Susan DentzerEditor-in-Chief

Moving Forward on Health Reform

How Health Care Reform Must Bend The Cost Curve

David M. CutlerHarvard University

The Drivers of Productive Industries

IT and its use[ARRA, 2009]

Move from pay-for-volume to pay-for-value[PPACA, 2010]

Engaging employees and consumers in continuous quality improvement

Bundled payment

Performance-based payment

Forecast of Cost Savings

Total savings = $9.0 trillion

What It Will Take• Administrative Implementation

– Shorten demonstration time– Openness to new approaches

• Provider response– Changing existing operations– New organizational forms

Health Reform And Federal Budget Deficits: Likely to Broaden The Gap, Not Reduce It

Michael RamletAnalyst, The Advisory Board Company

Douglas Holtz-EakinPresident, American Action Forum

It Was Ugly Before Reform

Source: Congressional Budget Office. The long-term budget outlook. Washington (DC): CBO; 2009 Jun.

Federal Revenues and Noninterest Spending, by Category

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Congressional Budget Office’s Alternative Fiscal Scenario

Modest Deficit Reduction Projected

Congressional Budget Office (CBO) Score – H.R. 4872, Reconciliation Act of 2010$ Billions

CBO Projections2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2010-2019

Total Subsidies 4 11 13 9 70 125 181 204 219 236 1072Total Cost Savings 2 -2 -11 -18 -43 -51 -59 -75 -91 -109 -455

Total Tax Revenues 0 -8 -15 -43 -77 -90 -114 -123 -131 -141 -739Net Deficit Effecta 6 1 -14 -50 -48 -15 7 6 -3 -13 -124

                       

CBO Extrapolationsb

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2020-2029

Subsidies (3.4% CAGR) 244 252 261 270 279 288 298 308 319 330 2850Cost Savings (10.0%

CAGR) -120 -132 -145 -160 -176 -193 -212 -234 -257 -283 -1911Tax Revenues (2.51%

CAGR)c -145 -148 -152 -156 -160 -164 -168 -172 -176 -181 -1620Net Deficit Effecta -20 -28 -36 -46 -56 -68 -82 -97 -114 -134 -681

Source: Congressional Budget Office. The long-term budget outlook. Washington (DC): CBO; 2009 Jun.

Really

Notes: Components may not sum to totals because of rounding. aPositive numbers indicate increases in the deficit, and negative numbers indicate reductions in the deficit. bExtrapolations for 2020-2029 calculated using CBO estimated compounded annual growth rates (CAGR).cThe CBO pegs tax revenues to the rate of general inflation. U.S. Breakeven 20-Year Inflation rate between normal bonds and inflationary bonds was 2.51 percent (accessed via Bloomberg, 9 April 2010).

Substantial Deficits More Likely

Alternative Scenarios 2010201120122013201420152016201720182019 2010-19Official CBO Score 6 1 -14 -50 -48 -15 7 6 -3 -13 -124Unachievable Savings 0 1 5 10 20 26 32 42 52 65 254Unscored Budget Effect 8 15 17 18 18 20 23 26 29 35 275Uncollectable Revenue 0 -1 -2 -5 1 6 14 18 22 27 78Premiums Reserved 0 0 5 9 10 11 11 9 8 7 70Net Deficit Effecta 14 16 12 -20 -1 47 89 101 108 119 554                       Extrapolated Scenariosb 2020202120222023202420252026202720282029 2020-29Subsidies (3.4% CAGR) 244 252 261 270 279 288 298 308 319 330 2850Cost Savings (10% CAGR) -10 -11 -13 -14 -15 -17 -19 -20 -22 -25 -167Tax Revenues (2.51% CAGR)c -110 -113 -115 -118 -121 -124 -128 -131 -134 -137 -1232

Net Deficit Effecte 124 128 133 137 142 147 152 157 162 168 1451

Scenario Analysis Summary – H.R. 4872, Reconciliation Act of 2010$ Billions

A Lot

Source: Congressional Budget Office. The long-term budget outlook. Washington (DC): CBO; 2009 Jun.

Notes: Components may not sum to totals because of rounding. aPositive numbers indicate increases in the deficit, and negative numbers indicate reductions in the deficit. bExtrapolations for 2020-2029 calculated using CBO estimated compounded annual growth rates (CAGR).cThe CBO pegs tax revenues to the rate of general inflation. U.S. Breakeven 20-Year Inflation rate between normal bonds and inflationary bonds was 2.51 percent (accessed via Bloomberg, 9 April 2010).

Hello Greece?• In light of the fiscal threat from growing spending, the budgetary

impacts of the Patient Protection and Affordable Care Act are central to any discussion of its merits

• Even with the budgetary gimmicks, if everything goes well there is only a modest projected decline in the deficit of $124 billion in the first 10 years and $681 billion in the second 10 years

• If one accounts for the dubious budgetary provisions related to unachievable cost savings, unscored budget effects, uncollectible revenue, and already reserved premiums, the act would raise, not lower, federal deficits by $554 billion in the first ten years and $1.4 trillion over the succeeding 10 years

Bruce H. HamoryExecutive Vice President, Chief Medical Officer EmeritusGeisinger Health System

Delivery System Reform and Bending the Cost Curve

Rich UmbdenstockAmerican Hospital Association

A Framework for Health Reform

• $12.9 billion prevention fund• Increases coverage of preventive services • No cost sharing for recommended preventive services • Annual Medicare wellness visits • Grants for workplace wellness programs• Creates a national public health council with advisory groups

• Comparative effectiveness• Hospital Value-Based Purchasing (VBP)• Enhanced public reporting• Numerous provisions to reduce health disparities• National quality center

