all-payer claims database, HealthCost, finds that although the system has not had a direct impact on consumer price-shopping, it has become an important tool in several other areas. Specifically, experts and stakeholders interviewed for the report cited: a statewide heightened awareness of provider price variation; more plan leverage in provider negotiating power; a shift to benefit designs that incent consumers to be more price-conscious when selecting providers; expanded use of high-deductible health plans (1.5% of total commercial enrollment in 2006 to 18% in 2011, faster than the national trend, with 29% of enrollment in the small group market); innovations in site-of-service and tiered co-payment products, especially in the small group market; and, increased market competition among rural hospitals. In addition, interviewees reported that health plans in the state have made consumer price-shopping tools more user-friendly, more specific, and more valuable by including incentives and rewards. For their part, hospitals have launched non-hospital based labs, urgent care centers, and other outpatient facilities with lower cost structures. Though these care settings are less expensive than hospital-based outpatient facilities, they are still more expensive than independent, freestanding facilities. Health plans have responded by developing tiered cost-sharing not just for high- or low-priced facilities but for these midpriced facilities as well.