The Patient Protection and Affordable Care Act:How will ACA Impact Small Business?

Sponsors:

St. Tammany Democratic Parish Executive Committee (DPEC) Louisiana Center for Health Equity

August 27, 2012

Why We Need Health Care ReformPresented by

David W. HoodFormer Secretary

LA Department of Health and Hospitals

Major Issues

• Why we need national reform

• How Louisiana compares to other states

• Will the Affordable Care Act (ACA) continue to

be ignored by Louisiana and other states?

• Making sense of the administration’s plan

• What can small business in Louisiana expect?

2

Why We Need Reform

• Coverage—Cost—Quality – Access to good healthcare for entire population– Need an efficient system that controls cost– Need to always strive for quality

• A matter of “national security”• Global competition• Don’t spend it all on healthcare

3

U.S. Healthcare

• Positives: best physicians, hospitals, medical schools, research and innovation

• Negatives: – Medical and admin costs very high and rising fast– 40 million uninsured– Lacks cohesive care delivery “system”– 1,300 private plans & 50 jurisdictions– Wide variation in cost, quality and outcomes

4

International Comparison of Spending on Health, 1980–2010

Average spending on healthper capita ($US PPP)

Total health expenditures aspercent of GDP

Notes: PPP = purchasing power parity; GDP = gross domestic product.Source: Commonwealth Fund, based on OECD Health Data 2012.

Premiums Rising Faster Than Inflation and Wages

Sources: (left) Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Annual Surveys, 1999–2012; (right) authors’ estimates based on CPS ASEC 2001–12, Kaiser/HRET 2001–12, CMS OACT 2012–21.

Projected average family premium as a percentage of median family income,

2013–2021

Cumulative changes in insurance premiums and workers’ earnings,

1999–2012

Percent Percent

180%

47%

38%

Projected

172%

25 Million Adults Underinsured in 2007,Up from 16 Million in 2003

Uninsuredduring the year

49.5(28%)

Insured all year, not

underinsured102.3(58%)

Insuredall year,

underinsured25.2

(14%)

2007Adults ages 19–64

(177.0 million)

Uninsuredduring the year

45.5(26%)

Insured all year, not

underinsured110.9(65%)

Insuredall year,

underinsured15.6(9%)

2003Adults ages 19–64

(172.0 million)*Underinsured defined as insured all year but experienced one of the following: medical expenses equaled 10% or more of income; medical expenses equaled 5% or more of income if low-income (<200% of poverty); or deductibles equaled 5% or more of income.Source: C. Schoen, S. R. Collins, J. L. Kriss, and M. M. Doty, “How Many Are Underinsured? Trends Among U.S. Adults, 2003 and 2007,” Health Affairs Web Exclusive, June 10, 2008. Data: Commonwealth Fund Biennial Health Insurance Surveys (2003 and 2007).

Projected Economic Impact of Health Spending Growth

8

Total National Health Expenditures (NHE), 2009–19:Before and After Reform

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Before Reform*

After Reform

NHE in trillions

Notes: * Estimate of pre-reform national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, The Impact of Health Reform on Health System Spending, (Washington, D.C., and New York: Center for American Progress and The Commonwealth Fund, May 2010).

$2.5

$4.3

5.7% annual growth

6.3% annual growth $4.6

Determinants of Health in Select OECD Countries, 2009

$370 $337 $337

$199$124

$407

$836

$1,495

$0

$400

$800

$1,200

$1,600

UnitedStates

Switzerland* Australia* NewZealand

France OECDMedian

Germany Canada

Spending on Basic Medical and Diagnostic Services,per Capita in 2006

Adjusted for Differences in Cost of Living

*2005

Source: OECD Health Data 2008, “June 2008.”

Hospital Spending per Discharge, 2009Adjusted for Differences in Cost of Living

Dollars

* 2008.** 2007.Source: OECD Health Data 2011 (Nov. 2011).

Physician Incomes, 2008Adjusted for Differences in Cost of Living

Primary care doctors Orthopedic physicians

Source: M. J. Laugesen and S. A. Glied, “Higher Fees Paid to U.S. Physicians Drive Higher Spending for Physician Services Compared to Other Countries,” Health Affairs, Sept. 2011 30(9):1647–56.

