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The Patient Protection and Affordable Care Act

This article provides an overview of the Patient Protection and Affordable Care Act and its impact on Medicare and Medicaid, including health care spending, reforms, efficiency and cuts, controversial expansion, preventative services, prescription drug plans, hospital spending, Medicare Advantage, closing the payment gap, payment reduction impact, and care coordination.

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The Patient Protection and Affordable Care Act

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  1. The Patient Protection and Affordable Care Act Medicare & Medicaid THE MEDICARE NEWSGROUP

  2. THE HEADLINES: Health Care Economics • Total Health Care Spending vs. Medicare and Medicaid ACA and Medicare • Efficiencies • Cuts • Spending and Taxes ACA and Medicaid • Access • Funding • Supreme Court decision, uncertainty

  3. NATIONAL HEALTH CARE SPENDING AS IT COMPARES TO MEDICARE AND MEDICAID FINANCES Health care Economics

  4. Health Care Spending in 2011 $2.7 TRILLION AND GROWING1 2011: • The growth rate was 3.9%, the same rate observed in 20101 • Federal spending outside of health care was $2.61 trillion Future: • Health care spending will grow 4.2% in 2012, 3.8% in 2013, and 7.4% in 20141

  5. Medicare Spending in 2011 $557.8 BILLION SPENT ON 47.6 MILLION1 2011: • The growth rate was 6.3% an increase from 5.0% in 20101 • Medicare accounted for 16% of federal spending3 Future: • In 2012 Medicare spending is expected to grow 5.9%1 • In ‬2013 spending could slow to 1.3% or grow at 5.0%1 • It is projected that from 2014-2021 Medicare spending growth will average 6.7% per year1

  6. Medicaid Spending in 2011 $428.7 BILLION SPENT ON 55.4 MILLION1 2011: • Medicaid spending is estimated to have grown by 6.8% in 2011,  down from 7.2% growth in 20101 • Medicaid accounted for 8% of total federal spending3 Future: • Medicaid spending is projected to accelerate to 7.0% by 2012 and 20131 • Medicaid spending is projected to grow by 18% by 20141

  7. THE ACA, MEDICARE AND MEDICAID REFORMS UNDER THE NEW HEALTH CARE LAW

  8. ACA and Medicare EFFICIENCY AND CUTS Efficiency • Preventive health care, drug benefits • Accountable Care Organizations • New government entities Cuts • Payment cuts to hospitals and insurers Spending and Taxes • Medicare spending • Taxes

  9. ACA and Medicaid CONTROVERSIAL EXPANSION Medicaid Expansion • Access • Funding • Supreme Court decision, uncertainty

  10. ACA and Medicare PREVENTATIVE SERVICES Free screenings for breast cancer, cervical cancer, prostate cancer and diabetes4 From January 1 to July 1, 2011, 51.5% of beneficiaries with Original Medicare received one or more free preventive services5

  11. ACA and Medicare PRESCRIPTION DRUG PLANS (PART D) Rebate Check • When beneficiaries reached the coverage gap, or “donut hole,” they received a $250 rebate check.6 50% Discount on brand-name drugs - Requires manufacturers to provide 50% discounts on brand-name drugs for people in the donut hole.6 Savings • As of March 19, 2012, 5.1 million beneficiaries had received a rebate check6 • The average savings for an individual was $6356

  12. ACA and Medicare HOSPITAL SPENDING ‪The Affordable Care Act includes up to $716 billion in Medicare spending cuts between 2013 and 2022.‬‪ Of that, 34.8% comes from reductions in hospital reimbursement rates8‬

  13. ACA and Medicare MEDICARE ADVANTAGE Cuts to Medicare Advantage reimbursements to private insurers account for 30.2% of the $716 billion in Medicare spending reductions8

  14. ACA and Medicare CLOSING THE PAYMENT GAP Of the 47 million Medicare beneficiaries, about 25% are in Medicare Advantage Plans (Part C)9 • Part C plans receive more money per participant from the federal government than is spent on the average beneficiary under Traditional Medicare.9 • The ACA aims to close this gap by reducing the extra payments over the next several years, starting in 2012.9

