Building a Sustainable Health Care System Leslie A. Margolin President, Anthem Blue Cross UCI Health Care Forecast Conference February 20, 2009

2 What Defines Health Care Reform?  Insuring the Uninsured?  Reducing Medical Inflation and Cost of Care?  Improving Access to Care?  Improving Quality, Performance, Service?  Eliminating Waste? Improving Efficiency?  Better Communicating via Technology?  Reforming the Insurance Market?  Expanding (and Funding) Public Sector Programs?  Eliminating Health Disparities – ethnic, racial, gender- based, geographic?  Investing in Innovation?

3 Quality & Safety: Medical errors account for more than 32,000 deaths annually. Antiquated, paper-based systems lead to inefficient and unnecessary care and expose patients to undue risk. Need to promote evidence-based medicine, transparency initiatives and innovative health IT. When it comes to health care reform, we should get it right, not just get it done. Pharmaceutical Safety Complex Clinical Cost-of-Care Comparative Effectiveness Clinical Outcomes Research INTEGRATED RESEARCH NETWORK COLLABORATIVE OUTCOMES ARCHITECTURE Cost of Health Care Financing Insurance Market Reform Quality and Safety of Health Care Sustainable Health Care System Accessible to All Cost: 30% of health care spending goes toward redundant or inappropriate care. Medical errors and drug safety events cost as much as $9B annually. Need to encourage the right treatment at the right time in the right setting. Financing 46 million individuals, including over 6 million children, currently lack health insurance coverage. Need to expand public programs, expand the employer-based system, and establish tax deductibility for individual coverage. Insurance Market Reform: Many Americans cannot obtain affordable coverage due to pre- existing conditions or cannot find coverage that meets their needs. Need to promote innovative plans and products to meet the needs of consumers at every stage of life. Building a Sustainable Health Care System

4 Commitment to Physicians and Hospitals Total Payments – WellPoint Significant increases in provider payments driving up premiums. Source: WellPoint actuarial analysis of provider payments, December Due to data restrictions, population definitions vary by state, and in some states an element of reasonable approximation was used. * Note: NY, CO, NV data not currently available. *

5 Commitment to Physicians and Hospitals Total Payments – Anthem Blue Cross Anthem Blue Cross Payment to CA Hospitals & Physicians

6 Health Care Reform: Treating the Disease, Not the Symptoms Sources: WellPoint analysis of U.S. Census Bureau Current Population Survey statistics. ( September Employer Benefits: 2008 Annual Survey. Kaiser Family Foundation. September ( As prices rise, private coverage decreases.

7 Health Care Reform: Treating the disease, not the symptoms 7

8 California Employment Status CA Employed Workforce Loss of 246K jobs, or 1.4% of workforce Unemployment Rate: Unemployment 9.3% statewide; 9.9% in L.A. County, highest since Nationally eliminated 3+ million jobs in 2008; January 2009 eliminated 600K more. Particular weakness in construction, finance, real estate, and manufacturing. LA and SF were the 2 nd and 4 th worst performing large cities in the US (June 08 YOY employment). Lack of credit beginning to squeeze many small businesses; CA now has the lowest credit rating in the nation. Consumer spending likely to slow further with continuing downturn in confidence. The Conference Board announced that October 2008 consumer confidence dropped to 38, the lowest level on record (back to 1967), with the sharpest drop in 35 years.

9 Quality & Safety: Medical errors account for more than 32,000 deaths annually. Antiquated, paper-based systems lead to inefficient and unnecessary care and expose patients to undue risk. Need to promote evidence-based medicine, transparency initiatives and innovative health IT. Cost: 30% of health care spending goes toward redundant or inappropriate care. Medical errors and drug safety events cost as much as $9B annually. Need to encourage the right treatment at the right time in the right setting. Financing 46 million individuals, including over 6 million children, currently lack health insurance coverage. Need to expand public programs, expand the employer-based system, and establish tax deductibility for individual coverage. Insurance Market Reform: Many Americans cannot obtain affordable coverage due to pre-existing conditions or cannot find coverage that meets their needs. Need to promote innovative plans and products to meet the needs of consumers at every stage of life. The Cornerstones

10 Building a Sustainable Health Care System: Covering the Uninsured and Improving Coverage for All Americans Improve and expand programs for the most needy Provide a bridge to self-sufficiency through premium assistance Expand the employer-based system Equalize tax treatment for individuals purchasing coverage on their own Increase funding for public-private partnerships Must enact financing strategies to place America on a sustainable path toward covering all of the uninsured:

11 Plan to Address 45.7 M Uninsured Building a Sustainable Health Care System ElementEligible Extend outreach to those already eligible for programs 12.0M Kids expansion to 300% FPL 6.5 M Parents expansion to 200% FPL 9.3 M Childless adults to 100% FPL 5.1 M Premium assistance 4.6 M Total 37.5 M Uninsured by Federal Poverty Level For the remaining 18% of uninsured who make over 300% FPL ($67k for family of 4), focus on expanding the employer-based system and designing attractive products Source: WellPoint analysis of U.S. Census Bureau Current Population Survey statistics. ( September 2008.

12 Participation in Public Programs Still need to correct this CIGNA.

13 Plan Participation in High-Risk Graduate Program Tony/Ben: Can you give Leslie a sentence or two on the graduate program?

14 Guaranteeing All Americans Access to Affordable Health Coverage Approaches to Ensuring Everyone Can Access Affordable Coverage in the Individual Health Insurance Market No Individual MandateEffective, Enforceable (and Enforced) Individual Mandate  Enhance state high risk pools; and/or  Require all health insurers to offer a “guaranteed issue” product in the individual market with a capped premium that is supported via a broad-based subsidy; or  Traditional “guaranteed issue” in the individual market; and  Subsidy mechanism for high-risk individuals to limit cost increases for existing members

15 Conclusion