Spencer Berthelsen, M.D. Chairman and Managing Director Kelsey-Seybold Medical Group, PLLC

Cost – The US spends twice as much per capita as the average of other industrialized nations Institute of Medicine – 30% of healthcare dollars in the US are wasted Maldistribution Uninsured – crowding the “safety net” Powerful economic forces – debt crisis

1950: Health care costs = 4.4% of GDP 1965: 6.1% 1970: 7.6% 1990: 12.0% 2000: 13.5% 2002: 14.9% 2007: 16.2% 2009: 17.3% 2012: 17.6%

Perverse incentives – fee for service Demographic shifts Expectations Technology Lack of coordination at all levels Defensive medicine – less in Texas End of Life care Practice Variation

Documents disparities in utilization of healthcare resources across the United States. Information & analysis of national, regional & local healthcare markets, local hospitals and physicians.

Consequences of inaction were mounting – 46 million uninsured – Emergency Departments overloaded – risk to all – Loss of economic competitiveness – off shoring – Displacement of other priorities Standard of living Education Infrastructure deferred investment Defense – Fiscal – budget deficits – bond market – Medicare Part A would be bankrupt by 2017

PPACA Patient Protection and Affordable Care Act signed into law March 23, 2010 Passed by the narrowest of margins with a partisan vote Voluminous legislation - 2,500 pages Drafted outside of public view The most sweeping social legislation since the passage of Medicare in 1965 Not supported by the majority of the public

No pre-existing condition exclusions No rescissions – except for fraud No lifetime or unreasonable annual limits Dependent coverage through age 26 Minimum medical loss ratios 80% or 85% Guaranteed issue with limited rating ratios Minimum benefits 60% to 90% coverage Preventive services covered Temporary high risk pool State or federally operated insurance exchanges Individual and employer mandate with penalties Individual subsidies and small employer tax credits

Half of the 32 million uninsured would have been covered through Medicaid expansion up to 130% of FPL – paid mostly with federal tax dollars at least for ten years Medicaid reimbursement parity with Medicare for primary care. Reductions in Medicare reimbursement to hospitals, nursing homes and home health care Pilots for bundled payments – Medicare Shared Savings ACOs Gradually closes the prescription benefit donut hole Reduces payments to hospitals related to readmission rate and preventable conditions Establishes a Medicare commission to make binding recommendations for cost reduction

Cadillac plan tax in 2018 Medicare tax – 0.9% of income over $200K for individuals, $250K for couples Investment income taxed additional 3.8% Health Insurer’s fee – based on market share Drug manufacturers fee Device makers excise tax $500K cap on insurer executive compensation deductibility

Opened October 1, 2013 Coverage effective January 1, 2014 Individual and SHOP Guaranteed issue 3:1 underwriting range vs. 6:1 Cannot consider health status Same rules apply outside the Marketplace Subsidies and tax credits Penalties if not insured – few exceptions Federal Data Hub

Single payer system – Medicare for all Public Option Elimination of Medicare Advantage Price controls

Move away from rescue care for the indigent to prevention at a fraction of the cost Relief for local tax payers who fund safety net hospitals Loosen the tight coupling of healthcare and employment

Establish coordinated systems of care with medical management systems Convert from FFS payment to payment for the care of a population over time Invest in Information Technology Avoid catastrophic care – 5% spending -- 50% of cost Increase the supply of physicians

3,200 Texas physicians over age 65 – approximately 1,260 medical graduates each year Texas is 45 th in the nation for the number of physicians per 100,000 population Increasing demand More medical care will be provided by allied health professions

Central control of the healthcare economy – Premium or fee control – Massachusetts example Accountable Care Organizations – American innovation – Best hope to avoid default of price controls

Hospital Systems transforming into HealthCare Systems Insurance carriers establishing performance based payment arrangements Multispecialty group practices extending their models of coordinated care – managing healthcare cost risk Government payors promoting systemic change through effectiveness research and modified payment for outcomes

Group commitment to raising quality and eliminating non-beneficial care Investment in Information Technology Management, measurement and reporting of quality and cost Reformed payment system away from Fee for Service to payment for maintaining the health of a population over time Certification

There is enough money There is enough time Change is underway We know what care is effective Proven models of accountable care exist today The consequences of failure are clear

Improvement on PPACA Increased access to care – reduced reliance on emergency care Organization of care to eliminate minimally beneficial care and increase beneficial care Reduce the overall cost of medical care Give individuals more responsibility for health insurance purchasing decisions Increase the health status of the population