Health Care overview

1. Health Care overview Scott Whisnant Director, Government Affairs Presentation to: Southeastern Healthcare Volunteer Leaders April 8, 2013

2. Health care around the world Four primary health care models • Private insurance model • Health care providers and payors are private entities • Typically financed by employers and employees through payroll deduction • Examples: Germany, Japan, France, Belgium, Switzerland, Japan • National health service model • Health care system provided and financed by government, through tax payments • Medical treatment is a public service • Examples: Great Britain, Italy, Spain • National health insurance model • Providers are private, but the payer is government-run insurance program • One insurance payer can negotiate for lower prices and control costs • Examples: Canada • Out-of-pocket model • 80% of nations too poor for established health care payment systems • Pay for medical care as you are able to afford it – the poor go without • Examples: Cambodia, India, Egypt

3. Americans recognize all these! Four primary health care models • Private insurance model • 64% of population (256.2 million) • 55.3% of population in employer-sponsored plans • 1,000 health insurance companies, 70 Blue Cross/Blue Shield, 540 HMOs • National health service model • U.S. Department of Veteran Affairs • Roughly 4% of population (16.5 million) • National health insurance model • Medicare, for 65+ population • 14.5% of population (44.3 million) • Popular with the elderly • Medicaid, government insurance for poor single parents, blind and disabled, is joint state/federal program • 15.9% of population (48.6 million) • Out-of-pocket model • Uninsured • 16.3% of population (49.9 million) Only the USA has separate systems instead of one unified approach!

4. A brief history of American health care • Before 1920, doctors didn’t know much about disease, so didn’t charge much • Most doctor visits in the home • Hospitals were mostly charitable institutions for people too sick to be cared for at home • Few employers offered insurance. Most Americans paid out of pocket • As doctors learned more and developed treatments, needed hospitals for the new technology. Health care became more expensive • Coupled with Great Depression, fewer patients could afford to pay for care • Blue Cross/Blue Shield, a nonprofit form of basic insurance to help the poor cover their bills, arose out of Texas • With Blue Cross’ success, other insurers entered the market • World War II brought a boom in employment. Employers offered health insurance as a benefit so that they could be competitive in hiring. Government provided tax incentive for them to do it • Nations around the world moving to national health care • Private insurers insured healthiest and avoided the sickest. Even Blue Cross followed the lead. Based on age, gender, health status and pre-existing conditions

5. A brief history of American health care • From 1940-60: • Health insurance become more common as more commercial companies entered the market • Medical technology more sophisticated, so health care and hospital use increased • Government encouraged employers to offer health care insurance as part of employee compensation. Unions bargained for these rights • By 1960, commercial insurance well established, but poor and elderly left out • Two programs emerged in 1965 • Medicare: 65 and older. Part A covered hospital services; Part B covered doctors • Medicaid: Federal/state program for the poor • Both programs started small, but grew rapidly because based on fee-for-service model. Medicare designed to pay claims, not achieve outcomes • Private insurers continued to grow, could focus on the healthy – not the sick • A number of factors – notably technology, growth in medication costs, and lawsuits, caused health care to become more and more expensive • Today, 50 million people without insurance and millions more cannot afford the premiums or deductibles on the insurance they have. America faces huge problems with access to care and affordability of care • And its government-funded programs – Medicare and Medicaid – cost 20% of the federal budget. Medicaid alone costs $486 billion. This is unsustainable

6. Hospitals’ role in health care • Started as charity care for the poor • Post WWII, government funded huge boom in hospital construction • With rise in technology, hospitals became important place to practice • Traditionally, private doctors have privileges to practice at local hospital • In 1980s, hospitals were paid for every service, every test. Changed with DRGs • As health care became expensive, more hospitals merged into large systems – not as many publicly owned • Typically largest employer in community • Federal law – EMTALA – requires that any hospital in Medicare/Medicaid program must treat emergency patients • Fewer community doctors treat patients in hospital, and many give up their privileges • Hospitals – public or private – are routinely the community’s “safety net” • Nationally, hospitals provide $41 billion in care for which they do not get paid

7. FY 2011 Overall Profitabilityby Payor Source: NHRMC FY11 Service Line Trended Profitability Reports 7

8. Is our system working?

9. Healthcare Spending per Capita, 2008Adjusted for Differences in Cost of Living * 2007. Source: OECD Health Data 2010 (Oct. 2010) 9

10. Hospital Spending per Discharge, 2008Adjusted for Differences in Cost of Living * 2007. ** 2006. Source: OECD Health Data 2010 (Oct. 2010) 10

11. International Comparison of Spending on Health, 1980-2008 Source: OECD Health Data 2010 (Oct. 2010) 11

12. Costs by Age Categories U.S. is spending much more for older ages Healthcare Costs by Age Source: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for Specific Gender-Age Groups.” Carnegie Mellon University; September, 2009. 

