1. “The Good, The Bad and the Ugly”
Dallas Friday Group
April 16, 2010
Health Care Reform
“The Good, The Bad and the Ugly”
Joel T. Allison, FACHE
President & CEO
Baylor Health Care System

2. The Need for Health Reform
Current system not sustainable
Growing uninsured and uncompensated care costs
Increase in incidence of chronic disease
Payment systems not tied to value, quality
Healthcare lags behind other sectors in information technology

3. “The Act”
The Patient Protection and Affordable Care Act (the Senate bill) was signed into law on March 23, 2010.
Healthcare and Education Reconciliation Act of 2010 (the House bill that ratifies the Senate bill) was approved by the Senate on March 25, 2010.

4. What is Current Play in DC?
Democrats try to sell plan to the public and help protect those who voted for it.
Republicans try to repeal, file constitutional legal challenge, win back control of Congress.
Implementation begins.
Federal regulatory activities begin.

5. What we can expect short-term
Increase in insurance premiums initially due to rising medical costs and adverse selection;
Pressure on small businesses to drop coverage;
More utilization of services due to pent-up demand;
New national high-risk health plan for those uninsured at least past 6 months;
Worse physician shortages, longer wait times; and
Potential hospital losses due to timing of cuts, delays in coverage for newly insured.

6. What we can expect longer-term
More insured patients/less uncompensated care;
Increase in health care workforce (jobs);
Evidenced-based medicine, improved quality, better patient outcomes;
Greater use of information technology;
More efficiency, lower costs
Healthier populations.

7. Expands coverage to 32 million uninsured.
What the bill does
Expands coverage to 32 million uninsured.
New “marketplace” through exchanges
Subsidies for purchase of private insurance
Insurance reforms

8. Promotes prevention and wellness
What the bill does
Promotes prevention and wellness
Additional Medicare benefits
Public health fund
Addresses health care disparities
Allows health plans in exchanges to offer incentives to providers for activities that address disparities as part of quality initiatives

9. What the bill does NOT do
No public option program
No expansion to include undocumented workers
No requirement that private insurance plans in state insurance exchanges pay Medicare or Medicaid rates.
Address access issues

10. Healthcare Reform Timeline
Sept. – Dec. 2010
2012
2014
2020
June 2010
2011
2013

11. Effective Immediately - 2010
Tax credits for small businesses
Starts to close Medicare Part D Prescription ‘doughnut hole’
Increases investment in primary care physician training programs

12. Effective 90 days after Implementation – June 2010
Federally-subsidized high-risk pools
People with pre-existing conditions that left them uninsurable for the last six months can enroll in a new federally-subsidized high-risk insurance program to be established within 90 days.

13. No pre-existing coverage insurance exclusions for children
Sept – Dec. 31, 2010
No pre-existing coverage insurance exclusions for children
Increases dependent coverage – young people can stay on parents’ policy until 27th birthday
Eliminates lifetime caps on coverage
Protects individuals from having insurance canceled
Bans new physician-owned hospitals in Medicare.

14. Provides grants to small employers that establish wellness programs
2011
Awards five-year demonstration grants to states to develop, implement and evaluate alternatives to current tort litigations
Provides grants to small employers that establish wellness programs
Provides 10% Medicare bonus for primary care physicians and general surgeons ( )
Develops a national quality improvement strategy
Establishes a new trauma center program

15. Establishes a hospital value-based purchasing program
2012
Allows providers organized as accountable care organizations (ACOs) to share in cost savings
Establishes a hospital value-based purchasing program
Reduces Medicare payment for hospitals with excess readmission rates
Establishes Medicare pilot program to evaluated bundled payments

16. Standardizes electronic exchange of health information
2013
Begins phasing in federal subsidies for brand-name prescriptions filled in the Medicare Part D “doughnut hole”
Standardizes electronic exchange of health information
Begins voluntary bundled payment pilot program for 10 conditions
Notify workers about state insurance exchanges which start in 2014

17. Expands Medicaid to 133% of the FPL ($29,327 for family of four)
2014
Prohibits health plans from denying coverage to anyone with a pre-existing condition
Expands Medicaid to 133% of the FPL ($29,327 for family of four)
Opens health insurance exchanges in states that have none
Provides individual health care tax credits for people between 100% and 400% of the FPL
Individual insurance mandate penalties begin

