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National Health Care Reform and Michigan

National Health Care Reform and Michigan. December 4, 2012. Peter Pratt President. Generally, What ACA Does and Doesn ’ t Do. (Most) everyone will be required to have health insurance—public or private—DONE People with public or private coverage can keep it—DONE

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National Health Care Reform and Michigan

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  1. National Health Care Reform and Michigan December 4, 2012 Peter Pratt President

  2. Generally, What ACA Does and Doesn’t Do • (Most) everyone will be required to have health insurance—public or private—DONE • People with public or private coverage can keep it—DONE • Private insurers need more regulation (no denials for pre-existing conditions, no annual or lifetime limits)—DONE • Health care quality must improve, and the way we pay providers must foster this improvement—MADE A START • Health care costs are rising too rapidly and must be controlled—NOT REALLY DONE www.pscinc.com

  3. Why Does the ACA Matter to Michigan? • Cover many of the now uninsured through private insurance/the exchange (MIHealth Marketplace) and Medicaid expansion (PERHAPS) • Individual tax—or penalty—with exemptions • Employer mandate—or penalty—with exemptions (for firms with 50 or more FTEs) • Tax credits/subsidies for premiums, copays and deductibles • Medicaid expansion to 133% FPL—perhaps • Determination of essential benefits (Michigan Essential Benefits Benchmark Plan—Priority Health HMO) • Address increased demand for care • Many more insured—but who will care for them? • Increased Medicaid payment rates to PCPs to 100% of Medicare rates for 2013-14 only • Foster quality improvement • Cover proven preventive services and eliminate cost-sharing for them (Medicare) • Offer incentive payments to providers for primary care and coordinated care • Lower payments for avoidable rehospitalizations, hospital-acquired infections • Bundle payments for acute and post-acute care • Foster accountable care organizations, PCMHs www.pscinc.com

  4. Covering Everyone? • New 2011 data: 47.9 million uninsured, down by 1.3 million from 2010 • ACA covers 32M (95% of population excluding unauthorized aliens), but may cover up to 40M if everyone eligible signs up • Michigan • Estimated 1M people will be eligible for subsidies through the exchanges; 640,000 will actually enroll (includes insured and uninsured) • Estimated 969,000 newly eligible for Medicaid; 400,000-600,000 will actually enroll www.pscinc.com

  5. Mandates for Individuals • Must have coverage that meets minimum standards • Penalties: Higher of • $95 (2014), $325 (2015), and $695 (2016)/yr/family member up to $2,085 or • 2.5% of household income, if above filing threshold ($9,350/individual or $18,700/couple in 2009) • Exemptions: financial hardship (income below filing threshold or spend more than 8% of income on insurance), religion, American Indians • Individuals whose employers don’t offer health insurance are NOT exempt • Individuals who don’t take employer-offered coverage are NOT exempt www.pscinc.com

  6. Subsidies for Individuals • Two kinds: for premiums and for out-of-pocket costs (copays and deductibles) • Sliding scale premium tax credits up to 400% FPL ($88K for family of four)—if don’t get affordable coverage from employer • Subsidies set to limit premium contribution to 2% of income if total income 133% FPL to 9.5% of income if total income 300-400% FPL (133% FPL=$29,000 for family of four; subsidy covers all but $600) • Increases cost-sharing subsidies for <250% FPL www.pscinc.com

  7. Requirements for Employers • No employer mandate for employers < 50 employees • Penalty for employers > 50 NOT offering HI is $2K/year/worker • If employer does offer HI and has one or more employees receiving premium tax credit, pay lesser of $3,000 for each employee receiving the credit or $2,000 for each FTE • First 30 employees exempt from calculation of penalty • Employers > 200 must enroll employees automatically into employer’s lowest cost plan if they don’t opt out • 98% of businesses unaffected, either because already offer coverage or they are exempt. • This all takes effect in 2014 www.pscinc.com

  8. Subsidies for Employers • Credits for small businesses (<25 employees, avg. annual wage of $25K): 35% from 2010-2013; 50% starting 2014. Credits phase out as firm size & average wage increase. As of 7/1/12, 7,000 Michigan businesses have used the tax credits • Credits may not be attractive enough to get smallest businesses to offer health insurance (and no penalty if they don’t) • No mandate, no credits for employers 26-50 employees www.pscinc.com

