U.S. Health Care Reform: Challenges and Opportunities

1. U.S. Health Care Reform: Challenges and Opportunities Karen Davis President The Commonwealth Fund www.commonwealthfund.org kd@cmwf.org Toledo Rotary Club September 17, 2012

2. U.S. Health Reform: Challenges and Opportunities • Why Health Reform is Needed • Early Evidence on Impact • Issues Ahead: • Supreme Court Decision and State Expansion of Medicaid • State Health Insurance Exchanges • What’s Next? Medicare and the Presidential Election

3. Why Health Reform is Needed Uninsured Rates Costs of Care Administrative Complexity Quality of Care Chasm

4. Signs and Symptoms of a Sick Health Care System High Costs Suboptimal and Variable Quality Poor Population Outcomes

6. Overall Health System Performance 1. St. Paul, MN 96. Ann Arbor, MI 124. Toledo, OH 306. Monroe, LA Top : St. Paul MN, Dubuque IA, Rochester MN Bottom: Shreveport LA, Jackson MS, Texarkana AR, Alexandria LA, Beaumont TX, Oxford MS, Hattiesburg MS, Monroe LA Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

7. 2012 Local Scorecard on Health System Performance, Ohio and Michigan HRRs Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

8. Percent of Adults Ages 18-64 Uninsured, 2009-2010 Ann Arbor, MI 16.9% Toledo, OH 17.0% Worcester, MA 5% McAllen TX 53% HRR = hospital referral region DATA: U.S. Census Bureau, 2009-10 American Community Survey Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

9. Health Reform “Game Changers” • Affordability provisions • Income-related assistance with premiums and medical bills; essential benefits; Medicaid expansion • New federal insurance market rules • Individual mandate; restrictions on underwriting, minimum medical loss ratio requirements, review of premium rate increases, and important consumer protections • New health insurance exchanges • Lower administrative costs and more choice of affordable health plans for eligible individuals and small businesses • Provider payment and delivery system reforms • Patient centered medical homes • Bundled acute and post-acute care payment • Accountable Care Organizations • CMS Innovation Center and Independent Payment Advisory Board Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, June 2010); C. Schoen, D. Helms, and A. Folsom, Harnessing Health Care Markets for the Public Interest: Insights for U.S. Health Reform from the German and Dutch Multipayer Systems, (New York and Washington: The Commonwealth Fund and AcademyHealth, December 2009); C. Schoen, U.S. Health Reforms to Improve Access, Outcomes, and Value: International Insights and Innovative Policies, Invited Testimony, Senate Committee on Aging, September 30, 2009

10. Major Sources of Cost, Savings and Revenues Compared with Projected Spending, Net Cumulative Effect on Federal Deficit, 2013–2022 Dollars in billions Note: *New tax revenues include annual fees on manufacturers and importers of braded drugs, manufacturers and importers of certain medical devices, health insurance providers; and additional HI tax of 0.9% on high-income ($200,000/$250,000) earners. Source: Congressional Budget Office, Letter to the Honorable John Boehner, July 24, 2012.

11. By 2019 Health Reform Will Reverse the Deterioration of Health Insurance Coverage for Working Age Adults over the Last Decade and Achieve Near Universal Coverage 2009-2010 Avg = 21.8% 1999-2000 Avg = 16.6% 2019 (estimated) Avg = 9.4% 14%–18.9% 23% or more 19%–22.9% 7.1%–13.9% 7% or less Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

12. Percent of the Non-Elderly Population in the Toledo Area Who Could Benefit From the ACA Coverage Expansions 19% 25% 18% 12% 11% Source: Kaiser Family Foundation, Mapping the Effects of the ACA's Health Insurance Coverage Expansions, available at http://healthreform.kff.org/Coverage-Expansion-Map.aspx.

13. Number of Uninsured Dropped by 1.3 Million People in 2011 Millions of uninsured Source: Income, Poverty, and Health Insurance Coverage in the United States: 2011. United States Census Bureau, September 2012.

