The Patient Protection & Affordable Care Act of 2010 (ACA)

1. The Patient Protection & Affordable Care Act of 2010 (ACA) Presented by: George Faulkner

2. Why We Needed Reform • Coverage (Access) - 50 million uninsured (2010) - 14,000 Americans lose health insurance coverage everyday - 29 million under-insured (2010) - 45 states allow denial for pre-existing conditions • Quality - 100,000 hospital infection deaths - 100,000 medical error deaths - WHO ranked US #37 among other industrial nations for outcomes

3. Why We Needed Reform Cost Approaching $3 trillion in 2012 The cost for average American family: $16,771 Half of all bankruptcies related to medical expenses 20-30% ($600 billion) on administration (not actual medical care) 1/3 or more of our costs are wasted Medicare: 3% administration. Medicare Advantage plans: get 14% more from the gov’t Projected Medicare bankruptcy by 2017 (delayed to 2029) Projected health care coverage cost 2020 is $25,000+

4. What the ACA Is and Isn’t • Some wanted: • “Improved Medicare” for all (single payer, like in Canada) • a public plan option • just individual policies purchased “across state lines” • malpractice reform at the national level instead of state level • no changes at all • The ACA keeps the current mixed system but adds: • regulations to control costs, guarantee access to good coverage, and improve medical care delivery • subsidies for individuals, small employers, and states • The bill is not perfect – changes will be made over time

5. Key Improvements for Individuals

6. ACA Summary

7. For Individuals Without Other Sources of Coverage and Small Employers State health insurance exchanges (2014) -- A new regulated marketplace for health insurance An “Orbitz” for health insurance plan comparison and annual enrollment Regulated and run by states. But states can go in together on multi-state exchanges or fall back on a federal exchange Open to individuals without health insurance and to small businesses All plans offered must cover certain “essential benefits” Competition on price and quality of plans

8. For Individuals Without Other Sources of Coverage and Small Employers (2014) Subsidies for Most Individuals Using Exchanges Eligibility up to 400% of Federal Poverty Level ($43,320 for individuals; $88,200 for family of four) Premiums can be no more than a certain percentage of income (roughly 2-10%, based on a sliding scale) Subsidies to reduce out-of-pocket spending on deductibles, co-pays, etc.

9. Medicaid Expansion (2014) Will cover many working poor who fall just above federal poverty line Eligibility expanded to 133% over the poverty level Childless adults covered Financed 100% by federal money for first two years, then ~90% federal match for all states Higher payments to primary care doctors in order to expand access (to match Medicare rates by 2013)

10. Universal Participation(Shared Responsibility) • Mandatory enrollment, starting in 2014 • Annual tax if choose not to enroll 2014 - $95 or 1% taxable income 2015 - $325 or 2% taxable income 2016 - $695 or 2.5% taxable income • Applies to U.S. citizens and legal immigrants • Exemptions for religious objection, American Indians, those without coverage <3 months, undocumented immigrants, if lowest cost plan is >8% of income, or income is below tax filing threshold

11. Universal Participation (Shared Responsibility) Why the individual mandate? Without it - difficult to incentivize young, healthy people to buy insurance and help mitigate risk for all Reduces “free-rider” problem: when people can sign up to use the benefit and then drop out again – raising costs for others Can’t make insurance companies eliminate pre-existing conditions limits and other underwriting practices without it (premiums would soar)

12. Employer Responsibility (2014) No employer mandate but… Employers with more than 50 full-time workers that do not offer coverage and have at least one worker who receives the premium assistance tax credit will pay a fee of $2,000 per full-time employee/year. Small Business with <25 employees who purchase health insurance for their workers get a tax break starting in 2010

13. Insurance Regulation Requires all new plans starting in 2013 to cover pre-existing conditions (starts in 2010 for children) At least 85% of premiums must pay for actual medical care – in small group and individual markets (starts in 2012, though regulation development in 2010) Prohibits lifetime dollar limits benefits paid (2010) Prohibits dropping patients from coverage (“rescission”) except in case of fraud (2010) Sets minimum benefit standards in the exchange (2014) Limits premium variation by age, gender, etc. (2012)

14. More Prevention and Wellness (2011-12) Eliminates co-pays and deductibles for preventive services in Medicare and in all new insurance plans Grants to employers for establishing wellness programs Premium discounts for employees who participate in wellness programs Requires chain restaurants to publish calorie and recommended daily allowance information for food products they sell

