Washington State Medical Association Presenter: Lance Heineccius Director of Performance Improvement

1. Swedish First Hill Residency ProgramHEALTH REFORM OVERVIEWThe Patient Protection and Affordable Care Act (PPACA) of 2010 and The Health Care and Education Affordability Reconciliation Act (HCEARA) of 2010 Washington State Medical Association Presenter: Lance Heineccius Director of Performance Improvement

2. Federal Health Reform – The Big Picture Two acts - over 3,000 pages of detailed changes Survived the initial Supreme Court challenge Presidential election seen as an endorsement Focus today on six major areas: Health insurance reform – national requirements Health benefits exchange Medicaid expansion in 2014 Medicare Shared Savings program (ACOs) Direct impacts on physicians and payments Opportunities for experimentation

3. Major Health Insurance Reforms • Insurers can no longer just avoid the bad risk (2014) • Removed lifetime and annual maximum benefit limits • Individuals under age 26 covered under parent’s policies • Mandated benefits for preventive health services • Sets minimum medical loss ratio at 80% of premium • Created federal high risk pool (transition; ends in 2014) • No pre-existing condition exclusions for children • Funding (via loans) to create consumer co-op plans • Requires employers >50 workers to provide insurance • Require all Americans to have health insurance (2014) • Many other requirements (already law in Washington) WSMA - Health Reform Act Overview

4. Guaranteed Issue / Prohibits • Pre-existing Condition Exclusions • Insurers can no longer avoid the bad risk (2014) • Expected implications of universal coverage: • Expect to see sicker patients (at least initially) • Inadequate insurance premiums (in the short-run) • Big premium increases and/or payment reductions • Increased emphasis on risk-adjustments • for premiums and potentially for payments • Potential physician shortages (in some areas) • But… more people will be getting the care they need WSMA - Health Reform Act Overview

5. Health Benefits Exchange • Required to be operational by January 1, 2014 • Washington state is designing its own Exchange • For individuals and small businesses (<50) • “Level Playing Field” for all participating insurers • No longer tied to one plan the employer selects • Individuals can choose from among many plans • Tax credit subsidies for low income participants • Risk-adjusted premium allocation among plans • At this time, no federal “public option” anticipated WSMA - Insurance Overview

6. Exchange Health Care Tax Credits • Makes premium tax credits available through the Exchange • Ensure people can obtain affordable coverage • Credits are available for people with incomes: • below 400 percent of federal poverty level (FPL) • above Medicaid eligibility (138% of FPL) • not eligible for or offered other acceptable coverage • Tax credits apply to both premiums and cost-sharing • Stated goal: • “Ensure no family faces bankruptcy due to medical expenses.” WSMA - Health Reform Act Overview

7. Washington Health Benefit Exchange • Independent agency/board – appointed by the Governor • Details at www.hca.wa.gov/hcr/exchange.html • Applied for/received over $200 million federal funding to: • Develop options/recommendations on policy decisions • Public education efforts and stakeholder coordination • Hold public meetings around the state • Hire staff and become operational • Develop/implement IT systems to support Exchange • Will begin enrollment in October 2013 (in six months) • Must be self-sustaining beginning in 2015 (major concern) WSMA - Health Reform Act Overview

8. Significant Medicaid Expansion in 2014 • Expansion for non-elderly adults (<65) and children • Up to 138% Federal Poverty Level (FPL) • Current FPL amounts: • Individuals: income under $14,400/year • Family of four: income under $29,330/year • No asset test – based on adjusted income only • Retains categorical Medicaid coverage for: • Aged • Blind • Disabled WSMA - Health Reform Act Overview

9. Medicaid Expansion – Who Pays • “New” eligibles paid for by federal funding • Feds pay 100% of costs for 2014-2016 • Drops to 90% by 2020 and thereafter • The “catch”: • State must keep track of the “new” • Based on eligibility rules, not date • 50% federal match still applies to “old” WSMA - Health Reform Act Overview

10. Washington Medicaid Expansion Other Significant Features: • Early expansion for childless adults (WA) • Designed to coordinate with Basic Health • Similar coverage expansions for CHIP Expected Impact in Washington • Add 300,000 to 500,000 to Medicaid • Hospital DSH Payments reduced 75% • All enrollees will be in “managed care” WSMA - Health Reform Act Overview

11. ACOs – Medicare Shared Savings Program Patient Protection and Affordable Care Act Medicare Shared Savings Program (Sec. 3022) • “Not later than January 1, 2012, the Secretary shall establish a shared savings program that promotes accountability for a patient population and coordinates items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.” • 2011: six pages of law turn into 696 pages of “regs” WSMA - ACO Overview

12. Key Issues – Medicare ACOs • Voluntary program to restructure care • Permanent program option – not a demonstration • Initial CMS regulations took the wind out of the sails • Final regulations released October 2011 > better • prospective and retrospective patient assignment • no required risk sharing in the third year • will be risk adjustment from baseline year • excessive bureaucracy and complexity remain • but… still “compete” against yourself (over time) • and identity of patients not sure until much later WSMA - ACO Overview

