Things To Consider
A number of figures used in tax and retirement planning have been updated for 2010. Most limits for pension and IRA contributions have been unchanged. For example:
1. The maximum contribution that can be made to a defined contribution plan in 2010 under Section 415 is the lesser of $49,000 or 100 percent of compensation-the same limit as in 2009.
2. The limit on employee elective deferrals to Section 401K and Section 403b plans has remained at $16,500 in 2010. For those over 50 this is increased an additional $5,000. The limit for Section 457 plan salary reductions has likewise kept steady at $16,500.
3. The maximum elective deferral for a SIMPLE or 401 K SIMPLE plan is $11,500 in 2010.
4. The limit on IRA contributions remains at $5,000 for 2010. Those 50 and older can still contribute an extra $1,000 under the special catch-up provision.
Here are a few of the income tax changes:
The standard deduction for joint filers and surviving spouses who do not itemize in 2010 is $11,400, the same as 2009. For heads of household, the deduction is $8,400, and for unmarried individuals it's $5,700. The aged and the blind get an additional $1,100 or $1,400 added to their standard deductions, depending on their filing status.
The personal exemption has remained steady at $3,650 for 2010. The exemption started to be phased out at $250,200 of adjusted gross income for married filers, $208,500 for heads of household, $166,800 for unmarried individuals and $125,100 for married individuals filing separate returns in 2009. The phase-out has been eliminated in 2010
The phase-out of itemized deductions began at $83,400 of adjusted gross for married individuals filing separate returns, and $166,800 for all other taxpayers. The phase-out has been eliminated in 2010.
And here are some other items that may be important to your clients.
The social security tax rate for individuals stays at 7.65% in 2010. The rate for self-employed individuals also remains constant at 15.3%. The taxable wage base for the OASDI portion is $106,800 in 2010-and that gets hit with the full 7.65% tax for individuals. Any additional compensation over that limit is subject to only the 1.45% for the Medicare portion.
In 2010, the federal annual gift tax exclusion amount has remained at $13,000. The lifetime gift tax exemption has stayed at $1 million; however the rate on gifts above $1 million is reduced to 35%.
The federal estate tax exemption was $3.5 million in 2009, and as of right now is unlimited in 2010. Watch for probable action on federal estate taxes by the Congress and President. Most experts expect the federal estate tax exemption for 2010 to be reinstated at $3.5 million. Many of those same commentators are suggesting that the federal estate tax exemption in 2011 will return to $1 million in 2010.
These changes may affect your client's retirement, tax plans and estate planning.
AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE OR OTHER FINANCIAL SECURITY ISSUES OF CONCERN.
Sincerely,Weatherby & Associates, PC
Henry C Weatherby
www.careconnecticut.org
Friday, February 26, 2010
Friday, February 19, 2010
U.S. Cracks Down on ‘Contractors’ as a Tax Dodge
By STEVEN GREENHOUSE
Published: February 17, 2010
Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.
President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.
Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.
Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.
One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees. Ohio’s attorney general estimates that his state has 92,500 misclassified workers, which has cost the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue.
“It’s a very significant problem,” said the attorney general, Richard Cordray. “Misclassification is bad for business, government and labor. Law-abiding businesses are in many ways the biggest fans of increased enforcement. Misclassifying can mean a 20 or 30 percent cost difference per worker.”
Employers deny misclassifying workers deliberately. The businesses say the lines are unclear between employee and independent contractor.
Workers are generally considered employees when someone else controls how and when they perform their work. In contrast, independent contractors are generally in business for themselves, obtain customers on their own and control how they perform services.
Many businesses are dismayed about the tougher federal and state scrutiny.
“The goal of raising money is not a proper rationale for reclassifying who falls on what side of the line,” said Randel K. Johnson, senior vice president with the United States Chamber of Commerce. “The laws are unclear in this area, and legitimate clarification is one thing. But if it’s just a way to justify enforcing very unclear laws against employers who can have a legitimate disagreement with the Labor Department or I.R.S., then we’re concerned.”
Among the most often misclassified workers are truck drivers, construction workers, home health aides and high-tech engineers.
