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Running Head: IMPACT OF HEALTHCARE REFORM 1

Impact of Healthcare Reform and the Affordable Care Act on Pharmacy

Michael W. Crowe

University of MichiganFlint

Author Note

Michael Crowe, Clinical Services, Diplomat Specialty Pharmacy

Michael Crowe is Clinical Technology Manager at Diplomat Specialty Pharmacy

Correspondence concerning this article should be addresses to Michael Crowe,

Diplomat Specialty Pharmacy, 4100 S. Saginaw Street, Flint, MI 48507.

Contact: [email protected]


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IMPACT OF HEALTHCARE REFORM 2

Abstract

Until recently, the United States healthcare system seemed to be headed in a downward

direction. With no action, it was expected that the poor access to care, extremely high costs, and

suffering quality would lead to the demise of the system. With the passage of the Patient

Protection and Affordable Care Act, changes finally started to be implemented, many of which

have already affected pharmacy. Overall, the biggest impact on pharmacy has been the increased

access to care, which has resulted in an increased demand for prescriptions and traditional

pharmacy services. However, the details of what stands to have the greatest impact on the

profession of pharmacy have yet to be fully developed. With the call for a more patient-

centered, team-based model of care, the stage is set for the pharmacist who provides cognitive

services to transition from the exception to the standard of care.

Keywords: health care reform, affordable care act, pharmacy, pharmacist


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Impact of Healthcare Reform and the Affordable Care Act on Pharmacy

Spending, access, and outcomes are three of the most commonly cited problems with the

current health care system in the United States. According to the Centers for Medicare and

Medicaid Services (CMS), the U.S. spent $2.6 trillion on health care costs in 2010, which was

ten times that spent in 1980 (Centers for Medicare and Medicaid Services, 2011). This amounts

to nearly $8,000 per person, per year, a figure more than two-and-a-half times that of most other

developed nations. Since 2002, employer-sponsored health insurance premiums have increased

97% (Kaiser Family Foundation, 2010). The World Health Organization reported that in 2008,

the U.S. spent more per capita, and more as a percent of gross domestic product (GDP), on

health care costs, than any other nation (World Health Organization, 2011). This health care

expenditures growth rate is expected to surpass the national income growth rate for the

foreseeable future (Robert Wood Johnson Foundation, 2008).

These increased costs have prevented more and more citizens from being able to afford

health insurance, as evidenced by the increased proportion of uninsured Americans seen over the

past decade (U.S. Census Bureau, 2011). As part of a vicious cycle, more citizens are unable to

afford health insurance and the remaining beneficiaries are forced to make up for the difference,

paying higher and higher premiums. Increasing premiums force more citizens to give up their

insurance and the cycle continues. This trend has particularly affected the number of citizens

with employer-sponsored insurance plans, which has declined from 64.1% to 55.1%, from 1999

through 2011 (U.S. Census Bureau, 2011). The two primary government health insurance

programs, Medicare and Medicaid, have also been impacted. Medicare, which provides

insurance to the elderly, is seeing increased enrollment due to the aging baby boomer population.

And Medicaid, which covers low-income families, is seeing increased enrollment due to the


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economic recession (Kaiser Family Foundation, 2012). Reliance on government insurance

overall has increased over two percent since 1999 (U.S. Census Bureau, 2011).

Worst of all, despite being the nation with the highest health care expenditures, the U.S.

health care system is far from being the best when it comes to quality and outcomes. For

example, the Organization for Economic Co-operation and Development (OECD), an

international economic group composed of 34 member nations, reports that the average U.S. life

expectancy in 2010 was 78.7 years, more than one yearbelow the OECD average. The U.S.

ranks 25th in terms of mortality rates for ischemic heart disease and stroke. Additionally, the

U.S. leads the 34 OECD nations in obesity rates and asthma-related hospital admissions. And

the U.S. offers less with each health care dollar, ranking 26th in terms of physicians per capita

and 29th in terms of doctor consultations per capita (Organization for Economic Cooperation and

Development, 2011). One of the few areas in which the U.S. ranks first is the highest price tag

for many health care procedures, such as joint replacements, coronary bypasses, and several

others. It is for these reasons that health care reform is considered so critical to the prosperity of

the U.S.