14. Reform Has Dramatically Reduced the Number of Young Adults Without Health Insurance Coverage Percentage of Young Adults Without Health Insurance • 6.6 million young adults enrolled in parents’ policies in 2011 who would not have been able to do so prior to law; 3 million newly insured • 62,000 people have been enrolled in Pre-Existing Condition Insurance Plans as of June 2012 • 102 million policyholders no longer have lifetime benefit limits • Beginning in 2014 insurance coverage for working families will improve markedly – up to 32 million newly covered; 39 million with subsidies and lower costs September 2010: Health Reform Allows Children to Remain on Parents’ Plans Until Age 26 2009 2010 2011 Source: S. R. Collins, R. Robertson, T. Garber, and M. M. Doty, Young, Uninsured, and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act Is Helping, (New York: The Commonwealth Fund, June 2012); HHS, ASPE Office of Health Policy based on CDC/NCHS National Health Interview Survey, 2009-2011.

15. Projected Health Spending in 2020 $275 Billion Lower Than Pre-Reform PredictionsCumulative Reduction of $1.7 Trillion over 2011-2020 • Lowest health care cost increase in 50 years -- 3.9% in 2009 and 2010 • $1.7 trillion lower health spending over the decade than projected 2 years ago • Medicare $750 billion lower • Private spending $1.1 trillion lower • Predictions that health reform would cause health care costs to rise not borne out • Health delivery system changes may be beginning to have an effect −5.6% 19.9% of GDP 21.1% of GDP 19.8% of GDP Source: K. Davis, Bending the Health Care Cost Curve: New Era in American Health Care?, (New York: The Commonwealth Fund Blog, January 2012).

16. Health Insurance Premium Trends • Employer-Sponsored Health Plan Premium Increases Slowed in 2012 • Single health coverage -- $5,615; family coverage $15,745 • Up 3 percent for single coverage and 4 percent for family coverage in 2012 over 2011; wages rose by 1.7 percent • Health care expenditures rose 3.9 percent in 2010 and 2011; lowest in 50 years • Small firms have slightly lower premiums ($5,588 vs. $5,628 for single coverage) but higher cost-sharing and deductibles • Premiums lower in firms with low-wages, younger workers • Premiums lower in HMO and high-deductible plans; highest in PPO plans • U.S. Department of Health and Human Services estimates $2.1 billion health insurance savings in 2012 from ACA provisions – review of premiums for “reasonableness” and medical loss ratio rebates

17. The Health System is Responding to Challenge to Provide Better Care • Meaningful use of health IT – • physicians with Electronic Health Records doubled from 17 to 34 percent in last three years • half of all hospitals have registered for a Medicare or Medicaid EHR Incentive Payment; $2.5 billion in EHR incentive payments • 154 ACOs with broad responsibility for quality and cost of patient care; Pioneer ACOs; Shared Savings Plans; cover 5% of Medicare beneficiaries • Bundled payment – 4 Medicare pilots for hospital and post-acute care; various bundles of hospital inpatient, physician inpatient, post-acute care • Primary care and Medical homes – Comprehensive Primary Care Initiative (multi-payer initiative in 7 areas with 75 primary care practices per area; blended FFS and care management fee per beneficiary per month; shared savings); community health centers; Medicare; 41 state Medicaid programs • Community-based Transitions Program – 7 communities in Arizona; Atlanta; Akron; Merrimack Valley (MA), Southern Maine, and Chicago selected as of January 2012; aims to improve post-hospital discharge care transitions and reduce hospital readmissions • Partnership for Patients – 6,900 hospitals and organizations pledged their commitment to a national campaign to improve the safety and coordination of care

