a new era in american health care: what does it mean for the economy?
DESCRIPTION
Presentation by Karen Davis at the Detroit Regional Chamber 2010 Health Care ForumTRANSCRIPT
THE COMMONWEALTH
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A New Era in American Health Care:What Does it Mean for the Economy?
Karen DavisPresident, The Commonwealth Fund
Federal Reserve Bank of Chicago – Detroit Branch2010 Health Care Leaders Forum
April 26, [email protected]
www.commonwealthfund.org
THE COMMONWEALTH
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What Are the Problems?
Uninsured Rates
Quality of Care Chasm
Costs of Care
Administrative
Complexity
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THE COMMONWEALTH
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2005 2007
In the past 12 months:
Had problems paying or unable to pay medical bills
23%39 million
27%48 million
Contacted by collection agency forunpaid medical bills
13%22 million
16%28 million
Had to change way of life to pay bills14%
24 million18%
32 million
Any of the above bill problems28%
48 million33%
59 million
Medical bills being paid off over time21%
37 million28%
49 million
Any bill problems or medical debt34%
58 million41%
72 million
Source: M. M. Doty, S. R. Collins, S. D. Rustgi, and J. L. Kriss, Seeing Red: The Growing Burden of Medical Bills and Debt Faced by U.S. Families (New York: The Commonwealth Fund, Aug. 2008).
Percent of adults ages 19–64
Seventy-Two Million Americans Have Problems with Medical Bills or Accrued Medical Debt, 2007
3
THE COMMONWEALTH
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Premiums Rising Faster Than Inflation and Wages
* 2008 and 2009 NHE projections. Data: Calculations based on M. Hartman et al., “National Health Spending in 2007,” Health Affairs, Jan./Feb. 2009 and A. Sisko et al., “Health Spending Projections through 2018,” Health Affairs, March/April 2009. Premiums, CPI and Workers’ earnings from Henry J. Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Annual Surveys, 2000–2009.
Source: K. Davis, Why Health Reform Must Counter the Rising Costs of Health Insurance Premiums, (New York: The Commonwealth Fund, August 2009).
Projected Average Family Premium as a Percentage of Median Family
Income, 2008–2020
0
25
50
75
100
125
2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009*
Insurance premiums
Workers' earnings
Consumer Price Index
Cumulative Changes in Components of U.S. National Health Expenditures and
Workers’ Earnings, 2000–2009
Percent Percent
108%
32%
24%
11%12%
13%
14%
16%17%
18%18%18% 18%19%19%19%20%20%21%21%
22%22%
23%24%
18%
0%
5%
10%
15%
20%
25%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Projected
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THE COMMONWEALTH
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$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
United States
Canada
Netherlands
Germany
Australia
United Kingdom
New Zealand
International Comparison of Spending on Health, 1980–2007
Data: OECD Health Data 2009 (November 2009).
$7,290
$2,510
5
THE COMMONWEALTH
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Note: * Estimate. Expenditures shown in US PPP.Source: Calculated by the Commonwealth Fund based on 2007 International Health Policy Survey; 2008 International Health Policy Survey of Sicker Adults; 2009 International Health Policy Survey of Primary Care Physicians; Commonwealth Fund Commission on a High Performance Health System National Scorecard; and OECD Health Data 2009 (November 2009).
