The Michigan Context

Denise Holmes Director, Institute for Health Care Studies

Associate Dean for Government Relations and Outreach

March 14, 2007

Trends and Indicators in the Changing Health Care Marketplace

14.0%13.5%

7.7%

5.7%

14.7%

9.3%

9.1%8.4%

6.2%

10.8%

10.2%

10.5%

8.0%

7.1%

6.1%

4.1% 4.4%3.9% 4.1%

4.6%5.1%

7.4%8.0%

7.2%6.8%

4.2%

13.5%

1.9%

3.2%

10.3%

6.2%

4.3%

3.6%

3.6%

4.1%

4.8%5.4%

3.0%

3.0%

2.6% 2.8% 3.0%2.3%

1.6%

2.2%

3.4%2.8%

1.6%

2.3%

2.7%

0%

3%

6%

9%

12%

15%

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Annual Increase in NHE per CapitaAnnual Increase in CPI

Percent Annual Increase in National Health Expenditures (NHE) per Capita vs. Increase in Consumer Price Index (CPI), 1980-2004

SOURCE: Trends and Indicators in the Changing Health Care MarketplaceInformation provided by the Health Care Marketplace Project.Publication Number: 7031Information Updated: 02/08/06

Health Care Costs are Increasing Faster than Inflation

Health Insurance, Medicaid* vs. CPI

13.9%

7.7%

1.6%

9.2%

11.2%10.9%

12.9%

8.2%

0.8% 0.8%

-1.2%

3.9%

5.7%5.0%5.2%

3.4%

2.3%3.2%

3.4%2.7%2.8%

-2%0%2%4%6%8%

10%12%14%16%

'00 '01 '02 '03 '04 '05 '06

Insurance Medicaid CPI

*Survey of Employer Sponsored Health Benefits, family of four, cited in Detroit Free Press, 1/25/05; Medicaid, per beneficiary expenditures w/out LTCSource: Paul Reinhart, MDCH, Medicaid Briefing: Select Committee on Medicaid Reform and Innovation, December 2005.Source of ’05 and ‘06 data: 2005 & 2006 Employer Health Benefits Survey, Kaiser Family Foundation and Health Education and Research Trust.

These unsustainable cost increases coupled with other changes in the economy are resulting in:• Fewer people with employer coverage• People shifting from private to public insurance• More uninsured• Health care taking a growing share of the state and

federal budget• Growing consumer dissatisfaction

Employer Based Coverage Non Elderly (Under Age 65)

71.6%75.4%75.3%

71.7%70.0% 69.7%

65.0% 63.8%

68.2%66.4%

63.2% 62.8%

50%

60%

70%

80%

90%

100%

'00 '01 '02 '03 '04 '05

Michigan United States

Source: U.S. Census Bureau, Current Population Survey, Table HI05

Medicaid CaseloadDHS Projection

1,0001,0501,1001,1501,2001,2501,3001,3501,4001,4501,5001,5501,600

Fiscal Year

In T

hous

ands

1999 2000 2001 2002 2003

Projection*

*Department of Human Services, October 2004, October 2005

2004 2005 2006 2007

Source: Paul Reinhart, MDCH, Medicaid: Current Realities and Future Challenges, November 2005

Growth in Michigan Medicaid Growth in Michigan Revenue

0%

20%

40%

60%

80%

100%

120%

Medicaid

Revenue

FY95 FY97 FY98 FY99 FY00 FY02FY01 FY04FY03 FY05 FY06FY96

Consumer Unease About Growing Health Care Costs

•80% dissatisfied with amount spent on health care •44% dissatisfied with quality•Major confusion about why costs are rising•Distaste for giving up anything to achieve major change

Recent poll by USA Today, ABC News, and the Kaiser Family Foundation

The Fall 2006 MSU State of State survey reports similar results for Michigan citizens compared to five years ago:

• A majority of Michigan citizens feel they are worse off in paying out-of-pocket health expenses

• Nearly half of college graduates (45%) are worse off with respect to health insurance coverage

Health Care Cost Drivers

• New and expensive technologies, new treatments, drugs, diagnostics

• Systemic inefficiencies – over use, under use, misuse, inefficient handoffs, failure to use evidence based medicine, high insurance administrative costs

• Aging population and aging workforce

Health Care Cost Drivers

• Avoidable illness (obesity)• Shortage of selected health professionals• Medical malpractice (.7%)

No magic solutions to controlling cost –the sad story of health care cost containment.

SOURCE: Trends and Indicators in the Changing Health Care MarketplaceInformation provided by the Health Care Marketplace ProjectPublication Number: 7031 Information Updated: 02/08/06

“Prediction is difficult – especially if it is about the future”

New approaches• More managed care• Pay for performance• Consumer driven plans• Health information technology• Universal coverage

Niels Bohr Danish Physicist (1885-1962)

• Employer-based enrollment 2.7 Million persons in 2006*

• Michigan’s proportional share of enrollees is 93,622 persons

• Few employers expect to adopt a CDHP in 2007*

Consumer Directed Health Plan (CDHP)

Source: 2006 Employer Health Benefits Survey, Kaiser Family Foundation and Health Education and Research Trust

Blue Cross Blue Shield Rolls Out a High Deductible Health Plan for Individuals

Beginning April 1, 2007Value Blue• Uses PPO network• Deductible/Copay

– $1000 individual/$2,000 family– Copays 30% in-network 50% out-of-network– Copay limit of $2,500

• Benefits– Hospital

Blue Cross Blue Shield Rolls Out a High Deductible Health Plan for Individuals

Benefits continued

– Physician– ER– Lab/x-ray– Limited pharmacy coverage

• Premiums– $171.70 one person– $343.39 two persons– $360.55 family

Blue Cross Blue Shield High Deductible Health Plan − Group

• BCBSM also offers group plans structured to employer needs– 45,000 enrollment (27,000 Michigan-based and

18,000 national groups)

Universal CoverageMichigan First − Who’s In?

• The target population for subsidized coverage is uninsured adults with incomes at or below 200% of the federal poverty level ($40,000 per year for a family of 4) without adequate access to insurance

• That’s about 550,000 people• An additional 550,000 uninsured people with

incomes over 200% of the FPL will have access to unsubsidized coverage under Michigan First

What’s Happening?

• CMS approval• Notification to legislature• Implementation plans• Tweaking the plan design in response to CMS,

legislature, and stakeholder input• Without an overall budget solution, is it possible to

implement Michigan First?

State staff are continuing to work on a number of plan issues including:

Health Information Technology

• Health Information Technology commission appointed August 2006

• $9 M in planning and implementation grants –for development of Health Information Exchanges awarded Spring, 2007

• 11 grant requests received

Planning and Implementation Grant Regions