U.S. Health Care Reform: Challenges and Opportunities

Karen DavisPresident

The Commonwealth Fundwww.commonwealthfund.org

kd@cmwf.org

Toledo Rotary ClubSeptember 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

Quality of Care Chasm

Costs of Care

Administrative Complexity

4

Signs and Symptoms of a Sick Health Care System

Chronic Disease Under Control: Managed Care Plan Distribution, 2009

72 72

55

8289

72

61

49

37

0

25

50

75

100

Private Medicare Medicaid

Mean 90th %ile 10th %ile

Note: Diabetes includes ages 18–75; hypertension includes ages 18–85.Data: Healthcare Effectiveness Data and Information Set (NCQA 2010).

Percent of adults with diagnosed diabetes whose hemoglobin A1c level <9.0%

QUALITY: EFFECTIVE CARE

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011. 1

6460

55

73 7267

5346 42

0

25

50

75

100

Private Medicare Medicaid

Mean 90th %ile 10th %ile

Percent of adults with hypertension whose blood pressure <140/90 mmHg

Diabetes Hypertension

International Comparison of Spending on Health, 1980–2009

* PPP=Purchasing Power Parity.Data: OECD Health Data 2011 (database), version 6/2011.

Average spending on healthper capita ($US PPP*)

Total expenditures on healthas percent of GDP

1

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

United StatesCanadaGermanyFranceAustraliaUnited Kingdom

0

2

4

6

8

10

12

14

16

18

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

United StatesFranceGermanyCanadaUnited KingdomAustralia

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

EFFICIENCY

1

76

88 8981

8899 97

109116

10697

134

115 113

127120

55 57 60 61 61 64 66 67 74 76 77 78 79 80 8396

0

50

100

150 1997–98 2006–07

Deaths per 100,000 population*

* Countries’ age-standardized death rates before age 75; including ischemic heart disease, diabetes, stroke, and bacterial infections.See Appendix B for list of all conditions considered amenable to health care in the analysis.Data: E. Nolte, RAND Europe, and M. McKee, London School of Hygiene and Tropical Medicine analysis of World Health Organization mortality files and CDC mortality data for U.S. (Nolte and McKee, 2011).

Mortality Amenable to Health Care

HEALTHY LIVES

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011. 1

High Costs

Poor Population Outcomes

Suboptimal and Variable Quality

5

6

Overall Health System Performance

Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

Top : St. Paul MN, Dubuque IA, Rochester MNBottom: Shreveport LA, Jackson MS, Texarkana AR, Alexandria LA, Beaumont TX, Oxford MS, Hattiesburg MS, Monroe LA

1. St. Paul, MN

306. Monroe, LA

124. Toledo, OH

96. Ann Arbor, MI

72012 Local Scorecard on Health System Performance, Ohio and Michigan HRRs

Hospital Referral Region Overall Rank

Overall Quartile

Access Quartile

Quality Quartile

Potentially Avoidable Hospital Use and

Cost Quartile

Healthy Lives

Quartile

Kettering 85 2 1 1 3 2Cleveland 124 2 1 2 4 2Toledo 124 2 1 3 2 2Akron 132 2 1 2 3 2Cincinnati 142 2 2 2 3 3Elyria 145 2 2 1 4 2Dayton 160 3 1 3 3 3Canton 176 3 3 3 2 2Columbus 207 3 2 3 3 3Youngstown 219 3 2 3 3 4

Ann Arbor 96 2 2 1 3 2Kalamazoo 99 2 2 1 1 3Detroit 189 3 2 2 4 3Dearborn 241 4 3 3 4 4

Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

8

HRR = hospital referral regionDATA: U.S. Census Bureau, 2009-10 American Community Survey

Percent of Adults Ages 18-64 Uninsured, 2009-2010

Worcester, MA5%

McAllen TX53%

Toledo, OH17.0%

Source: Commonwealth Fund Scorecard on Local Health System Performance, 2012

Ann Arbor, MI16.9%

9

Health Reform “Game Changers”

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

• 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

10

CBO estimate of Affordable Care Act

Gross Cost of Coverage Provisions $1,677Offsetting Revenues from Individual Mandate, Employers, and Excise Tax on High Premium Plans

–$506

Savings from Payment and System Reforms –$711• Productivity updates –415• Medicare Advantage reform –156• Provider payment changes and other

improvements–140

New Tax Revenues* –$569Total Net Impact on Federal Deficit, 2013–2022 –$109

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.

11By 2019 Health Reform Will Reverse the Deterioration of Health Insurance

Coverage for Working Age Adults over the Last Decade and Achieve Near Universal Coverage

Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

19%–22.9% 14%–18.9%23% or more7.1%–13.9% 7% or less

1999-2000Avg = 16.6%

2009-2010Avg = 21.8%

2019 (estimated)Avg = 9.4%

12Percent of the Non-Elderly Population in the Toledo Area Who

Could Benefit From the ACA Coverage Expansions

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.

18%

19%

25%

11%

12%

13

Millions of uninsured

Source: Income, Poverty, and Health Insurance Coverage in the United States: 2011 . United States Census Bureau, September 2012.

Number of Uninsured Dropped by 1.3 Million People in 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

36.6 38.0 39.841.9 41.8 43.0

45.2 44.1 44.849.0 50.0 48.6

14

Reform Has Dramatically Reduced the Number of Young Adults Without Health Insurance Coverage

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q0

5

10

15

20

25

30

35

40Age 19-25 Age 26-35

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.

Percentage of Young Adults Without Health Insurance

September 2010: Health Reform Allows Children to Remain on Parents’ Plans

Until Age 26

• 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

2009 2010 2011

15Projected Health Spending in 2020

$275 Billion Lower Than Pre-Reform PredictionsCumulative Reduction of $1.7 Trillion over 2011-2020

Pre-Refo

rm

After R

eform

Lates

t Esti

mate$0

$1,000

$2,000

$3,000

$4,000

$5,0004,913 4,861 4,638

Estimated NHE in 2020 ($ bil-lions)

−5.6%

19.8% of

GDP

21.1% of

GDP

19.9% of

GDP

• 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

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

17The 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

Source: American HealthLine, August 27, 2012.

Leaning Toward Participating (3) Undecided/No comment (26)Participating (11)

Leaning Toward Not Participating (5) Will Not Participate (5)

21

TX

FL

NMGA

AZ

CA

WY

NV

AK

OK

MSLA

MT

State Action to Establish Exchanges,As of July 2012

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.

WA

OR ID SD

ND

MNWI

MI

IA

AR

IL

OH

WV VA

AL

PA

NY

ME

MA

NHVT

HI

Exchange established through signed legislation

Legislation passed one or both houses or pending

Exchange established through executive order

No active exchange legislation or executive order, but received federal level one grant, studying exchange establishment, or governor pursuing alternative options

UTCO KS

NEIA

MO

IL IN

KY

WV VA

NC

SC

DCMD

DENJ

CTRI

State exchange in existence prior to passage of ACA

Will not pursue state-run exchange

TN

22What’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 ObamaImplement 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!

Kristof Stremikis, Senior Research Associate, ks@cmwf.org

For more information, please visit:www.commonwealthfund.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 Insurancesrc@cmwf.org

Stu Guterman, Vice President,Payment Reformsxg@cmwf.org

Robin Osborn, Vice President and Director,International Programro@cmwf.org