  15. ACA and Medicare PAYMENT REDUCTION IMPACT The 2012 Medicare Trustees Report predicts that enrollment in Part C plans will peak at 27 percent in 2012 and then, as new ACA-mandated payment rates are phased in, will decline to about 17 percent by 2020.10 According to the report, more seniors will opt for Traditional Medicare because Part C plans will offer less attractive benefit packages.10 Some of the extra benefits that Part C provides may be eliminated, or insurers may stop doing business in certain counties.10

  16. ACA and Medicare CARE COORDINATION An Accountable Care Organization is a network of doctors and hospitals that share responsibility for providing care to patients‬ The ranks of the 259 ACOs covering 4 million patients include:12 • 192 ACOs: participate in the Medicare Shared Savings Program12 • 32 ACOs: participate in the Pioneer Model13 • 35 ACOs: participate in the Advanced Payment Model14

  17. ACA and Medicare 32 Pioneer Model ACOs16 STATES INCLUDE: Arizona California Colorado Florida Illinois Iowa Indiana Maine Massachusetts Minnesota Michigan New Hampshire New York Nevada New Mexico Pennsylvania San Diego Vermont Wisconsin Texas

  18. ACA and Medicare 35 Advanced Payment Model ACOs17 STATES INCLUDE: California Florida Kentucky Mississippi Massachusetts Texas Maryland Arkansas New Hampshire Rhode Island Connecticut Tennessee Missouri Ohio Nebraska North Carolina

  19. ACA and Medicare ACA LINKS QUALITY AND PAYMENT18 • New Center for Medicare and Medicaid Innovations (2011) • Shared Savings/Accountable Care Organizations (2012) • Reduces payments for preventable hospitalizations (2012) • Independence at Home demonstration project with shared savings (2012) • Value-based purchasing for hospitals (2012) • National pilot to bundle payments for hospital and post-acute care (2013) • Reduce payments for hospital-acquired conditions (2015) • Mandatory physician quality reporting (2015)

  20. ACA and Medicare ENTITIES CREATED BY THE ACA Independent Payment Advisory Board (IPAB) Patient-Centered Outcomes Research Institute (PCORI) Center for Medicare & Medicaid Innovation Federal Coordinated Healthcare Office

  21. ACA and Medicare CHECKS ON GROWTH Independent Payment Advisory Board19 • The mission is to recommend ways to reduce the growth in Medicare spending, if Medicare spending growth exceeds target rates.19 • IPAB is comprised of 15 members, appointed by the president and confirmed by the Senate, and its savings recommendations will be sent to Congress for approval.19 • IPAB is not subject to judicial or administrative review.19 • Funding was $15 million for FY2012 from the Medicare Trust Funds.19

  22. ACA and Medicare WITH CHECKS ON POWER Limitations to Recommendations:19 • Cannot reduce beneficiary benefits.19 • Cannot modify Medicare beneficiary premiums, cost-sharing or eligibility requirements, or other changes that would result in health care rationing19 • Cannot recommend any increase in taxes19 • Cannot make changes that would reduce payments to certain providers before 202019

  23. ACA and Medicare PATIENTS FIRST Patient-Centered Outcomes Research Institute - • The PCORI is authorized by Congress to give out grants to conduct evidence-based research to help patients and their health care providers make more informed decisions about care.20 • Funding for PCORI’s research derives from taxes in the ACA. Its budget through 2012 totals $210 million, and is expected to reach $500 million by 201420

  24. ACA and Medicare INNOVATIVE SOLUTIONS Center for Medicare & Medicaid Innovationidentifies, develops, supports and evaluates:21 • Innovative payment and service delivery models • Programs that reduce expenditures • Programs that preserve or enhance the quality of care for those who receive Medicare, Medicaid or CHIP benefits Under the ACA, the Innovation Center may be allocated $10 billion every decade21

