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National Health Care Reform. Now the Hard Work Begins: September 23, 2010. Peter Pratt Senior Vice President. The Impetus for Reform. Increasing numbers of uninsured Rising health care costs for individuals, businesses, and government

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national health care reform

National Health Care Reform

Now the Hard Work Begins:

September 23, 2010

Peter Pratt

Senior Vice President

the impetus for reform
The Impetus for Reform
  • Increasing numbers of uninsured
  • Rising health care costs for individuals, businesses, and government
  • Wide variations in quality of care, inefficient use of resources (paying for quantity)
  • 14,000 people a day are losing their health insurance
  • Families with health insurance pay $1,000 to subsidize care for the uninsured

www.pscinc.com

areas of agreement
Areas of Agreement

Believe it or not, there was bipartisan agreement in theory at the start:

  • (Most) everyone will be required to have health insurance—public or private—DONE
  • Health care costs are rising too rapidly and must be controlled—NOT REALLY DONE
  • People with public or private coverage can keep it—DONE
  • Private insurers need more regulation (no denials for pre-existing conditions, no annual or lifetime limits) —DONE
  • Health care quality must improve, and the way we pay providers must foster this improvement—NOT REALLY DONE
  • Reconciling these areas of agreement has led to considerable disagreement

www.pscinc.com

major aspects of reform
Major Aspects of Reform
  • Covering more of the uninsured through public and private means
    • Mandates for individuals & employers, with subsidies and exemptions for small business & individual hardship
    • Expansion of Medicaid
  • Public plan option—not in final bills
  • Health insurance exchanges and regulation
  • Cost containment and quality improvement
  • Paying for reform

www.pscinc.com

covering everyone
Covering Everyone?
  • New 2009 data: 50.7 million uninsured, up from 46.3 million in 2008
  • Covers 32M, leaves 22M uninsured (95% of population excluding unauthorized aliens), but may cover up to 40M if everyone eligible signs up
  • How cover?
    • Individual mandate—or penalty—with exemptions
    • Employer mandate—or penalty—with exemptions
    • Tax credits/subsidies for premiums, copays and deductibles
    • Medicaid expansion to 133% FPL
    • Temporary coverage for uninsured people with pre-existing conditions (October 2010-January 2014)—applications taken starting August 31 in Michigan; $141M over three years; PHP to administer plan; 3,500 to be covered
  • Michigan
    • Estimated 1M people will be eligible for subsidies through the exchanges; 640,000 will actually enroll (includes insured and uninsured)
    • Estimated 969,000 newly eligible for Medicaid; 400,000-600,000 will actually enroll

www.pscinc.com

mandates for individuals
Mandates for Individuals
  • Must have coverage that meets minimum standards
  • Penalties: Higher of
    • $95 (2014), $325 (2015), and $695 (2016)/yr/family member up to $2,085 or
    • 2.5% of household income, if above filing threshold ($9,350/individual or $18,700/couple in 2009)
  • Exemptions: financial hardship (income below filing threshold or spend more than 8% of income on insurance), religion, American Indians
  • Individuals whose employers don’t offer health insurance are NOT exempt
  • Individuals who don’t take employer-offered coverage are NOT exempt

www.pscinc.com

subsidies for individuals
Subsidies for Individuals
  • Two kinds: for premiums and for out-of-pocket costs (copays and deductibles)
  • Sliding scale premium tax credits up to 400% FPL ($88K for family of four)
  • Subsidies set to limit premium contribution to 2% of income if total income 133% FPL to 9.5% of income if total income 300-400% FPL (133% FPL=$29,000 for family of four; subsidy covers all but $600)
  • Increases cost-sharing subsidies for <250% FPL

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requirements for employers
Requirements for Employers
  • No employer mandate for employers < 50 employees
  • Penalty for employers > 50 NOT offering HI is $2K/year/worker
  • If employer does offer HI and has one or more employees receiving premium tax credit, pay lesser of $3,000 for each employee receiving the credit or $2,000 for each FTE
  • First 30 employees exempt from calculation of penalty
  • Employers > 200 must enroll employees automatically into employer’s lowest cost plan if they don’t opt out
  • 98% of businesses unaffected, either because already offer coverage or they are exempt.
  • This all takes effect in 2014

www.pscinc.com

subsidies for employers
Subsidies for Employers
  • Credits for small businesses (<25 employees): 35% from 2010-2013; 50% starting 2014. Credits phase out as firm size & average wage increase. Families USA: 132,000 Michigan small businesses eligible for credit (85% of small business in state)
  • Credits may not be attractive enough to get smallest businesses to offer health insurance (and no penalty if they don’t)
  • No mandate, no credits for employers 26-50 employees
  • Temporary reinsurance program for employers covering retirees > age 55 not on Medicare. Pays 80% of retiree claims between $15K and $90K. In effect now. State, many cities and universities, GM, Kellogg, Dow Chemical, and others have qualified.

