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The Obama Administration and the 111 th Congress: The Outlines of Health Reform By Susan Dentzer Editor-in-Chief, Health Affairs For the Alliance for Health.

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Presentation on theme: "The Obama Administration and the 111 th Congress: The Outlines of Health Reform By Susan Dentzer Editor-in-Chief, Health Affairs For the Alliance for Health."— Presentation transcript:

1 The Obama Administration and the 111 th Congress: The Outlines of Health Reform By Susan Dentzer Editor-in-Chief, Health Affairs For the Alliance for Health Reform August 2009

2 This presentation at a glance The Obama administrations reform framework Top priorities of health reform Emerging Details of Key Bills

3 The Presidents 8 Principles for Health Reform Reduce rate of growth of health insurance premiums Premiums have more than doubled since 2000 Reduce high administrative costs, unnecessary tests and services, waste, inefficiencies Estimates that as much as 30% of health care spending is on care that is unnecessary, ineffective or even dangerous Medicares administrative costs = 1.4 percent of total program costs; administrative costs of Medicare private advantage plans = 9 percent of premiums Aim for universality Estimated 50 million-plus now uninsured; recession has added 3-6 million to rolls of uninsured

4 The Presidents 8 Principles for Health Reform Provide portability of coverage; no preexisting condition restrictions to deny coverage Provide choice of health plans and physicians; provide choice of keeping employer-based health plan Has also said he wants a public plan option Invest in public health measures to reduce cost drivers, including obesity, sedentary lifestyles and smoking; guarantee access to proven preventive treatments At current rates of weight gain, an estimated 86% of U.S. adults will be overweight or obese by 2030 Source: Obesity, July 2008; study by researchers at the Johns Hopkins Bloomberg School of Public Health, the Agency for Healthcare Research and Quality and the University of Pennsylvania School of Medicine

5 The Presidents 8 Principles for Health Reform Improve patient safety and provide incentives for quality care; support widespread use of health IT Institute of Medicine Study 1999: Estimated 44,000-98,000 avoidable deaths in hospitals alone in 1997 Plan must pay for itself by reducing the level of cost growth, improving productivity and dedicating additional sources of revenue. Congressional Budget Office estimates of early drafts of health reform legislation = $1 trillion to $1.6 trillion 2009-2010 CBO head Doug Elmendorf said in July that CBO sees no sign any then-current proposals in Congress will bend the curve

6 Primary Goals of Reform Ensure access to good health coverage for as much of population as possible Cover the uninsured Bend the health care cost curve

7 How Do People Below Age 65 Get Health Insurance? Employment-Based: 61% Private Non-Group: 5% Medicaid/Other Public: 16% Uninsured: 17% Source: Kaiser Commission on Medicaid and Unisured/Urban Institute Analysis of ASEC Supplement to CPS, Census Bureau

8 How to Broaden Coverage? Shore up and extend employer-based system Create pathway to insurance for others Expand safety net for poor and low-income All of above?

9 Copyright ©2008 by Project HOPE, all rights reserved. Sean Keehan, Andrea Sisko, Christopher Truffer, Sheila Smith, Cathy Cowan, John Poisal, M. Kent Clemens the National Health Expenditure Accounts Projections Team, Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare, Health Affairs, Vol 27, Issue 2, w145-155w

10 Pros and Cons Michael E. Chernew, Richard A. Hirth, and David M. Cutler Increased Spending On Health Care: How Much Can The United States Afford? Health Affairs, July/August 2003; 22(4): 15-25. 1% point gap: health care is affordable through 2075; 55% of real increase in per capita income goes to health care 2% point gap: health care affordable only through 2039; 124.2% of real increase in per capita income devoted to health care (e.g., implausible) Michael E. Chernew, Department of Health Care Policy, Harvard Medical School

11 Pros and Cons Michael E. Chernew, Richard A. Hirth, and David M. Cutler Increased Spending On Health Care: How Much Can The United States Afford? Health Affairs, July/August 2003; 22(4): 15-25. 1% point gap: health care is affordable through 2075; 55% of real increase in per capita income goes to health care 2% point gap: health care affordable only through 2039; 124.2% of real increase in per capita income devoted to health care (e.g., implausible) Michael E. Chernew, Department of Health Care Policy, Harvard Medical School

12 Covering the Uninsured: Those In or Near Poverty Medicaid expansion, primarily aimed to covering more poor and low-income parents and adults without dependent children Proposals cluster around expansion of eligibility to parents up to 115% of federal poverty level, plus childless adults Federal government to pick up cost of coverage

13 Covering the Uninsured: Insurance Exchanges House billSenate HELP bill Senate Finance draft One national exchange; states may also operate them according to federal rules State or federally run gateways State run exchanges

14 Covering the Uninsured: House Bill The Low to Moderate Income Affordability credits for population between 133 percent of poverty ($29,327 for a family of four) to 400 percent of poverty ($88,200 for a family of four). Would enable purchase of coverage through new insurance exchanges that eventually would be opened to all employers. The amount of the credit is reduced as individual and family income increases.