Portraying regular workers as contractors allows companies to circumvent minimum wage, overtime and antidiscrimination laws. Workers classified as contractors do not receive unemployment insurance if laid off or workers’ compensation if injured, and they rarely receive the health insurance or other fringe benefits regular employees do.
“This denies many workers their basic rights and protections and means less revenues to the Treasury and a competitive advantage for employers who misclassify,” said Jared Bernstein, who as executive director of Vice President Joseph R. Biden Jr.’s Middle Class Task Force has helped orchestrate the administration’s campaign against misclassification. “The last thing you want is to give a competitive advantage to employers who are breaking the rules.”
Organized labor, a strong supporter of Mr. Obama, has long complained about the practice. No administration has undertaken as big a crackdown as Mr. Obama’s, although administration and state officials deny they are doing it as a favor to labor.
California’s attorney general, Jerry Brown, is seeking $4.3 million from a construction firm he accused of misclassifying employees. Last April, he won a $13 million judgment when a court ruled that two companies had misclassified 300 janitors, cheated the state out of payroll taxes and not paid minimum wage and overtime.
Last November, the Illinois Department of Labor imposed $328,500 in penalties on a home improvement company for misclassifying 18 workers, saying it had pressed them to incorporate as separate business entities.
The Obama administration plans to expand investigations by hiring 100 more enforcement personnel. The I.R.S. has begun auditing 6,000 companies to see whether they are in compliance with the law.
U.S. Cracks Down on ‘Contractors’ as a Tax Dodge
Published: February 17, 2010
(Page 2 of 2)
The administration also plans to rewrite a three-decade-old I.R.S. rule that lets companies indefinitely classify employees as independent contractors — even when the government knows they are misclassified — so long as the company once had a reasonable belief that the workers were contractors.
One worker who welcomes stricter enforcement is Fritz Elienberg, who spent five years installing cable and Internet service for RCN in Boston.
Mr. Elienberg said he and a dozen other installers reported to an RCN office six mornings a week, shortly after 6:30, where they received their daily assignments and the equipment to do installations. He said he typically worked 10 to 14 hours a day and never received time-and-a-half pay for overtime.
“I didn’t feel like an independent contractor. I didn’t feel like my own boss,” Mr. Elienberg said. “I always believed I was an employee. It’s a win-win situation for them and a lose-lose for us. We didn’t get overtime, sick days, vacations, health insurance or pensions.”
Mr. Elienberg said his foot was seriously injured when a ladder fell on it, but workers’ compensation did not cover his medical bills because he was considered a contractor. He is suing RCN for overtime pay and the value of lost benefits.
Michele Murphy, an RCN spokeswoman, said the company often contracted with outside service providers but did not misclassify workers.
A Harvard study found that 4.5 percent of Massachusetts workers were misclassified, while a Cornell study concluded that 10 percent of New York’s private-sector workers were.
Last October, the attorneys general of New York, New Jersey and Montana threatened to sue FedEx Ground, asserting it had misclassified its drivers. The Teamsters union has long pressed officials to pursue the company. The Teamsters hope to unionize these drivers, but independent contractors, unlike regular employees, cannot form unions.
FedEx argues that these drivers are contractors because they own their trucks and can sell their routes.
One factor in the push for more aggressive enforcement is the Labor Department’s new top law enforcement official, M. Patricia Smith. As New York’s labor commissioner the past three years, she was known for cracking down on misclassification.
Ms. Smith oversaw a task force comprising various state agencies that conducted 2,413 misclassification investigations and 65 joint sweeps in which teams descended on companies’ offices to examine payroll records.
In a Feb. 1 report to New York’s governor, Ms. Smith noted that since late 2007, the task force had identified more than 31,000 instances of misclassification and assessed $11 million in unpaid unemployment taxes and $14.5 million in unpaid wages.
Published: February 17, 2010
Federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors.
President Obama’s 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years. More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.
Many workplace experts say a growing number of companies have maneuvered to cut costs by wrongly classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market.
Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers. Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.