Healthcare Reform

As one could infer from the problems facing the health care system, health care reform

has focused on three primary goals. The first is to expand access to care. The second is to

reduce the costs associated with care. And last, but not least, there is the goal to improve the

quality of care provided (Matzke, 2010).

In his editorial, Lipton outlines his five driving concepts of health care reform (Lipton,

2010). He starts with high-risk patients; those with chronic conditions receiving many

medications, that stand to benefit most from pharmacist-provided cognitive services such as


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medication therapy management (MTM). Strengthening the role of the primary care physician is

his second driving concept, and likely identified due to the overall shortage of this class of health

care provider. Third, he cites the creation of funding sources for pilot projects that have the

potential to save health care dollars and create efficiencies. Related to this driver, Lipton refers

to health care reform as outcomes driven, meaning that the focus is on results, not fee for

service. As such, there are incentives for health care providers and systems that are able to

improve quality of care and decrease overall health care costs. Lipton then turns to the most

important driver of health care reformtransforming health care delivery to a team-based

approach, which he believes will help contain costs, enhance quality, and translate to better

outcomes.

Many of the drivers identified by Lipton (2010) will reappear later in this report as the

focus shifts to the impact of health care reform on the profession of pharmacy. But first, we take

a look at the statute synonymous with health care reform in the United States, its effects thus far,

and how it stands to affect the future.

The Patient Protection and Affordable Care Act

On March 23, 2010, President Barack Obama signed the Patient Protection and

Affordable Care Act (PPACA). The passage of this law is expected to have the greatest impact

on healthcare since the creation of the Medicare Program in 1965 (Vincini, 2012). Although at

one point the PPACA was estimated to cost $940 billion during the first ten years of its life

(Dennis, 2010), it does make several efforts to contain costs that are part of the $2.6 trillion

industry.

First, the PPACA (hereafter referred to as the ACA) implements greater government

oversight of health insurer premiums and practices. Through health insurance exchanges, the


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ACA aims to increase competition and transparency among insurers. A movement away from

payments for treatments and hospitalizations that result from errors and poor quality of care is

supported by the ACA. Other ways in which the ACA aims to contain healthcare costs is

through promoting the use of information technology, switching to a more patient-centric model

of care, and by supporting research to find cost-effective interventions. In fact, with the passage

of the ACA, the Patient-Centered Outcomes Research Institute was established specifically for

commissioning comparative effectiveness research (U.S. Department of Health and Human

Services, 2013).

The ACA to Date

The ACA has already resulted in many changes to the health care system in the first three

years of its life. In 2010, perhaps the busiest year so far, the ACA increased funding to private

and state programs, giving tax credits to employers providing employees with health insurance,

and providing additional funding to state Medicaid programs. Medicare Part D patients reaching

the coverage gap received a $250 rebate in 2010 and a 50% discount on brand-name medications

in 2011. In general, patients received greater access to, and protection of, their health care

insurance. A bridge program was established for patients with pre-existing conditions until

2014, when it becomes illegal to deny patients with pre-existing conditions. Young adults on

their parents insurance had their coverage extended to the age of 26. Fraud prevention efforts

were strengthened as were efforts to attract providers to rural and underserved areas (U.S.

Department of Health and Human Services, 2013).

More regulations have been placed on insurers with the passage of the ACA. For one, it

is now illegal for plans to revoke coverage based on patient errors on an application. All new

plans must provide preventative care such as breast cancer screenings and colonoscopies without


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charging a deductible, co-pay, or coinsurance. For patients denied a benefit, the insurer must

offer a process for appeal, which is completed by an external panel. Lifetime limits on essential

benefits such as hospital stays are no longer allowed. Insurers spending less than 80% to 85% of

premiums on health care services and quality improvement are required to issue rebates to the

beneficiaries (U.S. Department of Health and Human Services, 2013).

The ACA has also led to increased funding of community programs, such as increased

funding for consumer assistance offices, which aim to assist patients with the new health care

landscape. A $15 billion Prevention and Public Health Fund was established to help support

programs that facilitate smoking cessation, obesity reduction, and other preventative measures.

Through funding for new community health centers and expansions, approximately 20 million

new patients have access to their own community health center (U.S. Department of Health and

Human Services, 2013).