15. Medicare Changes Medicare Advantage Changes Phases out overpayments to insurance companies: due to 2003 Act, Medicare pays on average 14% more, with little evidence of improved quality of care. Imagine the headline if the 2003 bill were enacted now: “Medicare system, already in deficit, will now pay insurance companies 14% more than those in regular Medicare.” New York Times: Contrary to fears, “…since the health care law was passed, ‘Medicare Advantage premiums have fallen by 10 percent, and enrollment has risen by 28 percent.’ ” Requires these plans to spend at least 85% of dollars on medical care or activities that improve the quality of care, rather than on administrative costs, profits, executive pay, etc.

16. Cost Containment and QualityImprovements • Independent Payment Advisory Board (IPAB) to make cost saving recommendations to Medicare • Physician payments exempt from these recommendations until 2020 • Creates a Center for Innovation to test payment/delivery system reforms • Pilot programs for “medical homes,” bundled payments, and accountable care organizations (ACOs) • Reduces hospital payments for preventable readmissions and infections • Requires reporting of quality indicators by physicians Begins 2011

17. Cost Containment and QualityImprovements Medical malpractice reform $50 million in grants to states to encourage alternatives to litigation More grants for those that focus on patient safety and reduction of medical errors Examples of innovative ideas: Medical review boards Prompt apology and compensation policies Protection for physicians adhering to evidence-based practices Begins 2014

18. Cost Containment and QualityImprovements Comparative Effectiveness Research Establishes a non-profit Patient-Centered Outcomes Research Institute. Will provide physicians with clinical effectiveness data that industry-sponsored research often does not undertake. Example: directly comparing different drugs that do the same thing, or researching cheap drugs that are not profitable for industry to sell. The findings will not lead to mandates (that will be left to specialty societies, as it is now). Begins 2010-11

19. Administrative Simplification for Insurance Claims • National rules to standardize and streamline health insurance claims processing. • For doctors’ offices: easier to track claims, faster payments by insurance companies, and lower overhead costs. • For patients: appeal procedure for denied claims will now go to an external reviewer instead of another division of the insurance company. Begins 2010

20. How Does Expanding Insurance Coverage Affect Physicians? • Less uncompensated care • The AMA estimated that physicians provided $24 billion in charity care in 2008 • Sustaining the Medicaid program with federal dollars and better reimbursement levels • Less use of emergency rooms for routine care • More ability to do preventive care • For those who are self-employed or own a small business: • New regulated health exchanges to select coverage, provide administration, and offer potential for subsidies and tax breaks

21. How Does Expanding Insurance Coverage Affect Physicians? Medicare and MedicaidPayment reform 10% bonus payment to all primary care physicians 10% bonus payments for general surgeons in rural areas 5% bonus for mental health providers Increase in Medicaid payment rates for primary care physicians to equal Medicare rates (2013-2014) Increased reimbursement in rural and low-cost areas Bonus payments for voluntary participation in Medicare’s Physician Quality Reporting Initiative (PQRI). Begins 2011

22. How Does Expanding Insurance Coverage Affect Physicians? Physician Workforce Investment Residency programs will be requiredto redistribute 65% of unfilled slots to primary care or general surgery Expanded scholarships and loan repayment through the National Health Service Corps Tax relief for those health care workers paying state-issued student loans for working in primary care or high need areas Additional low-interest student loans, scholarships, loan repayment programs for primary care and general surgery Increases funding for Community Health Centers Begins 2010-11

23. How We Pay For This Excise tax on high cost insurance plans, starting in 2018 Increased Medicare payroll tax for high income earners, starting in 2013: Additional 0.9% Medicare payroll tax on wages >$250,000 3.8% tax on unearned income (interest, dividends) Reduced payments to Medicare Advantage plans Savings in Medicaid and Medicare prescription drug costs Reduces Disproportionate Share Hospital (DSH) payments because newly insured will be able to pay Fees on certain device manufacturers, insurers, tanning salons, etc.

24. Do the Taxes, Etc. Affect You? • Do you make more than $250,000? • Medicare payroll tax (additional 0.9%) • Get substantial income from dividends and interest • Is your insurance premium above $27,000? • Starting in 2018, just the portion above $27K taxed as income. • Do you go to indoor tanning salons?