One federal study concluded that employers illegally passed off 3.4 million regular workers as contractors, while the Labor Department estimates that up to 30 percent of companies misclassify employees. Ohio’s attorney general estimates that his state has 92,500 misclassified workers, which has cost the state up to $35 million a year in unemployment insurance taxes, up to $103 million in workers’ compensation premiums and up to $223 million in income tax revenue.
“It’s a very significant problem,” said the attorney general, Richard Cordray. “Misclassification is bad for business, government and labor. Law-abiding businesses are in many ways the biggest fans of increased enforcement. Misclassifying can mean a 20 or 30 percent cost difference per worker.”
Employers deny misclassifying workers deliberately. The businesses say the lines are unclear between employee and independent contractor.
Workers are generally considered employees when someone else controls how and when they perform their work. In contrast, independent contractors are generally in business for themselves, obtain customers on their own and control how they perform services.
Many businesses are dismayed about the tougher federal and state scrutiny.
“The goal of raising money is not a proper rationale for reclassifying who falls on what side of the line,” said Randel K. Johnson, senior vice president with the United States Chamber of Commerce. “The laws are unclear in this area, and legitimate clarification is one thing. But if it’s just a way to justify enforcing very unclear laws against employers who can have a legitimate disagreement with the Labor Department or I.R.S., then we’re concerned.”
Among the most often misclassified workers are truck drivers, construction workers, home health aides and high-tech engineers.
Portraying regular workers as contractors allows companies to circumvent minimum wage, overtime and antidiscrimination laws. Workers classified as contractors do not receive unemployment insurance if laid off or workers’ compensation if injured, and they rarely receive the health insurance or other fringe benefits regular employees do.
“This denies many workers their basic rights and protections and means less revenues to the Treasury and a competitive advantage for employers who misclassify,” said Jared Bernstein, who as executive director of Vice President Joseph R. Biden Jr.’s Middle Class Task Force has helped orchestrate the administration’s campaign against misclassification. “The last thing you want is to give a competitive advantage to employers who are breaking the rules.”
Organized labor, a strong supporter of Mr. Obama, has long complained about the practice. No administration has undertaken as big a crackdown as Mr. Obama’s, although administration and state officials deny they are doing it as a favor to labor.
California’s attorney general, Jerry Brown, is seeking $4.3 million from a construction firm he accused of misclassifying employees. Last April, he won a $13 million judgment when a court ruled that two companies had misclassified 300 janitors, cheated the state out of payroll taxes and not paid minimum wage and overtime.
Last November, the Illinois Department of Labor imposed $328,500 in penalties on a home improvement company for misclassifying 18 workers, saying it had pressed them to incorporate as separate business entities.
The Obama administration plans to expand investigations by hiring 100 more enforcement personnel. The I.R.S. has begun auditing 6,000 companies to see whether they are in compliance with the law.
U.S. Cracks Down on ‘Contractors’ as a Tax Dodge
Published: February 17, 2010
(Page 2 of 2)
The administration also plans to rewrite a three-decade-old I.R.S. rule that lets companies indefinitely classify employees as independent contractors — even when the government knows they are misclassified — so long as the company once had a reasonable belief that the workers were contractors.
One worker who welcomes stricter enforcement is Fritz Elienberg, who spent five years installing cable and Internet service for RCN in Boston.
Mr. Elienberg said he and a dozen other installers reported to an RCN office six mornings a week, shortly after 6:30, where they received their daily assignments and the equipment to do installations. He said he typically worked 10 to 14 hours a day and never received time-and-a-half pay for overtime.
“I didn’t feel like an independent contractor. I didn’t feel like my own boss,” Mr. Elienberg said. “I always believed I was an employee. It’s a win-win situation for them and a lose-lose for us. We didn’t get overtime, sick days, vacations, health insurance or pensions.”
Mr. Elienberg said his foot was seriously injured when a ladder fell on it, but workers’ compensation did not cover his medical bills because he was considered a contractor. He is suing RCN for overtime pay and the value of lost benefits.
Michele Murphy, an RCN spokeswoman, said the company often contracted with outside service providers but did not misclassify workers.
A Harvard study found that 4.5 percent of Massachusetts workers were misclassified, while a Cornell study concluded that 10 percent of New York’s private-sector workers were.
