1. The Obama Administration and Health Reform Will The Massachusetts Reform Plan Serve As a Model? Stuart H. Altman Sol C. Chaikin Professor The Heller School for Social Policy and Management Brandeis university

2. The Stars are Aligned for Significant Health Reform BUT Major Obstacles Remain!

3. Major Options for Health Reform 1. Create a All Government Paid Healthcare Financing System 2. Restructure the Existing Mixed Public/Private System and Maintain Current Tax Preference for Employer Sponsored Coverage 3. Eliminate Tax Preference and Use Tax Credits to Subsidize Coverage

4. Candidate Obama Opted For Option 2 Similar To The Reform Plan of Massachusetts

5. Shared responsibility Shared responsibility GovernmentGovernment IndividualIndividual EmployerEmployer Shift from subsidizing safety net providers to insurance Shift from subsidizing safety net providers to insurance Keep stakeholders connected Keep stakeholders connected Put-off debate on controlling spending Put-off debate on controlling spending Massachusetts Vision

6. How Is The Plan Working Number of Uninsured Has Fallen Number of Uninsured Has Fallen Lowest in Nation---Estimate of 2 ½%Lowest in Nation---Estimate of 2 ½% Cost of Plan Higher Than Estimated Cost of Plan Higher Than Estimated More individuals receiving a state subsidyMore individuals receiving a state subsidy Connector Liberalized subsidy system Connector Liberalized subsidy system Plan includes prescription drugsPlan includes prescription drugs Healthcare costs rising faster than expectedHealthcare costs rising faster than expected Employer penalty fund less than expected Employer penalty fund less than expected No penalty if employer provides at least 25% of workers and pays at least 33% of premiumNo penalty if employer provides at least 25% of workers and pays at least 33% of premium Of newly insured 40% in private plans Of newly insured 40% in private plans Hospitals Have Several Concerns Hospitals Have Several Concerns Safety net hospitals say they are receiving less because of reductions from free care poolSafety net hospitals say they are receiving less because of reductions from free care pool Medicaid rates that were suppose to increase have been cutMedicaid rates that were suppose to increase have been cut However some evidence that hospitals are seeing less uninsured but bad debt is growingHowever some evidence that hospitals are seeing less uninsured but bad debt is growing Lack of primary care in some areasLack of primary care in some areas

7. Administration Has Already Made a Down Payment on Health Reform Administration Has Already Made a Down Payment on Health Reform The Economic Stimulus Plan Included: The Economic Stimulus Plan Included: Expansion of SCHIP– To support coverage for ChildrenExpansion of SCHIP– To support coverage for Children $20 to $35 Billion for Health Information Technology$20 to $35 Billion for Health Information Technology $1.5 Billion for Comparative Effectiveness Research$1.5 Billion for Comparative Effectiveness Research Subsidies for individuals to buy Cobra Insurance coverageSubsidies for individuals to buy Cobra Insurance coverage Funds to Help States Maintain Medicaid CoverageFunds to Help States Maintain Medicaid Coverage

8. Washington Pressure To Change Obama Plan Cannot Pass Significant Health Reform Without Serious Reductions In Spending for Healthcare Cannot Pass Significant Health Reform Without Serious Reductions In Spending for Healthcare Single Payer Advocates Want A Public Insurance Plan Option Open to Every American Single Payer Advocates Want A Public Insurance Plan Option Open to Every American Must Include a Mandate That Requires Everyone to Have Health Insurance Must Include a Mandate That Requires Everyone to Have Health Insurance

9. Obama’s Health Reform Principles 1. Protect families’ financial health 2. Make health insurance affordable 3. Aim for universal coverage 4. Provide portability of coverage 5. Guarantee choice 6. Improve patient safety and quality 7. Invest in prevention and wellness 8. Maintain long-term fiscal sustainability

10. The Two Most Contentious Issues in Current Health Care Reform Debate 1.Whether to Create a Public Plan That Competes With Private Insurance 2. Should The Plan Include Serious Cost Containment Provisions

11. Provider Payment Rates and Administrative Costs Under a Medicare-Type Public Plan and Private Insurance Source: The Lewin Group Staff working Paper #4 The Cost and Coverage Impacts of a Public Plan: Alternative Design Options, April 6, 2009 Medicare Provider Payments as a Percent of private Payer Rates Administrative Costs as a Percent of Claims Costs: Small Firms

12. Enrollment In Public Plan Under Alternative Assumptions (In Millions of Persons) Source: The Lewin Group Staff working Paper #4 The Cost and Coverage Impacts of a Public Plan: Alternative Design Options, April 6, 2009

13. If Reform Includes Serious Cost Containment and An Extensive “Public Plan” We May Not Be Able to Repeal-- ALTMAN’S LAW

14. ALTMAN’S LAW Most Every Major Healthcare Constituent Group Favors Universal Coverage and Healthcare Reform BUT If The Plan Deviates From Their Preferred Approach They Would Rather Remain With The “Status Quo”