25. What the Nonpartisan Congressional Budget Office Says Reduces federal deficit by $143 billion in the first 10 years and by another $1.2 trillion in the next 10 years. Repealing it does the opposite, only worse (CBO)! Will have little initial impact on health plan premiums for the majority of Americans who get their insurance from their employers Costs will go down for those who buy through exchanges and qualify for subsidies Elmendorf, D. (2010, March 18) Preliminary Cost Estimate for Pending Health Care Legislation. Retrieved April 5, 2010 from Congressional Budget Office Website: http://cboblog.cbo.gov/?p=508

27. Health Reform: Medicare Savings (Kaiser FF) Delivery System Pilots 1% Reducing Hospital Readmissions 1% Fraud, Waste, Abuse 1% Part D Enrollment/ Consumer Protections 1% Part D Premiums 2% • Sources of Savings • Provider payments, including DSH and home health - $219 billion • Medicare Advantage – $136 billion • Income-related premiums – $36 billion • New Independent Payment Advisory Panel – $16 billion • Delivery system reforms and hospital readmissions – $12 billion Part B Premiums 5% Independent Payment Advisory Board 3% Disproportionate Share Hospital (DSH) Payments 4% Home Health Payments 7% Medicare Advantage Payment Reforms 25% Medicare Advantage Payment Reforms 25% Annual Provider Payment Updates 29% Annual Provider Payment Updates29% Ten-Year Medicare Savings = $533.1 Billion Source: Kaiser Family Foundation analysis of Congressional Budget Office (CBO) cost estimates as provided on March 20, 2010. Notes: *Savings include interactions with Medicare Advantage and TRICARE; spending includes implementation of Medicare changes, Part D interactions with Medicare Advantage provisions, Part B interactions with Part D provisions, and Medicaid interactions with Medicare Part D provisions.

28. Medicare Part A Trust Fund (Kaiser FF) CBO Projection: Health reform legislation will extend the life of the Medicare Part A Trust Fund from 2017 to 2029 Assets as a share of annual spending: Post-health reform: 2029 projected insolvency date Pre-health reform: 2017 projected insolvency date

29. If Medicare Replaced… The “For-Profit” Health Coverage Penalty: 27% (Plus 5-10% Broker Commissions)?

30. Questions You May Have • Why not just allow purchase of coverage from any insurance company in any state? • Many major insurance companies (Aetna, United, CIGNA, Anthem/Wellpoint) are already in most states • Any insurance company will be able to offer coverage as long as they meet minimum standards on coverage, fair practices, clear policies, etc. • Currently, only states regulate insurance companies, and some do a very minimal job. If we allow insurance companies to all file in the least regulated state, then “let the buyer beware!” • It doesn’t really increase competition, since smaller insurance cos. won’t secure strong networks/discounts. 30

31. Questions You May Have Why have health exchanges, instead of just “voluntary” purchasing pools? • Voluntary pools are unstable: • The individuals or employers in the pool who have the lowest claim costs always get offered a better deal from another insurance company and then drop out. • As more drop out over time, costs rise even faster for those still in the pool. • The pool eventually becomes unaffordable and empty • This idea has been tried off and on for decades. • The exchanges must administer subsidies and carrier risk adjustments. 31

32. Questions You May Have • Why no national malpractice reform? • The law funds pilot projects at the state level, where malpractice is now regulated. Congress would have to expand its authority to take away state control. • This is an area where state experimentation makes sense. Right now we don’t have clear evidence of what works best. • Malpractice reform is a lot more than just capping “pain and suffering” awards. It involves new practices to prevent errors, prompt apologies to patients, possibly no-fault rules, new review and claim settlement processes, etc. 32

33. Questions You May Have • Is it “cutting” Medicare? • No Medicare benefits are being cut. • For-profit insurance companies should no longer get an extra 14% (on average) from the government for Medicare Advantage plans, compared to traditional Medicare benefits. That makes all others pay more. • Medicare now pays doctors and hospitals different rates around the country and for different health procedures. It generally pays “fee for service,” which drives up costs. • Medicare will gradually change these payment rules to slow the annual cost increases, primarily for “overpaid” services . • So if costs go up by 3% per year, instead of 5%, that’s not “cutting” Medicare. 33

34. Why “Regulation”? • Totally free markets are unstable and devolve to monopolies or oligarchies. • Regulation is needed to: • Require full disclosure: pricing, contract provisions, ban deceptive marketing practices • Allow easy comparison of products • Control or break up monopolies