  9. Cost of Covering More People • Two kinds of costs are competing for public’s attention: cost to government and cost to individuals, families, and businesses • Every dollar that defrays cost of health insurance for businesses, families, and individuals will add to the government’s cost—and who pays for government? • Individual and employer mandates—even with subsidies and limits, will people decide to buy HI or pay penalties? • Equity: How much should people and employers w/HI pay for those without it? ($1,000 a year now) • Firms with 3-9 employees offering HI (50%, down from 59% in 2010) • Equity: How much should employer and employee pay for employer-sponsored HI? Family coverage in 2012: $15,745. Employer share: 72% Employee share: 28% (largely unchanged since 2000) www.pscinc.com

  10. Expansion of Public Programs • Expand Medicaid to all individuals (133% FPL)—Michigan covers childless adults now up to 35% FPL • Feds fund • 100% of expansion population from 2014-16 • 95% for 2017 • 94% for 2018 • 93% for 2019 • 90% after that • State will save $1.3B over 10 years from expansion (mental health) • Increase Medicaid payment rates to PCPs to 100% of Medicare rates for 2013-14 only • Increase payments to community health centers for new eligibles • Why does this matter? For businesses, fewer uninsured. For providers, better (but not great) payment; pent-up demand www.pscinc.com

  11. Health Insurance Exchanges • State-based exchanges starting in 2014 called American Health Benefits Exchange & Small Business Health Options Programs, administered by government or non-profit organization. • Goal: Sustainable, financially viable, and transparent options that offer meaningful coverage • Michigan submitted short declaration of intent on November 16, 2012 for state-federal partnership (HHS approval by 1/1/13) • State-based exchange still a possibility, but blueprint must be submitted by 12/14/12 • Applications to qualified health plans (early 2013) • Certification of QHP rates (Summer 2013) • Open enrollment on exchange begins (10/1/13) • Exchange in full operation (1/1/14) www.pscinc.com

  12. Health Insurance Regulation • Guaranteed issue and renewability • No pre-existing condition exclusions—for children, went into effect 9/23/10 for group, but not individual, plans • No lifetime limits or rescissions • Limit rating variation to family size, geography, age, tobacco use (not allowed for health status, gender, occupation); for example, rate for 63-year-old can’t be more than 3x rate for 21-year-old. • Tighter oversight of health plans: • HHS secretary can require plans to lower rates • More requirements for existing plans: med loss ratios, cover <26 years old, preexisting condition exclusion prohibition (2014), cover preventive services www.pscinc.com

  13. Cost Containment • Encourage adoption and use of health IT • Reduce fraud, waste, and abuse • Simplify HI administration through standardization • Reduce payments to Medicare Advantage plans; after 2014, MA plans can earn 5% quality bonuses • Add $9.9B in reductions for IP hospitals, SNF, home health, and others from expected productivity gains • Reduce Medicaid and Medicare DSH allotments • Increase Medicaid drug rebates • Create Independent Payment Advisory Board—to rationalize and de-politicize cost control efforts www.pscinc.com

  14. Paying for Reform • HC reform can’t add to deficit, so must tax and/or cut spending • Net cost is $940B, cuts deficit by $138B over 10 years • Higher taxes for high-income individuals/households (2013): • Medicare Part A payroll tax rate rises from 1.45% to 2.35% for high-income taxpayers • 3.8% assessment on unearned income for high-income taxpayers • Taxes on policies with benefits over a certain threshold • 40% tax on plan >$10.2K indiv/$27.5K family (2018) • Vision and dental plans excluded from calculation • Penalties for individuals & large employers who don’t get/offer HI • Cuts in plan and provider payments • Insurers, medical device makers, Rx mfgers pay fees of more than $100B over 10 years, but with later start dates www.pscinc.com

  15. The Fiscal Cliff/Budget Deficit • Budget sequester has 2% cut to Medicare (plus 27% cut to physicians) • Medicare and Medicaid on the block if we’re to address deficit ($769B in 2011, 21% of federal budget) • Simpson-Bowles: Cut hospitals before 2020 • Raise eligibility age to 67 • Raise Medicare Part B premiums • Give seniors vouchers (Ryan), but tie amount to HC cost inflation not GDP • Limit Medicaid expansion? • Limit subsidies to less than 400% FPL? www.pscinc.com

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