Comments on Affordable Care Act and other healthcare issues
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Comments on Affordable Care Act and other healthcare issues

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Comments submitted to HHS on 4/2/2014 in a roundtable discussion.

Comments submitted to HHS on 4/2/2014 in a roundtable discussion.

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Comments on Affordable Care Act and other healthcare issues Comments on Affordable Care Act and other healthcare issues Document Transcript

  • P a g e | 1 White House Business Council Roundtable at the Pittsburgh Technology Council April 2, 2014-9:45am Summary of Prepared Comments Robert Dickson, Chief Financial Officer-CardiacAssist, Inc. Thanks to the representatives of the White House Business Council Roundtable and the Pittsburgh Technology Council for arranging this meeting and inviting us to attend and provide comments. CardiacAssist, Inc. is a Pittsburgh based medical device company that manufactures and sells the “TandemHeart”, a short term circulatory assistance device. The device is used by hospitals and doctors through-out the United States. CardiacAssist is revenue generating and employs approximately 40…25 in Pittsburgh and 15 elsewhere in the United States. CardiacAssist’s founders, investors and employees are concerned about overall health issues but are specifically concerned about cardiovascular healthcare since this is the focus of the company. We attempt to provide comprehensive medical insurance for our employees at a reasonable cost to them. CardiacAssist’s comments on items related to the Affordable Care Act (“ACA”) and other healthcare related matters follow: Overall government focus. ACA was aggressive legislation to provide medical insurance to those without insurance, estimated at almost 50 million people, and to reform health care in the United States. There is no question that health care reform is complicated and it needs to be a continuing effort. However, the focus of the Affordable Care Act seems is be too heavily focused on insurance structure and regulation rather than addressing real healthcare issues and remedies. Insurance premiums have been changed for groups of people but overall there have been no real reduction in insurance premiums or health care costs. Moving forward we encourage more focus on real healthcare issues…research and solutions to remedy the underlying diseases and conditions that impact health and less government control of the insurance marketplace. We discuss a few of these real healthcare issues in the following paragraphs. Medical device tax. At 2.3% of revenues, the medical device tax costs CardiacAssist about a few hundred thousand dollars per year and is estimated to cost the medical device industry $30 billion per year. It is a tax on revenue, not net income, so even companies whose performance does not result in net income, are required to pay the tax. As a result, the tax has a disproportionate impact on newer, smaller, start-up companies. Frequently this type company creates innovative medical devices and taxing innovation is not a good policy.
  • P a g e | 2 Increased cash outflow naturally needs to be covered from another source…probably payroll or research, which also impacts payroll. Say the annual cost is $30 billion and the average wage is $100,000 (with benefits). Intuitively, this would result in the permanent loss of 300,000 jobs. It is unlikely the use of the tax proceeds will make up for many of these lost jobs. The hospital industry does not generally permit the medical device tax to be passed along to them and their resistance has been effective. Since CardiacAssist is now beginning some clinical trials, animal studies and product development efforts to demonstrate that the TandemHeart is effective and competitive, CardiacAssist is presently cash flow negative. Accordingly, CardiacAssist, Inc. could utilize the cash paid for the medical device tax for research to increase the effectiveness of the TandemHeart to improve our competitive position. Most companies will have no benefit in return from the tax and do not expect a noticeable increase in revenue from the ACA. CardiacAssist has not experienced an increase in patients using the TandemHeart as a result of the ACA, in part because it is not an elective procedure. CardiacAssist does not expect to realize an increase in revenue from new insurance plan enrollees because many of the new enrollees are younger people who do not need devices like the TandemHeart. In short, the medical device industry has a focused tax on their products that does not result in any benefits to them. The medical device tax should be eliminated. Physician Payment Sunshine Act An example