18. Improved Prevention and Health Promotion • 32.5 million Medicare beneficiaries received free preventive services through May 2012 • 3.6 million seniors who reached the Medicare Part D “doughnut hole” received 50% discount on prescription drugs saving $2.1 billion through May 2012 • An additional 54 million policyholders under age 65 with private insurance have coverage for preventive services with no cost sharing • Employers mounting health promotion programs and introducing incentives for health risk assessment and healthier lifestyles • Hospitals have incentives to reduce hospital-acquired infections, improve patient safety, reduce hospital readmissions

19. Supreme Court Decision • Upholds constitutionality of the requirement to have health insurance on grounds that the associated penalties are taxes • Changes rules for state participation in the law’s Medicaid expansion for people earning up to 133 percent of poverty, estimated to cover up to 17 million uninsured people by 2020 • Federal government provides 100 percent financing for most states through 2016, phasing down to 90 percent for all states by 2020 • Decision permits but does not require states to expand their Medicaid programs under the conditions of the law and receive federal funds • States that choose not to participate in the expansion can maintain existing federal Medicaid funds • People with incomes between 100 and 400% poverty without affordable employer or public insurance are eligible for subsidized private plans through insurance exchanges; only legal immigrants under 100% poverty. • States and federal government can move forward in implementation; substantial federal financing of the Medicaid expansion will be a strong incentive for states but not all states likely to participate

20. What States Are Saying About ACA Medicaid Expansion Participating (11) Leaning Toward Participating (3) Undecided/No comment (26) Will Not Participate (5) Leaning Toward Not Participating (5) Source: American HealthLine, August 27, 2012.

21. State Action to Establish Exchanges, As of July 2012 NH WA VT ME MT ND AK MN OR NY WI ID MA SD RI WY MI CT PA IA NJ OH NE NV DE IN IL MD UT WV IA VA CO DC CA KS MO KY IL NC WV VA TN SC OK AZ AR NM GA AL MS HI LA TX FL State exchange in existence prior to passage of ACA No active exchange legislation or executive order, but received federal level one grant, studying exchange establishment, or governor pursuing alternative options Exchange established through signed legislation Exchange established through executive order Will not pursue state-run exchange Legislation passed one or both houses or pending Source: National Conference of State Legislatures, Federal Health Reform: State Legislative Tracking Database. http://www.ncsl.org/default.aspx?TabId=22122; Politico.com; Commonwealth Fund Analysis.

22. What’s Next?: Presidential Election • President Obama • Implementation of Affordable Care Act • Medicare/Federal budget savings through payment and delivery system reform, movement to pay for value instead of pay for volume • Governor Romney • Repeal Affordable Care Act and replace with targeted market-based measures • Medicare/Medicaid budget savings through Medicare premium support and and Medicaid block grants to states

23. President Obama Implement Affordable Care Act • Expansion of coverage to 32 million uninsured • Insurance market rules • Improved prescription drug coverage under Medicare • Payment and delivery system innovation • Prevention and health promotion Medicare Savings • Independent Payment Advisory Board (IPAB) recommendations on Medicare payment and value-based insurance design • Medicare spending target of GDP per capita + 0.5%

24. Governor Romney • Repeal and Replace Affordable Care Act • Equalize tax treatment of individual insurance with employer insurance • Pre-existing condition protections for people with continuous coverage • Sale of insurance across state lines • Coverage of young adults under parents’ policies? • Repeal IPAB and CMMI payment innovations • Medicare premium support • Block grants for Medicaid • State flexibility to cover uninsured including exchanges, high risk pools, reinsurance • Malpractice reform

25. Thank You! Robin Osborn, Vice President and Director, International Program ro@cmwf.org Tony Shih, Executive Vice President for Programs, ts@cmwf.org Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Sara Collins, Vice President, Affordable Health Insurance src@cmwf.org Stu Guterman, Vice President, Payment Reform sxg@cmwf.org Kristof Stremikis, Senior Research Associate, ks@cmwf.org For more information, please visit: www.commonwealthfund.org