  25. ACA and Medicare DUALS COORDINATION The Federal Coordinated Health Care Office, which is under the auspices of the CMS, is charged with:22 • Integrating benefits between Medicare and Medicaid • Improving coordination between state and federal governments • Addressing cost shifting between the two programs • Developing new strategies to improve care coordination and cost effectiveness • Eliminating regulatory conflicts between rules under the Medicare and Medicaid programs

  26. ACA and Medicare TRIMMING SPENDING The Medicare provisions of the health care reform law are estimated to experience a net reduction of $428 billion in spending between 2010 and 2019, taking into account $533 billion in Medicare savings and $105 billion in new Medicare spending.23

  27. ACA and Medicare MEDICARE TAX CHANGES9 Increases to the Medicare Hospital Insurance (Part A) tax rate on wages from 1.4% to 2.3% on earnings over $200,000 for individual taxpayers and $250,000 for couples filing jointly24 A 3.8% Medicare contribution tax on net investment income for higher-income taxpayers25 Elimination of the Medicare Prescription Drug Plans (Part D) subsidy tax deduction for employers that provide retiree prescription drug coverage.26

  28. ACA and Medicare PROJECTED REVENUE Revenue collected through 201927 • $87 billion through a higher Medicare payroll tax • $27 billion by imposing an annual fee on brand-name prescription drugs by pharmaceutical manufacturers and importers • $5 billion by eliminating the tax deduction for employers who receive Medicare Prescription Drug Plans (Part D) retiree drug subsidy payments, beginning in 2013

  29. TURMOIL AND UNCERTAINTY ACA and medicaid Expansion

  30. ACA and Medicaid COVERAGE FOR THE POOR Intent of the Law:9 • Expand health care for the poor • Would have added 24 million beneficiaries to Medicaid • Program now covers 60 million recipients (30 million children, 15 million adults, 8 million people with disabilities) • Expansion would have covered 16 million uninsured people

  31. ACA and Medicaid EVERYONE PLAYS NOW Funding for Medicaid comes from both federal and state governments. State participation in Medicaid is optional, but all 50 states have opted to join.9 The Medicaid expansion would see: State spending increase by $76 billion over 2013-2022 (an increase of less than 3%) Federal spending would increase by $952 billion (a 26% increase).28

  32. ACA and Medicaid EXPANSION TIMEFRAME Starting in 2014: States that opt into this provision will make their residents under age 65 Medicaid-eligible if they have incomes at or below 133% of the federal poverty level ($14,484 for an individual, or $29,726 for a family of four).28 2014-2016: For the first three years of the policy, the federal government will pay 100% of the costs of the expansion, and in subsequent years, it will gradually lower its share to 90% of costs.28

  33. ACA and Medicaid MEDICAID VS. SCHOOLS31

  34. ACA and Medicaid CONTROVERSY STRIKES Supreme Court Case: National Federation of Independent Business v. Sebelius35 Result: On June 28, 2012, the Supreme Court upheld the ACA, but set limits on the Medicaid expansion provision.35 Eligibility goes into effect on January 1, 2014, but states can choose whether they want to participate in the expansion of coverage.35

  35. WHICH STATES ARE PARTICIPATING?30 14 STATES AND THE DISTRICT OF COLUMBIA ARE PARTICIPATING: Arkansas, California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, Rhode Island, Vermont, Washington

  36. WHICH STATES ARE LEANING TOWARD PARTICIPATING?30 5 STATES LEANING TOWARDS PARTICIPATION: Colorado, Kentucky, New Hampshire, New York, Oregon

  37. WHICH STATES ARE NOT PARTICIPATING?30 9 STATES ARE NOT PARTICIPATING: Alabama, Georgia, Louisiana, Maine, Mississippi, South Carolina, South Dakota, Oklahoma, Texas

  38. WHICH STATES ARE LEANING TOWARD NOT PARTICIPATING?30 5 STATES ARE LEANING TOWARDS NOT PARTICIPATING: Iowa, Nebraska, New Jersey, Virginia, Wyoming

