National Health Policy Conference February 12, 2007 Washington, D.C. Kim Belshe

Our Broken Health Care System 6.5 Million Uninsured 20% of Population Source: California Health Interview Survey, 2005

Emergency Departments Closing Source: Office of Statewide Health Planning and Development

The Hidden Tax Actual Cost of Medical Care Uninsured Cost to Insured 10% of premium Source: New America Foundation

Actual Cost of Medical Care Uninsured Cost to Insured 17% of premium Medi-Cal Underfunding Source: Administration Analysis of Cost Shift Hydraulic, Dobson The Hidden Tax

Hidden Tax Individuals: $455 Families: $1,186 Source: New America Foundation

Drivers of Cost: Chronic Diseases Source: Centers for Disease Control and Prevention, 2003, U.S. Data $153 $151 BILLION Cancer & Diabetes Smoking & Physical Inactivity

Drivers of Cost: Medical Errors 23,000 Deaths Cost: >$4 Billion Source: CA Department of Health Services

Fixing Our Broken System Reduce the hidden tax; lower costs Reduce the hidden tax; lower costs Coverage for all; support better care Coverage for all; support better care Healthy California Healthy California

Prevention / Wellness Shared Responsibility / Coverage for All Affordability Governors Health Care Initiative

Prevention / Wellness Governors Health Care Initiative

Prevention & Wellness Healthier State – Long Term Affordability Prevention & Wellness Healthier State – Long Term Affordability Offer consumers incentives and rewards Promote diabetes prevention and treatment Reduce medical errors Reverse obesity trends Support tobacco cessation

Prevention / Wellness Shared Responsibility / Coverage for All Governors Health Care Initiative

Shared Benefit INDIVIDUALS Access to affordable coverage Healthier CA

GOVERNMENT Healthy, productive & economically competitive state Shared Benefit INDIVIDUALS Access to affordable coverage Healthier CA

GOVERNMENT Healthy, productive & economically competitive state DOCTORS & HOSPITALS Expanded insured pop Fair compensation Shared Benefit INDIVIDUALS Access to affordable coverage Healthier CA

GOVERNMENT Healthy, productive & economically competitive state DOCTORS & HOSPITALS Expanded insured pop Fair compensation Shared Benefit HEALTH PLANS Expanded market Fair compensation INDIVIDUALS Access to affordable coverage Healthier CA

GOVERNMENT Healthy, productive & economically competitive state DOCTORS & HOSPITALS Expanded insured pop Fair compensation Shared Benefit HEALTH PLANS Expanded market Fair compensation EMPLOYERS Affordable coverage Healthy, productive workforce INDIVIDUALS Access to affordable coverage Healthier CA

Fixing the Broken System Creating an efficient, competitive market dynamic

Payment Sources Commercial payer overpayment Medi-Cal/Uninsured Underpayment

Shared Responsibility INDIVIDUALS Obtain Health Coverage

GOVERNMENT INDIVIDUALS Must secure health coverage for themselves and their children Must secure health coverage for themselves and their children Assume greater personal responsibility for health and wellness Assume greater personal responsibility for health and wellness Contribute to paying for their coverage Contribute to paying for their coverage DOCTORS & HOSPITALS Fixing the Broken System HEALTH PLANS EMPLOYERS

INDIVIDUALS Obtain health coverage Shared Responsibility GOVERNMENT Promote a functional health care system Provide access to affordable coverage Fairly compensate Medi-Cal providers

INDIVIDUALS GOVERNMENT Expand SCHIP/Medi-Cal for all children in families earning under $60K Expand SCHIP/Medi-Cal for all children in families earning under $60K Subsidies to families between $20K-$50K provided through new purchasing pool Subsidies to families between $20K-$50K provided through new purchasing pool County responsible for access for undocumented County responsible for access for undocumented Expand Medi-Cal to adults in poverty Expand Medi-Cal to adults in poverty $4 billion increase in Medi-Cal reimbursement rates $4 billion increase in Medi-Cal reimbursement rates DOCTORS & HOSPITALS Fixing the Broken System HEALTH PLANS EMPLOYERS