of an excessive focus on regulation is the Physician Payment Sunshine Act. Certain portions of it have been delayed but we predict that the Sunshine Act will be very controversial once the reports are made and doctors are notified of expenditures. Doctors will begin receiving notices of expenditures, sometimes of very minor amounts that occurred months before in group meetings, for approval by them as items paid on their behalf. A 2010 study reported by pharmacompliancemonitor.com indicated that 24% of physician investigators responded that they would be less likely to participate in research or would not participate at all if the payments they received were publically disclosed. I could be a lost opportunity for a doctor not to be willing to meet with a medical device research person to discuss a new development, when the doctor has time over lunch, because the doctor or the company do not want a $15 expenditure to be reported because it would appear inappropriate. The conversation could have resulted in a significant new development. Physicians who are key opinion leaders that assist the health care industry and companies in evaluating issues and developing products will shy away from formally assisting companies in the future because of concerns about the bureaucratic impact of Sunshine Act reporting and incorrect perceptions that anything they receive from a company is inappropriate. Creating barriers between physicians who are key opinion leaders and companies that serve the industry
  • P a g e | 3 with innovative research and develop new products is the wrong solution. At a minimum, payments to physicians that are specifically focused on research should be excluded from reporting under the Physician Payment Sunshine Act. The Sunshine Act reporting is of little benefit, it is a nuisance and will result in controversy. The cost of compliance for CardiacAssist is several thousand dollars per year with no benefit in return. It is in the administrations best interest to delay the Sunshine Act Reporting since it may be another black eye for the Affordable Care Act and the administration. HealthCare insurance. Companies go from year to year anticipating a significant increase in premiums….CardiacAssist’s was a reduction last year of 20%, which we did not expect, and was based on mechanics of the system, not demographics or health care experience. HIPPA regulations hide the details of costs from employers, so companies don’t really have a full understanding of what is driving their premiums. Renewal premiums for the next calendar year generally are not known until a few months before the end of the previous year and companies have limited time to react and plan for these premium changes. Frequently the reaction is changing the plan design which confuses employees. CardiacAssist expects premiums to significantly increase next year but we do not know how to effectively control or plan for these costs. Hopefully we will receive another surprise and a 20% reduction. We will react after we learn of the renewal premiums late in the year and probably reengineering the coverage again and reeducate our employees, hopefully without disrupting their economic well-being and their lives. Insurance premiums are too volatile and the structure changes too frequently for companies to adequately plan ahead. Multi-year policies for larger groups should be encouraged to avoid the volatility. ACA discriminatory impact. Who would have thought that the government would promote discrimination? Two major ways discrimination is now built into health care premiums approved under the ACA: -In our plan the oldest employees’ premiums are 3.0x times the youngest, which is typical of other plans. For example in one of our plans the cost of insuring an individual in their early 20’s is $364 per month and the cost of insuring an individual older than 65 is $1,093 per month, both not tobacco users, or a difference of $8,748 a year. This creates a strong disincentive to hire younger people vs. older people, if the company pays their health insurance premiums. -Premiums are now billed to companies for each individual person in the family, not one bill for family coverage as before. This means that the company pays 5 premiums for a husband and wife with three children or about $3,300 per month if the adults are in their mid-sixties and the children are in their early twenties. In the past it was only one premium for family coverage, say at $1,500 per month. The cost is now almost $40,000 per year compared to about $18,000 for family coverage. -If age and family size are considered together, in these examples insurance coverage can be $40,000 per year for a family and about $5,000 per year for a thirty year old, with no dependents.
