The Obama Administration The Obama Administration and the 111and the 111thth Congress: Congress:

The Outlines of Health ReformThe Outlines of Health Reform

By Susan DentzerEditor-in-Chief, Health Affairs

For the Alliance for Health ReformAugust 2009

This presentation at a glanceThis presentation at a glance

The Obama administration’s reform frameworkThe Obama administration’s reform framework

Top priorities of health reformTop priorities of health reform

Emerging Details of Key BillsEmerging Details of Key Bills

The President’s 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

Medicare’s 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

The President’s 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

The President’s 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”

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

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

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?

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

Pros and ConsMichael E. Chernew, Richard A. Hirth, and David M. CutlerIncreased 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 care2% 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

Pros and ConsMichael E. Chernew, Richard A. Hirth, and David M. CutlerIncreased 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 care2% 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

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

Covering the Uninsured: Insurance Exchanges

House bill Senate 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

Covering the Uninsured: House BillThe 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.

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.

Insurance Market Reforms

All bills

Eliminate medical underwriting and preexisting condition restrictions in individual health insurance

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 bill’s enactment into law

Surgeon general’s 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

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

Public Plan

House Bill Senate HELP Senate Finance

Yes, one national public plan

Yes; “community insurance” plans

No public plan per se; nonprofit

“cooperative(s)”

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 don’t participate in both, they would get just Medicare rates.

Employer and individual mandatesComponent House Senate

HELPSenate

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 Yes Yes

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

Delivery System Reforms—House 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

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

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

Paying for Reform:The Major Work in Progress

Emerging Legislative Proposals: CostsEmerging Legislative Proposals: Costs

House bill: Scored by CBO at $1.024 trillion over 10 House bill: Scored by CBO at $1.024 trillion over 10 years (to 2019)years (to 2019)

Senate Finance: Baucus said 7/29 that CBO score Senate Finance: Baucus said 7/29 that CBO score was “less than $900 billion” over 10 years and fully was “less than $900 billion” over 10 years and fully offset by savings & revenuesoffset by savings & revenues

Acknowledges major components as yet undecidedAcknowledges major components as yet undecided

By comparison: total national health expenditures By comparison: total national health expenditures 2009-2014 estimated at $33 trillion (CMS)2009-2014 estimated at $33 trillion (CMS)

Emerging Legislative Proposals (or NOT)Emerging Legislative Proposals (or NOT)

Major revenue sources under discussionMajor revenue sources under discussion

SSurtax on the adjusted gross income of top earners

Excise taxes on insurers that sell very rich policies

????

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

What’s Ahead? What’s Ahead?

A nod to the A nod to the

immortal Yogi Berra: immortal Yogi Berra:

“Prediction is very hard, especially about the

future.”

The EndThe End