National Health Care Reform Overview Daniel B. McLaughlin Center for Health and Medical Affairs

The Best Health Care System in the World

The Best Medical Research Drug and Device Development Innovative Care Delivery –Minute Clinic –Electronic Health Record –Health 2.0 Health Services Research Passionate and skilled caregivers Engaged Consumers and Patients

Paradox Geographic Practice disparity Quality: over use, under use, misuse and safety Acute care model for Chronic disability Professions shortage –Primary care –Nursing Emerging public health problems Access problems: uninsured, underinsured, bankruptcy Insurance: pre existing conditions, deductibles & co-pays, lifetime limits Welfare payment for aged and disabled Most costly system in the World – 17% of GDP

Federal Reform 2010 Reduce cost growth, Improve access, and Improve quality and safety In a way that is acceptable to the American Public With Liberty and Justice for All

Health Care – A Systems View Professional - Patient

Health System – Core Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx

Health System – Tools Professional - Patient Tools – Dx & Rx Facilities Medical Technology Health Care Workers Information Technology Reform - $80 Billion in discounts over 10 years from drug companies + Medicaid rebates The tradeoff – no direct negotiations with Medicare, extended patent protection - Transparency on drug/device company relationships with providers Reform $18 Billion for Health Information Technology (Stimulus bill) Reform - Improved payment for primary care services - More funding for training primary care providers Reform: structure Accountable Care Organizations

Health System – Consumer Professional - Patient Illness Burden Consumer Behavior Tools – Dx & Rx Past Experience – Personal, networks Information Market/Clinical Financial resources & goals Knowledge Environment: - Air, food, water -Economic - Cultural Genetics of the Individual

Consumer Behavior and Illness Reform – Illness Burden –New funds and coverage for prevention –Payment for Chronic Disease Management –Payment for Medical home –Payment for Health IT to track chronic patients Reform – Consumer behavior –Increased payment for health promotion and disease prevention –Medicare recipients get “health risk assessment” –Grants and tax incentives to employers for wellness programs (Safeway model) –Tort reform pilots (Malpractice)

Health System – Education & Research Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Primary Education Continuing Education Research

Education and Research Reform - Education –Revised Medicare funding for training to emphasize primary care –Increased funding for nursing education Reform - Research – Funding for Comparative Effectiveness Research (Stimulus) – Cannot be used to direct payment policy

Health System – Financing Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Financing Sources & Structure Individuals Employers Government Financial resources & goals

Total Health System Model Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Facilities Medical Technology Health Care Workers Financing Sources & Structure Information Technology Primary Education Individuals Employers Government Continuing Education Past Experience – Personal, networks Information Market/Clinical Genetics of the Individual Environment: - Air, food, water -Economic - Cultural Financial resources & goals Research

Employers Remain Primary Sponsor of Coverage Distribution of 307 Million People by Primary Source of Coverage Employer Direct 164m 53% Uninsured 49m 16% Medicare 39m 13% Medicaid 42m 14% Medicare 41m 13% Individual Direct 14m 5% Employer Direct 55m 18% Total Employer 164m (53%) Total Individual 14m (5%) Source: The Lewin Group, The Path to a High Performance U.S. Health System: Technical Documentation (Washington, D.C.: The Lewin Group, 2009).

Insurance Reform Mandates insurance: both employers and individuals Subsidies available for both low income individuals and small business Expands Medicaid income limits to 133% – state match held harmless Standardized benefit levels (Bronze – Platinum) Eliminates pre existing condition, lifetime caps, recissions and other insurance practices HSAs still available Simplified and standardized billing

The Exchange

Financing Medicare Advantage – Health Plans Drug Discounts Hospital Inflation (-1.5%), Re- admits, DSH Personal Income Taxes> $250,000, 3.8% on unearned income System taxes: health plans, device companies, tanning, Cadillac Health plans Subsidies for individuals and small business Medicaid eligibility buy down MD fees – repeal SGR Fix Medicare donut hole $ One Trillion 4% of total NHE 1099s for purchases > $600 X

Bending the cost curve Competition between Health Plans Delivery system Substitution of lower priced care Inpatient, clinic, home Increased availability and use of primary care Improved chronic care (Medical home, ACO etc.) Reduced system costs (billing, overhead) Comparative effectiveness research Medicare Innovations Center Consumers Prevention and Wellness and the Social Determinates of Health Tort Reform demonstrations Consumer Directed Health Care

Reform’s Impact on Stakeholders

Insurance Companies Gain 30 million new customers Cease most underwriting practices Participate in state based insurance exchanges No change with large employers Agree to standardization –Benefits –Payment systems Overhead less than 20%, 15% Become more retail and consumer oriented

Government Federal –Enforce Insurance mandate –Implement new Medicare payment policies –Implement Insurance Exchange (states or feds) –Continue to fund HIT, Comparative Effectiveness Research –Implement Medicare pilots (value purchasing, etc.) –Raise taxes –Implement fraud prevention States –Expand Medicaid eligibility –Operate Exchanges

Direct providers of Care Reduced uncompensated care Bundled payments – value purchasing Incentives to form larger groups and structures Increased transparency and reporting Reduction in growth of hospital payments Incentives to purchase HIT Higher payment for primary care Changes in payment due to geographic variation (?)

Consumers Negatives –Short term insurance rate increases –Insurance mandate –Higher taxes for some –Access issues to primary care Positives –Improved access to health insurance –Lowering of health care inflation –Elimination in Medicare donut hole –Improved information about system and provider performance –Eliminates job lock for entrepreneurs –e

Current Issues Individual and employer mandate to have health insurance (State Attorney Generals) State’s ability to control health insurance rate increases Temporary high risk pools No pre existing conditions for children Payment to firms for early retirement coverage Continuing health care inflation

Changes Possible Insurance Mandate Methods –Open enrollment –Part D penalties Standard Benefits State Medicaid funding increases Comparative Effectiveness Research Independent Payment Advisory Board Malpractice reform State Waivers (e.g. public option in Vermont)

Unlikely to change Health Insurance Exchanges Quality Workforce improvements – primary care Fraud Prevention Prevention and Wellness Chronic Disease Management –ACOs, bundled Payments, Medical home Total Repeal: due to provider/health plan resistance

“Americans always do what is right, but only after trying everything else.” Winston Churchill

The Best Health Care System in the World

Additional Reading Health Administration Press Further Information at: HAPMclaughlin.com

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