  • P a g e | 4 This incentivizes employers to high younger workers with no families. Individuals with preexisting conditions can’t be denied coverage, which is a good policy, but older workers with families are more likely to have preexisting conditions and companies are paying higher premiums to pay for this based on a new premium structure. This premium structure may be unrealistically low for younger people because of the bias to coerce young people to obtain insurance, but the employers pay for it through older workers premiums. The structure of premiums has historically been complicated and continues to be so under the ACA. The structure is further complicated since low income people may receive subsidies for their premiums. According to the “Age Discrimination Act of 1975…no person in the United States shall, on the basis of age, be …subjected to discrimination by any program or activity receiving Federal financial assistance”. Accordingly, the Affordable Care Act may be violating preexisting laws. This whole premium structure of pitting the young vs. old, people with families vs. individual insured’s and low income subsidies needs to be restudied to create a more equitable system. Insurance policies that promote employment discrimination should not be permitted. Reimbursement for procedures. There is little visibility beyond the current year about what reimbursement to hospitals and doctors for procedures is going to be when devices like the TandemHeart are used in the future. Companies like CardiacAssist have a difficult time planning for the future without visibility. Trying to navigate through the Centers for Medicare and Medicaid information on reimbursement is very difficult. There are concerns about reimbursement being significantly decreased as the ACA evolves in future years. Clinical trials are being postponed, slowed down or cancelled because the hospitals want to be guaranteed reimbursement and ask the sponsoring company to provide the guarantees, which in many cases is a risk companies cannot assume. Overall, the focus on reimbursement is very short term, the process is very complex and everybody accepts the status quo. This restricts innovation. CMS should outline their objectives for reimbursement over a longer period of time (say ten years) to enable a longer term understanding for companies that rely on reimbursement structures to market their products. The “ICD-10” program that was recently postponed is another example of overregulation. The explosion of codes seems like overkill and an already complicated system will become more complicated. I am personally concerned about the proposed coding for “hit by golf ball” because based on my golf game my name could end up in some government database associated with the repeated use of the code for “hit by golf ball”. It should be determined whether all the ICD-10 codes are necessary and the ICD-10 program should be simplified before implementation. FDA regulation. Improvements are being made in the FDA’s system but there is a strong disconnect/mistrust between the FDA and industry…industry expects the FDA to be unrealistic in their approach, to impose requirements (particularly in clinical trials) that are impossible to meet and then to change their minds at any time. Many device companies are flying under
  • P a g e | 5 the radar, to avoid the FDA’a process, which invites more distrust and potential punitive action. This invites more regulation and punitive actions for deviations from regulations, resulting in more mistrust. When a new medical treatment is formally introduced to the FDA, the FDA should evaluate the healthcare benefit of the treatment and if the evaluation is positive and there appears to be a significant benefit, the FDA should become champions of the company’s effort, rather than a regulatory bottleneck designed to make it difficult for approval. The FDA attitude should be “how can we effectively bring this medical treatment to market faster” rather than “do we have enough regulations in place to make sure a mistake is never made”. The FDA should increase the focus on the ways to get beneficial technology to the market faster. Payments to doctors for Medicare services. Every year the doctors are faced with significant cuts in reimbursement but at the last minute a temporary fix (the SGR or doc-fix issue) is put in place. Everybody expects a temporary fix but it is still disruptive. Everybody knows the doctors reimbursement process needs to be fixed, so the government should just fix the process for payment of doctors rather than kicking the can down the road. Recently Congress acted again to provide a temporary fix and kicked the can down the road again, for the 17th year. Fear of healthcare rationing. A popular concern about the centralization of health care and overall top down management by controlling health care budgets, is rationing of health care and discrimination against patients based on age. This concern is not unrealistic since the United Kingdom’s National Health Service (“NHS”) rations care and discriminates against the elderly. The administration’s health officials and advisors support this concern. For example,: -Tom Daschle wanted a rationing board like the NHS has but for his tax issues, he would have been Secretary of Health and Human Services. He was a major advisor to the ACA. -Donald Berwick, who was in charge of Medicare, applauded the NHS and rationing before his term in government. His views were so explicit, the Democratic Senate never held a hearing on his nomination and the president used a recess appointment so he would not need to answer potentially politically embarrassing questions. -President Obama once told a woman at a town hall meeting that rather than treating an elderly woman for her disease, she should instead be given pain pills, because this will save us money. It should be required that any hospital or doctor that rations healthcare, without the approval of the patient or the patients family, should report the health care rationed to the American Medical Association for evaluation as to whether the rationing was appropriate. Sale and consumption of tobacco products. A major cause of poor health care is the consumption of tobacco products, particularly cigarette smoking, yet the government permits it to continue. The impact of individuals smoking has been directly linked to cancer and cardiovascular diseases. Exposure to second hand smoke may also result in severe health