18. Insurance penalties begin for employers with more than 50 employees
2014, cont’d.
Insurance penalties begin for employers with more than 50 employees
Limits any waiting periods for coverage to 90 days
Imposes fees on the health insurance industry ($8 billion)
Permits employers to offer employees rewards for participating in a wellness program

19. Creates physician value-based payment program
2015 and later
Creates physician value-based payment program
Establishes Independent Payment Advisory Board
Implements high-cost “Cadillac” plan tax (2018)

20. Funding of Legislation
Impose new fees/taxes & curb Medicare payments to hospitals and many other heath care providers.
Tax on costly health plans – in 2018 will impose 40% excise tax on Cadillac plans and will increase thresholds to $10,200 for individual coverage and $27,500 for family.
Medicare payroll tax - In 2013, tax rate will increase from 1.45 to 2.35% for individuals earning more than $200,000 a year and families earning more than $250,000; will impose additional 3.8% tax on capital gains, dividends, interest and other ‘unearned income’.

21. Funding of Legislation
Drug makers will pay $2.8 billion in ; $3 billion from , $4 billion in 2017, $4.1 billion in 2018 & $2.8 billion in 2019 & later.
Manufacturers of medical devices will pay 2.3% excise tax on devices sold starting in 2013.
Insurance companies – Fee will start at $8 billion (2014) & rise to $14.3 billion (2018).
Flexible spending accounts – In 2011, $2,500 annual limit will be placed on what people can set aside from their paychecks before paying taxes on health care expenses.

22. Funding of Legislation
Medicare savings – squeeze roughly $500 billion out of projected growth in Medicare over 10 years, including $132 billion in cuts to federal subsidies for privately offered Medicare Advantage plans.
Indoor tanning – 10% tax to be implemented starting July 2010.

23. Funding of Legislation
Total cost & coverage - $940 billion over 10 years
Expected to reduce deficits by $138 billion in that period and by $1.2 trillion in second decade
32 million people will gain coverage
Will leave 22 million uninsured
Kaiser Family Foundation “Summary of New Health Reform Law”, March 26, 2010

24. Publication #8061 is available on Kaiser Family Foundation website www
Publication #8061 is available on Kaiser Family Foundation website

25. Why Texas needs health reform
Highest rate of uninsured in the nation
25.7 percent of population; >30% in Houston, other cities
6.1 million uninsured Texans currently
Poor health status of population
Obesity rate: 66% Texas; 63% U.S.
1st trimester prenatal care: 61.6% Texas – 83.2% U.S.
Teen birth rate – 63.1 Texas; 41.9 U.S. (per 1,000)

26. What reform means for Texas
4.1 million more Texans will have health coverage.
The Perryman Group estimates net gain of $124 billion in federal funds; with 3.25 economic multiplier, generates $402.8 billion in economic activity for Texas businesses.

27. Potential issues for Texas
Impact on access to doctors, hospitals
Impact of Medicaid expansion on state budget
Ability of state to process applications for Medicaid, subsidies
Treatment of rural hospitals
Barriers to physician/hospital alignment
Undocumented workers not covered

28. 2011 Texas legislative session issues
Texas faces $12 billion – $16 billion deficit for
Opportunity to begin implementing health care reforms (insurance, Medicaid)
Texas Department of Insurance sunset:
Removing barriers to buying insurance
Risk pools
Insurance exchanges

29. Interim Studies – Texas Senate
Implications of federal health care reform legislation on state, providers and insurers
HIT – how to facilitate exchange of health information among providers to improve quality
Policies to improve health through obesity prevention, nutrition and diabetes management
Use of best practices to improve quality, including payment incentives

30. In Summary
The health reform legislation isn’t perfect, but it is a start.
Reform will make it possible for anyone who wants health insurance and can afford it to buy it and keep it.
The bill takes steps to increase the number of primary care physicians in America and supports training of more health care workers.
Congress will tweak/modify as implementation begins.

31. The Good
More individuals will have coverage.
Did away with pre-existing condition exclusions
Emphasis on wellness and prevention
Pay for quality

32. The Bad
Not enough providers
Coverage does not mean access
Does not address undocumented workers

33. The Ugly
Process used to pass legislation
Rule-making

34. Wild Cards
2010 elections
Lawsuit challenges by state attorneys general
Real cost of reform
How many employers will drop coverage for employees?

35. “You can always count on Americans to do the right thing—after they’ve tried everything else.” Winston Churchill

36. Questions?