1. And the Winner is….. Health Reform in the Era of Obama UC Irvine Health Care Forecast Conference February 19, 2009 Dean A. Rosen, Partner

2. Lights, Camera, Action…

3. The Case for Full Speed Ahead

4. The Case for Gloom and Doom

5. Overview The 2008 election results –Who’s in charge and how will they govern? Health care reform landscape –What does election and public opinion indicate about direction and priorities of new Congress/Administration? –What issues are motivating policymakers? Outlook and options for health reform –What’s on the agenda and what will get done?

6. The 2008 Elections

7. Worst Pre-Election 6-Month Period For Dow Jones Industrial Average Ever Oct. 2008Oct. 1928

8. Pre-Election Polling: McCain Took Nosedive Along With Economy Obama McCain

9. The Result: 2008 Presidential Outcome Source: CNN, December 2008

10. Democrats Enjoy Substantial Congressional Majorities, But Shy of 60 in Senate 111 th Senate: 58-41 Democratic Majority, with 1 Undecided 111 th Congress: 257-178 Democratic Majority 57 New Members since 1999 269 New Members Since 1999

11. HEALTH POLICY LANDS In Ceremonies Held Earlier: Children’s Health Insurance and Economic Stimulus Package

12. Nearly $200 Billion in Health Program Spending Already Over 20% of $787 billion Economic Stimulus Package devoted to health care programs ( Signed into law February 17 ) –Medicaid 6.2% FMAP Increase - $90b –Health insurance assistance for unemployed - $25.1b –Health information technology - $22.8b –NIH Research - $9.7b –Comparative effectiveness - $1.1b CHIP Reauthorization ( Signed into law February 8 ) –4.5 year extension will cover estimated 4.5 million additional children at cost of $32.8 billion

13. A Look Ahead

15. The Case for Full Speed Ahead

16. Obama mandate Kennedy legacy, Baucus priority Delay killed Clinton health plan Economic security and health security inseparable Bailout shows spending doesn’t matter Business supports reform

17. By Chris Frates, Staff Writer Washington -- Democrat Barack Obama has spent $113 million in health care television advertising so far this year, eight times that of Republican rival John McCain — an investment that polls show are paying big dividends as the election enters its closing weeks. Obama has devoted 68 percent of his total TV advertising this year to ads that include health care themes, and McCain has devoted 13 percent. That includes both primary and general election spending, according to the Campaign Media Analysis Group that tracks and analyzes campaign advertising and provided Politico with its tally through mid-October. In October, McCain spent 1.5 percent of his TV ads on health care, while Obama upped the ante to 86 percent of his total budget. October 23, 2008 Obama outspends in health care ads

18. Now let me read you a list reasons to support Barack Obama. Which THREE describe the most important reasons why you voted for Barack Obama? Offers a different path from Bush Withdraw troops from Iraq For the middle class, tax cuts Affordable health care for all Protect Social Security, Medicare Wealthiest pay fair share Invest in education End outsourcing tax breaks Just couldn’t vote for McCain Middle Class Economics Self-confident, strong leader Bring together, get things done Serious response to financial crisis Endorsed by Buffett, Powell Character and Leadership Change Social Policies Post-Election Results: Reasons For Supporting Barack Obama Source: Greenberg Quinlan Rosner Research, November 2008

19. Cost to Families Source: KFF/HRET, Health Benefits 2008; Commonwealth Fund, 2008 Insurance Premium Increases More than Triple Earnings Premiums more than doubled in a decade, reaching an average of $12,680 annually

20. 39.6 40.9 43.3 44.7 45.5 30.231.7 34 35.5 36.5 9.4 9.29.39.1 43 44.4 46.5 45.0 34.6 35.637 36.1 8.48.79.4 8.9 0 25 50 20002001200220032004200520062007 All Nonelderly Children Revised CPS* Source: Urban Institute, 2008. Based on data from the 2001 through 2008 March Supplements to the current population survey. Note: Census revisions to the CPS resulted in lower number of uninsured in 2004; estimates prior to 2004 are not directly comparable to those after 2004 Adults Number of Uninsured Will Rise Faster As Recession Lingers and Job Losses Mount

21. The Case for Gloom and Doom

22. Competing Priorities Economic Bailout Middle Class Tax Cut Affordable Housing Financial Services/Banking Regulation Energy/Environment/Climate Change Iraq, Afghanistan, Iran

23. Starting to Add Up The Federal Government Has Committed $7.8 Trillion in Loans, Investments and Guarantees Since 2008

24. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 19701975198019851990199520002005201020152018 $14 $38 $82 $73 $23 $70 $88 $170 $53 $142 $135 $291 $129 $163 $253 $448 $184 $200 $300 $627 $232 $272 $274 $819 $223 $322 $295 $1,030 $184 $474 $494 $1,320 $265 $562 $696 $1,789 $367 $625 $792 $2,336 $447 $645 $718 $2,684 Non-Defense Defense Entitlements and Mandatory Spending Net Interest Expenditures (billions) FY70-FY00: Congressional Budget Office (CBO), December 2003 Long-Term Budget Outlook FY05: CBO Budget and Economic Outlook, January 2006, August 2006 FY10-FY15: Estimates: CBO Budget and Economic Outlook, An Update, September 2008 FY18: MVC Analysis of CBO Budget and Economic Outlook: Fiscal Years 2009-2019, January 2009 Entitlement Spending is Growing, Fueled Largely by Health Program Costs

25. A Third Way: What Could Meaningful, Incremental Progress Look Like? Targeted Coverage Expansions –SCHIP expansion (completed) –COBRA/Medicaid subsidies for temporarily unemployed (completed) –Medicare buy-in or Medicaid expansion for age 55-64 –Tax credit/Medicaid expansion for middle-income individuals without employer coverage Insurance Reforms –Additional federal limits on disqualification for preexisting conditions –Possible rate limits linked to increased subsidies Quality/Savings –Comparative effectiveness research (completed) –Health IT (completed) –Prevention, adherence, chronic care management –Medicare negotiation and/or low-income rebates Steps Toward More Rational Entitlement Program Payment –Pay-for-performance –Increase reimbursement for primary care, prevention –Bundling –Medical home

26. Slowing Health Care Spending: Who’s Going to Pay For This? Insurance Companies –Medicare Advantage program cuts –Insurance reforms, including guaranteed issue and rate limits Employers –Pay or play –Modify/cap tax exclusion Pharma/Biotech Companies –Medicaid Rebate Expansion to low-income seniors in Part D Expansion to MCOs Increase in base rebate –HHS Negotiating Authority –Follow-on biologics –Potential Medicare Part B cuts Other provider cuts under Medicare –For now, everything is on the table

27. GOP Positioning On Health Reform Budget Hawks/Fiscal Conservatives Undecided, So Far Moderates, Willing to Compromise Reformers, With Radically Different Reform Visions Emerging Fault Lines Individual mandate Employer mandate Medicare buy-in Public plan option Overall cost

28. And the Winner is….. Health Reform in the Era of Obama UC Irvine Health Care Forecast Conference February 19, 2009 Dean A. Rosen, Partner