HEALTHCARE REFORM – WHAT NOW?

HEALTHCARE REFORM – WHAT NOW? Steve Markesich, CPAM Yale-New Haven Health System Maryland Chapter AI September 13, 2012

How we left things at last year’s AI • 2012 campaign takes center stage • Fate of House, Senate and White House • Lots of rhetoric – little change • Maybe some tweaking • More specifics (good and bad) may come to light • Nothing significant until Supreme Court hears case and/or elections

TODAY’S OUTLINE • The SCOTUS decision • Review the law’s primary features • What states need to decide • What parts of the law remain vulnerable • What providers should expect • What individuals should expect • The politics of 2012 and beyond • The reality

The Decision - June 28, 2012 • In what was a surprise to many based on the analysis following March’s oral arguments, the Supreme Court upheld the constitutionality of the individual mandate by a 5-4 vote.

Reform Implementation The law’s primary features

Primary Features • Prohibits: • Pre-existing condition exclusions (currently effective for Children under 19. • Unjustified rescissions of coverage. • Prohibits lifetime limits on coverage. • Restricts annual limits on coverage. • Provides financial relief for Pt D recipients. • Extends coverage on parent’s EGHP to children up to 26 year old • Caps out of pocket expenses for private health plans. • Major Medicaid Expansion (optional)

Features, cont. Employers get help covering cost for their retirees Tax credits for small business Subsidies for self-employed Incentives for wellness and preventative programs More money for PCPs Higher taxes, particularly on high income earners Higher deduction limit for medical expenses Reduces H.S.A. exemptions and amounts No coverage no longer an option Emphasis and reimbursement based on outcomes and quality, not volume

Features, cont. • ACOs • Bundling pilots • Medicaid first, then Medicare • Disclosure of information • Hospital readmission rates (2012) • Hospital records for medical errors and infection rates for Medicare patients (2015) • Reimbursement reductions • Reduce annual MCR market basket amount and update for productivity • MCR rates reduced by as much as 1% for hospital with highest rates of medical errors and infections (2015) • No MCD reimbursement for same (2015)

Features, cont. • Sets target levels for per physician per Capita Medicare spending in 2015 that may be hard to reach • Reduce MCD DSH allotments (2014) • Uniform transaction sets – comply or pay a penalty • Insurance rebates • 80 to 85% spending requirement on medical care • Estimated 13M Americans will receive a rebate by year’s end between $1 and $517(most states) • $1.1B total refunds expected in 2012

Reform Implementation What the states need to decide

Medicaid Options • The law as originally written required states to participate in Medicaid expansion or lose all their federal funding • SCOTUS ruled that unconstitutional, and that states had the right to opt out while keeping the rest of their programs (and funding) intact. • The following are therefore optional: • Cover childless adults through a Medicaid State Plan Amendment. • Provide coverage for family planning services to certain low-income individuals. • Pick up CHIP coverage to children of state employees eligible for health benefits if certain conditions are met. • Allow MCD enrollees with certain conditions to designate a provider as a health home

Medicaid Options, Cont. • More options: • Create an incentive program to increase non-institutionally based long term care service. • Establish an option to provide community-based support services to certain people with disabilities • Provide Medicaid coverage (and remove cost-sharing) for preventive services and immunizations. • States need to decide if they want to additional federal money and participate in the expansion • Unlike insurance exchanges, there is not fallback for states that do not do this. • For states that expand coverage up to 133% of the FIPG, the feds cover the entire cost from 2014-2016, and phase that down to 90% by 2020. (loophole)

Insurance Exchanges • The day after SCOTUS announced its decision, the administration began to aggressively push states to implement insurance exchanges • Within 2 weeks, HHS pushed out new funding opportunities designed to help states plan for their insurance exchanges • These funds/grants are designed for planning the exchanges at the state level. States do not have to pay the money back of they decide to let the feds handle their exchanges

Exchanges, cont. • The law said exchanges had to be up and running by 2014, so HHS has to certify in 2013 whether each state will be able to build its own. • HHS said last year in its first proposed rules that is would certify state-based exchanges after 2014 in case states were not ready on time but could get there eventually. • The feds clearly want each state to set up their own exchange, which most policy experts agree would be better than a federal exchange. • Some Republican governors who said they were waiting for SCOTUS are now saying they won’t implement the law until they see how the November elections shake out and if they pick up enough seats to try to repeal the law.

Reform Implementation What part of the law remain vulnerable or are problematic?