Some of the latest and perhaps the most complex implications of the ACA have been the

promotion of accountable care organizations (ACOs), moving from paper-based to electronic

health information, and transitioning to a bundled payment model. The ACA has established

incentives for physicians to form ACOs and to move to electronic health records (EHRs), but

there is much more to be determined with the exact integration of the two, especially in regard to

the role of pharmacy (U.S. Department of Health and Human Services, 2013).

Future Impact of the ACA

There are many more consequences expected from the ACA in the coming years. Before

the close of 2012 the ACA will make additional funding available for the Childrens Health

Insurance Program (CHIP) which insures children ineligible for Medicaid. In 2014, the Health

Insurance Exchange (or Marketplace) opens, offering affordable health insurance options for


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individuals and small businesses. Tax credits are available for patients unable to afford health

insurance. For those that are able to afford health insurance but choose not to, they will be

penalized with a government fee. Next year will also bring expanded eligibility criteria for the

Medicaid program. States will receive federal funding for the subsequent three years to help

cover the costs of increased enrollment (U.S. Department of Health and Human Services, 2013).

In 2015, a new payment model will begin in which physicians are paid based on the

quality of the care they provide, not volume (U.S. Department of Health and Human Services,

2013). This transition actually mirrors that of pharmacy, in that the profession of pharmacy has

been advocating for reimbursement based on cognitive services that produce valuable outcomes,

as opposed to the outdated dispensing fees that encourage prescription volume. Many of these

pharmacist-provided cognitive services will be expanded upon in the upcoming sections.

Impact on Pharmacy

The ACA has certainly resulted in many changes in the way health care is delivered and

financed in the U.S. Many of these changes have been stimulated by the core causes of

increased health care spending. First, there is the increased prevalence of chronic diseases. It is

estimated that the costs associated with managing chronic diseases account for 75% of national

health care expenditures (Congress of the United States, 2008). Related is the increased

spending on prescription medications. Medications being developed today involve a great deal

of research, technology, and other resources. Therefore medications today are more costly than

ever before (Centers for Disease Control and Prevention, 2011). Taken together, there are many

opportunities for the pharmacist to intervene and ensure patients are receiving the most cost-

effective medication regimens. However, these opportunities will rely on the impact of the

ACA.


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As already discussed the ACA will increase access to care, including prescription drug

coverage. Therefore, the demand for pharmacy services is expected to rise. In addition, there

are several other ways in which the ACA stands to impact pharmacy: Medicare DMEPOS

accreditation exemption; closing the Medicare Part D coverage gap; changes in Medicaid

reimbursement; increased fraud, waste, and abuse prevention efforts; and an expanded role of the

pharmacist in medication therapy management and other patient care models. These will be

discussed in greater detail in the forthcoming sections.

Medicare DMEPOS Accreditation

Prior to the passage of the ACA, all pharmacies supplying durable medical equipment

were required to obtain durable medical equipment, prosthetics, orthotics and supplies

(DMEPOS) accreditation if they were billing Medicare. Under the new health care law, many

pharmacies may no longer be required to obtain this accreditation (Jonas, 2010).

According to Section 3109 of the ACA, pharmacies that have been enrolled as a

DMEPOS supplier for the previous five years and have Medicare DME billings that do not

exceed five percent of the total pharmacy sales over the previous three years may be eligible for

accreditation exemption. Additional criteria required to be considered for this exemption

includes having no adverse actions taken against the provider in the past five years and agreeing

to cooperate in an audit of a random sample of pharmacies each year. Pharmacies meeting the

criteria for exemption must still submit an attestation that it meets the above criteria. New

pharmacies and those that have been in operation for less than five years are not eligible for the

exemption. These requirements are outlined in section 3109 of the ACA (Matzke, 2010).

While this exemption may save pharmacies some time, it is important that pharmacies

look carefully at all third-party insurers they bill for DME products. CMS is not the only insurer


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that requires DMEPOS accreditation. Some commercial and state Medicaid programs have also

required accreditation as a means of combating fraud. Therefore, not maintaining accreditation

may exclude a pharmacy from other potential sources of revenue. Not to mention, accreditation

is also a sign of qualitythat an organization has been evaluated by a third party and meets a

certain standard. Therefore, choosing not to renew accreditation may also hinder other clients

confidence in the business (Renz, 2010).

