RIBGH 2019 Healthcare Summit Kim Keck President & CEO Blue Cross & Blue Shield of Rhode Island September 20, 2019

Agenda Current State: Healthcare costs in Rhode Island What drives cost? Actions to date Additional Work: Cost Trend Target You

HEALTHCARE COSTS IN RHODE ISLAND CURRENT STATE HEALTHCARE COSTS IN RHODE ISLAND

RISE OF HEALTHCARE COSTS OUTPACE OTHER ECONOMIC INDICATORS National Commercial Medical Trend and CPI; RI Wage Growth and GSP 2014-2018* Annual Healthcare Expenditures per Capita 2008-2014** Source: *1. PwC “Medical Cost Trend: Behind the Numbers 2020”; 2. Fred.stlouis.org; 3. BLS Employment and Wages; 4. US Inflation Calculator **Kaiser Family Foundation OHIC, Bureau of Economic Analysis

RhODE ISLAND’s COST OF HEALTHCARE RANKS AMONG THE HIGHEST IN THE NATION Highest healthcare spending per capita in the U.S.* 4th Highest in total drug expense in U.S.* 7th Highest per capita prescription drug use 12th Highest per capita spend in U.S. per hospital inpatient day 10th Highest in nursing home utilization in the U.S.** *Kaiser Family Foundation, State Health Data 2014. Published 2017 https://www.kff.org/statedata/ **Kaiser Family Foundation, Health Costs and Budgets tool: CMS Chronic condition warehouse, 2000 - 2016

WHAT DRIVES COST?

What drives healthcare costs? Cost of Healthcare = Price of services X Use of services

INCREASED USE OF SERVICES: A SIGNIFICANT DRIVER Increase in BCBSRI Commercial Medical Costs, 2014 - 2018 High Use Services in Rhode Island 40% 25% more ER visits 40% more specialist visits 34% more prescription drugs

ADDRESSING THE ISSUE ACTIONS TO DATE

BCBSRI INVESTMENTS TO HELP REDUCE cost of care Well-coordinated systems of care with primary care providers as quarterbacks Quality and cost ratings help members select most efficient PCPs Products encourage members to choose highest quality care at the best price available Policy advocacy on affordability at the state level, e.g. Reinsurance Innovative care and payment models based on patient outcomes, not number of services Price transparency tools for members and providers

STATE OF RHODE ISLAND AND PROVIDER EFFORTS TO SLOW THE INCREASE IN HEALTHCARE COSTS Policy Efforts Affordability & Quality Standards Focus on primary care and patient center medical homes Limits on hospital rate increases and payments tied to quality Move from fee for service payments towards outcomes-based payment model Additional Efforts Reinsurance signed into law for 2020 Leadership in value-based care and other initiatives State Innovation Model (SIM) Grant Aligned quality metrics for primary care, accountable care organizations, hospitals, behavioral health and maternity Affordability Standards Reduce costs by improving primary care Increased investment in primary care Transform primary care practices into PCMHs Reduce costs through payment reform strategies Promoting population based contracting Adoption of alternative payment methodologies Improved hospital contracting practices Quality Standards – hospital cap tied to quality SIM grant -- $20 million award to test our health care payment and service delivery reform model over the next four years – goal is to achieve measurable improvement in health and productivity of all Rhode Islanders, and achieve better care while decreasing the overall cost of care. Organized delivery and payment system that is outcomes-oriented and person-centric. Value-based care paradigm, engaging patients in their own healthcare. BUT. . . . We could and should be doing more – today there is no coordinated effort to ensure accountability around affordability and quality across all participants in the healthcare system. We hope to see something like that in the future.

ADDITIONAL WORK COST TREND TARGET

GOALS OF THE COST TRENDS STEERING COMMITTEE Reduce growth in healthcare costs Develop a deeper understanding of cost drivers and cost variation in RI Determine what investments are needed to sustain ongoing analysis

RHODE ISLAND HEALTHCARE COST TRENDS PROJECT In order to keep healthcare spending growth in-line with state economic growth, cost trend steering committee proposed a 3.2% cost trend target. Formed with 18 RI stakeholders, recently added 6 more Grant funded by Peterson Center on Healthcare to initiate trend target work Annual health care cost growth target = RI Potential Gross State Product 3.2% Target annual rate of growth of total health care spending in the state (2019-2022)

COST TREND EARLY ACCOMPLISHMENTS AND WHAT IS COMING NEXT Established the foundation Brought together a diverse group Set priorities to understand cost and quality drivers and data strategy Voluntarily signed compact Executive Order by Governor 3rd state in the country to establish cost trend target Next Steps Lead change Continue stakeholder engagement Expand group Engage and educate employers Learn as we go, change expectations

A cost trend target does not EQUAL premium increases Massachusetts Increase in Total Health Care Expenditures, 2016 - 2017 $1.6 $2.2 1.6% Growth in Total Health Care Expenditures per capita 10.3% Rate of Cost Increase 3.1% 1.9% Employers in Massachusetts are not seeing average premium increases of 1.6% -0.2% Commercial MassHealth Medicare Other/Admin Source: Data represent Massachusetts total health care expenditures in 2017. Center for Health Information and Analysis (2018)

ADDRESSING THE ISSUE YOU

ACTIONS EMPLOYERS CAN TAKE TO LOWER COSTS Steer the dialogue Change expectations Understand options Champion new approaches Promote Choosing Wisely Empower employee well-being Lead change

Thank You