13. WHO health system rankings 2000

14. Commonwealth Fund: 7 industrialized nations

15. What many of us would say • WHO methodology is flawed and out of date • USA has best specialty care in the world • We don’t want government rationing care • We don’t want to pay higher taxes for health care • We see ourselves as individualists who choose our own • National health care is “socialism.” Free market decides best, leads to most innovation path. Health system ranks 1st in world in “responsiveness” in WHO study

16. All this leads to health care reform • Five years ago, 18% of those polled in survey said U.S. health care system was working well • 79% said they want either fundamental change or a complete overhaul • Yet today, the Affordable Care Act is the focal point of intense political division • National associations for hospitals and doctors supported the ACA, yet many individuals within opposed it • November election was likely a life/death issue for ACA

17. Affordable Care Actaka “ObamaCare” • Signed into law on March 23, 2010 after narrow passage along party lines • AHA supported at last minute, saying at least it’s an attempt to address nation’s access issue • AMA supported but many individual physicians did not

18. The mandate issue • Key piece of President Obama’s plan – every individual must buy health insurance • Government will help the poor buy into a plan • Idea of a mandate originated from conservative think tank in 1993 • Americans don’t like to be toldthey have to buy anything • Hospitals already have a“mandate” they understand all too well

19. The Supreme Court challenge • ACA upheld 5-4 last year. Chief Justice Roberts fooled just about everyone by siding with majority • However, Justice Roberts didn’t rule mandates as legal under commerce clause … but as a tax • Same opinion ruled that Medicaid expansion – thought not to be in question – cannot be forced upon states. Rather they can opt in, state by state • Not unlike the original Medicaid program, which passed in 1965 but wasn’t in all 50 states until 1982 (Arizona)

20. The Medicaid question • Eligibility is vastly misunderstood • Poverty does not automatically qualify someone for Medicaid. In North Carolina, basically, must be a single parent with child living in the home, or aged, blind or disabled • ACA would have automatically qualified everyone below 138% of poverty level • Health exchanges only subsidize those between 100% and 400% of poverty level. Technically, those below 100% don’t qualify for help with exchanges • In North Carolina, about 500,000 to 750,000 would have qualified under new Medicaid program

21. Why expand? • Federal government pays 100% for first three years. Support then tapers down to 90% over next three • General belief that health care is cheaper, by being more effective, when patients have a primary care home • 50 million plus uninsured in United States • When hospitals agreed to support ACA, agreed to reduction in pay – largely based on idea that revenue from Medicaid expansion would offset cuts • Funding for other components of the safety net is “fatigued.” • Hospitals will continue as safety net for the uninsured poor

22. Which states are playing along? • 24 governors support • 4 lean toward support • 5 undecided • 3 lean toward not supporting • 14 not participating Some states – ex: Arkansas and Florida – are exploring whether they can expand Medicaid through private insurance. Obama Administration needs to rule on proposals

23. Name the bleeding heart • “This country is the greatest in the world, and it’s the greatest largely because of how we value the weakest among us. It shouldn’t depend on your ZIP code or your tax bracket. No mother or father should despair over whether they have access to high quality health care for their sick child.” • “I can’t look at the disabled, I can’t look at the poor, I can’t look at the mentally ill, I can’t look at the addicted and think we ought to ignore them. For those that live in the shadows of life, those who are the least among us, I will not accept the fact that the most vulnerable in our state should be ignored. We can help them.” • “We also have to be sensitive to the needs of the poorest and weakest among us who struggle to access accordable, high-quality health care.” 1, 3 – Gov. Rick Scott, R, Fla. 2 – Gov. John Kasich, R, Ohio

24. Components of the ACA

25. “Insurance” reform • Bill essentially has more to say about insuranceindustry than actual health reform. Key examples: • No lifetime limits on coverage or annual limits • No exclusions based on pre-existing conditions, starting with children’s coverage • No discrimination based on health status • Coverage of preventive services • Women can see OB/GYN without a referral • No cancellation if you become sick • Young adults can stay on parents’ plan until age 26 • Same co-pay for out-of-network ED visit • Insurers must spend 85% of income on health claims With these changes in place, insurance industry insisted on mandates for everyone to join the risk pool – otherwise people only buy insurance when they got sick

26. Physician/provider issues • Pool of primary care physicians needs to grow, ornewly insured still won’t have many treatmentoptions. Some measures taken include: • Requiring states to increase Medicaid payment rates for primary care providers to Medicare levels. Fully funds the increase • Rewards physicians who certify as “medical homes,” able to address entire spectrum of patient needs • Not reducing graduate medical education payments; redistributes unused residency slots to encourage increased training of primary care physicians and surgeons – emphasis on underserved areas • Loan forgiveness and scholarships to train primary care physicians, among other specialties in short supply • Provides $50 million for medical liability demonstrations • States can apply for planning grants of $500,000 to evaluate alternatives to medical tort legislation