Medicare Part D Coverage Gap

On January 1, 2006, as part of the Medicare Modernization Act of 2003, Medicare

beneficiaries were given a new option for prescription drug coverageMedicare Part D. Since

the implementation of the Medicare Prescription Drug Plans (Part D), patients have had to deal

with a complex benefits structure. In addition to a monthly premium of approximately $35,

patients in 2006 were also obligated to pay a $250 out of pocket deductible before benefits would

kick in. Both of these amounts have since increased. After the deductible and up to $2,250,

patients are responsible for 25% of their medication expenses. After $2,250 is reached, and up to

a $3,600 stop-loss threshold, enrollees are responsible for 100% of their medication expenses.

This is known as the coverage gap. After reaching this threshold, enrollees pay the greater of $2

generics/$5 brand drugs, or a five percent coinsurance.

These thresholds and limits have changed with the growth in per capita Part D drug

spending, but until the ACA was passed, many patients were faced with liability for 100% of the

expenses incurred while in the coverage gap (also referred to as the donut hole). Now, Part D

beneficiaries can expect to see a gradual close in the coverage gap during the first ten years of

the ACA. Beginning in 2010, beneficiaries entering the coverage gap received a $250 rebate. In

2011, this increased to a 50% discount on brand-name medications (Jonas, 2010). Generic


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medications are also affected, with a seven percent discount in 2011 and a fourteen percent

discount in 2012. CMS estimated that the ACA has saved Medicare enrollees $3.4 billion,

largely due to efforts to close the coverage gap. The gap is expected to be closed by 2020

(Jonas, 2012).

As a result of these changes, pharmacies can expect to see more Medicare Part D claims

further into the year. Prior to the ACA, when discounts for the coverage gap were not available,

many beneficiaries would choose not to purchase their medication once they entered the

coverage gap. With the goal of eliminating the coverage gap gradually over time, more and

more patients should be expected to continue their medications into the year. At the same time,

pharmacies should expect to see more patients getting out of the coverage gap by being able to

more gradually make purchases that count towards reaching their out-of-pocket (OOP) liability.

Patients should be aware of differences between brand-name and generic drugs within the

coverage gap. While the entire price (not just the OOP expense) of the brand-name product will

be counted towards reaching the catastrophic coverage level, only the OOP expense will count

for generic products (Centers for Medicare and Medicaid Services, 2012).

Medicaid Reimbursement

Medicaid reimbursement for pharmacy services has long been a concern of the

profession. In 2005, the Deficit Reduction Act created rules for the federal upper limit (FUL) for

reimbursement, which was largely based on the average manufacturers price (AMP).

Unfortunately with the definition used for AMP, reimbursement rates for pharmacies would be

severely reduced, and in some cases pharmacies would be reimbursed below the actual cost of

the medication (Matzke, 2010). The ACA includes an improved definition of AMP and directs

CMS to set the FUL at no less than 175% of the averaged weighted AMP (Jonas, 2010). It also


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required HHS to implement new generic reimbursement rates near the end of 2010. These

changes contained in the ACA are expected to save pharmacies nearly $3 billion. Pharmacies can

also expect to see a remarkable increase in the volume of Medicaid prescriptions as a result of

expanded inclusion criteria for Medicaid patients. The law also expands the Medicaid formulary

to include tobacco cessation agents, barbiturates, and benzodiazepines (Matzke, 2010).

On the other side of the coin, the Medicaid programs have been put at risk for losing

money with the passage of the ACA. This is due to the changes in the way Medicaid

prescription drug rebates are going to be handled. Originally created by the Omnibus

Reconciliation Act of 1990 (OBRA 1990), the rebates were intended to help save Medicaid

money through discounts given by pharmaceutical manufacturers to the individual states. Each

manufacturer is required to sign a rebate agreement with the state Medicaid program in order to

participate in the program. The rebates are paid directly to the state, but the federal government

receives a percentage. With the passage of the ACA, the proportion that is collected by the

federal government has the potential to increase, costing the states millions of dollars (Jonas,

2010).