Last October, the attorneys general of New York, New Jersey and Montana threatened to sue FedEx Ground, asserting it had misclassified its drivers. The Teamsters union has long pressed officials to pursue the company. The Teamsters hope to unionize these drivers, but independent contractors, unlike regular employees, cannot form unions.
FedEx argues that these drivers are contractors because they own their trucks and can sell their routes.
One factor in the push for more aggressive enforcement is the Labor Department’s new top law enforcement official, M. Patricia Smith. As New York’s labor commissioner the past three years, she was known for cracking down on misclassification.
Ms. Smith oversaw a task force comprising various state agencies that conducted 2,413 misclassification investigations and 65 joint sweeps in which teams descended on companies’ offices to examine payroll records.
In a Feb. 1 report to New York’s governor, Ms. Smith noted that since late 2007, the task force had identified more than 31,000 instances of misclassification and assessed $11 million in unpaid unemployment taxes and $14.5 million in unpaid wages.
Wednesday, January 6, 2010
Remote Electronic Patient Monitoring Could Save $197 Billion Over 25 Years
Remote Electronic Patient Monitoring Could Save $197 Billion Over 25 Years
by Tim Rowan stored in: Tim Rowan's Home Care Technology Report and tagged: Telehealth
The United States is faced with a choice to spend more on healthcare — money that does not exist — or cut costs over time, according to a report underwritten by AT&T and conducted by Kauffman Foundation and Brookings Institution economist Robert E. Litan. $197 in savings would result from implementing telehealth systems. Failure to make policy adjustments that encourage healthcare providers to take advantage of remote monitoring technologies will cut estimated savings by nearly $44 billion.
Both forecasts consider results over a 25-year span. Litan is Vice President for Research and Policy at the Kauffman Foundation, a Senior Fellow in the Economic and Global Economics Programs at the Brookings Institution, and a Consultant to Empiris. He conducted the study of financial implications of remote monitoring technologies in 2008 but the report was recently published by the “Better Health Care Together” coalition (BHCT).
Widespread use of remote monitoring over broadband networks, located in both institutions and homes, to track vital signs of patients with chronic diseases such as congestive heart failure and diabetes is a critical and urgent development. “Remote monitoring can spot health problems sooner, reduce hospitalization, improve life quality and save money,” Litan said at a health care forum sponsored by BHCT.
During his remarks at the BHCT forum, Litan warned that adoption of remote monitoring technologies will be slowed and benefits reduced unless the United States does a better job of reimbursing health care organizations for remote care and encouraging continued investment in broadband infrastructure that can be tailored to meet privacy, security and reliability requirements for telemedicine applications.
“Hospitals and doctors can’t provide services unless they get paid. We need insurance reimbursement policies, beginning with Medicare and Medicaid, that cover remote monitoring,” Litan told the BHCT audience. “We also need policies that deliver broadband, including ’smart networks’ that ensure that patients’ critical data is secure and that communications are not disrupted.”
Jody Hoffman, Executive Director of Better Health Care Together said Litan’s study illustrates how new directions in health care can enable the United States to deliver quality care at lower costs. “Our first priority is to make sure every American has quality, affordable health coverage,” Hoffman said. “In order to do that we also need to get better value for our health care dollars and we believe information technologies can help in a big way.”
Litan’s savings estimates are tied to four specific conditions – congestive heart failure, diabetes, chronic obstruction pulmonary disease, and chronic skin ulcers and wounds.
Following is the Executive Summary from Litan’s report. The entire, 60-page document is available from BHCT at http://www.betterhealthcaretogether.org/study.
VITAL SIGNS VIA BROADBAND: REMOTE HEALTH MONITORING TRANSMITS SAVINGS, ENHANCES LIVES
For the millions of people around the world who have embraced the Internet, the transformational effects of modern communications technologies are well known. Using search engines to access information, attending classes and college lectures online, conducting financial transactions and shopping, and enjoying music, video and games over the Internet are increasingly routine. But other Internet-based activities have yet to reach their full potential; among the most significant is telemedicine – the use of modern communications to deliver a wide range of health care to patients at locations that are physically distant from the caregiver.