www.pscinc.com

cost of covering more people
Cost of Covering More People
  • Two kinds of costs are competing for public’s attention: cost to government and cost to individuals, families, and businesses
  • Most talk in Washington DC was about former; now focus has shifted to the latter
  • Every dollar that defrays cost of health insurance for businesses, families, and individuals will add to the government’s cost—and who pays for government?
  • Individual and employer mandates—even with subsidies and limits, will people decide to buy HI or pay penalties?
  • Equity: How much should people and employers w/HI pay for those without it? ($1,000 a year now)
  • Equity: Big 2010 jump in firms 3-9 offering HI (46% to 59%)
  • Equity: How much should employer and employee pay for employer-sponsored HI? Family coverage in 2010: $13,770. Employer share: 71% Employee share: 29% and rising (25% in 2000)

www.pscinc.com

expansion of public programs
Expansion of Public Programs
  • Expand Medicaid to all individuals (133% FPL)—Michigan covers childless adults now up to 35% FPL
  • States can expand coverage before 2014, but at current FMAP
  • Feds fund 100% of expansion population from 2014-16, 95% for 2017, 94% for 2018, 93% for 2019, 90% after that
  • Require states to maintain current income eligibility levels for children in Medicaid & CHIP until 2019 & extends funding for CHIP through 2015. In 2015, states get 23% increase in CHIP match rate up to 100%.
  • Increase Medicaid payment rates to PCPs to 100% of Medicare rates for 2013-14 only
  • Increase payments to community health centers for new eligibles
  • Why does this matter? For businesses, fewer uninsured. For providers, better payment but not great payment; pent-up demand

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the public plan or not
The Public Plan or Not
  • NOT.

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health insurance exchanges
Health Insurance Exchanges
  • State-based exchanges starting in 2014 called American Health Benefits Exchange & Small Business Health Options Programs, administered by government or non-profits.
  • Goal: Sustainable, financially viable options that offer meaningful coverage
  • HHS to give up to $1M/state for designing exchanges
  • Standardization of presentation of insurance benefit options (transparency)
  • Big question: How active a regulator will the exchanges be?

www.pscinc.com

health insurance regulation
Health Insurance Regulation
  • Guaranteed issue and renewability
  • No pre-existing condition exclusions—for children, goes into effect 9/23/10 for group, but not individual, plans
  • No lifetime limits or rescissions (effective 9/23 for new plan year—January 1 for many)
  • Limit rating variation to family size, geography, age, tobacco use (not allowed for health status, gender, occupation)
  • Tighter oversight of health plans:
    • HHS secretary can require plans to lower rates
    • More requirements for existing plans: med loss ratios (2010), cover <26 years old (9/23/10), preexisting condition exclusion prohibition (2014), cover preventive services (new plans, 9/23/10; grandfathered plans, 2018)
    • Essentially, all consumer protections except underwriting will apply to grandfathered plans

www.pscinc.com

benefits
Benefits
  • Essential benefits package
    • HHS sec’y recommends essential benefit package that covers 60% of actuarial value of covered benefits
    • Limits cost sharing to $5,950 or $11,900, no annual or lifetime limits on coverage
    • July 14: New rules requiring insurers to provide free (no copays, deductibles) coverage for many screenings, lab tests, and other preventive services recommended by US Preventive Svs TF
      • Applies to new plans after 9/23/10 and existing plans that make significant changes after that date
      • Will increase premiums 1.5%
  • Plan categories through exchanges
    • Bronze (plan pays 60% of costs), silver (70%), gold (80%), platinum (90%), up to age 30 (catastrophic plan).

www.pscinc.com

cost containment
Cost Containment
  • Encourage adoption and use of health IT
  • Reduce fraud, waste, and abuse
  • Simplify HI administration through standardization
  • Reduce payments to Medicare Advantage plans; after 2014, MA plans can earn 5% quality bonuses
  • Add $9.9B in reductions for IP hospitals, SNF, home health, and others from expected productivity gains
  • Reduce Medicaid and Medicare DSH allotments
  • Increase Medicaid drug rebates
  • Create Independent Payment Advisory Board—to rationalize and de-politicize cost control efforts

www.pscinc.com

quality improvement
Quality Improvement
  • Develop a national strategy to improve quality
  • Cover proven preventive services and eliminate cost-sharing for them (Medicare)
  • Offer incentive pmts to providers for coordinated care
  • Lower payments for avoidable rehospitalizations, hospital-acquired infections
  • Bundle payments for acute and post-acute care
  • Provide grants for H system efficiency improvements
  • Offer Medicare and Medicaid bonus payments for primary care and care coordination
  • Intensify comparative effectiveness research
  • Foster accountable care organizations

www.pscinc.com

quality improvement acos
Quality Improvement: ACOs
  • Medicare Shared Savings Program
    • By 1/1/12, HHS sec’y establishes program to promote accountability for a patient population, coordinate services for M’care FFS beneficiaries, & encourage investment in infrastructure and redesigned care processes
    • ACOs must have formal legal structure; shared governance of group practices, hospitals, joint ventures; enough PCPs to meet needs (5,000 minimum beneficiaries)
    • ACOs must define processes for EBM & patient engagement, report quality and cost measures, coordinate care through telehealth and remote patient monitoring, and demonstrate patient centeredness
  • Pediatric ACO Demonstration Project
    • State makes application to HHS
    • Allows state to recognize certain pediatric providers as ACOs and receive incentive payments
    • Must demonstrate savings—incentive pmt is portion of savings