15 Senate Finance Committee Bill: Assistance for low-to-moderate income individuals, small businesses Temporary tax credit to provide coverage would be available to firms with fewer than 25 employees and average wages below $40,000 until a state exchange is established to enroll individuals and small groups in insurance plans. Once the exchange is established, a small business tax credit would be available for five years to new businesses and firms newly offering coverage to workers through the exchange. States would have the option of creating multiple, competing exchanges after five years with the approval of the secretary of Health and Human Services. Exchanges must be self- sustaining under the proposal.

16 Insurance Market Reforms All bills Eliminate medical underwriting and preexisting condition restrictions in individual health insurance

17 Insurance Market Reforms: House Bill Health insurers would have new minimum loss ratio – i.e. profit and administrative margins limited to 15 percent of the money they take in through premiums. Requirement would take effect within a year of the bills enactment into law Surgeon generals office would get broad powers over private insurance plans seeking to sell products in the insurance exchange New 26 member Health Benefits Advisory Council appointed by President and Government Accountability Office would regulate private insurance and public plan

18 Insurance market reforms – House Bill Lifetime and annual limits on benefits would be banned All new policies will cap annual out of pocket spending to prevent bankruptcies from medical expenses Modified community rating; ability of insurance companies to charge higher rates due to health status, gender or other factors would be limited. Premiums could vary based only on age, geography and family size. Premiums can vary based on age only by a factor of 2 to 1. Existing insurance is grandfathered, but individual insurance products are eventually phased out

19 Public Plan House BillSenate HELPSenate Finance Yes, one national public plan Yes; community insurance plans No public plan per se; nonprofit cooperative(s)

20 House Version, Public Plan Actuarially sound; self-sustaining; no government subsidies except to get started Level playing field with private plans; subject to same market reforms & reserve requirements Would keep private plans honest; in 36 states, the top two insurance companies dominate two-thirds of the market. Providers who participate in both Medicare and the public plan would receive a 5 percent higher rate than Medicare for the first three years If providers dont participate in both, they would get just Medicare rates.

21 Employer and individual mandates ComponentHouseSenate HELP Senate Finance Employer mandate Yes; employers must 72.5% of costs of coverage for worker or 65% of family coverage or pay 8% of payroll Yes for firms with 25 or more workers. Would pay 60% of coverage or pay govern- ment $750 per worker per year, or $375 for part-time workers No, but possibly a free rider provision and incentives for employers to maintain coverage Individual mandate Yes

22 Delivery system reforms To large degree, health care reform in US = delivery system reform Chronic disease treatment = estimated 75% of US health expenditures Ergo, delivery system reform = chronic disease care reform

23 Delivery System ReformsHouse Bill Broad authority handed to Secretary of HHS for new demonstration projects in Medicare to test concepts such as accountable care organizations, medical home, value-based purchasing Demo on bundling of acute and post-acute provider payments; study on hospital readmissions Accountable care organizations can operate on partial capitation; to receive incentive payments based on meeting spending targets Medical home models to be tested include an independent patient-centered medical home model and a community- based medical home model built around community health centers. Secretary of HHS to figure out how to pay medical homes on a prospective basis

24 Internal House Democratic Debate: MedPAC on steroids Obama administration & Blue Dogs backing proposal to transform MedPAC into Independent Medicare Advisory Council Would make recommendations on payment that would go into effect unless Congress acted within 30 days Similar bill sponsored by Sen. Jay Rockefeller (D-WV) and Rep. Jim Cooper (D-TN) would require 3/5 vote by both houses of Congress to override recommendations by enhanced MedPAC

25 Workforce Issues, House Bill Increases to the National Health Service Corp; More training of primary care doctors Expansion of the pipeline going into health professions, including primary care, nursing and public health; Greater support for workforce diversity Expansion of scholarships and loans in needed professions and shortage areas Redistribution of unfilled graduate medical education residency slots to train more primary care physicians. Improved accountability for graduate medical education funding to ensure that physicians are trained with skills needed

26 Paying for Reform: The Major Work in Progress

27 Emerging Legislative Proposals: Costs House bill: Scored by CBO at $1.024 trillion over 10 years (to 2019) Senate Finance: Baucus said 7/29 that CBO score was less than $900 billion over 10 years and fully offset by savings & revenues Acknowledges major components as yet undecided By comparison: total national health expenditures 2009-2014 estimated at $33 trillion (CMS)

28 Emerging Legislative Proposals (or NOT) Major revenue sources under discussion S Surtax on the adjusted gross income of top earners Excise taxes on insurers that sell very rich policies ????

29 Savings in Medicare and Medicaid Medicare savings in reduced updates across fee-for- service In addition to earlier proposed savings, e.g., in Medicare Advantage Includes proposed savings on Medicare prescription drugs of $75 billion over a decade. Medicare/Medicaid disproportionate share payments

30 Whats Ahead? A nod to the immortal Yogi Berra: immortal Yogi Berra: Prediction is very hard, especially about the future.

31 The End


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