By enabling more regular contact between patient and caregiver, the use of IT technologies can mean earlier detection of health problems and better outcomes that enable people to live longer and more satisfying lives. Telemedicine can help those with chronic illnesses to lead normal work and personal lives and enable older Americans to remain in their own homes instead of moving to institutional settings.
Remote Monitoring Detects Problems Earlier; Means Better Outcomes and Less Hospital Time
These benefits of telemedicine, and in particular remote monitoring, are well-documented. Remote monitoring helps chronic disease patients avoid hospitalization and enables those in geographically isolated settings to access specialized and preventive medicine. Distant monitoring has special efficacy for patients with chronic ailments such as diabetes, congestive heart failure, chronic obstructive pulmonary disease, and chronic skin ulcers for which changes in vital signs can signal a need for medical intervention. Remote monitoring technologies can transmit data on a regular, real time basis and prevent hospitalizations by identifying and treating problems by triggering adjustments in care before negative trends reach crisis stage.
The improvements in patient experience can be dramatic. For example, a widely cited study by Meyer, Kobb, and Ryan reports that the combination of home telemonitoring, video visits, and coordinated care resulted in substantial improvements in health outcomes among a group of elderly veterans with a variety of chronic diseases. These gains included a 40 percent reduction in emergency room visits, a 63 percent reduction in hospital admissions, and a 60 percent reduction in hospital bed days of care, along with similar reductions in nursing home care.
These types of outcomes also deliver significant savings to the health care system, particularly for the chronic illnesses that account for roughly 80 percent of increases in Medicare costs.
Widespread Remote Monitoring Can Cut Health Care Costs By $197 Billion
Upon examination of existing literature and experience to date, I estimate that a full embrace of remote monitoring alone could reduce health care expenditures by a net of $197 billion (in constant 2008 dollars) over the next 25 years with the adoption of policies that reduce barriers and accelerate the use of remote monitoring technologies. The policy enhancements boost savings by almost $44 billion over the 25-year period, an improvement of almost 29 percent compared with continuation of the current policy baseline.
The savings are largely attributable to better management of chronic diseases because of remote monitoring. Widespread implementation of remote monitoring means key vital signs can be transmitted to a caregiver or a data center in real time and trigger an instant alert when readings change in a medically significant way. Caregivers also say that addition of two-way video to monitoring programs can further enhance the quality of interaction between patient and caregiver and can encourage patients to observe treatment regimens with greater consistency.
When broken down by condition, I estimate the following net savings over the 25-year period:
Congestive Heart Failure
$102.5 billion
Diabetes
$54.4 billion
Chronic Obstruction
Pulmonary Disease
$24.1 billion
Chronic Skin Ulcers
$16.0 billion
Savings Can Be Accelerated With Smart Policy in Medical Reimbursement and Technology
Success in translating potential savings into real savings depends in part on public policy decisions that speed the acceptance and penetration of remote monitoring. The realignment of reimbursement policy for telemedicine is among the most critical requirements. For example, Medicare and insurance reimbursement policies that recognize the value of investments in telemedicine equipment and expertise can spread the use of remote monitoring by reducing out-of-pocket costs and encouraging buy-in among practitioners. [For full set of policy recommendations see pages 50-51 and 54-55]
Right now, like other preventive care, telemedicine is only covered by current private and public health insurance plans to a limited extent. For example, remote consultations with physicians are reimbursed if they are conducted over two-way video. However, physicians are not reimbursed for examining remote monitoring data as a preventive measure. Right now, patients and insurers are capturing many of the quality improvements and cost savings from telemedicine, but paying for few of them. The costs are largely incurred by health care providers, but not fully reimbursed. This circumstance will not encourage optimal levels of investment in and commitment to the provision of telemedicine infrastructure and services. Quite simply, we need policy incentives that ensure that institutions and practitioners who invest in telemedicine are sufficiently compensated for the resulting improvements in both care and costs.