www.pscinc.com

patient centered medical home
Patient-Centered Medical Home
  • New Center for Medicare & Medicaid Innovation suggests PCMH as model to be tested
  • Grants and contracts to establish community-based, interdisciplinary health teams to support primary care practices (State or state-designated entity must apply) and PCMH
  • Primary Care Extension Program: Education and support for PCPs by “health extension agents” for PCMH, process redesign, cultural competence ($120M/yr for FY11 and FY12)

www.pscinc.com

primary care workforce grants 250m on june 16
Primary Care Workforce Grants: $250M on June 16
  • Investments to train 16,000 new providers
  • $168M for 500 primary care residency slots
  • $32M for training PAs in primary care
  • $30M to encourage 600 nursing students to attend school full time
  • $15M for operation of 10 nurse-managed health clinics to help train NPs
  • $5M for states to plan and implement innovate expansion of primary care workforce by 10-25%

www.pscinc.com

other workforce grants 159m on august 5
Other Workforce Grants: $159M on August 5
  • Nursing workforce development
    • Advanced education for nurses as PCPs/faculty
    • Support for clinical nurse specialists
    • CRNA training
    • Expansion of nursing school capacity and retention
    • Workforce diversity
    • Faculty development in health IT
  • Interdisciplinary geriatric nursing and training
  • Centers for Excellence grants to improve recruitment and performance of minorities

www.pscinc.com

paying for reform
Paying for Reform
  • HC reform can’t add to deficit, so must tax and/or cut spending
  • Net cost is $940B, cuts deficit by $138B over 10 yrs
  • Higher taxes for high-income individuals/households:
    • Part A payroll tax rate rises from 1.45% to 2.35%
    • 3.8% assessment on unearned income for high-income taxpayers
  • Taxes on policies with benefits over a certain threshold
    • 40% tax on plan >$10.2K indiv/$27.5K family (2018)
    • Vision and dental plans excluded from calculation
  • Penalties for individuals & large employers who don’t get/offer HI
  • Cuts in plan and provider payments
  • Insurers, medical device makers, Rx mfgers pay fees of more than $100B over 10 years, but with later start dates

www.pscinc.com

the public and reform
The Public and Reform
  • Public divided on reform in general, but objected to the process more than the content
  • Public not wild about mandates
  • Public strongly supports most major features of reform: tax credits, exchanges, expand Medicaid, prohibit pre-existing condition exclusions, leave most people’s coverage unchanged

www.pscinc.com

changes in 2010
Changes in 2010
  • Dependent children can remain on parents’ HI until age 26
  • Seniors will get more help paying for drugs under Medicare ($250 for donut hole)
  • Some Medicare preventive care will be free of copays and deductibles (1/1/11)
  • Uninsurable people could qualify for temporary high-risk pool
  • Employers of early retirees (55-64) reimbursed 80% claims between $15K and $90K
  • Small biz (<25 employees) gets tax credits
  • 10% tax on indoor tanning services
  • More oversight of health plan premium increases
  • Ban on lifetime limits on HI coverage and on retroactive cancellation of policies
  • Prohibit new health plans from denying children coverage based on pre-existing conditions
  • Most of the big stuff goes into effect in 2013 and 2014

www.pscinc.com

michigan roles and decisions i
Michigan Roles and Decisions, I
  • Health Insurance Reform Coordinating Council
    • Members are all senior administration officials
    • Evaluate ACA and its impact on state’s health care system; identify actions necessary to comply w/act
    • Identify & recommend mechanisms to assure coordinated, efficient implementation
    • Engage with relevant stakeholders to assist in developing implementation recommendations
    • Identify federal grants, pilots, and other non-state funding sources to assist with implementation
    • Submit strategic plan to governor and MDCH director—MDCH drafting, likely to be out in October

www.pscinc.com

michigan roles and decisions ii
Michigan Roles and Decisions, II
  • Expand Medicaid before 2014 (current FMAP rate)?
  • Two sets of criteria for Medicaid eligibility
  • Medicaid eligibility and enrollment coordination with the exchange
  • Michigan has said “yes” to high-risk pool—will cover thousands, not hundreds of thousands.
  • Pool won’t cover those who have coverage now
  • Health insurance ombudsperson established
  • Down the road: is the exchange run by the government or a nonprofit?
  • New administration in 2011

www.pscinc.com

what did we get
What Did We Get?
  • Centrist-left reform that preserves and expands government and private market for health insurance and health care—no single-payer or public option
  • Focus more on expanding coverage than controlling costs, but no universal coverage
  • Government cost control—no addition to the budget deficit—trumps affordability for small biz, families—affordability is the big question!
  • Health plans have begun offering lower cost plans with restricted networks (employers interested?)
  • Penalties for individuals, biz
  • Modest quality improvement/changing delivery of health care
  • Repeal unlikely, but public education on what’s really in the bill and implementation will determine public acceptance

www.pscinc.com