Objectives

Items with the Affordable Care Act Any questions about the structure Medicare Part D Doughtnut Hole Other provisions ACA Impact:

Access Cost Quality

Brief discussion on costs of medical malpractice system

The Affordable Care Act: What is it?

The Law, signed March 23, 2010Set of regulations and structure to expand access to the

current system of Public and Private health insuranceRequires all Americans to have health insuranceEstablishment of Health Insurance ExchangesSubsidies to eligible consumers in these marketplaces Federal regulations on insurance plans sold in the

individual marketMedicaid Eligibility ExpansionMany other provisions: Innovation research, Public Hlth

ACA: what it is not

Does not establish a new government-run health insurance The “Public Option” was part of a HR bill, dropped

Not a government-run health care system A matter of terms? New federal regulations, but most still resides with

State regulatorsDoes not alter Employer-based insurance system

However, does increase portability, aims to decrease “Job Lock”Does not change/ decrease Medicare benefits

Some increase in Preventive services, Part D doughnut holeDoes not regulate doctors’ and patients’ medical care decisions

Controversial. Establishes Medicare Independent Payment Advisory Board, but not binding

Calls for Quality reporting Anticipates advent of paying for Value

Health Insurance Exchanges

Online marketplaces where insurers selindividuals Insurance plans must meet federal regulations A shift from “Experience Rating” to “Community Rating”

Federal vs. State 17 State-created exchanges Rest are Federal-administered The differences are in State Regulatory flexibility and Fed funding

Variety in the number of products and insurers Some western states were dominated by only few insurers Illinois 2014: 165 plans offered by 8 companies

Small Business Health Options Program (SHOP) Not in effect until 2015 due to website malfunction Employment <50

Subsidies for Exchange plans Available only for purchasing plans in the Exchanges Based on household income: 138% to 400% of Federal

poverty line (=$24,250/year)

Families USA via http://obamacarefacts.com/obamacarefacts-images/public-domain/obamacare-subsidies.jpg

ACA: Federal Regulations on Insurance plans

Cannot deny or charge more based on pre-existing conditions

Cannot drop based on new condition (rescission) Limits on premium charges

Gender: Cannot charge more based on gender Age: Limit of 3:1 for age (highest age to lowest age)

“Medical Loss Ratio”: Must spend >80% on health care

Must cover 10 “Essential health benefits”Preventive services free of co-payCap on Out-of-pocket payments

Excluding premiums $6350 for individuals $12,700 for family

Medicaid Eligibility Expansion

Previously Poverty + additional condition Child or pregnancy, Elderly poor, Disability High variability among states In general , most adult males did not qualify

Now, no such requirementLess than 138% of poverty lineFederal support to states for the newly

eligibile ~$900 billion over next ten years; 100% then 90%

after Estimated to increase state costs by 2-3% over next 10

years

Individual Insurance Mandate

“Minimum coverage provision,” “shared responsibility fee”

All citizens and permanent residentsPenalty enforced through taxes and IRS

enforcement “Tax” or “Penalty” or both? Political and legal

implications Minimum fee or percentage: First year 1% , rises to

2.5% Exemptions

Religious Those whose prior insurance are no longer sold

Families USA via http://obamacarefacts.com/obamacare-individual-madate

Medicare changes

Part A: Trust Fund solvency ensured 2029 Hospital stays up to 90 days/ year, with deductible, co-pays Skilled Nursing Facility, Home Health (limits), Hospice (fully)

Part B: Preventive care free Physicians, Diagnostic tests, Physical Tx, equipment

Part C: Advantage (MA) plans Est. 1997, then expanded 2003 to offer seniors private plans Medicare pays capitation payments from its fund Costs Medicare ~14% more than traditional Medicare So, these payments will be reduced, est savings $156 billion

Part D: Prescription Drugs: Phases out the Coverage Gap After initial coverage, beneficiaries paid entirely out-of-pocket

until Catastrophic coverage, mostly by gov’t

Medicare Part D “Doughnut Hole”

Starting 2010, will be phased out by 2020

ACA: Many other provisions

Public Health and Prevention Fund From $2b down to ~$400 million

Center for Medicare and Medicaid Innovation (Full disclosure from us) Exploring Value and Quality, $900 million 2015

Patient-centered Outcomes Research InstituteExpansion of National Health Service Corps

Tripled to ~40,000 serve in Health Professions Shortage Areas

Goal to retain providers after their serviceNew Federally Qualified Health Centers

300 new building, ~600 renovations

ACA Impact: Access

2010: Children <26 years old ~3.3 million, many students, and some entrepreneurs

2012 Supreme Court Case Struck down Medicaid expansion requirement as

coercive17 states and D.C. have established

exchanges From failure (Oregon, Maryland, e.g.) to Success

(Kentucky)34 have not; federal exchanges

Not as much money to work with

ACA Impact: Access

~18 million newly covered 11.7 million enrollees through Exchanges, net of ~7

million 11 million newly enrolled under Medicaid

Uninsured rate from ~15.7% (2013) to 9.2% (2015) CDC and Census data, Gallup poll

Coverage Gap: 3.1 million in non-Medicaid expansion states Only 24 states + D.C. expanded Medicaid And, they are ineligible for subsidies (100-138% pov level)

ACA Impact: Access

Discovery of plans no longer offered by insurers ~2 million affected. Insurers were allowed to continue

to offer, but didn’t make economic sense Narrow provider networks

A way that cheaper plans were offeredUnclear whether decrease in Medicaid

providers

ACA Impact: Cost

Medicare Part D doughnut hole closing ~8 million seniors have saved $10 billion

Costs per enrollee, premiums + subsidies ~$5,000 per enrollee

Overall decrease in the *rate of overall health expenditure growth. Pre-dated ACA, difficult to attribute. Culture change?