AUS CAN GER NETH NZ UK US
OVERALL RANKING (2010) 3 6 4 1 5 2 7
Quality Care 4 7 5 2 1 3 6
Effective Care 2 7 6 3 5 1 4
Safe Care 6 5 3 1 4 2 7
Coordinated Care 4 5 7 2 1 3 6
Patient-Centered Care 2 5 3 6 1 7 4
Access 6.5 5 3 1 4 2 6.5
Cost-Related Problem 6 3.5 3.5 2 5 1 7
Timeliness of Care 6 7 2 1 3 4 5
Efficiency 2 6 5 3 4 1 7
Equity 4 5 3 1 6 2 7
Long, Healthy, Productive Lives 1 2 3 4 5 6 7
Health Expenditures/Capita, 2007 $3,357 $3,895 $3,558 $3,837* $2,454 $2,992 $7,290
Country Rankings
1.0-2.33
2.33-4.66
4.66-7.0
The Bottom Line: The U.S. Spends Most and Ranks Last6
THE COMMONWEALTH
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The Affordable Care Act of 2010
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THE COMMONWEALTH
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A Historic Accomplishment
• Health reform promises to help usher in a new era in American health care
• It will: – Cover 32 million uninsured– Improve affordability of coverage for millions now having difficulty
paying health insurance premiums, medical bills, or accumulated medical debt
– Eliminate doughnut hole in Medicare Rx coverage; institute a new voluntary long-term care financing program
– Begin to move to an organized integrated delivery system with coordinated care, reducing errors, duplication, and waste
– Help slow rising health care costs that are a burden on families, employers, and federal, state, and local government budgets
• Important to foster understanding of what health reform is and isn’t• Build areas of consensus; will need cooperation of all stakeholders to
realize potential
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THE COMMONWEALTH
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Major Features of New Health Reform Law
Health Reform Law
Individual Mandate
Employer Shared Responsibility$2000 per employee for employers 50+ employees not
offering coverage
Insurance Market RulesRules on enrollment, premiums, medical loss, consumer
protections
Insurance Exchanges State, start in 2014
Benefit Standard Comprehensive; 70% actuarial value
Income-related Premium and Cost Sharing; Medicaid expansions
2-9.5% of income up to 400% FPL; Medicaid to 133% poverty
Payment Reform
Voluntary Medicare payment innovations -- ACOs, Medical Homes, 10% increase in primary care, 1% productivity
improvement, Medicaid primary care at Medicare levels, CMS Payment Innovation Center, Independent Payment
Advisory Board
System ReformComparative effectiveness research; HIT; Medicare
Advantage reform
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THE COMMONWEALTH
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Health Reform Timeline: What is Relevant to Employers?
Source: B. Schilling, Health Care Reform: What Does it Mean for Employers, (New York: The Commonwealth Fund, forthcoming).
2010 2011
• Dependent adults up to age 26 on parents’ policies
• Policies cannot be canceled
• Tax credits for small businesses
• No pre-existing condition exclusions for children
• Lifetime benefit caps banned
• HHS review of premium increases
• Reinsurance for retirees’ benefits
• Comparative effectiveness research
• Refunds if medical loss ratio less than 85 percent in large group market; 80 percent in small group and individual market
• Employers note value of health benefits on W-2 forms
• Center for Medicare and Medicaid Innovation
• Web site for comparing Medicare doctors
THE COMMONWEALTH
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Health Reform Timeline: What is Relevant to Employers?
Source: B. Schilling, Health Care Reform: What Does it Mean for Employers, (New York: The Commonwealth Fund, forthcoming).
2012-2013 2014-2018
• Value-based purchasing for hospitals (2012)
• Diabetes report card (2012)
• Elimination of deduction for 28 percent Medicare Part D subsidy (2013)
• Limits on flexible spending arrangements (2013)
• No one gets turned away (2014)
• Establishment of state-based insurance exchanges (2014)
• National coverage requirement (2014)
• Fines for large employers that opt out (2014)
• Small business tax credit increases (2014)
• Quality reporting (2014)
• Independent Payment Advisory Board (2014)
• Cadillac Plan taxes – 40 percent on premiums for individual plans that cost more that $10,200 and family plans that cost more than $27,500 (2018)
THE COMMONWEALTH
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10 M (4%)Nongroup
32 Million Uninsured Covered Under Affordable Care Act, Employers Remain Primary Source, 2019
* Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, The Commonwealth Fund, (forthcoming).
