National Health Care Reform: Where Do We Go From Here

1. National Health Care Reform:Where Do We Go From Here? Karen Davis, President Rachel Nuzum, Senior Policy Director The Commonwealth Fund Qualis Safety Net Medical Home Initiative March 23, 2010 kd@cmwf.org and rn@cmwf.org www.commonwealthfund.org Thank you for that introduction. Good afternoon, my name is Karen Davis and I�m president of the Commonwealth Fund. I�m joined today by Rachel Nuzum, our Senior Policy Director. Thank you for that introduction. Good afternoon, my name is Karen Davis and I�m president of the Commonwealth Fund. I�m joined today by Rachel Nuzum, our Senior Policy Director.

2. 2 Uninsured Projected to Rise to 61 Million by 2020,Not Counting Underinsured or Part-Year Uninsured One of the single largest problems with the American health care system is the number of individuals and families who lack health insurance. According to the Census Bureau, about 46 million Americans did not have coverage in 2008. This is staggering. No other industrialized country fails to guarantee its citizens access to basic medical care. The economic and health consequences of being uninsured are stark: Commonwealth Fund studies show that those without coverage are far more likely to forgo needed care due to cost, be in poorer health, and run up ruinous amounts of medical debt. Absent reform, the Lewin Group projects that 61 million of us will lack insurance by 2020. President Obama has made extending stable and affordable coverage for all one of the central goals of health reform. One of the single largest problems with the American health care system is the number of individuals and families who lack health insurance. According to the Census Bureau, about 46 million Americans did not have coverage in 2008. This is staggering. No other industrialized country fails to guarantee its citizens access to basic medical care. The economic and health consequences of being uninsured are stark: Commonwealth Fund studies show that those without coverage are far more likely to forgo needed care due to cost, be in poorer health, and run up ruinous amounts of medical debt. Absent reform, the Lewin Group projects that 61 million of us will lack insurance by 2020. President Obama has made extending stable and affordable coverage for all one of the central goals of health reform.

3. 3 Seventy-Two Million Americans Have Problems with Medical Bills or Accrued Medical Debt, 2007 We have a system with close to 50 million people uninsured, and millions more underinsured. Believe it or not, of the 72 million people mentioned on this slide who had trouble paying medical bills over the past year, almost 60 percent of them � 42 million � had insurance all year. So we really do have a broken system when even insurance fails to protect families. We have a system with close to 50 million people uninsured, and millions more underinsured. Believe it or not, of the 72 million people mentioned on this slide who had trouble paying medical bills over the past year, almost 60 percent of them � 42 million � had insurance all year. So we really do have a broken system when even insurance fails to protect families.

4. 4 Premiums Rising Faster Than Inflation and Wages A major driver of the increasing uninsured population in the United States is the exploding cost of health insurance premiums. This slide shows that insurance premiums increased 108 percent between 2000 and 2009, while inflation increased just 24 percent and workers earnings increased just 32 percent. If we continue on our current course, Commonwealth Fund analysis shows that the average family premium will reach 24 percent of median family income by 2020. This is simply unsustainable. A major driver of the increasing uninsured population in the United States is the exploding cost of health insurance premiums. This slide shows that insurance premiums increased 108 percent between 2000 and 2009, while inflation increased just 24 percent and workers earnings increased just 32 percent. If we continue on our current course, Commonwealth Fund analysis shows that the average family premium will reach 24 percent of median family income by 2020. This is simply unsustainable.

5. 5 History is Made: March 21, 2010 House of Representatives passed the Affordable Health Care for America Act on Nov. 7, 2009 (220-215) Senate passed the Patient Protection and Affordable Care Act (HR 3590) on Dec. 24, 2009 (60-39) House passed Senate measure (219-212) and reconciliation bill (HR 4872) 220-211 on March 21, 2010 Senate bill ready for President�s signature and will become law Reconciliation bill now moves to the Senate for action this week House bill included: More generous Medicaid expansion (150% FPL vs. 133% in Senate) More generous premium and cost-sharing subsidies Employer play-or-pay requirement vs. Senate employer contribution if low-income employees enter exchange Surtax on wealthy Americans to finance large portion of coverage expansion Senate bill included: More affordable premium cap for middle income families (cap at 9.8% of income at 300+% FPL vs. 10-12% of income at 300+% FPL in House) Less costly individual mandate ($750 penalty for uninsured by 2016 vs. 2.5% of income in House) Excise tax on high cost insurance plans to finance large portion of coverage expansion House bill included: More generous Medicaid expansion (150% FPL vs. 133% in Senate) More generous premium and cost-sharing subsidies Employer play-or-pay requirement vs. Senate employer contribution if low-income employees enter exchange Surtax on wealthy Americans to finance large portion of coverage expansion Senate bill included: More affordable premium cap for middle income families (cap at 9.8% of income at 300+% FPL vs. 10-12% of income at 300+% FPL in House) Less costly individual mandate ($750 penalty for uninsured by 2016 vs. 2.5% of income in House) Excise tax on high cost insurance plans to finance large portion of coverage expansion