  39. WHICH STATES ARE UNDECIDED?30 17 STATES ARE UNDECIDED: Alaska, Arizona, Florida, Idaho, Indiana, Kansas, Michigan, Montana, Ohio, New Mexico, North Carolina, North Dakota, Pennsylvania, Tennessee, Utah, West Virginia, Wisconsin

  40. ALL THE STATES TOGETHER30

  41. Summarizing ACA STORYLINES: IT’S ALL ABOUT THE MONEY • Medicare has a revenue problem • So does Medicaid, from some states’ perspective • At some point there will not be enough money to sustain the Medicare program • State officials are leery that more and more of their budgets will fund health care at the expense of other programs

  42. Summarizing ACA STORYLINES: REFORM IS ABOUT THE MONEY There are currently two schools of thought: • Refocus the health care delivery system around value over volume (pay for performance)  • Restructure the program in more basic and fundamental ways (eligibility age increase, premium support, means testing)

  43. Summarizing ACA STORYLINES: FOLLOW THE MONEY Look at the reform proposals from the view of each stakeholder operating in the Medicare space: • How much have they already given in the name of reform? • Who profits and who loses?  • Who will be squeezed?  • Where and how can money be made?  • Where can saving be found? 

  44. Summarizing ACA STORYLINES: COMPARE, CONSTRAST BOTTOM LINES The financial bottom line versus the quality health bottom line: • Can you have both, without either suffering terribly? • Who has to give in order to get? • Who might get hurt?  • And is that hurt real or perceived? 

  45. REFERENCE LIST • http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf • https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/tables.pdf • http://facts.kff.org/chart.aspx?cb=58&sctn=169&ch=1793 • http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm • http://www.hhs.gov/news/press/2011pres/08/20110804a.html • http://healthreform.kff.org/Document-Finder/HHS/HHS-Report-on-the-Medicare-Prescription-Drug-Rebate-Program.aspx • http://www.healthcare.gov/compare/partnership-for-patients/about/index.html • http://www.washingtonpost.com/blogs/wonkblog/wp/2012/08/14/romneys-right-obamacare-cuts-medicare-by-716-billion-heres-how/ • http://www.kff.org/healthreform/upload/7948-02.pdf • http://www.cbo.gov/sites/default/files/cbofiles/attachments/43471-hr6079.pdf • http://innovations.cms.gov/Files/x/Pioneer-ACO-Model-Press-Release-12-19-2011.pdf • https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/index.html?redirect=/sharedsavingsprogram/ • http://innovations.cms.gov/initiatives/ACO/Pioneer/index.html • http://innovations.cms.gov/initiatives/aco/advance-payment/index.html • http://www.hhs.gov/news/press/2013pres/01/20130110a.html

  46. REFERENCE LIST • http://innovations.cms.gov/initiatives/ACO/Pioneer/index.html • http://innovations.cms.gov/initiatives/aco/advance-payment/index.html • ‪http://healthreform.kff.org/timeline.aspx • http://www.kff.org/medicare/upload/8150.pdf • http://www.pcori.org/about/ • http://www.innovations.cms.gov/About/index.html • http://www.healthcare.gov/law/full/ • http://www.kff.org/healthreform/upload/7948-02.pdf • http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax • https://www.fidelity.com/viewpoints/personal-finance/new-medicare-taxes • http://www.deloitte.com/view/en_US/us/Services/audit-enterprise-risk-services/Financial-Statement-Internal-Control-Audit/Accounting-Standards-Communications/b9500b1044c97210VgnVCM100000ba42f00aRCRD.htm • http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/downloads/PPACA_2010-04-22.pdf • http://www.kff.org/healthreform/upload/8288.pdf • http://www.kff.org/healthreform/upload/8348.pdf • http://www.advisory.com/Daily-Briefing/2012/11/09/MedicaidMap#lightbox/1/ • http://www.nasbo.org/sites/default/files/Summary%20-%20State%20Expenditure%20Report_0.pdf

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