A New Era in American Health Care: What’s Ahead for Hospital and Providers?

1. A New Era in American Health Care: What’s Ahead for Hospital and Providers? Karen Davis President, The Commonwealth Fund Maryland Hospital Association Annual Meeting June 4, 2010 kd@cmwf.org www.commonwealthfund.org

2. 2 A Historic Accomplishment • Health reform promises to help usher in a new era in American health care • It will: • Cover 32 million uninsured • Improve affordability of coverage for millions now having difficulty paying health insurance premiums, medical bills, or accumulated medical debt • Eliminate doughnut hole in Medicare Rx coverage; institute a new voluntary long-term care financing program • Begin to move to an organized integrated delivery system with coordinated care, reducing errors, duplication, and waste • Help slow rising health care costs that are a burden on families, employers, and federal, state, and local government budgets • Important to foster understanding of what health reform is and isn’t • Build areas of consensus; will need cooperation of all stakeholders to realize potential

3. 3 Major Features of New Health Reform Law Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, (New York: The Commonwealth Fund, forthcoming).

4. 4 32 Million Uninsured Covered Under Affordable Care Act, Employers Remain Primary Source, 2019 23 M (8%) Uninsured 16 M (6%) Other 54 M (19%) Uninsured 16 M (6%) Other 162 M (57%) ESI 159 M (56%) ESI 51 M (18%) Medicaid 35 M (12%) Medicaid 24 M (9%) Exchanges (Private Plans) 15 M (5%) Nongroup 10 M (4%) Nongroup Pre-Reform Affordable Care Act Among 282 million people under age 65 * Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, (New York: The Commonwealth Fund, forthcoming).

5. 5 Total National Health Expenditures (NHE), 2009–2019Before and After Reform NHE in trillions 6.3% annual growth $4.6 $4.3 5.7% annual growth $2.5 Notes: * Estimate of pre-reform national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, TheImpact of Health Reform on Health System Spending, (Washington and New York: Center for American Progress and The Commonwealth Fund, May 2010).

6. 6 Major Sources of Cost, Savings and Revenues Compared with Projected Spending, Net Cumulative Effect on Federal Deficit, 2010–2019 Dollars in billions Note: Totals do not reflect net impact on deficit due to rounding. Source: Congressional Budget Office, Letter to the Honorable Nancy Pelosi, Mar. 20, 2010.

7. Why Health Reform Will Bring Down Costs for Everyone: Four “Game Changers” New federal insurance market rules Restrictions on underwriting, minimum medical loss ratio requirements, review of premium rate increases, and important consumer protections New health insurance exchanges Lower administrative costs and more choice of affordable health plans for eligible individuals and small businesses Innovative provider payment and delivery system reforms Patient centered medical homes Bundled acute and post-acute care payment Accountable Care Organizations CMS Innovation Center and Independent Payment Advisory Board Improved and more affordable coverage Income-related assistance with premiums and medical bills; essential benefits; Medicaid expansion 7 Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, May 2010).

8. 8 Timeline for Payment and System Innovation • Productivity Improvement -- 2010 • 10 Percent Increase in Medicare Payment for Primary Care -- 2011 • Center for Medicare and Medicaid Innovation -- 2011 • State-based all-payer payment demonstrations and payment to Healthcare Innovation Zones through the CMI -- 2011 • Value-based Purchasing for Hospitals 2012 • Reduce payment for preventable hospital readmissions -- 2012 • Accountable Care Organization Provider shared savings -- 2012 • Five state capitated payment for safety net hospitals -- 2012 • National voluntary pilot on payment bundling for acute care episodes including hospitals, doctors, and post-acute providers -- 2013 • Independent Payment Advisory Board tasked with recommendations to reduce Medicare spending and excess cost growth and improve quality of care throughout the healthcare system -- 2014 • Medicaid primary care payment up to Medicare levels -- 2013 and 2014 • Create a physician value-based payment program in Medicare -- 2015 • Reduce Medicare Payment for Hospital Acquired Infections -- 2015 Source: S. Guterman, K. Davis, K. Stremikis, and H. Drake, “New Center for Medicare And Medicaid Innovation Is Central To Reform’s Success,” Health Affairs 29, no. 6 (June 2010).

9. Moving Towards High Performance: 10 Ways the Health System Will Change Under the Affordable Care Act Stronger primary care and care coordination through patient-centered medical homes and ACOs Better access to community health centers for low-income patients Improved efficiency through health information technology Proper alignment of incentives for quality and good outcomes More support and information during hospital discharges Fewer hospital-acquired infections Additional patient information on quality of physicians, hospitals, and health plans Increased choice of insurance plans, including non-profit plans Rewards for private plans that provide high quality care Lower health insurance premiums 9 Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, May 2010).

10. Many Concerns Going Forward Will employers continue to provide coverage to employees? Will insurance markets lead to competition on value or adverse risk selection? Will innovation work gaining widespread voluntary participation of physicians, hospitals, and other providers, and lead to widespread change? Will the affordability provisions be adequate? Will the safety net hold together until coverage is expanded and improved? Will the incentives for primary care and care coordination generate a strong primary care foundation for the health system of the future? Will federal and state government agencies be up to the implementation task? 10 Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, May 2010).

11. Health Care Opinion Leader Views on Implementation Issues 11 “Assuming a comprehensive health reform bill reaches the President’s desk, how much of a concern are the following implementation issues?” 88% 79% 75% 68% 61% 60% 54% 42% 35% 34% *Percentages may not equal 100% due to rounding. Source: Source: K. Stremikis, K. Davis, and R. Nuzum, Health Care Opinion Leaders' Views on Health Reform, Implementation, and Post-Reform Priorities, (New York: The Commonwealth Fund, April 2010).

12. Health Care Opinion Leader Views onPotential Challenges and the Long-term Issues 12 “Looking ahead, how important is it that the following issues be readdressed in the next two to three years?” 95% 89% 89% 79% 69% 46% *Percentages may not equal 100% due to rounding. Source: K. Stremikis, K. Davis, and R. Nuzum, Health Care Opinion Leaders' Views on Health Reform, Implementation, and Post-Reform Priorities, (New York: The Commonwealth Fund, April 2010).

13. 13 A New Era in Health Care Delivery: How Hospitals and Providers Can Help • The U.S. has passed historic legislation that will help usher in a new era in American health care • Will make major strides toward achievement of goals of affordable coverage for all while slowing cost growth • However, realizing the potential is not assured • Oversight and system of tracking health system performance will be needed • Effective implementation is a big hurdle • Stakeholders need to work together toward success of reform • Learning rapidly as innovation is tested and experience is gained and applying that knowledge to spread successful innovation are essential • Hospitals and providers to come together and help make it work • Active participation in innovative payment pilots

14. 14 Thank You! Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Sara Collins, Vice President, src@cmwf.org Stu Guterman, Assistant Vice President, Payment Reform sxg@cmwf.org Rachel Nuzum, Senior Policy Director rn@cmwf.org Kristof Stremikis, Senior Research Associate, ks@cmwf.org Stephen C. Schoenbaum, M.D. Executive Vice President for Programs scs@cmwf.org For more information, please visit: www.commonwealthfund.org