6. 6 Impact of Senate+Reconciliation Bill Coverage expanded to an additional 32 uninsured by 2019 Total cost of coverage expansion with Senate bill modified by Reconciliation bill: $938 billion, 2010�2019 Net impact on federal deficit of Senate + Reconciliation bill: $143 billion savings, 2010�2019 Estimated to decrease premiums and out-of-pocket costs by ~$2,500 per family in 2019 Slows the rate of National Health Expenditures (NHE) from 6.6% annually to ~6.0% annually What are the major impacts of the Reconciliation bill? First and foremost, 32 million previously uninsured Americans are projected to receive coverage by 2019 at a total cost of $938 billion. However, all of this cost is offset and the bill actually reduces the deficit by $143 billion over 2010 to 2019. A Commonwealth Fund study has shown that the bill will likely decrease premiums and out-of-pocket costs by $2,500 per family in 2019 and slow the rate of growth in national health expenditures from 6.6 percent annually to 6.0 percent. What are the major impacts of the Reconciliation bill? First and foremost, 32 million previously uninsured Americans are projected to receive coverage by 2019 at a total cost of $938 billion. However, all of this cost is offset and the bill actually reduces the deficit by $143 billion over 2010 to 2019. A Commonwealth Fund study has shown that the bill will likely decrease premiums and out-of-pocket costs by $2,500 per family in 2019 and slow the rate of growth in national health expenditures from 6.6 percent annually to 6.0 percent.

7. 7 Key Features of Reform Legislation Individual mandate to obtain insurance Guaranteed issue, modified community rating, and prohibitions on rescissions Insurance exchanges as marketplace for individuals and small groups; establish minimum benefit standards Medicaid expansion to 133% FPL with improved FMAP for all states for newly eligible populations (e.g., nonelderly childless adults) Employer contribution to premiums or employer fee if no coverage offered and employees access premium tax credits Improved affordability for individuals and families: premium and cost-sharing subsidies on a sliding scale; premium caps on a sliding scale up to 9.5% income for 300�400% FPL Reforms to the delivery system to improve quality and contain costs What are some of the key features of the reform legislation? First, all Americans would be required to carry insurance, which would be guaranteed for everyone and never rescinded due to illness. Insurance exchanges would be set up as a marketplace for individuals and small businesses to purchase coverage, and authorities would establish minimum benefit standards to ensure that everyone has adequate financial protection. Medicaid is scheduled to be expanded to 133 percent of the poverty level, which currently translates to around $29,000 for a family of four. Employers will be required to share responsibility for financing coverage for their employees, and individuals and families purchasing coverage in the health insurance exchanges will be eligible for premium caps and cost-sharing subsidies on a sliding scale. Finally, several important delivery system reforms to reign in rising costs are included, such as productivity adjustments for hospitals, Medicare Advantage reform, and an Independent Payment Advisory Board. What are some of the key features of the reform legislation? First, all Americans would be required to carry insurance, which would be guaranteed for everyone and never rescinded due to illness. Insurance exchanges would be set up as a marketplace for individuals and small businesses to purchase coverage, and authorities would establish minimum benefit standards to ensure that everyone has adequate financial protection. Medicaid is scheduled to be expanded to 133 percent of the poverty level, which currently translates to around $29,000 for a family of four. Employers will be required to share responsibility for financing coverage for their employees, and individuals and families purchasing coverage in the health insurance exchanges will be eligible for premium caps and cost-sharing subsidies on a sliding scale. Finally, several important delivery system reforms to reign in rising costs are included, such as productivity adjustments for hospitals, Medicare Advantage reform, and an Independent Payment Advisory Board.

