D CEO Health Care Reform Discussion October 6, 2010 D CEO Health Care Reform Discussion Joel T. Allison, FACHE President & CEO Baylor Health Care System

The Patient Protection and Affordable Care Act

The Need for Health Reform Current system not sustainable Growing uninsured and uncompensated care costs Increase in incidence of chronic disease Payment systems not tied to value, quality Healthcare lags behind other sectors in information technology

Expands coverage to 32 million uninsured (legal residents). What the bill does Insurance reforms Expands coverage to 32 million uninsured (legal residents). Subsidies for purchase of private insurance New “marketplace” through exchanges.

What the bill does, cont’d. Promotes prevention and wellness Additional Medicare benefits Public health fund Addresses health care disparities Allows health plans in exchanges to offer incentives to providers for activities that address disparities as part of quality initiatives

What the bill does NOT do No expansion to include undocumented workers No requirement that private insurance plans in state insurance exchanges pay Medicare or Medicaid rates. Does not address access issues No public option program

What the bill does NOT do, cont’d. It does not cut Medicare or Medicaid benefits. It did not permanently address the cuts that physicians are going to take. It does not fix fundamental Medicare problems. It does not solve states’ problems with Medicaid and states’ obligations.

Healthcare Reform Timeline Sept. – Dec. 2010 2012 2014 2020 June 2010 2011 2013

What we can expect short-term Increase in insurance premiums initially due to rising medical costs and adverse selection; Pressure on small businesses to drop coverage; More utilization of services due to pent-up demand; New national high-risk health plan for those uninsured at least past 6 months; Worse physician shortages, longer wait times; and Potential hospital losses due to timing of cuts, delays in coverage for newly-insured.

What we can expect long-term More insured patients/less uncompensated care; Increase in health care workforce (jobs); Evidenced-based medicine, improved quality, better patient outcomes; Greater use of information technology; More efficiency, lower costs; and Healthier populations.

Clear Winners under Reform Low-income people, especially those who are currently uninsured or have pre-existing conditions People with chronic conditions or pre-existing conditions, especially in the individual insurance market Small businesses that were considering health insurance but could not quite afford it Worried parents who wanted to keep twenty-somethings on coverage

Clear Winners under Reform, cont’d. Primary care physicians Any physicians or providers with significant share of uncompensated care Bio-pharmaceutical companies Avoided government price negotiation and re-importation Closed the doughnut hole with brands, especially biologics Got 12-year exclusivity before Bio-Similars Got new customers Elderly not in Medical Advantage plans

Clear Losers under Reform Tanning salons Health insurers (although they get 32 million new customers for a business that had zero source of growth) Wealthy people earning over a quarter million dollars a year, especially from investment income Insurance brokers who don’t add value Specialists who don’t see poor people

Clear Losers under Reform, cont’d. 30+ youngsters who “don’t need insurance” Medical device manufacturers who have hidden from view until now Seniors on Medicare Advantage Hospitals with open doors that may be overwhelmed by volume of new patients paying below costs of service States that did not want to expand coverage to low income people

In Summary The health reform legislation isn’t perfect, but it is a start. Like most legislation, it needs work. Modifications are likely – repeal is not. Reform will make it possible for anyone who wants health insurance and can afford it, to buy it and keep it. Implementation has begun, and Congress will tweak. Medicare program must be fixed. Health care delivery will change, and hopefully patients will get better, more cost-effective care.

The Good More individuals will have coverage. Did away with pre-existing condition exclusions Emphasis on wellness and prevention Pay for quality

The Bad Not enough providers Coverage does not mean access Does not address undocumented workers

The Ugly Process used to pass legislation Rule-making

Wild Cards 2010 elections Lawsuit challenges by state attorneys general Real cost of reform How many employers will drop coverage for employees?

Baylor’s Vision 2015 By 2015, Baylor Health Care System will: 1. Influence health care reform through patient-centered models of care 2. Fully implement clinical transformation to create an ideal experience for patients and caregivers 3. Continue to be a leader in medical education and research

Baylor’s Vision 2015 4. Continue to develop existing and build new clinical centers of excellence to serve all people and improve the health of the communities we serve Diabetes Health and Wellness Institute 5. Demonstrate financial stewardship by maintaining a top bond rating (AA) 6. Become an Accountable Care Organization 7. Be routinely listed as one of the “Top 5” health care systems in the nation

“You can always count on Americans to do the right thing—after they’ve tried everything else.” Winston Churchill