15. The Original Obama Cost Control Plan Was Limited

16. System Saving Features (Obama Plan) Promote Comparative Effectiveness--- Establish Institute to guide review and research on comparative effectiveness Promote Comparative Effectiveness--- Establish Institute to guide review and research on comparative effectiveness Fund Health Information Technology--- Provide $10 billion annually for 5 yrs to expand use of HIT Fund Health Information Technology--- Provide $10 billion annually for 5 yrs to expand use of HIT Reduce Payments to Medicare Advantage Plans--- Reduce MA payments to equal Medicare FFS payments Reduce Payments to Medicare Advantage Plans--- Reduce MA payments to equal Medicare FFS payments

17. System Saving Features (Obama Plan) Pres. Drug Price Negotiation--- Govt. would negotiated directly with manufactures for drugs for Medicare Part D Pres. Drug Price Negotiation--- Govt. would negotiated directly with manufactures for drugs for Medicare Part D Drug- Re-importation--- Permit drug re- importation of drugs from other countries Drug- Re-importation--- Permit drug re- importation of drugs from other countries Disease Management--- Require use of DM for National Exchange and new FEHBP plan Disease Management--- Require use of DM for National Exchange and new FEHBP plan Medical Home--- Encourage use of Medical Home model for special payments Medical Home--- Encourage use of Medical Home model for special payments Pay for Performance---Require use of Medicare P4P model for National Exchange and FEHBP plans Pay for Performance---Require use of Medicare P4P model for National Exchange and FEHBP plans

18. How The Obama Plan Cost Control Proposals Stack Up Against Techniques That Will Really Control Spending?

19. Techniques for Limiting Growth In Health Spending and Likely Impact Techniques for Limiting Growth In Health Spending and Likely Impact Very Limited Impact Very Limited Impact Encourage Greater Use of Preventive Services (Short-term)Encourage Greater Use of Preventive Services (Short-term) Limited Impact Limited Impact Provide Better Price and Quality InformationProvide Better Price and Quality Information Require Patients To Pay MoreRequire Patients To Pay More Restrict Use of Harmful CareRestrict Use of Harmful Care Create a Governmental “High Cost Reinsurance System” with Effective Disease Management Systems for Chronic ConditionsCreate a Governmental “High Cost Reinsurance System” with Effective Disease Management Systems for Chronic Conditions Reduce Expense and Waste of Medical Mal-Practice SystemReduce Expense and Waste of Medical Mal-Practice System Reduce Administrative Costs of InsuranceReduce Administrative Costs of Insurance Develop and Use Government Supported “Comparative Effectiveness StudiesDevelop and Use Government Supported “Comparative Effectiveness Studies Greater Impact Greater Impact Restructure Payment System--- (Bundled Payment and Value Based Pricing)Restructure Payment System--- (Bundled Payment and Value Based Pricing) Restructure Delivery System (Integrated Care)Restructure Delivery System (Integrated Care) Restrict Use of Marginally Useful CareRestrict Use of Marginally Useful Care Limit Supply of Expensive ServicesLimit Supply of Expensive Services Incentives to Use Preventive Services (Long-Term)Incentives to Use Preventive Services (Long-Term) Expand and Restructure Primary Care---Create Effective “Medical Homes for Patients)Expand and Restructure Primary Care---Create Effective “Medical Homes for Patients) Greatest Potential Impact Greatest Potential Impact Gov. Regulation of Payments To ProvidersGov. Regulation of Payments To Providers Establish Global BudgetsEstablish Global Budgets

20. The 800 lb. Gorilla of U.S. Healthcare Financing! Medicare

21. HI Trust Fund Balance At Beginning Of Year As A Percentage Of Annual Expenditures SOURCE: 2004 Annual Report of The Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds Historical Estimated This year bankruptcy could fall to 2015 This year bankruptcy could fall to 2015

22. Where We Need To Go

23. Commonwealth Fund --- “Framework for a High Performance Health System” Need to Deliver Care Through Healthcare Systems That Emphasize Coordination and Integration

24. Authors of The Commonwealth Fund Report Believe --- “Improved safety and quality envision cooperative behavior between hospitals and physicians so as to make optimum use of expanded health IT, hospital P4P and chronic care management for the frail elderly and patients with severe chronic conditions”

25. Any Significant Restructuring of Healthcare Delivery System Will Require Reimbursement Systems That Supports Such Behavior---- Fee-for-Service System Needs to be Modified or Abandoned!

26. Current Fee-for-Service Payment System Encourages Aggressive Competition Not Collaboration Between Hospitals and Physicians

27. Options For Changing Payment System Bundled or Case Payments Bundled or Case Payments Significant Pay-for-Performance Add- On or Penalties Significant Pay-for-Performance Add- On or Penalties Value-Based Payments Value-Based Payments Permit Wider Use of “Gain-sharing” Between Hospitals and Doctors Permit Wider Use of “Gain-sharing” Between Hospitals and Doctors

28. Aligning Incentives Between Hospitals and Doctors The Importance of a Value-Based Payment System--- The Importance of a Value-Based Payment System--- Allows Hospitals to Be Rewarded for More Appropriate and Cost Effective CareAllows Hospitals to Be Rewarded for More Appropriate and Cost Effective Care Permits Hospitals to Share With Physicians The Benefits of Higher Valued CarePermits Hospitals to Share With Physicians The Benefits of Higher Valued Care Need Transparency and Elimination of Conflicts of Interest Need Transparency and Elimination of Conflicts of Interest