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Health Care Reform and Its Impact on Business PlanningOn March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act passed by the Senate on December 24, 2009, and by the House of Representatives on March 21, 2010.1 On March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010, making changes to the Patient Protection and Affordable Care Act. It is essential for organizations to understand how some of the larger changes engendered by this health reform legislation will affect business practices and performance—which components will require immediate changes and which will have long-term implications. Scientific and business expertise will need to be coordinated for organizations to identify the implications for their investments and operational planning. Some of the new provisions specifically address changing markets for insurance products, changing programs to affect health risks, changing investment opportunities to increase health-care efficiencies and lower costs, and changing needs for health-care personnel and services to meet demands. We consider expected changes in four important areas as a result of this reform package, and the related role of science-based analysis for organizational planning. Insurance Products and Markets Insurance mandates, the creation of health benefit exchanges, the inclusion or exclusion of certain services, market rules, and reporting requirements are expected to affect insurance product offerings and their pricing.2 The reforms likely will change the composition of member populations, risk pools, and insurance products. For example, in response to favorable financial treatment from increasing the efficacy of health-care plans, insurance providers and businesses are likely to increase the use of incentives and penalties to reduce health-care risks and lower costs.3 Understanding the fundamental relationships between coverage terms and health behaviors will be essential to design effective and sustainable insurance and benefit plans. Given the scope of the reforms, predictive risk modeling provides a rigorous method to augment approaches that rely heavily on past history for insurance pricing and terms. Wellness and Nutrition Programs The reforms place a heavy emphasis on activities to improve health care, including wellness and nutritional programs.4 Emphasis on evidence-based and community-based prevention suggests the need for methods to test and prove the effectiveness of such wellness programs in terms of cost, quality of life, and productivity. Employers must determine how to structure these programs, estimate both start-up and long-term costs, and create incentives programs for employees. Organizations will want to investigate the adequacy of their existing resources and compare available programs that can augment in-house resources, to understand health-related choices and to benchmark their current and planned program design and performance against best practices. In addition, the release of the new Dietary Guidelines for Americans later this year may affect the current dietary and nutritional programs within national, state, and regional infrastructures. Understanding how the new dietary recommendations may affect program planning and employee health will facilitate an improved framework for promoting a healthier workplace environment. Investments in New and Existing Services Health-care reforms are expected to encourage private investment in new approaches and therapies for disease treatment and prevention.5 Expanding opportunities in the health care markets will require enhanced due diligence investigations of both the business and the science propositions offered to investors. Rigorous analysis of the science proposition often requires improved understanding of the prevalence and incidence of disease, the factors influencing patterns of care, descriptive epidemiologic characterization of patient populations, projection of future needs, modeling of clinical trends and economic impacts related to therapeutics, estimation of risk of adverse events among patients using therapeutics, risk of disease recurrence, assessment of clinical trial feasibility, genetic factors associated with disease occurrence and therapeutic metabolism or efficacy, and the use of biomarkers to measure exposure or outcomes in a population. Organizations seeking to re-evaluate their offerings in response to the new law have a number of areas to explore.6 For example, the availability of and incentives for using new types of services and coverage may require shifting of resources internally, or a thorough evaluation of costs to assess the cost-effectiveness of major hiring initiatives or capital equipment purchases. Pharmaceuticals While pharmaceutical companies are expected to contribute tens of billions of dollars over the next ten years in terms of fees and reduced prices under government programs, the addition of millions of additional participants to health plans will expand the demand for prescription drugs. The law's inclusion of a provision to close the "doughnut hole" in Medicare drug coverage for elderly patients contributes additional expectations for increased revenue.7 Pharmaceutical companies will be faced with strategic decision making at all phases of drug development to respond to the increased demand. Medical Devices Medical device manufacturers will face a 2.3 percent excise tax on all sales of medical devices starting in 2013,8 which MDMA expects will generate up to $20 billion over 10 years.9 This tax will be based on sales, rather than profits. The excise tax will be scaled based on sales revenues, with businesses with revenue of less than $5 million being exempt, roughly 1.5 percent to companies with revenue between $5 million and $25 million and larger businesses contributing between 3 percent and 4 percent of sales. As a tax, this reform might affect growth, innovation, and expansion of the medical device industry. Companies likely will need to understand the implications for jobs, investor opportunities, expansion plans, and R&D spending, among other issues. Device companies will be faced with strategic decision-making at crucial points of device development as a response to planning for this tax. Why Exponent? Exponent has one of the foremost health sciences consulting practices in the United States. Our staff is on the forefront of analysis of these issues in the context of organizational planning. Exponent's staff specializes in solving complex problems related to health and economics. Our engineers, scientists, economists, physicians, and regulatory specialists provide unparalleled, interdisciplinary expertise to evaluate the full range of health care, pharmaceutical and medical device issues. These issues include potential health effects associated with environmental agents, chemicals, consumer products, food safety and nutrition, wellness programs, and pharmaceutical or medical products. Indeed, members of our staff are leaders in developing methodologies that are essential to address the complexities of these health-care issues. For more information related to analysis for health care reform planning, please contact us. For health sciences and risk assessment:
For economics, risk and insurance:
For health outcomes:
For pharmaceuticals:
For medical devices:
1 Public Law No: 111-148. 2 See, e.g., Patient Protection and Affordable Care Act of 2010, H.R. 3590, 111th Cong. (the "Act") §§ 1311-3 ("PART II—CONSUMER CHOICES AND INSURANCE COMPETITION THROUGH HEALTH BENEFIT EXCHANGES") and 1201, 2701-8 ("PART I—HEALTH INSURANCE MARKET REFORMS") (2010). 3 See, e.g., Act § 2718 ("BRINGING DOWN THE COST OF HEALTH CARE COVERAGE"). 4 See, e.g., Act §§ 4001-4402 ("TITLE IV—PREVENTION OF CHRONIC DISEASE AND IMPROVING PUBLIC HEALTH") 5 See, e.g., Act §§ 3021-7 ("PART III—ENCOURAGING DEVELOPMENT OF NEW PATIENT CARE MODELS") and 7001-7103 ("TITLE VII—IMPROVING ACCESS TO INNOVATIVE MEDICAL THERAPIES"). 6 See, e.g., Act §§ 5001-5701 ("TITLE V—HEALTH CARE WORKFORCE"). 7 See, e.g., Act §§ 2501-3 ("Subtitle F—Medicaid Prescription Drug Coverage") and 3301-15 ("Subtitle D—Medicare Part D Improvements for Prescription Drug Plans and MA–PD Plans"). 8 See, e.g., Health Care and Education Reconciliation Act of 2010, H.R. 4872, 111th Cong. § 1405 ("Subchapter E- Medical Devices"). 9 See, e.g., http://www.medicaldevices.org/node/704 |
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