What Michigan Thinks About Health Care Reform Paul H. Keckley, Ph.D. Deloitte Center for Health Solutions Washington, DC October 14, 2010

Innovators Administrators/Watchdogs Service Providers Physicians HCIT Pharma Device Hospitals Outpatient Facilities Insurers Regulators Long Term Care BioTech Professional Societies/ Special Interests Accrediting Agencies Disease Management Employers CAM Media Academic Medicine Consumers Allied Health Professionals Disruptors The U.S. health system today: fragmented, expensive, complicated, disconnected ($7,681 per capita, NHE 2008)

The “health reform” landscape includes several federal bills starting with the stimulus bill (ARRA 2/09) and PPACA (3/10), plus new rules and regulations to be written System-wide Disruption State-based Reforms New Clinical Coding Standards (ICD-10) Private Employer Initiatives And more... Health and Education Reconciliation Act of 2010 American Recovery and Reinvestment Act and HITECH Act CORE Standards Development Consumerism Patient Protection and Affordable Care Act Children’s Health Insurance Program Reauthorization Act (CHIPRA)

PPACA implementation: three major phases While 2014 will see many of the most dramatic changes, some changes have earlier – or later – effective dates, and additional activities will be required to support implementation. Rules, Regulations & New Funding 105 new agencies/programs Coordination between states and federal government Coordination between federal agencies Insurance conformity Excise taxes—insurance, medical devices, drug companies Mandates, Pilots & Exchanges “New Normal” Delivery system integration Insurance market shakeout Legislative amendments/ rulemaking Appropriations Individual mandate Health exchanges Employer pay or play Demonstration & pilot programs

Payment system changes Increased performance-based contracting by employers and plans Increased enrollment in individual insurance markets (thru exchanges, thru commercial plans-16 million) Increased enrollment in government plans: enrollment: military, Medicaid, (16 million) Medicare, SCHIP, exchanges, state and federal employees Increased regulation of business practices: premium reviews, coverage, preventive health Overview of delivery system framework—post reform Major investments: Medicaid expansion ($434 B); commercial expansion via exchanges ($464 B); tax credits for small employers ($40 B) Consumerism Preventive health, individual insurance, PHR Comparative Effectiveness/EBM Personalized medicine, bundled payments, provider adherence/performance-based payments liability reforms Health Information Technology EHR (HiTech), health information exchanges,,fraud detection administrative simplification, clinical data ware-housing, ICD-10, direct to consumer e-medicine Primary Care 2.0 Home monitoring, retail medicine, LTC, medical homes, scope of practice expansion, health coaching Funding ($1.083 Trillion) Spending cuts: $575 B Medicare Advantage -$207B Medicare PPS -$157 B Medicare-Medicaid Cuts: $93 B Budget cuts: -$118B New Revenues: $508 B Mandate penalties: $69 B Industry taxes and fees: $109 B Medicare payroll tax: $209 B Cadillac tax: $32 B Other taxes: $89 B

Can consumers make the transition to “the new normal”?  Can the U.S. health system engage consumers appropriately?  Are U.S. consumers capable of engaging the health system effectively?

Methodology  Survey of Michigan:  The Deloitte Center for Health Solutions, part of Deloitte LLP, commissioned this Harris Poll National Quorum ® telephone survey of 200 Michigan adults 18 years old and older September 29 – October 4, 2010  Data were weighted to be representative of the total adult population on the basis of age, sex, race/ethnicity, education, number of adults in the household, and number of phone lines in the household where necessary  The survey results have a sampling error of +/- 7 percentage points at the 95% confidence level  Referred to as “2010 Michigan”  Michigan comparative data:  Based on Michigan portion of 2009 Survey of Health Care Consumers: 203 adults surveyed October 2–10, 2008, using a web-based questionnaire  Referred to as “2009 Michigan”  National comparative data:  2010 Survey of Health Care Consumers: 4,008 adults surveyed December 28, 2009 – January 5, 2010, using a web-based questionnaire  Referred to as “2010 National”  2009 Survey of Health Care Consumers: 4,001 adults surveyed October 2–10, 2008, using a web- based questionnaire  Referred to as “2009 National”

Michigan adults who have health insurance of any kind declined since 2009, similar to national trends Question: Do you currently have primary health insurance?

Similarly, employer-sponsored coverage declined in the past year * Numbers may add up to more than 100% due to the possibility of dual coverage.

57% overall say they are in “excellent” / “very good health”; by contrast, drops to 39% among the uninsured  Additional results:  61% of the uninsured and 47% of individually insured said they are in “fair” or “poor” health, which is statistically different than those with employer-provided coverage (7%)  36% of those earning <$25K and 37% of $75-100K said they are in “fair” or “poor” health, which statistically different than those earning $100K+ (6%)  Comparison to 2009 Michigan:  63% were in “excellent” or “very good” health  9% were in “fair” or “poor” health  Comparison to 2010 National:  58% were in “excellent” or “very good” health  12% were in “fair” or “poor” health Question: In general, how would you rate your overall health?

34% of Michigan adults gave the U.S. health care system a grade of A/B compared to 25% who give a D/F—more favorable than the U.S. overall grade  Additional results:  39% of those with incomes of <$25K gave the system a D/F, which is statistically different from $50-75K (10%) and $75-100K (6%)  53% of the uninsured gave the system a D/F, which is statistically different from those with employer- provided coverage (15%)  Comparison to 2010 National:  24% gave the system an A/B  35% gave the system a D/F  Comparison to 2009 Michigan:  25% gave the system an A/B  28% gave the system a D/F Question: Using a typical report card scale with grades of A, B, C, D and F, how would you grade the overall performance of the current U.S. health care system? * Numbers may not add up to 100% due to “Don’t Know” and refused categories.