8. 8 Congressional Health Reform Bills: Exchanges The health insurance exchanges will allow individuals and small groups to pool risk together. The exchanges will operate at the regional, state, or sub-state level. By 2014, each state will be required to establish an exchange for individuals, and a Small Business Health Options Program (SHOP) exchange for small employers. States can opt to provide just one exchange for individuals and small employers. Individuals will be eligible for the exchange as soon as it is operational. Until 2016, states can opt to limit enrollment to firms with 50 or fewer employees; in 2016 they must allow firms with up to 100 employees, with the state option to allow companies with more than 100 employees to purchase as well Individuals may still purchase insurance plans outside the exchange Plans offered within the exchanges would be required to meet a minimum set of standards. Each would offer a package of essential health benefits, equal in scope to a typical employer plan, with four tiers ranging in actuarial value from 60%-90%. All plans selling in the exchanges would be required to offer coverage at the silver and gold categories at a minimum, with the option to offer the bronze and platinum levels. Beginning this year, the HHS secretary and states will establish a process for annual review of premium increases. Once the exchanges are operational, this review process would affect determination of plan participation in the exchanges. This year, health plans will be required to report the proportion of premiums spent on items other than medical care, known as the medical loss ratio. In 2011, health plans, including the existing plans, will be required to refund enrollees for non-claims costs that exceed 15% in the large group market and 20% in the small group and individual markets. The health insurance exchanges will allow individuals and small groups to pool risk together. The exchanges will operate at the regional, state, or sub-state level. By 2014, each state will be required to establish an exchange for individuals, and a Small Business Health Options Program (SHOP) exchange for small employers. States can opt to provide just one exchange for individuals and small employers. Individuals will be eligible for the exchange as soon as it is operational. Until 2016, states can opt to limit enrollment to firms with 50 or fewer employees; in 2016 they must allow firms with up to 100 employees, with the state option to allow companies with more than 100 employees to purchase as well Individuals may still purchase insurance plans outside the exchange Plans offered within the exchanges would be required to meet a minimum set of standards. Each would offer a package of essential health benefits, equal in scope to a typical employer plan, with four tiers ranging in actuarial value from 60%-90%. All plans selling in the exchanges would be required to offer coverage at the silver and gold categories at a minimum, with the option to offer the bronze and platinum levels. Beginning this year, the HHS secretary and states will establish a process for annual review of premium increases. Once the exchanges are operational, this review process would affect determination of plan participation in the exchanges. This year, health plans will be required to report the proportion of premiums spent on items other than medical care, known as the medical loss ratio. In 2011, health plans, including the existing plans, will be required to refund enrollees for non-claims costs that exceed 15% in the large group market and 20% in the small group and individual markets.

9. 9 Medicaid/CHIP Expansion in Combined Senate-Reconciliation Bills Starting in 2014, Medicaid expands to cover all nonelderly individuals with incomes up to 133% FPL with federal funding for expanded eligibility 100% federal funding 2014�2016 95% 2017 94% 2018 93% 2019 90% 2020 and beyond CHIP reauthorized through September 2015 States required to maintain current Medicaid eligibility for adults through 2013 and for children through 2019 Medicaid payment rates to primary care physicians for primary care services floor of 100% Medicare rates in 2013 and 2014; 100% federal funding for incremental costs for states to meet requirement Newly eligible Medicaid beneficiaries would receive �benchmark� coverage with at least essential benefits, plus coverage for Rx and mental health services Starting April 2010, states can opt to expand Medicaid to adults up to 133% FPL and receive current law FMAP Beginning 2014, states required to offer Medicaid to all individuals below age 26 who were in foster care for at least 6 months Individuals can apply for and enroll in Medicaid, CHIP, and exchange through state-run websitesNewly eligible Medicaid beneficiaries would receive �benchmark� coverage with at least essential benefits, plus coverage for Rx and mental health services Starting April 2010, states can opt to expand Medicaid to adults up to 133% FPL and receive current law FMAP Beginning 2014, states required to offer Medicaid to all individuals below age 26 who were in foster care for at least 6 months Individuals can apply for and enroll in Medicaid, CHIP, and exchange through state-run websites

10. 10 Primary Care, Care Management, and Medical Home in Combined Senate-Reconciliation Bills Medicare payment bonus (10%) to primary care physicians beginning 2011 Primary Care Extension Program through grants to state hubs Chronic care management Home-based chronic care management pilot to bring primary care services to high-cost beneficiaries with multiple chronic conditions State option to enroll chronically ill Medicaid beneficiaries into a health home Medical home Grants/contracts to states to establish Community Health Teams to support medical home model CMS Innovations Center to test payment reform models that improve quality and reduce cost, including medical home; successful models can be expanded nationally The health reform bill promotes primary care, care management, and the medical home model in a number of ways One of the exciting provisions promoting primary care is a new payment bonus for Medicare-participating primary care physicians whose Medicare-related claims are at least 60% designated primary care services The primary care extension program is intended to educate and provide technical assistance to primary care providers about evidence-based therapies, preventive medicine, health promotion, chronic disease management, and mental healthThe health reform bill promotes primary care, care management, and the medical home model in a number of ways One of the exciting provisions promoting primary care is a new payment bonus for Medicare-participating primary care physicians whose Medicare-related claims are at least 60% designated primary care services The primary care extension program is intended to educate and provide technical assistance to primary care providers about evidence-based therapies, preventive medicine, health promotion, chronic disease management, and mental health

