National Health Care Reform

Now the Hard Work Begins:September 23, 2010

Peter PrattSenior Vice President

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The Impetus for Reform

Increasing numbers of uninsured Rising health care costs for individuals,

businesses, and government Wide variations in quality of care, inefficient use

of resources (paying for quantity) 14,000 people a day are losing their health

insurance Families with health insurance pay $1,000 to

subsidize care for the uninsured

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Areas of Agreement

Believe it or not, there was bipartisan agreement in theory at the start:

(Most) everyone will be required to have health insurance—public or private—DONE

Health care costs are rising too rapidly and must be controlled—NOT REALLY DONE

People with public or private coverage can keep it—DONE Private insurers need more regulation (no denials for pre-existing

conditions, no annual or lifetime limits) —DONE Health care quality must improve, and the way we pay providers

must foster this improvement—NOT REALLY DONE Reconciling these areas of agreement has led to considerable

disagreement

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Major Aspects of Reform

Covering more of the uninsured through public and private means• Mandates for individuals & employers, with subsidies and

exemptions for small business & individual hardship• Expansion of Medicaid

Public plan option—not in final bills Health insurance exchanges and regulation Cost containment and quality improvement Paying for reform

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Covering Everyone?

New 2009 data: 50.7 million uninsured, up from 46.3 million in 2008 Covers 32M, leaves 22M uninsured (95% of population excluding unauthorized

aliens), but may cover up to 40M if everyone eligible signs up How cover?

• Individual mandate—or penalty—with exemptions • Employer mandate—or penalty—with exemptions• Tax credits/subsidies for premiums, copays and deductibles• Medicaid expansion to 133% FPL• Temporary coverage for uninsured people with pre-existing conditions (October 2010-

January 2014)—applications taken starting August 31 in Michigan; $141M over three years; PHP to administer plan; 3,500 to be covered

Michigan• Estimated 1M people will be eligible for subsidies through the exchanges; 640,000 will

actually enroll (includes insured and uninsured)• Estimated 969,000 newly eligible for Medicaid; 400,000-600,000 will actually enroll

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Mandates for Individuals

Must have coverage that meets minimum standards Penalties: Higher of

• $95 (2014), $325 (2015), and $695 (2016)/yr/family member up to $2,085 or

• 2.5% of household income, if above filing threshold ($9,350/individual or $18,700/couple in 2009)

Exemptions: financial hardship (income below filing threshold or spend more than 8% of income on insurance), religion, American Indians

Individuals whose employers don’t offer health insurance are NOT exempt

Individuals who don’t take employer-offered coverage are NOT exempt

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Subsidies for Individuals

Two kinds: for premiums and for out-of-pocket costs (copays and deductibles)

Sliding scale premium tax credits up to 400% FPL ($88K for family of four)

Subsidies set to limit premium contribution to 2% of income if total income 133% FPL to 9.5% of income if total income 300-400% FPL (133% FPL=$29,000 for family of four; subsidy covers all but $600)

Increases cost-sharing subsidies for <250% FPL

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Requirements for Employers

No employer mandate for employers < 50 employees Penalty for employers > 50 NOT offering HI is $2K/year/worker If employer does offer HI and has one or more employees

receiving premium tax credit, pay lesser of $3,000 for each employee receiving the credit or $2,000 for each FTE

First 30 employees exempt from calculation of penalty Employers > 200 must enroll employees automatically into

employer’s lowest cost plan if they don’t opt out 98% of businesses unaffected, either because already offer

coverage or they are exempt. This all takes effect in 2014

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Subsidies for Employers

Credits for small businesses (<25 employees): 35% from 2010-2013; 50% starting 2014. Credits phase out as firm size & average wage increase. Families USA: 132,000 Michigan small businesses eligible for credit (85% of small business in state)

Credits may not be attractive enough to get smallest businesses to offer health insurance (and no penalty if they don’t)

No mandate, no credits for employers 26-50 employees Temporary reinsurance program for employers covering retirees >

age 55 not on Medicare. Pays 80% of retiree claims between $15K and $90K. In effect now. State, many cities and universities, GM, Kellogg, Dow Chemical, and others have qualified.

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Cost of Covering More People Two kinds of costs are competing for public’s attention: cost to

government and cost to individuals, families, and businesses Most talk in Washington DC was about former; now focus has shifted to

the latter Every dollar that defrays cost of health insurance for businesses,

families, and individuals will add to the government’s cost—and who pays for government?