Among 282 million people under age 65
Pre-Reform
162 M(57%)ESI
35 M(12%)
Medicaid
54 M(19%)
Uninsured16 M (6%)Other
15 M (5%)Nongroup
159 M(56%)ESI
51 M(18%)
Medicaid
24 M (9%)Exchanges
(Private Plans)
16 M (6%)Other
23 M (8%)Uninsured
Affordable Care Act
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THE COMMONWEALTH
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Small Business Tax Credits Under Health Reform Law for Family Premiums
$3,067$2,359
$3,067
$4,717 $4,717 $4,717
$1,651$2,359
$1,651
$0
$2,500
$5,000
$7,500
$10,000
Senate Temporary Program(2010–2013)
Senate Permanent Program(2014)
Senate Permanent Programfor Nonprofits
Tax Credit Net Employer Contribution Net Employee Contribution
* To be eligible for tax credits, firms must contribute 50% of premiums. Firms receive 35% and later 50% of their contribution in tax credits.Note: Projected premium for a family of four in a medium-cost area in 2009 (age 40). Premium estimates are based on actuarial value = 0.70. Actuarial value is the average percent of medical costs covered by a health plan.Small businesses are eligible for new tax credits to offset their premium costs in 2010. Tax credits will be available for up to a two-year period, starting in 2010 for small businesses with fewer than 25 employees and with average wages under $50,000. The full credit will be available to companies with 10 or fewer employees and average wages of $25,000, phasing out for larger firms. Eligible businesses will have to contribute 50 percent of their employees' premiums. Between 2010–13, the full credit will cover 35 percent of a company's premium contribution. Beginning in 2014, the full credit will cover 50 percent of that contribution. Tax-exempt organizations will be eligible to receive the tax credits, though the credits are somewhat lower: 25 percent of the employer's contribution to premiums in 2010–13 and 35 percent beginning in 2014. Source: Commonwealth Fund analysis of proposals. Premium estimates are from Kaiser Family Foundation Health Reform Subsidy Calculator, http://healthreform.kff.org/Subsidycalculator.aspx.
$4,718*
$9,435—projected family premium
50% employer contribution
Credit per employee
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THE COMMONWEALTH
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Total National Health Expenditures (NHE), 2009–2019Before and After Reform
$0
$1
$1
$2
$2
$3
$3
$4
$4
$5
$5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Before Reform
After Reform
NHE in trillions
Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, (Washington and New York: Center for American Progress and The Commonwealth Fund, December 2009).
$2.5
$4.56.6% annual
growth
6.0% annual growth
$4.8
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THE COMMONWEALTH
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CBO estimate of Affordable Care Act of
2010
Total Net Impact on Federal Deficit, 2010–2019 –$143
Gross Cost of Coverage Provisions $938
Offsetting Revenues from Individual Mandate, Employers, and Wage Effects
–$117
Savings from Payment and System Reforms –$511
• Productivity updates/provider payment changes –160
• Medicare Advantage reform –204
• Other improvements and savings –147
Education System Savings –$19
Total Revenues –$432
Major Sources of Cost, Savings and Revenues Compared with Projected Spending, Net Cumulative Effect on Federal Deficit, 2010–2019
Dollars in billions
Note: Totals do not reflect net impact on deficit due to rounding.Source: Congressional Budget Office, Letter to the Honorable Nancy Pelosi, Mar. 20, 2010.