Smart communications policy also can expedite the adoption of remote monitoring and other telemedicine technologies. Policies that increase the public’s fluency with advanced communications technology will make telemedicine more effective and easier to implement. Policies that bring broadband technologies into more homes also will help bring in remote monitoring, video visits with providers, and self-care education. Investments in networks provide needed capacity for live video and continuous monitoring, and policies allowing quality-of-service offerings allow doctors to treat their patients without interruption.
In particular, the long-term success of remote monitoring requires telecommunications policies that encourage widespread deployment of broadband and accelerated private investment in “smart networks.” Policy should promote network investment and allow operators to tailor services to the needs of telemedicine, including data privacy and reliable real-time connectivity.
www.adhomehealthsolutions.com
www.ctcarecouncil.org
by Tim Rowan stored in: Tim Rowan's Home Care Technology Report and tagged: Telehealth
The United States is faced with a choice to spend more on healthcare — money that does not exist — or cut costs over time, according to a report underwritten by AT&T and conducted by Kauffman Foundation and Brookings Institution economist Robert E. Litan. $197 in savings would result from implementing telehealth systems. Failure to make policy adjustments that encourage healthcare providers to take advantage of remote monitoring technologies will cut estimated savings by nearly $44 billion.
Both forecasts consider results over a 25-year span. Litan is Vice President for Research and Policy at the Kauffman Foundation, a Senior Fellow in the Economic and Global Economics Programs at the Brookings Institution, and a Consultant to Empiris. He conducted the study of financial implications of remote monitoring technologies in 2008 but the report was recently published by the “Better Health Care Together” coalition (BHCT).
Widespread use of remote monitoring over broadband networks, located in both institutions and homes, to track vital signs of patients with chronic diseases such as congestive heart failure and diabetes is a critical and urgent development. “Remote monitoring can spot health problems sooner, reduce hospitalization, improve life quality and save money,” Litan said at a health care forum sponsored by BHCT.
During his remarks at the BHCT forum, Litan warned that adoption of remote monitoring technologies will be slowed and benefits reduced unless the United States does a better job of reimbursing health care organizations for remote care and encouraging continued investment in broadband infrastructure that can be tailored to meet privacy, security and reliability requirements for telemedicine applications.
“Hospitals and doctors can’t provide services unless they get paid. We need insurance reimbursement policies, beginning with Medicare and Medicaid, that cover remote monitoring,” Litan told the BHCT audience. “We also need policies that deliver broadband, including ’smart networks’ that ensure that patients’ critical data is secure and that communications are not disrupted.”
Jody Hoffman, Executive Director of Better Health Care Together said Litan’s study illustrates how new directions in health care can enable the United States to deliver quality care at lower costs. “Our first priority is to make sure every American has quality, affordable health coverage,” Hoffman said. “In order to do that we also need to get better value for our health care dollars and we believe information technologies can help in a big way.”
Litan’s savings estimates are tied to four specific conditions – congestive heart failure, diabetes, chronic obstruction pulmonary disease, and chronic skin ulcers and wounds.
Following is the Executive Summary from Litan’s report. The entire, 60-page document is available from BHCT at http://www.betterhealthcaretogether.org/study.
VITAL SIGNS VIA BROADBAND: REMOTE HEALTH MONITORING TRANSMITS SAVINGS, ENHANCES LIVES
For the millions of people around the world who have embraced the Internet, the transformational effects of modern communications technologies are well known. Using search engines to access information, attending classes and college lectures online, conducting financial transactions and shopping, and enjoying music, video and games over the Internet are increasingly routine. But other Internet-based activities have yet to reach their full potential; among the most significant is telemedicine – the use of modern communications to deliver a wide range of health care to patients at locations that are physically distant from the caregiver.
By enabling more regular contact between patient and caregiver, the use of IT technologies can mean earlier detection of health problems and better outcomes that enable people to live longer and more satisfying lives. Telemedicine can help those with chronic illnesses to lead normal work and personal lives and enable older Americans to remain in their own homes instead of moving to institutional settings.