Vulnerable/Politically Problematic • IPAB – Independent Advisory Board • IRS Enforcement • Is the IRS capable of policing the healthcare decisions millions will make while also collecting the taxes needed to run the federal government? • Questions exists regarding staffing levels sufficient • Questions exists regarding whether IRS will be given the congressionalauthority to enforce what it is accountable to enforce

V&P, cont. • Congressional funding (more on this later) • Will employers who currently offer EGHPs continue to or find it cheaper to pay the fine and push their employees to the insurance exchanges • Political issue for the administration who promised that if you like what you have you will be able to keep it • The uninsured does not go away

Reform Implementation What providers should expect

Impact on Providers • The law will cut payments to physicians and hospitals as a group, although the degree to which payments are cut varies • Hospitals will see more patients and get paid less to do so. • Emphasis on quality and outcomes • Hospital readmission rates • Hospital errors and infections • Hospitals hire more PCPs? • Expansion of electronic medical records • Inpatient care de-emphasized • Replaced by outpatient services move to at-home services

Providers, cont. • Community Hospitals are more vulnerable • The era of CHs being all things to all people is over • Significant increase in hospital integration • Creation of “centers of excellence” • Elimination of duplicate services in regional areas • A surgeon who performs 350 heart-valve surgeries a year will have better outcomes than one who performs a variety of 200 heart-related procedures a year • Patient-centered care where specialists treat specific conditions within an area of expertise • Individual/small physician groups to become extinct?

To summarize: The legislation aims at reducing wasteful spending and duplicate services, and to slow the growth of costs through improvement in the delivery system In order to thrive in this environment physicians will have to merge into larger groups to make it easier to adopt management practices to evaluate their care, and conduct internal quality reviews.

Summary, cont. • The law includes incentives for hospitals to shift business away from traditional acute care inpatient facilities into more cost-effective settings. • Focus on disease management and avoiding hospitalizations • Medicare cuts will be a reality as the IPAB will fast-track recommendations to reduce Medicare spending if spending exceeds targets.

Reform Implementation What individuals should expect

Penalties on unhealthy “choices” • Higher costs related to obesity • Recent studies show that obesity’s price tag is not $190B a year, more than 20% of U.S. healthcare costs • Rewards for eating healthier and exercising • Eventual out of pocket premium and co-pay expenses. • Same kind of penalties for smokers

Rationing of care? • The issue nobody wants to confront • Cost/benefit of chemo • Cost/benefit of artificial joints • Cost/benefit of expensive, life saving treatment with questionable expected outcomes • Do we ultimately wind up with a two-tiered system?

Reform Implementation The politics of 2012 and beyond

The immediate aftermath Shortly after the SCOTUS decision the Republican-controlled house voted to repeal the law. This was the 33rd time since the law was passed in 2010 the House has voted to repeal all or part of the law. Democrats pleased with Republicans to stop fighting old (and losing) battles. Republicans claimed they had to press forward with repeal to jump-start a sluggish economy and rein in spending

Aftermath, cont. • The House Appropriations subcommittee passed a spending bill in July that would defund PPACA, eliminate the Agency for Health Care Quality and Research, as well as slashing the budgets for other health programs. • Romney and the R’s vowed to make this a referendum in the November elections and promised to kill the bill • Some pundits have reported that the mantra of “repeal and replace” has been changed to “repeal”.

Onto November • Expect a lot of sound and fury and political posturing as the political campaign heats up, but not much else. • How much political capital will the Republicans invest in this crusade and how will it sell with the national electorate? • Are they really going to go on record as being against many of the law’s aspects that have tremendous bipartisan support among the electorate? • How is Romney going to handle opposition to bill when it virtually models the act he championed and got passed as Governor of Massachusetts? • How is one’s position going to help or hurt them in this election (polls)

Election scenarios as they pertain to the bill • Repeal: • Republican sweep of Presidential, House of Representatives and Senate • Still may not be enough if the Senate majority is thin • Put them in position of having to provide a viable alternative • Defunding: • Obama re-elected but Republicans control House and Senate • Budget reconciliation option in Senate by-passes filibuster option

Scenarios, cont. • Status quo: • Democratic sweep • Obama re-elected and Democrats control either the House or the Senate. • Worst case: • Obama re-elected but Republicans control House and Senate • Romney elected by Democrats control either the House or the Senate.

Reform Implementation The reality

It’s here to stay “Congressional majorities come and go, but entitlement program last forever.” Even if the Republicans swept, which appears unlikely at this time, it would be extremely difficult legislatively, politically and fiscally to put this genie back into the bottle.

The Reality • In many ways, the SCOTUS decision represents the end of the beginning rather than the beginning of the end. • The act mostly extends a flawed system to more people • Medicare and SS insolvency are real threats so something has got to give. • In many ways this is only the first step in the reform process, hopefully providing a step in the right direction that ultimately evolves into something better.

The Reality • Expect the law’s infrastructure continue to develop as states decide what they are going to do • Expect changes and tweaks to be made on the fly during the first decade of the programs existence • Look at the successes and failure of other countries as a guide to what we may ultimately wind up (sometime in the 2020s)

The reality • Healthcare delivery as we know it is going to change (nothing new) • Lower reimbursement puts priority on collecting every penny possible (is more pressure possible?) • Education, operational flexibility and technology are going to be critical for revenue cycle success.

THANK YOU QUESTIONS?

HEALTHCARE REFORM – WHAT NOW?