The Affordable Care Act and the Future of U.S. Healthcare

1. The Affordable Care Act and the Future of U.S. Healthcare Karen Davis President The Commonwealth Fund www.commonwealthfund.org kd@cmwf.org The Century Foundation July 11, 2012

2. Supreme Court Decision • Upholds constitutionality of the requirement to have health insurance on grounds that the associated penalties are taxes • Changes rules for state participation in the law’s Medicaid expansion for people earning up to 133 percent of poverty, estimated to cover up to 17 million uninsured people by 2020 • Federal government provides 100 percent financing for most states through 2016, phasing down to 90 percent for all states by 2020 • Decision permits but does not require states to expand their Medicaid programs under the conditions of the law and receive federal funds • States that choose not to participate in the expansion can maintain existing federal Medicaid funds • People with incomes between 100 and 400% poverty without affordable employer or public insurance are eligible for subsidized private plans through insurance exchanges; only legal immigrants under 100% poverty. • States and federal government can move forward in implementation; substantial federal financing of the Medicaid expansion will be a strong incentive for states but not all states likely to participate

3. What States Are Saying About ACA Medicaid Expansion Undecided/No comment Leaning Toward Participating Participating Will Not Participate Leaning Toward Not Participating Source: American HealthLine, July 3, 2012.

4. Health Reform: Already Beginning to Improve American Lives • Health Reform Essential • Decade of rising uninsured and medical bill problems for working Americans • 36.6 million uninsured in 2000, 49.9 million uninsured in 2010 • Health care costs a major burden on families, businesses, federal and state budgets • Health care 13.8% of GDP in 2000, 17.9% of GDP in 2010 • Only half of older Americans up-to-date with preventive care • U.S. ranks last on preventable mortality out of 19 countries; 100,000 lives lost to medical errors • Key Health Reform Provisions • Expansion of coverage to up to 32 million uninsured by 2020; coverage affordable for all • Rules on insurers to prevent excessive premiums and stop practices that put those with pre-existing conditions and major health problems at risk • Investment in innovation to improve patient safety, care coordination across sites of care, quality, health outcomes • Focus on prevention and health promotion • Early Results • Lower health care costs • Expanded coverage • Better care

5. Projected Health Spending in 2020 $275 Billion Lower Than Pre-Reform PredictionsCumulative Reduction of $1.7 Trillion over 2011-2020 • Lowest health care cost increase in 50 years -- 3.9% in 2009 and 2010 • $1.7 trillion lower health spending over the decade than projected 2 years ago • Medicare $750 billion lower • Private spending $1.1 trillion lower • Predictions that health reform would cause health care costs to rise not borne out • Health delivery system changes may be beginning to have an effect −5.6% 19.9% of GDP 21.1% of GDP 19.8% of GDP Source: K. Davis, Bending the Health Care Cost Curve: New Era in American Health Care?, (New York: The Commonwealth Fund Blog, January 2012).

6. Reform Has Dramatically Reduced the Number of Young Adults Without Health Insurance Coverage Percentage of Young Adults Without Health Insurance • 6.6 million young adults enrolled in parents’ policies in 2011 who would not have been able to do so prior to law; 3 million newly insured • 62,000 people have been enrolled in Pre-Existing Condition Insurance Plans as of June 2012 • 102 million policyholders no longer have lifetime benefit limits • Beginning in 2014 insurance coverage for working families will improve markedly – up to 32 million newly covered; 39 million with subsidies and lower costs September 2010: Health Reform Allows Children to Remain on Parents’ Plans Until Age 26 2009 2010 2011 Source: S. R. Collins, R. Robertson, T. Garber, and M. M. Doty, Young, Uninsured, and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act Is Helping, (New York: The Commonwealth Fund, June 2012); HHS, ASPE Office of Health Policy based on CDC/NCHS National Health Interview Survey, 2009-2011.

7. By 2019 Health Reform Will Reverse the Deterioration of Health Insurance Coverage for Working Age Adults over the Last Decade and Achieve Near Universal Coverage 1999-2000 2009-2010 2019 (estimated) 14%–18.9% 23% or more 19%–22.9% 7.1%–13.9% 7% or less Source: Commonwealth Fund National Scorecard on U.S. Health System Performance, 2011.

