April 12, 2006- REVISED 1

Catamount Health Catamount Health Financial Facts Financial Facts

Under the Senate Under the Senate BillBill

Kenneth E. ThorpeKenneth E. Thorpe

Emory UniversityEmory University

2April 12, 2006- REVISED

Catamount HealthCatamount Health Comprehensive insurance subsidies Comprehensive insurance subsidies

available through 300% of povertyavailable through 300% of poverty Assistance to enroll those not currently Assistance to enroll those not currently

covered by their employers’ plan (if the covered by their employers’ plan (if the benefits are as generous as CH). Limits benefits are as generous as CH). Limits “crowd-out” and reinforces coverage in “crowd-out” and reinforces coverage in the private market.the private market.

Financial assistance to reduce the cost of Financial assistance to reduce the cost of insurance in the individual marketinsurance in the individual market

Free basic immunizations for VermontersFree basic immunizations for Vermonters

3April 12, 2006- REVISED

Based on typical plan in BCBSVT book of businessBased on typical plan in BCBSVT book of business Plan designPlan design

In-network: $200 deductible, 20% coinsurance, In-network: $200 deductible, 20% coinsurance, $600 limit on out-of-pocket spending . $10 office co-$600 limit on out-of-pocket spending . $10 office co-pay. pay.

Out-of-network: $400 deductible 30% coinsurance, Out-of-network: $400 deductible 30% coinsurance, $1,200 limit on out-of-pocket spending$1,200 limit on out-of-pocket spending

No copayments on clinically recommended services No copayments on clinically recommended services for chronic diseasefor chronic disease

No drug deductible, $15 copay for generic, $25 for No drug deductible, $15 copay for generic, $25 for preferred brand and $50 for non-preferred brandpreferred brand and $50 for non-preferred brand

Catamount Health Catamount Health BenefitBenefit

4April 12, 2006- REVISED

Catamount Health Catamount Health Premiums For those Premiums For those

Enrolling in CHEnrolling in CH Single premium for this benefit in the Single premium for this benefit in the

commercial market today = $423 per mo.commercial market today = $423 per mo. The premium is high since commercial payers The premium is high since commercial payers

reimburse hospitals and other providers at 44% reimburse hospitals and other providers at 44% above the cost of treatment!above the cost of treatment!

CH would pay 10% above the cost of treatment, CH would pay 10% above the cost of treatment, reducing the premium by 24%reducing the premium by 24%

Differences in morbidity between the CH Differences in morbidity between the CH eligibles and those privately insured reduce the eligibles and those privately insured reduce the premiums by 10%premiums by 10%

Overall reduction in premium is 34%--24% from Overall reduction in premium is 34%--24% from lower payments and 10% due to differences in lower payments and 10% due to differences in health statushealth status

Used a lower reduction (28%) to build in a Used a lower reduction (28%) to build in a “cushion” in case actual costs exceed estimated “cushion” in case actual costs exceed estimated costs.costs.

5April 12, 2006- REVISED

CH Premium Also Lower Due CH Premium Also Lower Due to Demographicsto Demographics

Age-adjusted prevalence of chronic Age-adjusted prevalence of chronic illnesses including diabetes, illnesses including diabetes, hypertension, cancer, heart disease hypertension, cancer, heart disease are higher in VT’s employer-based are higher in VT’s employer-based system than among the uninsuredsystem than among the uninsured

Uninsured are also younger. Nearly Uninsured are also younger. Nearly 50% of uninsured adults are aged 50% of uninsured adults are aged 19-34 compared to 25% of privately 19-34 compared to 25% of privately insured adults.insured adults.

6April 12, 2006- REVISED

Growth in Premiums Growth in Premiums Over TimeOver Time

Linked to the growth in Medicare spending per Linked to the growth in Medicare spending per capitacapita

CBO projects for hospital, outpatient, ancillary CBO projects for hospital, outpatient, ancillary services and physician services spending will rise services and physician services spending will rise 3.6% per year between 2007 and 2010. Assuming 3.6% per year between 2007 and 2010. Assuming drug spending rises 9% per year under the drug spending rises 9% per year under the program yields an average growth in CH program yields an average growth in CH premiums of 4.5%premiums of 4.5%