58% say they are “very knowledgeable” or “somewhat knowledgeable” about PPACA  Additional points in Michigan results:  81% of those with incomes of $75-100K said they were “very” or “somewhat knowledgeable” about PPACA, which is statistically different from <$25K (48%)  67% of the uninsured said they were “not at all knowledgeable” about PPACA, which is statistically different from those with Medicaid (36%)  Compared to June 2010 National Pulse Survey:  61% said they were “very knowledgeable” or “somewhat knowledgeable” about PPACA Question: How knowledgeable are you about the components of the Patient Protection and Affordable Care Act (PPACA)?

Most are somewhat optimistic PPACA will increase access; opinions about its effectiveness in other areas are mixed Question: Based on what you know, do you think PPACA will have a positive impact, negative impact or no impact on the following aspects of the U.S. health care system?

 54% of those “very knowledgeable” about PPACA said their households are financially prepared to handle future health care costs, which is statistically different from “not at all knowledgeable” (19%)  51% of the uninsured said their households are not financially prepared to handle future health care costs, which is statistically different from employer- sponsored coverage (15%) and Medicare (14%)  46% of those in “fair” or “poor” health said their households are not financially prepared to handle future health care costs, which is statistically different from those in “excellent” or “very good” health (13%) Question: On a scale from 1 (low) to 10 (high), to what extent do you feel your household is financially prepared to handle future health care costs? 26% said they are financially prepared to handle their future health care costs—slightly higher than 2009

59% say they used an over-the-counter therapeutics instead of seeing a doctor for a problem; a quarter tried other forms of substitutionary care  39% of males 65+ said they traveled outside their area to consult with a doctor, undergo a medical test or procedure or receive treatment, which is statistically different than males (21%), females (19%) and females 65+ (21%)  59% of Medicaid enrollees and 52% of the individually insured said they traveled outside their area to consult with a doctor, undergo a medical test or procedure or receive treatment, which is statistically different from employer-sponsored coverage (15%) and the uninsured (9%)  43% of those in “fair” or “poor” health said they traveled outside their area to consult with a doctor, undergo a medical test or procedure, or receive treatment, which is statistically different from those in “excellent” or “very good” health (11%) Question: Which of the following have you done in the last 12 months?

A substantial majority believe hospitals costs, insurance company costs and fraud in the system are major drivers of overall health care system cost  78% of individually insured said government regulation is a major influence on system costs, which is statistically different than those with employer-sponsored coverage (39%)  78% of those “somewhat knowledgeable” and 76% of those “not at all knowledgeable” said insurance company costs are a major influence on system costs, which is statistically different than those “very knowledgeable” (42%)  55% of those “very knowledgeable” about PPACA said overutilization of diagnostic testing like MRIs and CT scans have no influence on the overall health care system cost, which is statistically different from those “somewhat knowledgeable” (10%) and “not at all knowledgeable” (11%) Question: Based on what you know, does each of the following have a major influence, minor influence or no influence on overall health care system costs?

Most think 15% is a reasonable admin cost for insurance companies  51% of those with employer- sponsored coverage said more than 20% of total premiums is reasonable for covering insurance plan overheads, which is statistically different than those with Medicare (26%)  30% of the individually insured said less than 5% of their total premiums is reasonable for covering insurance plan overheads, which is statistically different than employer- sponsored coverage (10%) and Medicare (4%) Question: What percentage of the total premium that you pay for health insurance do you think is reasonable for insurance plan overheads?

Observations about consumerism in Michigan  Good news… Michigan consumers want to engage their system: It matters  Bad news… Michigan consumers are not equipped to engage

The economy: Economic recovery and the consumer quest for value Balance: Reduce costs or cover everyone “Big Government” Politics: Change What does it mean for 2010 election cycle? How will spin benefit partisans? Can government improve the system or is the private sector a better option? How much government is too much, and is it good/bad? How can the uninsured be insured? Should the healthy and young subsidize the older and less healthy? How should personal health and accountability be pursued? Can we afford health reform NOW or can it wait? Can reforms be paid for without significant federal spending cuts and increased taxes? Are incentives aligned with desirable behavior by payers and providers? How can the value gap in health care be closed? Four major themes going forward…

 Individual mandate: Will the uninsured and newly eligible for Medicaid enroll? Will the insured increase 32,000,000 as targeted?  Employer sponsorship: Will employers drop health benefits after 2016 to facilitate direct consumer engagement and their reduce operating costs?  State solvency: Will states be able to manage their expansion new responsibilities and obligations?  Delivery system changes: Will delivery system reforms – accountable care organizations, value-based purchasing, medical homes, bundled payments, comparative effectiveness – reduce costs over time?  Consumers: Will they engage? And the two big unknowns hanging over reform..  Economic recovery: Will the economy recover?  Physician pay and role: Will physicians collaborate or pursue independence? Big bets in the bill…

Contact information For more information, please contact: Paul H. Keckley, Ph.D., Executive Director Deloitte Center for Health Solutions For the latest Monday Memo, please visit: And visit our website to subscribe to our content: September 27, 2010 Monday memo Health reform update This week’s headlines: My take Senators request premium information from major plans MLR proposed draft submitted Friday HHS clarifies grandfathered, self-insured rules FDA and CMS consider parallel review process; crosswalk among federal health agencies a key focus MACPAC hosts inaugural briefings Administrative simplification: Update IRS requests comments about health plan executive compensation HHS publishes rule on waste, fraud and abuse Claims appeal process revisited, grace period extended GAO announces PCORI board members HHS seeks comments on quality improvement priorities Insurers end child-only policies Medicare Advantage premiums projected to decrease NJ to establish medical home demo

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