8. Status of State Legislation to Establish Exchanges, As of May 2012 NH WA VT ME MT ND AK MN OR NY WI ID MA SD RI WY MI CT PA IA NJ OH NE NV DE IN IL MD UT WV IA VA CO DC CA KS MO KY IL NC WV VA TN SC OK AZ AR NM GA AL MS HI LA TX FL State exchange in existence prior to passage of ACA Legislation failed/no gubernatorial action Legislation signed into law post passage of ACA Governors pursuing non-legislative options Legislation signed: intent to establish an exchange, creation of study panel or appropriation Governors working with HHS on options Legislation passed one or both houses Governor veto or decision not to establish exchange Legislation pending in one or both houses No legislative activity to date Source: National Conference of State Legislatures, Federal Health Reform: State Legislative Tracking Database. http://www.ncsl.org/default.aspx?TabId=22122; Politico.com; Commonwealth Fund Analysis.

9. Improved Prevention and Health Promotion • 32.5 million Medicare beneficiaries received free preventive services through May 2012 • 3.6 million seniors who reached the Medicare Part D “doughnut hole” received 50% discount on prescription drugs saving $2.1 billion through May 2012 • An additional 54 million policyholders under age 65 with private insurance have coverage for preventive services with no cost sharing • Employers mounting health promotion programs and introducing incentives for health risk assessment and healthier lifestyles • Hospitals have incentives to reduce hospital-acquired infections, improve patient safety, reduce hospital readmissions

10. Payment and Delivery System Reforms Support a High Performance Health System • ACO: Broad responsibility for quality and cost of patient care, rewards for quality, shared savings • Center on Medicare and Medicaid Innovation • Primary Care and Medical Homes: three new Medicare pilots, several Medicaid initiatives; increased payment for primary care • Bundled payments: Medicare pilots for hospital and post-acute care, Medicaid initiatives • Value-based purchasing • More transparency on quality and cost Payment and Delivery System Integration Global Budget Pioneer ACOs Medicare Shared Savings Plan Payment Integration Comprehensive Primary Care Initiative FFS and DRGs Small MD practice; unrelated hospitals Integrated delivery system Delivery System Integration Source: The Commonwealth Fund, The New Wave of Innovation: How the Health Care System Is Reforming, (New York: Columbia Journalism Review, November 2011); A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance (New York: The Commonwealth Fund, Aug. 2008); A. Dreyfus, The Alternative Quality Contract and ACOs: Lessons for Policy-Makers, presentation to 2012 Bipartisan Congressional Health Policy Conference, January 22, 2012.

11. The Health System is Responding to Challenge to Provide Better Care • Meaningful use of health IT – • physicians with Electronic Health Records doubled from 17 to 34 percent in last three years • half of all hospitals have registered for a Medicare or Medicaid EHR Incentive Payment; $2.5 billion in EHR incentive payments • 50,000 health IT-related jobs created since the enactment of the HITECH Act (BLS) • Hospitals/physicians are participating in care transformation collaboratives • 32 Pioneer ACOs – committed to moving faster toward accountability • Bundled payment – Acute Care Episode demonstration, CMS bundled payment initiative • Primary care and Medical homes – Comprehensive Primary Care Initiative; 41 state Medicaid programs supporting initiatives • Community-based Transitions Program – 7 communities in Arizona; Atlanta; Akron; Merrimack Valley (MA), Southern Maine, and Chicago selected as of January 2012; aims to improve post-hospital discharge care transitions and reduce hospital readmissions • Partnership for Patients -- 6,900 hospitals and organizations pledged their commitment to a national campaign to improve the safety and coordination of care

12. Thank You! Sara Collins, Vice President, Affordable Health Insurance src@cmwf.org Tony Shih, Executive Vice President for Programs, ts@cmwf.org Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Melinda Abrams, Vice President, mka@cmwf.org Stu Guterman, Vice President, Payment Reform sxg@cmwf.org Kristof Stremikis, Senior Research Associate, ks@cmwf.org For more information, please visit: www.commonwealthfund.org