Shared Responsibility INDIVIDUALS Obtain health coverage DOCTORS & HOSPITALS Provide affordable, quality care Share cost savings GOVERNMENT Promote functional market Provide access to affordable coverage Fairly compensate Medi-Cal providers

Redistribution to Providers $10 - $15 Billion $3.5 Billion New Funds to Providers Coverage Dividend from Providers

GOVERNMENT DOCTORS & HOSPITALS 2% fee on physician revenues – 4% on hospital revenues 2% fee on physician revenues – 4% on hospital revenues Participation in patient safety initiatives Participation in patient safety initiatives At least 85% of hospital payments spent on patient care At least 85% of hospital payments spent on patient care INDIVIDUALS Fixing the Broken System HEALTH PLANS EMPLOYERS

Shared Responsibility HEALTH PLANS Guarantee access to affordable coverage DOCTORS & HOSPITALS Provide affordable, quality care Share cost savings INDIVIDUALS Obtain health coverage GOVERNMENT Promote functional market Provide access to affordable coverage Fairly compensate Medi-Cal providers

GOVERNMENT HEALTH PLANS Guarantee coverage Only base rates on age and geographic area in the individual market 85% of premiums dedicated to patient care Offer Healthy Actions rewards and incentives within benefit packages DOCTORS & HOSPITALS Fixing the Broken System INDIVIDUALS EMPLOYERS

Shared Responsibility EMPLOYERS Support employee access to affordable coverage DOCTORS & HOSPITALS Provide affordable, quality care Share cost savings GOVERNMENT Promote functional health care market Provide access to affordable coverage Fairly compensate Medi-Cal providers INDIVIDUALS Obtain health coverage HEALTH PLANS Guarantee access to affordable coverage Pass along savings

GOVERNMENT EMPLOYERS Offer federal Section125 plans to allow employees to make pre-tax contributions to coverage Contribute to the cost of coverage – non- offering employers with 10 or more employees will contribute 4% of payroll DOCTORS & HOSPITALS Fixing the Broken System HEALTH PLANS INDIVIDUALS

Governors Health Care Initiative Prevention / Wellness Shared Responsibility / Coverage for All Affordability

Affordability: Short Term Reduce hidden tax Tax breaks for individuals & businesses tied to purchase of health insurance Enhance insurer & hospital efficiency by requiring 85% of premiums & hospital dollars on patient care Remove regulatory barriers Reduce regulatory red tape

Affordability: Long-Term Promote prevention & wellness Accelerate adoption of health information technology Tie Medi-Cal rate increases to performance measures Enhance health care quality & efficiency through transparency and performance measures Monitor & evaluate market function & costs and revise as necessary

FISCAL IMPACT Prevention $300 Tax Incentive $900 Counties $2,000 Subsidized Coverage $2,270 Medi-Cal/HFP Coverage $2,638 Medi-Cal Rate Increase $4,039 Other - $203 Employer in lieu $1,000 County and Other Redirect $2,000 Physician/Hospitals Recapture $3,472 Federal Funds $5,474 $12 Billion CostFunding in millions

Federal Funding: $5.47 Billion $1.77 billion: Redirection of current federal funds used for programs for the uninsured $3.7 billion: New federal funds $3.45 billion: guaranteed under current federal statute (match for Medi-Cal reimbursement, Healthy Families parental match) $3.45 billion: guaranteed under current federal statute (match for Medi-Cal reimbursement, Healthy Families parental match) $250 million: Discretionary funds via 1115 waiver $250 million: Discretionary funds via 1115 waiver

Federal Role Medicaid funding – Rates; Parental expansion Section 1115 waiver Deficit Reduction Act flexibility Value-driven health care Tax advantages – HSAs, Section 125 plan

Fixing Our Broken System: Shared Responsibility Reduce the hidden tax; lower costs Reduce the hidden tax; lower costs Coverage for all; support better care Coverage for all; support better care Healthy California Healthy California