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THE COMMONWEALTH
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Why Health Reform Will Bring Down Costs for Businesses
• Creation of health insurance exchanges, public reporting and transparency on cost and quality, patient financial incentives, innovative payment methods for qualified health plans will pool risk, increase purchasing power and efficiency, and drive competition
– Cutler-Davis estimate $162 billion in 10-year administrative savings, $122 billion of which goes to businesses
– Cutler-Davis estimate $530 billion in 10-year modernization savings, $236 billion of which goes to businesses
• Small business tax credits available to an estimated 3.6 million firms
• Coverage expansion reduces hidden cost of uninsured for those who already provide insurance
• New medical loss ratio standards will have a dampening impact on premiums, especially in the individual and small business market
• Federal oversight of insurance premium increases will end arbitrary hikes
• Elimination of health status rating broadens risk pool and stability of premiums
• Innovations Center will conduct pilots of new payment methods, including multi-payer strategies
• Payment and system reform will lower cost of care and lead to lower premiums
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Source: M. Seshamani, Lower Premiums, Stronger Businesses: How Health Insurance Reform Will Bring Down Costs for Small Businesses, (Washington: U.S. Department of Health and Human Services, 2010); D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, (Washington and New York: Center for American Progress and The Commonwealth Fund, December 2009).
THE COMMONWEALTH
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Modernizing the Health System with Payment and Delivery Reform Innovations: What is Promising?
• Rewarding hospital and physician performance based on quality and/or cost instead of fee-for-service volume
• Provisions to encourage multi-payer payment reform
• CMS Innovation Center pilots, accountable care organizations with shared savings, and other payment innovations including multi-payer payment innovations
• Improved payment for primary care under Medicare and Medicaid
• Bundling acute care episode and post-acute care payment demonstration
• Insurance exchanges and insurance market rules, review of premiums
• Qualified health plans in insurance exchanges will be encouraged to move away from fee-for-service provider payment
• Rewarding high quality Medicare managed care plans
• Independent Payment Advisory Board with recommendations to achieve Medicare savings targets and non-binding recommendations for private payers
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THE COMMONWEALTH
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Timeline for Payment and System Innovation• Productivity Improvement -- 2010• 10 Percent Increase in Medicare Payment for Primary Care -- 2011• Center for Medicare and Medicaid Innovation -- 2011• State-based all-payer payment demonstrations and payment to Healthcare Innovation Zones through the CMI -- 2011• Value-based Purchasing for Hospitals 2012• Reduce payment for preventable hospital readmissions -- 2012• Accountable Care Organization Provider shared savings -- 2012• Five state capitated payment for safety net hospitals -- 2012 • National voluntary pilot on payment bundling for acute care episodes including hospitals, doctors, and post-acute providers -- 2013• Independent Payment Advisory Board tasked with recommendations to reduce Medicare spending and excess cost growth and
improve quality of care throughout the healthcare system -- 2014• Medicaid primary care payment up to Medicare levels – 2013 and 2014• Create a physician value-based payment program in Medicare -- 2015• Reduce Medicare Payment for Hospital Acquired Infections -- 2015
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THE COMMONWEALTH
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Innovation Center Pilots• Patient-centered medical homes• Promotion of innovative care delivery models with providers such as risk-based comprehensive payment or
salary-based payment• Using geriatric assessments and comprehensive care plans to coordinate care• Promote care coordination through salary-based payment• Support care coordination through the use of health information technology• Payment to physicians ordering diagnostic imaging services based on appropriateness • Use medication therapy management services• Establish community-based health teams to support small practice medical homes• Support the use of patient decision support tools• Allow states to test and evaluate care for dual eligibles• Allow states to test and evaluate all-payer payment reform• Align nationally recognized, evidence-based guidelines of cancer care with payment incentives• Improve post-acute care through continuing care hospitals• Fund home health providers offering chronic care management• Develop a collaborative of high-quality, low-cost health care institutions to develop, disseminate, and implement
best practices and provide assistance to other institutions• Use electronic monitoring to facilitate inpatient care of hospitalized individuals • Promote efficiency and timely access to outpatient services • Establish comprehensive payments to Healthcare Innovation Zones