11. 11 Community Health Centers in Combined Senate-Reconciliation Bills Increase mandatory FQHC funding to $11 billion over five years (through 2015); establish CHC and NHSC Fund to sustain national investment Grant program to states to support providers who treat a high percentage of medically underserved populations Authorize $50 million in grants for coordinated and integrated services through co-location of primary and specialty care in community-based mental and behavioral health settings Grants up to three years to employ and train family nurse practitioners who provide primary care in FQHCs and nurse-managed health clinics Establish Teaching Health Centers: Community based, ambulatory patient care centers, including FQHCs and other federally-funded health centers Health professional scholarships and loans; primary care training and capacity building; train and recruit providers to serve in rural areas; public health workforce loan repayment program; train medical residents in preventive medicine and public health Community health centers and the National Health Service Corps will see an influx of resources in the next five years and should expect additional resources through various grant programs supporting medically underserved populations, integrated primary and specialty care services, and nurse-leadership Also establish a PPS for Medicare-covered services furnished by an FQHC; remaining Medicare-covered preventive services will be added to the list of services eligible for reimbursement when furnished by an FQHC Community health centers and the National Health Service Corps will see an influx of resources in the next five years and should expect additional resources through various grant programs supporting medically underserved populations, integrated primary and specialty care services, and nurse-leadership Also establish a PPS for Medicare-covered services furnished by an FQHC; remaining Medicare-covered preventive services will be added to the list of services eligible for reimbursement when furnished by an FQHC

12. 12 Trend in the Number of Uninsured Nonelderly, 2013�2019Under Current Law and Senate+Reconciliation bill The most recent estimates by the Congressional Budget Office show that the Reconciliation Act would vastly reduce the number of uninsured. 32 million previously uninsured Americans would have coverage in 2019, almost 95% of the non-elderly population legally residing in this country. The most recent estimates by the Congressional Budget Office show that the Reconciliation Act would vastly reduce the number of uninsured. 32 million previously uninsured Americans would have coverage in 2019, almost 95% of the non-elderly population legally residing in this country.

13. 13 Source of Insurance Coverage Under Current Law and Reconciliation Bill, 2019 A solid majority of Americans will continue to receive coverage through their employer, as they would without reform. However, this slide shows the many previously uninsured will become eligible for Medicaid, and several million will purchase private plans in the exchange thanks to new insurance market rules and greater efficiencies that hold down costs. A solid majority of Americans will continue to receive coverage through their employer, as they would without reform. However, this slide shows the many previously uninsured will become eligible for Medicaid, and several million will purchase private plans in the exchange thanks to new insurance market rules and greater efficiencies that hold down costs.

14. 14 Estimated Net 2010-19 System-wide Savings and Federal Budget Deficit Reduction Resulting from Proposed Reforms According to the CBO, both the Reconciliation bill that passed the House on Sunday and the Senate bill that passed on Christmas Eve generate significant savings from payment and system reform provisions, including provider productivity improvements and Medicare Advantage reform. Both bills save the federal government money over 10 years, reducing the deficit by approximately $120-140 billion dollars. Additional studies have shown the potential for greater savings across the entire U.S. health system. A recent paper published by the Commonwealth Fund shows that the Senate reform bill has the potential to save $683 billion or more in national health expenditures and reduce the rate of growth from 6.6 percent annually to 6.0 percent. According to the CBO, both the Reconciliation bill that passed the House on Sunday and the Senate bill that passed on Christmas Eve generate significant savings from payment and system reform provisions, including provider productivity improvements and Medicare Advantage reform. Both bills save the federal government money over 10 years, reducing the deficit by approximately $120-140 billion dollars. Additional studies have shown the potential for greater savings across the entire U.S. health system. A recent paper published by the Commonwealth Fund shows that the Senate reform bill has the potential to save $683 billion or more in national health expenditures and reduce the rate of growth from 6.6 percent annually to 6.0 percent.