Finally, CMS has introduced a proposed rule that implements provisions of the ACA. A

portion of that rule recommends states change the term pharmacy dispensing fee to

professional dispensing fee. Its a small change, but better reflects the pharmacists

professional services associated with the delivery of the medication, as well as the cost

associated with that dispensing (Jonas, 2012).

Fraud, Waste, and Abuse Prevention

Instances of fraud, waste, and abuse are a huge threat to the U.S. health care system.

Some have estimated that fraud, waste, and abuse cost the system nearly $100 billion annually


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(Kauffman, 2010). In response to these issues, the ACA makes several attempts to prevent fraud

waste, and abuse. These include new provider screenings and enforcement measures, $350

million for the Health Care Fraud and Abuse Control Program (HCFAC), Department of Health

and Human Services and Department of Justice expanded partnerships throughout the country to

investigate and convict health care fraud-related crimes, and a new enrollment processes for

Medicaid providers (Jonas, 2010).

All providers, including pharmacists, providing services to Medicare, Medicaid, or

Childrens Health Insurance Programs will be subject to new screening and enrollment

requirements. This first-time screening procedure went into effect when the ACA was signed

into law, in March 2012. Thereafter, all new providers were subject to the screening, which

includes a licensure check, criminal background check, fingerprinting, and surprise visits to the

practice site. Existing providers were not subject until March 2012. No providers will be able to

receive payments from any federal program if he/she has not been screened (Carpenter, 2010).

In pharmacy, the federal False Claims Act (FCA) is used to recover funds from

inappropriate billing practices, such as up-coding and billing for products and services not

provided. While the FCA itself did not change with the passage of the ACA, the civil monetary

penalties for violating it did. The fine for making a false claim increased from $10,000 to

$50,000 plus three times the amount of the claim for each false record. Violators will also be

fined $15,000 for every day HHS is not allowed to access records for audits. And overpayments

must be paid within 60 days of being identified. It is unclear whether or not overpayments will

be considered false claims (Carpenter, 2010).

The ACA has also resulted in changes to the Medicare antikickback statute (AKS) and

remuneration laws. The AKS prohibits anyone from knowingly and willfully soliciting or


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receiving any remuneration directly or indirection under a federal health care program. It was

typically used in conjunction with the FCA to increase penalties, but required prosecutors to

establish a connection between a false claim and a violation of AKS. Prosecutors no longer need

to establish this link; now, any violation of AKS is automatically considered a false claim. The

ACA also removed the requirement that a person involved in kickbacks had to have knowledge

of the arrangement to be in violation of AKS. According to past remuneration laws, it used to be

illegal for patients covered by any government health care program to receive inducements if the

provider knows or should know that the inducement is likely to influence the patients choice

of product or service for which payment may be made under a government program. Under the

ACA, new exceptions have been added that, after interpretation by the Office of Inspector

General (OIG), may allow a pharmacy to offer rewards programs to its Medicare and Medicaid

patients (Carpenter, 2010).

Pharmacy audits will be another means by which the ACA seeks to combat Fraud, Waste,

and Abuse. It aims to do this by calling for recovery audit contractors (RACs) and Zone

Program Integrity Contractors (ZPICs). RACs are government-independent contractors that

review post-payment claims data, seeking to find improper (unintentional) claims. The RACs

are reimbursed by the government as a percentage of the dollars recovered. The ACA calls for

each state to contract with RACs to audit Medicaid and Medicare Part D prescription claims.

ZPICs audit providers specifically for fraud and abuse, and their fee is fixed, not contingent on

what they find. Both RACs and ZPICs have proven highly cost-effective. Pharmacists should

be prepared for the impact of RAC and ZPIC audits; Carpenter (2010) provides these

recommendations: (1) ensure that the fraud and abuse compliance program is active and

functioning correctly; (2) designate a point person to handle ZPIC audit requests; (3) develop a


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multidisciplinary committee that has representation across all departments, so that the entire

organization can assist in developing and implementing procedures in case of an audit; and (4)

create an intake and tracking system to monitor audit deadlines (Carpenter, 2010).