  • P a g e | 6 problems, particularly in children. In particular, smoking has been linked to increases in preterm births and hospital attendance for asthma in children. It is perceived that politicians may be reluctant to adopt aggressive tobacco control policies because of the risk of irritating tobacco companies, the loss of campaign contributions and that the benefits (reduced disease and medicals costs) are years in the future. Sara Kalkhoran, MD, and Stanton Glantz, PhD, from the University of California San Francisco School of Medicine, wrote that medical expenses associated with asthma topped $50 billion in the U.S. in 2007. They also wrote that California saved $243 billion in medical costs between 1989 and 2008, after spending less than $3 billion on tobacco control programs. Regulation of the sale and consumption of tobacco products is not enough..the sale and use of tobacco products needs to be banned. President Obama is in an ideal position to place this ban in effect. In the past he has issued Executive Orders to accomplish his objectives, he is a champion of health care reform and he is no longer reliant on campaign contributions since his second term is ending. Addiction to opiates. An article in The Boston Globe dated March 27, 2014 stated that Massachusetts Governor Deval Patrick declared a public health emergency to combat the growing abuse of opiates. He directed that all the state’s police, firefighters and other emergency response be equipped with a drug that can quickly reverse heroin overdoses. Patrick said: “Heroin today is cheap and highly potent, we have right now an opiate epidemic.” Using his emergency powers, Patrick told the Massachusetts Department of Public Health to make Narcan available immediately to all first responders, as well as more accessible to families and friends of drug abusers. Narcan, the brand name for naloxone halts overdoses immediately. Although making Narcan more readily available, his directive also established a few other initiatives, including spending $20 million more to increase treatment and recovery services. His actions follow an alarming increase in the number of heroin deaths in Massachusetts and in other states, including Pennsylvania, in the last several months. The administration should follow Massachusetts Governor Patrick’s lead and declare a public health emergency to combat the use of opiates. Ironically, in 2010 the FDA has approved a once-monthly injection to treat opioid dependence. One brand name is Vivitrol, which is an opioid antagonist, which blocks the brain’s opioid receptors, leaving individuals with a loss of feeling from the opioid if they attempt to abuse opioids. Data reported at an American Psychological Association indicated that 90 percent of individuals on Vivitrol had opioid-free urine screens over a six-month period, compared to 35 percent of those on a placebo injection. The administration should encourage the use of opioid antagonist drugs and ensure that health care policies are designed to cover the cost of these life-saving drugs. Prevalence of obesity. Obesity rates are increasing very fast in the adult population but also in in children! The two attached charts developed by the American Heart Association/American Stroke Association indicate the increase in and the prevalence of obesity. Clearly, the trend lines indicate a significant problem, since obesity alone can significantly shorten a life span and
  • P a g e | 7 it is linked to other health problems like cardiovascular issues, diabetes and structural issues. Obesity is a known issue with known consequences. More should be done to control and reduce this trend line ...restrictions on sales of foods that are clearly not healthy, education about foods, such as yogurt, that can be substituted for less healthy foods, such as ice cream. A national program to “fight against obesity” should be established as a priority when evaluating health issues at all levels and sectors. Source of funding. The Federal government has a deficit issue which must be overcome when any issue is considered. We strongly favor spending reductions where appropriate and we believe such opportunities exist and should be aggressively pursued. However, there is another source of funding that could be used to help stabilize longer term programs such as Medicare and Social Security. Currently, significant amounts of money are in tax deferred retirement accounts such as 401-k’s. Consideration should be given to providing a significant one-time tax rate reduction if these funds are rolled over to a Roth retirement account or an equivalent. This would create a huge source of current tax revenue for the government and individuals would benefit from the tax rate reduction. The government would have an known source of revenue that could be dedicated to future Medicare and Social Security benefits and individuals would know the after tax amount of investments that they have for future use. Naturally the tax rate reduction would need to be significant enough to make the transfer to a Roth like account beneficial to individuals. A one-time tax rate reduction should be considered when funds in tax deferred accounts are transferred to a Roth-like account. Health care insurance policy delivery. The Affordable Care Act has focused extensively on the development of insurance exchanges, which is a business that governments should not be in. At the same time, insurance companies are not permitted to sell insurance products across state lines which should reduce costs, provide more uniform policies and be of benefit to insurance consumers. The number of insurance policies available to any one person and the number of insurance companies, is too confusing for the typical purchaser of insurance and this confusion is only compounded by insurance exchanges. The administration’s goal was to have 7 million people enroll in the insurance exchanges by March 31, 2014 and it is estimated that less than 50% of these were previously uninsured. If so, then about 3.5 million people who were previously uninsured would be insured. The number of newly insured does not seem quite worth the effort to build, and media focus on, these exchanges The government should exit the business of insurance policy delivery through exchanges and leave the function of health care insurance policy delivery up to the private sector. Private sector investing in innovation. All the above factors make planning by employers, employees, retirees and others difficult in one way or another. Difficulty in planning makes people risk adverse and funding is more difficult to obtain, particularly for the smaller more innovative companies. Who is going to fund a company when it cannot be estimated how many “years” it will take to get a product approved by the FDA and then the ability to obtain reimbursement for the product is not clear?