15. 15 Major Sources of Savings and Revenues Compared with Projected Spending, Net Cumulative Effect on Federal Deficit, 2010�2019 Some of the major costs of coverage expansion, payment and system reforms, and revenue provisions are included on this slide. While the total cost of coverage expansion is projected to reach $820 billion over 10 years, payment and system reform savings of $511 billion and revenue generation of $432 billion provide the bulk of the offsets. Some of the major costs of coverage expansion, payment and system reforms, and revenue provisions are included on this slide. While the total cost of coverage expansion is projected to reach $820 billion over 10 years, payment and system reform savings of $511 billion and revenue generation of $432 billion provide the bulk of the offsets.

16. 16 Proportions of System Savings and New Revenue in Senate and Reconciliation Bills This slide provides a graphic representation of the previous slide. You can see that the cost of coverage expansion in the health reform bills is completely offset by savings from system reform and new revenues. Two major differences the Reconciliation bill made to the Senate bill were a new Unearned Income Medicare Contribution on 3.8% of investment income for those individuals with incomes over $200,000 or families with incomes over $250,000 per year, estimated to raise $123 billion in new revenues by 2019; and a revision of the federal postsecondary education loan program, such that the federal Department of Education will make direct loans to students and increase spending for the Pell Grant program and other education grant programs. This change is estimated to save $19 billion by 2019.This slide provides a graphic representation of the previous slide. You can see that the cost of coverage expansion in the health reform bills is completely offset by savings from system reform and new revenues. Two major differences the Reconciliation bill made to the Senate bill were a new Unearned Income Medicare Contribution on 3.8% of investment income for those individuals with incomes over $200,000 or families with incomes over $250,000 per year, estimated to raise $123 billion in new revenues by 2019; and a revision of the federal postsecondary education loan program, such that the federal Department of Education will make direct loans to students and increase spending for the Pell Grant program and other education grant programs. This change is estimated to save $19 billion by 2019.

17. 17 Challenges Ahead American people are still skeptical and unsure of how they�ll be impacted by the bill Fiscal situation facing states: states have a large role to play in implementing reform Legal challenges: states challenge federal mandate to purchase coverage Implementation: managing expectations, building infrastructure and securing resources needed. State Challenges: Covering those now eligible for Medicaid but not enrolled FMAP �cliff� when enhanced match from stimulus package expires State responsibility for insurance exchanges, high risk pools Reduced DSH funding as more people gain insurance legal challenges: as of 3/22/10, ID and VA have enacted laws to challenge reform, AZ has a constitutional amendment on the ballot, and 36 other states had proposed such legislation Difficult balance between taking time to build the needed infrastructure to allow reform to succeed and producing results that voters can see in the short-term Acording to CBO, roughly $50B in will be needed in discretionary funding via Appropriations for implementation State Challenges: Covering those now eligible for Medicaid but not enrolled FMAP �cliff� when enhanced match from stimulus package expires State responsibility for insurance exchanges, high risk pools Reduced DSH funding as more people gain insurance legal challenges: as of 3/22/10, ID and VA have enacted laws to challenge reform, AZ has a constitutional amendment on the ballot, and 36 other states had proposed such legislation Difficult balance between taking time to build the needed infrastructure to allow reform to succeed and producing results that voters can see in the short-term Acording to CBO, roughly $50B in will be needed in discretionary funding via Appropriations for implementation

18. 18 A New Era in Health Care Delivery The U.S. has a historic opportunity to implement reforms that will achieve a high performance health system; we can�t afford to continue on our current course Goals of affordable coverage for all while slowing cost growth are achievable Innovations: Investing in primary care Rapid cycle testing of innovative payment reforms to reward quality and value Productivity improvement Correcting market price signals: Medicare Advantage, Rx Insurance market reform, reduced administrative costs Independent commission charged with budget savings and long-term goal of harmonization of private and public payment methods It is possible to expand coverage, improve quality of care provided while reducing the federal deficit and slowing the rate of health care cost growth Strong oversight and system of tracking health system performance will be needed as we move into implementation. The passage of health reform has led us to a new frontier and presented an opportunity to implement changes to start us on the path to a high performance health system A number of payment and delivery system innovations were included in the bill, and a few that we think are especially promising are listed hereThe passage of health reform has led us to a new frontier and presented an opportunity to implement changes to start us on the path to a high performance health system A number of payment and delivery system innovations were included in the bill, and a few that we think are especially promising are listed here

19. 19 Thank You!