Pharmacists and Medication Therapy Management

One of the ways in which the ACA aims to reduce waste is through the promotion of

medication therapy management (MTM). MTM is defined by federal law as a program of drug

therapy management that may be furnished by a pharmacist and that is designed to assure that

covered part D drugs under the prescription drug plan are appropriately used to optimize

therapeutic outcomes through improved medication use, and to reduce the risk of adverse events,

including adverse drug interactions. Within an MTM session, federal regulations require

inclusion of screening for potential problems resulting from therapeutic duplication, age- and

gender-related contradictions, over- and underuse, drug-drug interactions, incorrect drug dosage

or duration, drug-allergy contraindications, and clinical abuse/misuse of prescription drugs.

Currently, MTM is a required component of Medicare Part D plans for patients with at least two

chronic conditions, receiving at least two medications, and expected to incur at least $3,000 in

annual prescription drug costs (Carpenter, 2010).

The ACA calls for HHS to establish grant programs to health entities offering MTM

programs that exceed the baseline requirements. The ACA also calls for a required

comprehensive medication review annually and potentially the creation of a medication action

plan in collaboration with the patient and prescriber. Follow-up interventions will be required.

At least quarterly, plan sponsors will be required to assess the medication use of high-risk

patients not enrolled in an MTM program. Plan sponsors must also establish a process that

automatically enrolls targeted beneficiaries into an MTM program. It is the hope that the


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expanded use of MTM will result in cost savings through the elimination of medication overuse

and prevention of adverse drug events such as drug-to-drug interactions (Carpenter, 2010).

Pharmacy Practice Expansion

In addition to an expanded role in MTM, the ACA also calls for the increased

development of the patient-centered medical home (PCMH), a key component of accountable

care organizations (ACOs). The intent is to replace the fragmented healthcare model with a

multidisciplinary team approach, with the overall goal of improving quality of care and

decreasing health care system costs (Matzke, 2010).

For health care providers transitioning to new patient care models, the PCMH is

becoming the most common choice. It focuses on collaboration and coordination of the patient

care by a team of various health care providers. As its name states, its goal is to put the patient at

the center of their own care. PCMH practices are reimbursed at higher rates, but must first

become accredited by a governing body. Each governing body has a set of requirements that the

practice must comply with before earning the designation. Although the ACA does not

specifically require a pharmacist, most physicians recognize the value of having one involved.

In a survey of more than 100 physicians, across 13 states, 96 percent reported benefits to patient

outcomes and quality of care when a pharmacist was involved in the health care team model

(Farran, 2013).

Another way in which pharmacists may expect to become involved is in transition-in-

care teams, which are responsible forhelping patients move from the hospital to the home.

CMS has identified unplanned readmissions as a key quality indicator and financial risk to

hospitals. Transition-in-care teams have been shown to decrease hospital readmissions and

improve patient satisfaction. The pharmacist has the potential to serve and important role on this


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team, counseling patients and caregivers on their medications and providing post-discharge

follow-up (Cutler, 2011).

ACOs are local health care organizations comprised of a related group of providers,

which as a whole is responsible for the cost and quality of care delivered. ACOs meeting

voluntary quality thresholds qualify to share a portion of the savings with the government.

While the ACO health care professionals listed in the law do not include pharmacists, the

knowledge and skills of the pharmacist is invaluable to a program seeking to improve outcomes

and reduce costs. Expect to see pharmacists being pulled into ACOs more frequently in the

coming years (Lipton, 2010).

Education

One final area pharmacists may expect to see changes as a result of the ACA is in

education. The ACA makes grants available to educational entities, including colleges of

pharmacy, that are integrating quality improvement and patient safety into their curriculum.

There is also incentives for programs focusing on geriatric education such as pharmacy

fellowships, and incentives for healthcare professionals to go into practice in the geriatrics field

(Matzke, 2010).

Conclusion

The passage of the ACA has certainly resulted in many changes that stand to impact

pharmacy. While many of these changes seem to help pharmacists continue to focus on the

productprescriptions and durable medical goodspractitioners should be prepared to see a

major shift in how pharmacy is practiced. With a call for changes in the health care delivery

model to be more team-based and with greater recognition of the pharmacist in providing


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cognitive services such as MTM, it should be expected that the focus on dispensing will change

to a focus on cognitive services provided by the pharmacist.


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References

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