GNYHA Healthcare Financial Management Association New York Hospitals and the 2010 State and Federal Landscape March 18, 2010 LaGuardia Marriott

GNYHA Agenda New York Hospitals Financial Picture Outlook for Future New York State OutlookNational Health Reform 2

GNYHA New York Hospitals 3

GNYHA New York Hospital and Insurer Margins Over the last 8 years, NY hospitals have incurred losses of $466 million while NY insurer profits exceeded $10.3 Billion * Does not reflect $500 million in 2009 Medicaid cuts or proposed 2010 cuts 4

GNYHA New York Hospitals Disproportionately Reliant on Medicaid and Medicare New York State New York City Greater New York Hospital Association 5 64% Medicaid/Medicare69% Medicaid/Medicare (National number is 56%)

GNYHA Medicaid cuts are huge but pressure is coming from all over  Relatively flat Medicare payments  Increasing bad debt due to recession, increased patient cost sharing  Increased audit recoveries  Payment reductions for Never events Readmissions Observation level 6

GNYHA Hospitals turn to private payers to subsidize government program losses Upward pressure on private sector revenues increases As budget constraints suppress public sector revenues 7

GNYHA Ability to cost shift is not unlimited Budgetary constraints reduce public sector revenues Providers respond by increasing prices for private payers where possible Insurers increase premiums, tighten payment practices Calls for premium regulation Premium regulation leads to pressure on provider prices 8

GNYHA Tight Medicare and Medicaid Budgets Will Continue State Economy Decreased tax revenue Increased Medicaid enrollment Increasing elderly population National Health Reform Medicaid expansion Low income subsidies Medicare cuts DSH cuts 9

GNYHA New York State 10

GNYHA Proposed 2010 Medicaid Cuts ($ in Millions) 11 Note: Providers losses account for the typical cash-flow lag in State savings, the loss of Medicaid Federal matching funds, and, for hospitals, the impact on Medicaid managed care, Workers’ Compensation, and No Fault rates. Almost $1 Billion

GNYHA Enrollment Growth Accounts for Almost All of New York’s Medicaid Spending Growth Greater New York Hospital Association 12

GNYHA New York Medicaid Enrollment Has Grown Sharply And Government Has Paid for Part of this Growth Through Provider cuts! Greater New York Hospital Association 13 Medicaid enrollment has grown 60%

GNYHA GNYHA Budget Advocacy Reduce size of cuts Get rid of readmissions cut Support Soda Tax Mitigate redistributional effects to “reforms” Secure Enhanced FMAP 14

GNYHA NY Managed Care Advocacy 2007 Bill Limited ability of plans to deny claims for services which were preauthorized Cooling off period Extension of external to certain out- of-network services 2009 Bill Shortened prompt pay timeframes Limited plan ability to deny for late submission Limited denials for COB Extended provider rights to external appeal Shortened timeframes for authorizing post -acute home care Prohibited treating par hospitals as non-par when physician is non-par Limits overpayment recoupment to two years except for fraud/abuse situations 15

GNYHA 2010 State Action A09988/S Prohibition on reimbursement reductions due to failure to notify Breslin bill? Reduce penalty for timely filing Collection of coinsurance and deductibles Insurer prompt pay fines should go to bad debt and charity care Prior approval of premiumsMalpractice Reform 16

GNYHA National Health Reform 17

GNYHA Road to Reform House Bill passed 11/07/09 Senate Bill passed 12/24/09 Reconciliation House must pass Senate bill, both houses pass reconciliation bill 18

GNYHA Senate Bill -Achieving Coverage Expansion Medicaid Expansion Insurance Reform Insurance Mandates Insurance Exchange Insurance Subsidies 19

GNYHA Medicaid Expansion 100% FMAP for non-expansion states, phases down Enhanced FMAP for expansion States on new eligibles NY is an expansion State because it already covers childless adults to 100%, parents to 150% NY to receive enhanced FMAP only on childless adults between 100 and 133% FPL National expansion to 133% FPL 20

GNYHA Insurance Reforms Temporary High Risk Pool for people with preexisting conditions Guaranteed issue and renewal Dependent coverage to age 26Minimum MLRs of 85%/80%No annual/lifetime maximums Community Rating and Premium Review Administrative simplification Standardization of benefits (4 options) Caps on Deductibles Healthcare Compacts 21

GNYHA Insurance Mandates Subject to penalties of $95 in 2014, $495 in 2015, $ Capped at > of $2,250 per household or 2% of income Exemptions if premiums exceed 8% of income Individuals must have qualified coverage Subject to penalties of $750 per employee or $3K/subsidized employee Employers who impose waiting periods pay penalties of $400-$600 Employers with more than 50 employees must offer coverage 22

GNYHA Insurance Subsidies Subsidies for Individuals Premium credits available to individuals and families between 100 and 400% FPL Sliding scale such that required premium contributions are between 2.8% and 9.8% of income Cost sharing subsidies between 100 and 300% FPL Subsidies for Employers Tax credits for small businesses with no more than 25 employees and annual average wages < $50,000 Temporary reinsurance for employers covering retirees between 55 and 65 ($5 billion) 23

GNYHA Results of Coverage Expansion Uninsured in Millions Insured % of U.S. Residents (including unauthorized immigrants) 24 Source: Congressional Budget Office.

GNYHA GNYHA Concerns Provider Cuts Market Basket Geographic variation DSHFMAPReadmissions 25

GNYHA Hospital Cuts , $ in Billions 26 Source: Congressional Budget Office.

GNYHA GNYHA Conclusion: Support Reform Lengthy implementation means there’s time to fix problems Size of deficit means cuts are coming anyway Failure of Clinton reform and subsequent BBA Cuts Important to support administration 27