Growth rate of insurance premiums has slowed.

But increases reported for this year

ACA: Delivery System and Payment Reform

Innovative models of care Mostly funded through research grants More freedom for Co-ops, “Direct Pay” models

Accountable Care Organizations (ACOs) Medicare-driven, but other payers, too Provider-led, loose contract-based organization of various

providers. Adequate Primary Care base is required Manage the full continuum of care, episode-based Accountable for costs and quality for a defined population Can share in the Savings / Surplus payment derived from

high quality care, resulting in lower cost healthcare use

Post-ACA: Medicare Payment Reform

Medicare’s goal: Increased Value-based payment 30% of payment should be tied to alternative contracts that are value-

based (not Fee for service) by 2016 50% by 2018. Medicare Payment Advisory Committee

2015: The “SGR” was finally repealed Sustainable Growth Rate formula (1998): Decrease payments to physicians if the growth of overall Medicare Part B

expenditures exceed the rate of National GDP growth Replaced with Merit-based Incentive Payment system

(MIPS): Providers can choose between old system and MIPS Can receive bonus payments for quality, shared savings if part of ACO or

part of a “medical home” healthcare team. 5% bonus for those who participate substantially

ACA: Quality

Pre-ACA: Hospital and physician Quality reporting (2003)

Incentivized providers to report the quality of their work (but not necessarily penalize for lower quality)

Hospital “report cards”, financial incentives, penaltiesAffordable Care Act (2010)

Value-based purchasing Hospital Re-admissions Reduction Program

Overall decrease in re-admission rate in aggregate: good or bad?

Hospital-acquired Condition (HAC) Reduction Program Decreases in Catheter-related infections

Reform challenges continue

Further research and innovation to improve value and quality

How will ACOs and hospital consolidations increase prices, increase quality,

Will provider networks improve? Will immigration reform allow health

coverage under ACA?

Costs of Medical Malpractice system

Costs to healthcare providers“Medical Liability” insurance, “Tort” systemDirect costs

Malpractice insurance Legal fees and court system costs in the case of lawsuit Costs of settlements, additional payouts beyond

insurance coverageIndirect costs

“Defensive” medicine Loss of income Stress and anxiety to providers

Direct costs

Congressional Budget Office (2004): <2% of healthcare expenditures are spent on direct costs Data from Centers for Medicare and Medicaid

services Unspecified data from a private actuarial firm

Mello, et al. (Health Affairs, 2010): $9 billion

$3b in economic damanges, $2.4b in non-economic damages

$4.1b in administrative, legal expenses Good quality for total; moderate quality for

components

Defensive Medicine

Very difficult to define. Care that is provided “purely” for the sake of avoiding

lawsuit, with knowledge that it will make no difference in the experience or outcomes of (Krishnamoorthi, 2014)

Care that is excessive with *or without* knowledg of whether it will make a difference

Providers aim to manage their own uncertainty, but find this very challenging in this age of vast information.

Providers also have to manage patients’ uncertainty, expectations, and anxiety

Perhaps we don’t know or are incorrect in what we think we are doing “defensively” and what we are doing out of “uncertainty,” and the anxiety. We don’t want to harm patients.

Defensive Medicine cost estimates

Price-Waterhouse coopers (2006): 8% of the healthcare system ~ $200 billion per year Unspecified data. Based on physician surveys and

extrapolation Often cited by proponents of tort reform as cost-saver

Mello, et al. (2010) $45 billion per year in Hospital services ($38b) and

Physician service ($6.8 billion) Low quality data: Along with direct costs:

Is it worth it?

Institute of medicine: “To Err is Human” (2009) 44,000 to 98,000 deaths per year from medical error Economic burden: $17- 29 billion per year

But IOM also estimated that ~30% of health care spending is wasteful: unnecessary for improving lives with current, quality evidence

System does not seem to achieve our goals: Restorative: The minority of injured patients seek justic in the

legal system Just: the minority of those that do get a payout Improve quality and reduce medical errors

And yet, very stressful

Tort reform efforts and proposals

States have been experimenting for years California, Texas, New York (Changing laws)

Congressional Budget Office (CBO, 2009): Requested by conservative opponents to Health reform $58 billion could be saved federally if federal law implemented

Caps on non-economic damages (pain and suffering, punitive) Extrapolating state data

Alternative systems: Medical advisory board: Indiana Medical courts “Early Sorry” laws: providers can pay in exchange for no

lawsuit Reforming the Medical expert system