Dollars

Drug Prices for 30 Most Commonly Prescribed Drugs, 2006–07US is set at 1.0

0.34

0.440.450.490.51

0.63

0.760.77

1.00

0.0

0.2

0.4

0.6

0.8

1.0

US CAN GER SWIZ UK AUS NETH FR NZ

Source: IMS Health.

MRI Scan and Imaging Fees, 2009

500

1,200839 824

567

436

179

0

200

400

600

800

1,000

1,200

1,400

1,600

US Medicare US GER CAN NETH FR UK

Source: International Federation of Health Plans, 2009 Comparative Price Report.

Dollars

1,500

US average

US high-end

Insurance Administrative Costs as a Percent of Total Private and Public Insured Spending on Health Services and Supplies, 2007

14.1

10.6

11.3

5.8

6.1

12.4

0 10 20 30

Source: Authors’ calculations from M. Hartman, A. Martin, P. McDonnell et al., “National Health Spending in 2007: Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998,” Health Affairs, Jan./Feb. 2009 28(1):246–61.

Private admin. expenses as % of privately insured personal health spending

Public admin. expenses as % of publicly insured personal health spending

Public admin. expenses as % of publicly insured personal health spending,

excluding Medicare Part D

Part D admin. expenses as % of drug spending

Private drug plan admin. expenses as % of drug spending

Medicare Advantage private drug plan admin. expenses as % of drug spending

Percent

Trends in Total Payments to Medicare Advantage (MA) Plans in Excess of Fee-for-Service (FFS) Costs, 2004–2010

Total payments to MA plans in excess of FFS costs (in $ billions)

YearSources: George Washington University analysis of CMS Medicare Advantage enrollment and payment rate data for 2004–2010; estimated plan payments for 2010 based on plan bids and local benchmarks; and MedPAC analysis of MA plan bids for 2006–2009.

THE COMMONWEALTH

FUND

THE COMMONWEALTH

FUND

Louisiana Medicaid Spending• Medicaid spending growing rapidly:

– $2.1 billion state funds– $7.4 billion total for current year (FY 2013) – Total increase of $670 million over last year

• Comparing current year to FY 2007:– Total spending increased $2.2 billion– State spending increased $770 million

18

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0LA Medicaid Spending ($ billions)

State Total

Medicaid Budget Cuts Severe

• Congressional action in July reduced Louisiana’s federal Medicaid revenues

• Total funds lost: $895 million• LSU hospitals were cut 24% while other

Medicaid providers cut 2%• Cuts at mid-year devastating for some providers• Revenue forecast for coming year not

encouraging

20

Jindal Administration Budget Plan

• Administration was “surprised” by Congressional action on Medicaid FMAP

• Most reductions were at LSU hospitals• Administration is working to privatize services at

each LSU hospital• These hospitals are the main safety net for the

uninsured• ACA remedy for uninsured ignored by the

uninsured

21

Jindal Administration Budget Plan

• The Affordable Care Act provides for an expansion of Medicaid to cover more than 30 million uninsured

• Louisiana would benefit but opted out, as did several other states

• Compounding the problem is the massive budget cut against LSU

• What was the administration thinking?22

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Federal and state share of Medicaid expansionHigh estimate - $ in millions

*Source: Studies prepared for DHH by Mercer Consulting, 2010. Notes: Estimates by state fiscal year. Coverage start date Jan. 1, 2014. Federal share 100% until 2016-17.

17

Jindal Administration Budget Plan

• The ACA Medicaid expansion offers states a significant reduction in the state match needed for the coverage

• Louisiana would cover 400,000 uninsured adults by 2023 at reduced state match to save $5.7 billion over 10 years

24

Health Insurance Exchanges Also in Limbo• Exchanges promoted by a conservative think tank

(Heritage Foundation) to restore free market incentives to health care.

• First used in Massachusetts as a key element of “Romney Care” and later included in “Obama Care.”

• However, most Republican governors (but not all) opted out of creating an exchange, leaving the task to the feds.

• Louisiana should at least be a partner in this effort. • Insurance Commissioner Jim Donelon (R) favors exchanges

to improve competition between health plans.