The Rolling Hills Group

Creating the Plan for Healthcare Reform for Tennessee

About The Rolling Hills Group

• Goal is to create healthcare reform in Tennessee that could serve as a model for other states and the nation

• Prominent Tennessee “thought leaders” chaired by Clayton McWhorter– Representatives from Nissan, BlueCross, hospital

industry, banking, attorneys, physicians– Staffed by former CMS administrator and former staff

to Senator Ron Wyden• Routinely met from October 2007 through November

2008

Goals for Healthcare Reform

• Universal insurance employing a mix of private and public structures and funding

• Health system reforms that produce a higher value for the dollars spent on care and increase the use of best practices and evidence-based decision making

• Funded through changes to the federal tax code and the better use of existing funding and resources without adding new costs

Overall Approach to Expanding Access to Coverage

• Requires all Americans to have comprehensive health insurance coverage by 2019

• Requires the creation of state or regional risk pools – Comprised of private insurance offerings – All offerings must be actuarially equivalent to the standard

BlueCross plan offered Federal employees– Oversight of the pools will be by Regional Federal Health

Reserve Boards

• Medicaid, Medicare and SCHIP remain intact

Federal Health Reserve Board

Oversight of Risk Pools Health Insurance Connector

Oversight of Plans

• Insure participation in the pool is adequate to provide a strong base of private insurance offerings

• Require all insurers to minimally provide a comprehensive benefit package

• Guarantee access to insurance for all

• Limit insurer’s ability to vary premiums based on health risk or other factors

• Establish administrative standards for participating insurers

• Monitor insurer profits and medical loss ratios

Connector Role

• Provide outreach and enrollment support– Provide standard information

on participating plans– Assist uninsured and

employers in selection of plans

• Establish and monitor subsidies– Determine criteria for and

amounts of subsidies– Assist individuals determining

eligibility for and in applying for subsidies

The Requirement“Everyone Covered”

Uninsured Individuals

Employers

Direct purchase of insurance from the risk pool

Random assignment at time of interaction with the health system

Move employees to the lower cost pool

Maintain current insurance

Employer group lower risk than FHR pool plans pays into the

pool

Employer group higher risk than FHR pool plans receives

payments form the pool

EnforcementNo New Bureaucracy

Proof of insurance required

to complete usual interactions with government

OR

Random assignment when an uninsured person attempts to interact

with the health care system

Higher Income Lower Income

Cost becomes an IRS tax liability

Premium paid directly to risk pool plan by US

Treasury

Premium Subsidies For The Uninsured

Income < 150% of poverty – full cost subsidized

Income between 150% and 350% of poverty – sliding scale subsidy

Subsidies paid directly to risk pool plan – not to individual

Low income with credible coverage are not eligible for subsidies

Tax subsidies will be limited to the “actuarial value” of a Blue Cross

Standard Option PPO, with a $750 deductible indexed to inflation

Funding The SystemCurrently Insured Individuals

Employers

Providers

Taxed on health insurance benefits that exceed the cost of the FHR benchmark plan

Business expense deduction only allowed for cost of FHR benchmark plan

Deduction phased down to 50% of the cost of the FHR benchmark plan by 2019

Phase out of special payments currently used to offset the cost of unreimbursed Medicare, Medicaid and charity care

How the Funding is Generated Currently Insured Individuals

Employers

Providers

Employer provides health insurance benefit that costs $5,000

Employer provides health insurance benefit that costs $5,000

The cost of the risk pool plans is $4,000

The employer may only claim the risk pool cost of $4000 as a business expense ( instead of $5,000)

By 2019 the amount the employer may deduct as a business expense is reduced to $2,000 ( half of the cost of the risk pool plan)

In 2012, a hospital receives $5 million in disproportionate share hospital payments (DSH) payments from the state and federal government to help offset the cost of charity care

In 2019, the hospital charity care volume has virtually been eliminated and the $5 million will be redirected to fund cost of the FHR and the subsidies

The cost of the risk pool plans is $4,000

The individual is taxed on the difference, or $5,000 - $4,000 = $1,000

Phasing In The Plan

2010 - Tax Code Changes

2012 - Initial Coverage Requirement

Those with income <100% of poverty

Those with income >350% of poverty

2019 - Virtually Everyone Covered

•Full subsidies for those <150% of poverty•Partial subsidies for those from 150% to 350% of poverty

Additional Federal Reforms to Reduce Costs and Improve Quality • Return to the original rules prohibiting direct to consumer advertising

for prescription drugs• The FHR system should make drug coverage recommendations

that would guide plan formularies for cost and effectiveness • Pharmacy benefit managers should provide increased transparency

concerning drug costs and utilization• Research to expand evidence - based guidelines would become a

priority• Support for health information technology initiatives to improve

quality and reduce costs• Align payments and incentives for coordinated care through the

FHR system, CMS, and other agencies

Tennessee Reform Initiated in 2010

• Create a state risk pool that meets the requirements for federal reform

• All Tennesseans in families with incomes above 400 percent of poverty would be required to have at least the basic health plan offered through the insurance pool or have other public services disallowed (licenses, benefits, etc)

• Children in families with incomes up to 250 percent of the federal poverty level should be required to enroll in Tennessee’s CoverKids program

Tennessee as a Laboratory for Additional Reforms to Reduce Cost and Improve Quality

• Outcomes and Quality – Design and test new methods of provider education that foster adoption of

best practices

– Leverage national research organizations and Tennessee’s medical schools and universities to develop ongoing review of all elements of the healthcare system

• Payment Reform – Test new models of payment that align incentives among providers – Evaluate new payment systems that include incentives for providers who

successfully treat chronic care patients, including a medical home model – Require payers to have plans evaluated periodically to ensure payment is

supporting the use of primary care and disease management – Evaluate alternative payment and delivery models that emphasize health

and wellness

Tennessee as a Laboratory for Additional Reforms to Reduce Cost and Improve Quality

• Transparency – Develop and encourage the use of standardized quality measures

among payers and providers

– Provide patients and purchasers information concerning cost and quality of providers and insurers

• End of Life Care– Enhance information and understanding about end of life care.

– Provide ongoing education concerning living wills, advanced directives and health proxies

• Tort Reform

– The liability system should be reformed to minimize risk for providers

who follow evidence-based guidelines