Individual and employer mandates—even with subsidies and limits, will people decide to buy HI or pay penalties?

Equity: How much should people and employers w/HI pay for those without it? ($1,000 a year now)

Equity: Big 2010 jump in firms 3-9 offering HI (46% to 59%) Equity: How much should employer and employee pay for employer-

sponsored HI? Family coverage in 2010: $13,770. Employer share: 71% Employee share: 29% and rising (25% in 2000)

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Expansion of Public Programs Expand Medicaid to all individuals (133% FPL)—Michigan covers

childless adults now up to 35% FPL States can expand coverage before 2014, but at current FMAP Feds fund 100% of expansion population from 2014-16, 95% for

2017, 94% for 2018, 93% for 2019, 90% after that Require states to maintain current income eligibility levels for

children in Medicaid & CHIP until 2019 & extends funding for CHIP through 2015. In 2015, states get 23% increase in CHIP match rate up to 100%.

Increase Medicaid payment rates to PCPs to 100% of Medicare rates for 2013-14 only

Increase payments to community health centers for new eligibles Why does this matter? For businesses, fewer uninsured. For

providers, better payment but not great payment; pent-up demand

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The Public Plan or Not

NOT.

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Health Insurance Exchanges

State-based exchanges starting in 2014 called American Health Benefits Exchange & Small Business Health Options Programs, administered by government or non-profits.

Goal: Sustainable, financially viable options that offer meaningful coverage

HHS to give up to $1M/state for designing exchanges Standardization of presentation of insurance benefit

options (transparency) Big question: How active a regulator will the exchanges

be?

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Health Insurance Regulation Guaranteed issue and renewability No pre-existing condition exclusions—for children, goes into effect

9/23/10 for group, but not individual, plans No lifetime limits or rescissions (effective 9/23 for new plan year—

January 1 for many) Limit rating variation to family size, geography, age, tobacco use

(not allowed for health status, gender, occupation) Tighter oversight of health plans:

• HHS secretary can require plans to lower rates• More requirements for existing plans: med loss ratios (2010), cover <26

years old (9/23/10), preexisting condition exclusion prohibition (2014), cover preventive services (new plans, 9/23/10; grandfathered plans, 2018)

• Essentially, all consumer protections except underwriting will apply to grandfathered plans

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Benefits Essential benefits package

• HHS sec’y recommends essential benefit package that covers 60% of actuarial value of covered benefits

• Limits cost sharing to $5,950 or $11,900, no annual or lifetime limits on coverage

• July 14: New rules requiring insurers to provide free (no copays, deductibles) coverage for many screenings, lab tests, and other preventive services recommended by US Preventive Svs TF

o Applies to new plans after 9/23/10 and existing plans that make significant changes after that date

o Will increase premiums 1.5%

Plan categories through exchanges• Bronze (plan pays 60% of costs), silver (70%), gold (80%),

platinum (90%), up to age 30 (catastrophic plan).

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Cost Containment

Encourage adoption and use of health IT Reduce fraud, waste, and abuse Simplify HI administration through standardization Reduce payments to Medicare Advantage plans; after

2014, MA plans can earn 5% quality bonuses Add $9.9B in reductions for IP hospitals, SNF, home

health, and others from expected productivity gains Reduce Medicaid and Medicare DSH allotments Increase Medicaid drug rebates Create Independent Payment Advisory Board—to

rationalize and de-politicize cost control efforts

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Quality Improvement Develop a national strategy to improve quality Cover proven preventive services and eliminate cost-

sharing for them (Medicare) Offer incentive pmts to providers for coordinated care Lower payments for avoidable rehospitalizations,

hospital-acquired infections Bundle payments for acute and post-acute care Provide grants for H system efficiency improvements Offer Medicare and Medicaid bonus payments for

primary care and care coordination Intensify comparative effectiveness research Foster accountable care organizations

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Quality Improvement: ACOs Medicare Shared Savings Program

• By 1/1/12, HHS sec’y establishes program to promote accountability for a patient population, coordinate services for M’care FFS beneficiaries, & encourage investment in infrastructure and redesigned care processes

• ACOs must have formal legal structure; shared governance of group practices, hospitals, joint ventures; enough PCPs to meet needs (5,000 minimum beneficiaries)

• ACOs must define processes for EBM & patient engagement, report quality and cost measures, coordinate care through telehealth and remote patient monitoring, and demonstrate patient centeredness