  • P a g e | 8 Summary and overall recommendation. Our overall recommendation is to establish an independent, nonpolitical commission of highly qualified individuals with diversified backgrounds to restudy the issue of health care in the United States, with the intent of developing specific recommendations for reform of health care and the ACA. Experience with health care reform and the ACA should be the basis for identifying reforms that need to be made. Most people would view this as a positive step forward and it is better than doing nothing with the view that the ACA must be replaced or the view that it does not need fixing does not need fixing. Establishment of such a commission would probably be a positive for the administration. Our specific recommendations include: -We encourage more focus on real healthcare issues…research and solutions to remedy the underlying diseases and conditions that impact health and less government control of the insurance marketplace. -The medical device tax should be eliminated. -Reporting under the Physician Payment Sunshine Act should be delayed until a more reasonable approach is developed. At a minimum, payments to physicians that are specifically focused on research should be excluded from reporting under the Physician Payment Sunshine Act. -Insurance premiums are too volatile and the structure changes too frequently for companies to adequately plan ahead. Multi-year policies for larger groups should be encouraged to avoid the volatility. -The structure of health care premiums should be evaluated to eliminate discrimination against older workers and workers with families. Insurance policies that promote employment discrimination should not be permitted. -CMS should outline their objectives for reimbursement over a longer period of time (say ten years) to enable a longer term understanding for companies that rely on reimbursement structures to market their products. -It should be determined whether all the ICD-10 codes are necessary and the ICD-10 program should be simplified before implementation. -The FDA attitude should be “how can we effectively bring this medical treatment to market faster” rather than “do we have enough regulations in place to ensure a mistake is never made”.
  • P a g e | 9 -Payments made to doctors should have a long term fix rather than the annual doc-fix that has been used for 17 years. -It should be required that any hospital or doctor that rations healthcare, without the approval of the patient or the patients family, should report the health care rationed to the American Medical Association for evaluation as to whether the rationing was appropriate. -The sale and consumption of tobacco products, particularly cigarettes, should be banned. -The administration should follow-up on Governor Patrick’s lead and declare a public health emergency to combat the use of opiates. The administration should encourage the use of opioid antagonist drugs and ensure that health care policies are designed to cover the cost of these life-saving drugs. -A national program to “fight against obesity” should be established as a priority when evaluating health issues at all levels and sectors. - We strongly favor spending reductions where appropriate and we believe such opportunities exist and should be aggressively pursued. However, a significant one-time tax rate reduction should be considered when funds in tax deferred accounts are transferred to a Roth like account. -The government should exit the business of insurance policy delivery through exchanges and leave this function up to the private sector. ****************** We appreciate the administration’s taking the time to learn our opinion on issues like these. However, the process appears to be broken. There are battles between political parties rather than efforts to constructively improve the system. Please let us know what we can do to assist in the process in the future. Bob Dickson Chief Financial Officer CardiacAssist, Inc. 240 Alpha Drive Pittsburgh, PA 15237 412-963-7770 rdickson@cardiacassist.com