13. Medicare Shared Savings Program - Highlights • Began January 2012 (now 15 months underway) • Applies only to Medicare FFS (Parts A & B) • Providers are paid standard Medicare FFS • ACO shares in the savings (or the “losses”) WSMA - ACO Overview

14. Medicare Shared Savings Program • “Mind-boggling” requirements to be ACO • Only the strongest ACOs need apply • Three year participation required • No ability to restrict patients to ACO network • Beneficiaries will be confirmed retrospectively • Based on “plurality” of primary care received • Primary care practices: usually one ACO only • Specialists/hospitals should be in many ACOs WSMA - ACO Overview

15. Medicare Shared Savings Program • Minimum of 5,000 Medicare beneficiaries • ACO can apply for one of two options: • “Gain-sharing” model for first three years • “Full-risk” model immediately (at risk) • Maximum shared savings based on quality • Up to 60% in full risk model (cap at 15%) • Up to 50% in gain-sharing model (cap at 10%) • Extensive quality reporting requirements • Serious compliance and anti-trust issues • “Why would anyone want to do this?” WSMA - ACO Overview

16. Medicare Shared Savings Program • Advance payment option: non-hospital ACOs • ACOs awarded 3-year rolling contracts • Current status of Medicare ACOs – now 254 • Six original Physician Group Practices • 32 “pioneer” ACOs began Jan 1, 2012 • 27 first round ACOs (April 1, 2012) • 89 second round ACOs (July 1, 2012) • 106 third round ACOs (January 10, 2013) • CMS expected up to 270 by end of 2014 • Nearly 5 million beneficiaries currently • Many are “physician-led” (non-hospital based) WSMA - ACO Overview

17. Impacts on All Physicians Medicare Payment Changes: • Value-Based Purchasing (VBP) modifiers • Selected categories of physicians – beginning in 2015 (delayed) • All physicians by 2017 • Differential payments based on cost and quality indicators • Creates Independent Payment Advisory Board (IPAB) • Medicare shared saving program (ACOs) • GME – resident payments in non-hospital settings • All independent of the Sustainable Growth Rate (SGR) Other Major Requirements and Impacts • Physician Quality Reporting System (PQRI > PQRS) • Launch a Physician Compare website (2013) • Medical liability reform – demo grants to states WSMA - Health Reform Act Overview

18. Impact on Primary Care Physicians • CMS also has three “Medical Home” models in development as demonstrations: • Multi-payer Advanced Primary Care Practice Demonstration • Federally Qualified Health Center (FQHC) Advanced Primary Care Practice Demonstration • Medicare Medical Home Demonstration WSMA - Health Reform Act Overview

19. Impact on Hospital Payments Scores of Medicare hospital payment reductions • Excessive readmissions > payment reductions • Productivity offsets (reductions) to payments • Annual Medicare update factor reductions • Hospital wage index – comprehensive reform • Dozens of specific adjustments: rurals, CAH Requires Medicaid to mirror Medicare methods WSMA - Health Reform Act Overview

20. Dozens of Payment Demonstrations • Medicare Payment Bundling Pilot (Sec. 3023) • 2013-2018, up to ten medical conditions • MD, hospital, SNF & home health payments • 3 days prior to admission > 30 days post • Medicaid Pediatric ACO Demo (Sec. 2706) • Runs 2012 through 2016 • Medicaid Bundled Payment Demo (Sec. 2704) • Runs 2012-2016 – MD & hospital payments WSMA - Health Reform Act Overview

21. Center for Medicare and Medicaid Innovation • (CMMI) • $1.3 billion per year for demonstrations and pilots • Test innovative payment/service delivery models • Reduce health care costs • Enhance the quality of care • Goal is Don Berwick’s Triple Aim: • Better health of populations • Better care processes • Reduce health care costs • Recent IOM Study: $750 billion each year in waste WSMA - Health Reform Act Overview

22. CMMI Impact on Physicians • More than 20 specific demos and pilots • Several dozen grant programs as well • Opportunities for medical groups to: • Obtain some funding for needed transitions • Gain experience with likely “futures” • Influence federal/state policy direction • But…exercise caution in applying • Requires major time commitments • Often the costs exceed the return WSMA - Health Reform Act Overview

23. CMMI - Summary • Too many options, coming too fast: • over 200 “opportunities to improve” • support personnel – costs to train and sustain • multiple payers, demanding different things • infrastructure and technology requirements • Few practices can survive “experiments” gone bad • No practice can adopt more than a few changes • Deciding what is best to do can lead to paralysis WSMA - ACO Overview

24. My Conclusions on ACA Throw lots of stuff at the wall - see what sticks Supercharged political environment Uncertain economy makes things worse However… Current payment system is unsustainable Any reforms are complex and often messy Challenging times ahead for us all WSMA - Health Reform Act Overview

25. Questions and Discussion WSMA - Health Reform Act Overview

26. Contact Information • Lance Heineccius • Director of Performance Improvement • Washington State Medical Association • Foundation for Health Care Improvement • Direct: (206) 956-3657 • Email: Lance@wsma.org