Pediatric ACO Demonstration Project• State makes application to HHS• Allows state to recognize certain pediatric providers as ACOs and

receive incentive payments• Must demonstrate savings—incentive pmt is portion of savings

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Patient-Centered Medical Home

New Center for Medicare & Medicaid Innovation suggests PCMH as model to be tested

Grants and contracts to establish community-based, interdisciplinary health teams to support primary care practices (State or state-designated entity must apply) and PCMH

Primary Care Extension Program: Education and support for PCPs by “health extension agents” for PCMH, process redesign, cultural competence ($120M/yr for FY11 and FY12)

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Primary Care Workforce Grants: $250M on June 16

Investments to train 16,000 new providers $168M for 500 primary care residency slots $32M for training PAs in primary care $30M to encourage 600 nursing students to

attend school full time $15M for operation of 10 nurse-managed health

clinics to help train NPs $5M for states to plan and implement innovate

expansion of primary care workforce by 10-25%

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Other Workforce Grants: $159M on August 5

Nursing workforce development• Advanced education for nurses as PCPs/faculty• Support for clinical nurse specialists• CRNA training• Expansion of nursing school capacity and retention• Workforce diversity• Faculty development in health IT

Interdisciplinary geriatric nursing and training Centers for Excellence grants to improve

recruitment and performance of minorities

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Paying for Reform

HC reform can’t add to deficit, so must tax and/or cut spending Net cost is $940B, cuts deficit by $138B over 10 yrs Higher taxes for high-income individuals/households:

Part A payroll tax rate rises from 1.45% to 2.35% 3.8% assessment on unearned income for high-income taxpayers

Taxes on policies with benefits over a certain threshold 40% tax on plan >$10.2K indiv/$27.5K family (2018) Vision and dental plans excluded from calculation

Penalties for individuals & large employers who don’t get/offer HI Cuts in plan and provider payments Insurers, medical device makers, Rx mfgers pay fees of more

than $100B over 10 years, but with later start dates

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The Public and Reform

Public divided on reform in general, but objected to the process more than the content

Public not wild about mandates Public strongly supports most major features of

reform: tax credits, exchanges, expand Medicaid, prohibit pre-existing condition exclusions, leave most people’s coverage unchanged

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Changes in 2010 Dependent children can remain on parents’ HI until age 26 Seniors will get more help paying for drugs under Medicare ($250 for donut

hole) Some Medicare preventive care will be free of copays and deductibles

(1/1/11) Uninsurable people could qualify for temporary high-risk pool Employers of early retirees (55-64) reimbursed 80% claims between $15K

and $90K Small biz (<25 employees) gets tax credits 10% tax on indoor tanning services More oversight of health plan premium increases Ban on lifetime limits on HI coverage and on retroactive cancellation of

policies Prohibit new health plans from denying children coverage based on pre-

existing conditions Most of the big stuff goes into effect in 2013 and 2014

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Michigan Roles and Decisions, I

Health Insurance Reform Coordinating Council• Members are all senior administration officials• Evaluate ACA and its impact on state’s health care system;

identify actions necessary to comply w/act• Identify & recommend mechanisms to assure coordinated,

efficient implementation• Engage with relevant stakeholders to assist in developing

implementation recommendations• Identify federal grants, pilots, and other non-state funding

sources to assist with implementation• Submit strategic plan to governor and MDCH director—MDCH

drafting, likely to be out in October

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Michigan Roles and Decisions, II

Expand Medicaid before 2014 (current FMAP rate)? Two sets of criteria for Medicaid eligibility Medicaid eligibility and enrollment coordination with the

exchange Michigan has said “yes” to high-risk pool—will cover

thousands, not hundreds of thousands. Pool won’t cover those who have coverage now Health insurance ombudsperson established Down the road: is the exchange run by the government

or a nonprofit? New administration in 2011

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What Did We Get?

Centrist-left reform that preserves and expands government and private market for health insurance and health care—no single-payer or public option

Focus more on expanding coverage than controlling costs, but no universal coverage

Government cost control—no addition to the budget deficit—trumps affordability for small biz, families—affordability is the big question!

Health plans have begun offering lower cost plans with restricted networks (employers interested?)

Penalties for individuals, biz Modest quality improvement/changing delivery of health care Repeal unlikely, but public education on what’s really in the bill and

implementation will determine public acceptance