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THE COMMONWEALTH
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Investment in Information, Infrastructure, and Research
• Health information technology; regional extension centers• Comparative effectiveness research; Patient-centered Outcomes Research Institute• Continued investment in research to improve performance, identify and share best
practices• Greater transparency and better multi-payer data on comparative performance• Investment in primary care workforce and improved payment for primary care;
funding for Community Health Centers; National Commission on Workforce• National Quality Strategy; continued progress in performance metrics and
measurement• National Prevention Strategy; support for employer wellness and community-based
health promotion
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THE COMMONWEALTH
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A New Era in Health Care Delivery
• The U.S. has passed historic legislation that will help usher in a new era in American health care
• Will make major strides toward achievement of goals of affordable coverage for all while slowing cost growth
• Payment and system reforms – Innovation Center• Insurance market reforms• Independent Payment Advisory Board• Budget-neutrality is achievable through combination of
cost-containment and new revenues • Oversight and system of tracking health system
performance will be needed
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THE COMMONWEALTH
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Health Reform: Opportunities for Michigan
• Health reform at the national level opens up opportunities for Michigan:– To be a leader in shaping the state health system for high
performance– To use opportunities in federal reform legislation for state
demonstrations, waivers, or leadership in pursuing this goal– To leverage newly available federal funds to test innovative
approaches to enhancing value in the health care system– To craft all-payer (multi-stakeholder) initiatives
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THE COMMONWEALTH
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Michigan Blue Cross Blue Shield Physician Group Incentive Program
• 8,150 physicians– 5,000 Primary Care Physicians
• 38 Physician Organizations (some of which serve as umbrella and management support organizations for many smaller POs)– 100 sub-POs
• 2,000,000 members• $100+M annual incentive dollars
THE COMMONWEALTH
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Improvement Capacity Initiatives• Establishing staff dedicated to managing process improvement teams (new PGIP groups only)• Establishing analytics and reporting staff (new PGIP groups only)
Condition-focused Initiatives• Oncology/ASCO Quality Oncology Practice Initiative™ (limited participation)Service-focused Initiatives• Pharmacy use and quality• Radiology procedures utilization• ER Utilization • Inpatient Utilization • Anticoagulation management • Transition of Care Professional Core Clinical Process-focused Initiatives• Evidence based care (quality) performance • *Performance reporting• *Patient-Provider agreement• *Extended access• *Individual care management• *Test tracking and follow-up • Lean Thinking-Clinic Re-engineering Clinical IT-focused Initiatives• *Accelerating the Adoption and Use of Electronic prescribing• *Patient registry• *Patient Portal
2
3
4
5
1
Michigan Blue Cross Blue Shield PGIP Initiatives
• *Coordination of Care• *Preventive Services • *Specialist Referral Process • *Linkage to Community Services • *Self-Management Support
THE COMMONWEALTH
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Implications for Michigan
• 1.3 million residents who do not currently have insurance and 459,000 residents who have nongroup insurance can get affordable coverage through the health insurance exchange
• 797,000 residents will qualify for premium tax credits to help them purchase health coverage
• 1.6 million seniors will receive free preventive services• 279,000 seniors will have their brand-name drug costs in the
Medicare Part D “doughnut hole” halved• 109,000 small businesses will be eligible for tax credits to offset up
to 35 percent of premium cost in 2010 (and 50 percent in 2014)• Businesses likely to see moderation of insurance premium growth• Opportunity to lead in shaping a high performance health system
Source: White House Office of Health Reform, “Health Insurance Reform and Michigan,” available at: http://www.healthreform.gov/reports/statehealthreform/michigan.html
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THE COMMONWEALTH
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Thank You!
Kristof Stremikis, Senior Research Associate,
For more information, please visit:
www.commonwealthfund.org
Rachel Nuzum,Senior Policy [email protected]
Stephen C. Schoenbaum, M.D.Executive Vice President for [email protected]
26
Sara Collins,Vice President, [email protected]
Cathy Schoen, Senior Vice President for Research and Evaluation, [email protected]
Stu Guterman, Assistant Vice President, Payment [email protected]