• Pilot programs on payment bundling• Accountable Care Organizations • Center for Medicare and Medicaid Innovation (CMI)• Independent Payment Advisory Board (IPAB)• Administrative Simplification

• HIT Medicare/ Medicaid Incentive programs • Expansion of broadband technology• Funding for HIT infrastructure

• 32 million more people with health coverage• Shared responsibility • Insurance reforms• Medicaid expansions• Tax credits

Assisting with Health Reform

Education, Tools, Leadership Development and National Projects to Support Implementation

National Framework for System Reform

Key Health Reform Quality Issues

National ProjectsComprehensive Unit-based Patient Safety Program (CUSP) to reduce Central Line Associated Blood Stream Infections (CLABSI) and Catheter Associated Urinary Tract Infections (CAUTI)

CLABSI: 28 states, over 600 hospitals and growing

Work To Be Done• Policy Adjustments

– Readmissions – Hospital acquired conditions– DSH

Additional Issues• Campaigns

– GME slots– 340B expansions– Medicaid hospital payments– Liability reform– Coverage (undocumented

immigrants)

The New Health Reform Law and Private Insurance

Scott KeeferAmerica’s Health Insurance Plans

Laying the Foundation

Building Up to Successful

Implementation

2010 Market Reforms and Impact

Impact on Costs and Premiums; Provider

Capacity?

Changes in Coverage and Cost Impact?

Reforms & Reflection through 2015

Broader Reforms and Key Challenges

Sustainability: Driving Value in Delivery

Implementing Insurance Market Reforms Under the Federal Health Reform Law

Len M. Nichols, Ph.D. Director, Center For Health Policy Research and EthicsCollege of Health And Human ServicesGeorge Mason University

Jon KingsdaleExecutive DirectorCommonwealth Health Insurance Connector Authority

PPACA is NOT a Federal Takeover• Takeover not 2000 pages, rather, 2

lines

• Federalism:– Federal Goals – State Implementation

• McCarran-Ferguson• HIPAA• Patient Protection and Affordable Care Act

Examples of Federalism in PPACA• Grants to states for Ombudsmen• Reporting and regulation of MLRs• Setting up an exchange, with federal

start-up funds, and flexibility in key areas

• high-risk Pools• Annual review of premium increases• State insurance departments and

regulation of immediate and 2014 reforms

Successful Implementation

AuthorityCapacity

Self-Interest

Major Challenges• Coordinating Medicaid and

Exchange subsidy eligibility in the dynamic real world

• Politics of non-cooperation

Playing for Time: The Federal high-risk Program

Deborah CholletMathematica Policy Research

Why focus on high-risk individuals?• Unlike groups, individuals who apply

for coverage now can be:– Denied coverage– Offered coverage that excludes care

broadly related to their condition– Charged a much higher premium

• Even minor conditions can trigger denial, exclusions, or a “rate up”

Where do high-risk individuals find coverage now?

• In 35 states, a state high-risk pool funded by premiums, assessments on insurers, state funds

• In 5 states, the insurance market• An insurer of last resort• No option if not transferring from

group coverage

State high-risk pools• High premiums• Rarely, enrollment limits• High cost sharing• Annual/lifetime benefit limits• Waiting periods for coverage of

preexisting conditions

The Federal High-Risk Program• Temporary, pending 2014 market

reforms• Premiums equal to market rates• No waiting periods, lower cost

sharing• Eligible if

– Qualifying condition, denied coverage or offered exclusion or higher premium

– Uninsured 6 months or more

Ready, Set, Plan, Implement: Executing the Expansion of Medicaid

Leighton KuGeorge Washington University

Medicaid Eligibility in a Typical State: Now and 2014

Now 2014

Parents64% of poverty($14,000

family of 4)

138% of poverty($30,000

family of 4)

Adults without Children

Not Eligible

138% of poverty

($15,000 for one person)

Countdown for Key ChangesNow• States must retain Medicaid & CHIP

eligibility (limited exceptions)• States may begin expansions for adults earlySoon• CMS & states begin planning & systems

developmentJan. 2014• Expand eligibility for non-elderly adults• Narrower benefit packages for newly

covered• Coordinated applications for Medicaid, CHIP

& health insurance exchanges

Big Challenges Ahead

• Will the health care system be ready?

• How much will this cost?

• Will the states be ready?

States Opposing Health Reform Have More to Gain

39%

26%

Opposing States Other States

% of Medicaid-Eligible Adults Uninsured

Source: Author’s analysis of March 2009 Current Population Survey dataNotes: Opposing states include Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Virginia and Washington state. Estimates are for people 19 to 64 with income below 138 percent of poverty, adjusted for immigrant status.

New Roles For States In Health Reform Implementation

Alan WeilNational Academy for State Health Policy

Raymond ScheppachNational Governors Association

The State To-Do List• Medicaid Eligibility Expansion• Commercial Health Insurance

Regulation• Insurance Exchanges• Many Other Provisions

What States Need• Knowledge• Executive-Branch Leadership• Strategic Plan• Operational Plan• Needs Assessment• Short-Term Plan

Conditions For Success• Federal Cooperation• Stakeholder Engagement• State-to-State Learning• Vision, Leadership, Commitment

and Willingness to Take Risks

Health Reform’s Late-Term Delivery: Struggling with Political Birth Defects

Thomas P. MillerAmerican Enterprise Institute

Political Strategies

Smoke Screens

Budget Extenders

All or Nothing

Beat the Clock

Health Reform Stooges

Rough Road Ahead?

Raymond C. ScheppachExecutive DirectorNational Governors Association

Thank you!www.HealthAffairs.org