27. Quality and reimbursement • FY 2013 - penalties for “excess” readmissions, based on 30-day measures for heart attack, CHF and pneumonia • “Excess” is defined as more than would be expected. If exceed by one readmit in any of these measures, the penalty is triggered • The bill estimates savings of $188 billion from 2013-2019 • First phase of penalty: 71% of hospitals; $280 million • Last year, readmit rates dropped for first time in five years. From 19% to 17.8% for heart attack, heart failure and pneumonia

28. Readmissions: everyone’s focus Has it become a moral issue? • Scenario: CHF patient discharges from hospital with no Lasix prescription. Five days later, patient readmits • Loser? Patient, patient’s family, workplace, taxpayers • Winner? …. The hospital. Gets paid for both admissions • Pilot at NHRMC: • 27% of readmits in first four days • 7 of 11 patients discharged on Mon-Tues before Thanksgiving readmitted; 3 of 4 d/c on New Year’s Day • Med rec on patients found error, inconsistency or need to intervene in … 25.8% of cases • CMS investing significant dollars through Medicare for “care transitions.” New buzzword in our industry

29. More quality/reimbursement • FY 2013 – Hospitals that meet or exceed DHHS performance standards for quality are eligible for 1% increase in total payments; 2% in FY 2017. Known as “Value-Based Purchasing.” Ones at bottom cut by that amount • HCAHPS: 30% of 1% of Medicare funding in play with stronger satisfaction • FY 2015 - 1% penalty if among top quartile of Hospital-Acquired Conditions Rationale behind incentives such as these: Administration estimates as much as 30% of health care spending is on care that is unnecessary, ineffective or even dangerous

30. Prevention/Wellness • More could be done to address this area. Some components that made the bill: • Annual wellness visits covered by Medicare • $15 billion toward prevention and public health fund and other initiatives to create healthier communities. A threat to be cut • Federal council to coordinate federal prevention, wellness and public health activities. Council to develop national strategy to improve nation’s health • Permits employers to offer employees premium discounts, waivers of cost-sharing requirements, or benefits not otherwise provided– up to 30% of cost of coverage – for participating in wellness program and meeting certain health-related goals

31. Better disease managementwould reduce costs • Chronic illness accounts for estimated 83 percent of U.S. health expenditures • 74% of private spending • 83% of Medicaid spending • 96% of Medicare spending • Ten chronic conditions account for nearly half the rise in Medicare spending over last 20 years • Many conditions are either unmanaged or not managed well • Obesity a huge factor. At current rate of weight gain, 86% of U.S. adults will be obese or overweight by 2030 • RN Case Manager – a new star in the ObamaCare health care world?

32. Delivery system reforms • Primary concern about health reform: Doesn’t doenough to move from fee-for-service system.Some options, however, did make the bill: • Hospitals can create “Accountable Care Organizations” in which all providers of care in a given area pool together to treat that area’s population. If quality goals met and cost is less than certain amount, partners share in the savings • Pilot programs/demonstrations available for “bundling” • Creation of medical homes • Funds to adjust for geographic variations in cost of care for disparities in outcomes

33. Meanwhile .. current threats to funding persist • Sequestration is in place • Spending reductions on the table • Congress just fixed the proposed 27% cut in doctors’ Medicare pay … largely on the back’s of hospitals • “Coding offset” will cost NHRMC about $3.8 million/year for 2014-17 • Speaker Boehner: We know what’s on the menu, just need to have guts to choose • Menu: • E/M pay for hospital OP services • Medicare bad debt – House would eliminate it, Senate allowed it to be reduced last year • Post acute care reductions • Critical access hospitals • Graduate Medical Education reductions • Hospital provider taxes in states

34. Threats? … or opportunities? ObamaCare starts to challenge assumptions about howwe provide health care in this nation • Doesn’t quite say: “We’ll pay you to keep people healthy” • It does say: • “Thirty percent of what you do is unnecessary, ineffective, or even dangerous” • “We’re not going to keep paying you the same for what you’re doing today” Hospitals will be migrating away from fee-for-service models. Look for rise in ACO-type programs. Pays off financially to keep people healthy

35. A return to the basics? • Are policy and market changes returning us toan old-fashioned nursing model? • Where we take ownership of the entire patient’s physical, social and emotional needs? • Where we ask questions like: • Who is this patient’s caregiver and is that person in the care plan? • Does the patient/caregiver understand post-discharge instructions? Was it given in terms they can understand? Can they tell me - in their own words - how to carry out the plan? • Have I linked this patient to the right community resources? • Is this still “our” patient - even after the patient goes home? • Are we headed toward a world where we cut costs by providing better care and making better use of community resources?

36. Questions?