Actual growth will of course differ based on Actual growth will of course differ based on changes in Medicare ruleschanges in Medicare rules

Payments to hospitals start in 2008 at 110% of Payments to hospitals start in 2008 at 110% of costscosts

7April 12, 2006- REVISED

Reduction in Reduction in Uncompensated CareUncompensated Care

Today-private health insurers pay Today-private health insurers pay providers $183 million (at least) more providers $183 million (at least) more than the cost of treating their insured than the cost of treating their insured patients in hospitalspatients in hospitals

Under no reform and current law private Under no reform and current law private health plans will pay $287 million more health plans will pay $287 million more than the cost of treatment by 2010than the cost of treatment by 2010

CH will reduce these above cost CH will reduce these above cost payments by $53 million by 2010 —payments by $53 million by 2010 —reducing the cost shift and slowing the reducing the cost shift and slowing the growth in insurance premiumsgrowth in insurance premiums

8April 12, 2006- REVISED

Compared to No Reform CH Results in Compared to No Reform CH Results in Lower Health Insurance Premiums By Lower Health Insurance Premiums By

Reducing the Cost ShiftReducing the Cost Shift

Payment to Cost RatiosPayment to Cost Ratios No Reform CH EnrolleesNo Reform CH Enrollees

Uninsured in CH Uninsured in CH 13% 110% 16,09513% 110% 16,095

Uninsured in ESI Uninsured in ESI 13% 144% 1,469 13% 144% 1,469 VHAP VHAP

Uninsured 13% 73% 4,060Uninsured 13% 73% 4,060 Uninsured to ESI 13% 144% 2,808Uninsured to ESI 13% 144% 2,808 Currently Enrolled 73% 144% 3,180Currently Enrolled 73% 144% 3,180

To ESITo ESI

Currently insured 144% 110% 2,635Currently insured 144% 110% 2,635

Payments to Payments to

Hospitals % Costs 30% 113% 30,247Hospitals % Costs 30% 113% 30,247

9April 12, 2006- REVISED

What Happens if Hospital Spending Rises What Happens if Hospital Spending Rises Faster Than the Medicare Payment Updates? Faster Than the Medicare Payment Updates?

Cost Shifting is Reduced Dramatically and Cost Shifting is Reduced Dramatically and Premiums are Still Lower!Premiums are Still Lower!

Assumes BISHCA Not CBO Projections Assumes BISHCA Not CBO Projections of Hospital Spending Increase (6.36% of Hospital Spending Increase (6.36% per year)per year)

Payment to Cost Ratios for the Payment to Cost Ratios for the UninsuredUninsured

No Reform CHNo Reform CH 2008 13% 1.10% 2008 13% 1.10% 2009 13% 1.08% 2009 13% 1.08% 2010 13% 1.06%2010 13% 1.06%

10April 12, 2006- REVISED

Reduction in Cost Shift Reduction in Cost Shift Under CHUnder CH

The cost shift facing commercial insurers The cost shift facing commercial insurers RELATIVE to the no reform (i.e. baseline RELATIVE to the no reform (i.e. baseline of no change) will unambiguously be of no change) will unambiguously be reducedreduced

The cost shift is reduced and private The cost shift is reduced and private insurance premiums will lower relative insurance premiums will lower relative to the no reform option due to:to the no reform option due to: Moving the uninsured to CH and ESI Moving the uninsured to CH and ESI

coveragecoverage Moving VHAP insured to ESI coverageMoving VHAP insured to ESI coverage

11April 12, 2006- REVISED

Private Insurance Payments Relative to Costs

1.351.4

1.451.5

1.55

2007 2008 2009 2010

Year

Pay

men

t to

C

ost

Rat

io

No Reform CH

12April 12, 2006- REVISED

Family Premiums Under No Family Premiums Under No Reform and CHReform and CH

Year No Reform Catamount Year No Reform Catamount HealthHealth

2008 $12,950 $12,5602008 $12,950 $12,560

2009 $14,050 $13,0652009 $14,050 $13,065

2010 $15,245 $13,8722010 $15,245 $13,872

13April 12, 2006- REVISED

$388

$984

$1,372

0

500

1000

1500

$ Savings

2008 2009 2010

Savings to Vermonters with Private Insurance Under Catamount Health

$ Savings