Remote Monitoring Detects Problems Earlier; Means Better Outcomes and Less Hospital Time
These benefits of telemedicine, and in particular remote monitoring, are well-documented. Remote monitoring helps chronic disease patients avoid hospitalization and enables those in geographically isolated settings to access specialized and preventive medicine. Distant monitoring has special efficacy for patients with chronic ailments such as diabetes, congestive heart failure, chronic obstructive pulmonary disease, and chronic skin ulcers for which changes in vital signs can signal a need for medical intervention. Remote monitoring technologies can transmit data on a regular, real time basis and prevent hospitalizations by identifying and treating problems by triggering adjustments in care before negative trends reach crisis stage.
The improvements in patient experience can be dramatic. For example, a widely cited study by Meyer, Kobb, and Ryan reports that the combination of home telemonitoring, video visits, and coordinated care resulted in substantial improvements in health outcomes among a group of elderly veterans with a variety of chronic diseases. These gains included a 40 percent reduction in emergency room visits, a 63 percent reduction in hospital admissions, and a 60 percent reduction in hospital bed days of care, along with similar reductions in nursing home care.
These types of outcomes also deliver significant savings to the health care system, particularly for the chronic illnesses that account for roughly 80 percent of increases in Medicare costs.
Widespread Remote Monitoring Can Cut Health Care Costs By $197 Billion
Upon examination of existing literature and experience to date, I estimate that a full embrace of remote monitoring alone could reduce health care expenditures by a net of $197 billion (in constant 2008 dollars) over the next 25 years with the adoption of policies that reduce barriers and accelerate the use of remote monitoring technologies. The policy enhancements boost savings by almost $44 billion over the 25-year period, an improvement of almost 29 percent compared with continuation of the current policy baseline.
The savings are largely attributable to better management of chronic diseases because of remote monitoring. Widespread implementation of remote monitoring means key vital signs can be transmitted to a caregiver or a data center in real time and trigger an instant alert when readings change in a medically significant way. Caregivers also say that addition of two-way video to monitoring programs can further enhance the quality of interaction between patient and caregiver and can encourage patients to observe treatment regimens with greater consistency.
When broken down by condition, I estimate the following net savings over the 25-year period:
Congestive Heart Failure
$102.5 billion
Diabetes
$54.4 billion
Chronic Obstruction
Pulmonary Disease
$24.1 billion
Chronic Skin Ulcers
$16.0 billion
Savings Can Be Accelerated With Smart Policy in Medical Reimbursement and Technology
Success in translating potential savings into real savings depends in part on public policy decisions that speed the acceptance and penetration of remote monitoring. The realignment of reimbursement policy for telemedicine is among the most critical requirements. For example, Medicare and insurance reimbursement policies that recognize the value of investments in telemedicine equipment and expertise can spread the use of remote monitoring by reducing out-of-pocket costs and encouraging buy-in among practitioners. [For full set of policy recommendations see pages 50-51 and 54-55]
Right now, like other preventive care, telemedicine is only covered by current private and public health insurance plans to a limited extent. For example, remote consultations with physicians are reimbursed if they are conducted over two-way video. However, physicians are not reimbursed for examining remote monitoring data as a preventive measure. Right now, patients and insurers are capturing many of the quality improvements and cost savings from telemedicine, but paying for few of them. The costs are largely incurred by health care providers, but not fully reimbursed. This circumstance will not encourage optimal levels of investment in and commitment to the provision of telemedicine infrastructure and services. Quite simply, we need policy incentives that ensure that institutions and practitioners who invest in telemedicine are sufficiently compensated for the resulting improvements in both care and costs.
Smart communications policy also can expedite the adoption of remote monitoring and other telemedicine technologies. Policies that increase the public’s fluency with advanced communications technology will make telemedicine more effective and easier to implement. Policies that bring broadband technologies into more homes also will help bring in remote monitoring, video visits with providers, and self-care education. Investments in networks provide needed capacity for live video and continuous monitoring, and policies allowing quality-of-service offerings allow doctors to treat their patients without interruption.
In particular, the long-term success of remote monitoring requires telecommunications policies that encourage widespread deployment of broadband and accelerated private investment in “smart networks.” Policy should promote network investment and allow operators to tailor services to the needs of telemedicine, including data privacy and reliable real-time connectivity.
www.adhomehealthsolutions.com
www.ctcarecouncil.org
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