1. PROFESSOR EMERITUS, PSYCHIATRY CHAIR, UCFW ISSUES IN HEALTH CARE JOEL E DIMSDALE, M.D. 3/31/15

2. UC CARE GOALS Self-funded platform-- UC has many others such as disability & malpractice 2014 earnings were 76.68% for HN (43.47% Aetna)* Can we have some of that and invest it in other things? Self-funded means we assume financial risk Increased efficiency w common purchasing etc. = decreased costs Improve platform for care delivery *Zacks Equity Research 3/23/15

3. UC CARE PROGRESS 23,000 employee subscribers Year 1: rocky start; major access issues (not so much in San Diego) How much fault is UC Care vs Blue Shield as 3 rd Party Administrator? Year 2: less confusion; slightly improved access

4. WHO IS THE ENEMY? Health care is costly Limited competition in certain practice environments = high costs (e.g. Sutter, Santa Barbara) Conflicts of interest: Patient Med Center Doctor Insurance company Employer

5. 2016 AND BEYOND Continue UC Care PPO Self-insure HMO? Savings? Who will be 3 rd party administrator? 2016- unlikely 2017- maybe No plans for absorbing Kaiser

6. CHALLENGES I: HEP C HCV 1% prevalence; New drugs curative after 3-6 months but cost $100,000; currently covered for use in those w fibrotic liver changes; Current cost $5/member/month If all were treated, cost $35/member/month

7. CHALLENGES II: CADILLAC TAX Cadillac tax- 2018 Goal: decrease costs by having employees share in costs (e.g. curtail utilization) 40% tax on plans costing >$10,200/y for individual (>$27,500 for family)

8. CHALLENGES III: MENTAL HEALTH Nationwide, mental health problems account for ~25% of all hospitalizations & are in the top 5 most costly conditions* Currently “carved out” to Optum How well is it working? How do we coordinate care across mental health and other health? (e.g. depression in diabetes) *Agency Healthcare Research and Quality 09-P011, 2009

9. CHALLENGES IV: PAY BANDS Progressive increase in insurance rates; higher earners subsidize lower earners Employee cost (monthly) for family coverage UC Care, 2015 <$51,000 $335 $51,101 – 101,000$446 $101,001- 152,000$550 >$152,001$657 Should there be a 5 th pay band? (?>$200K)

10. CHALLENGES V: RETIREE HEALTH Currently pay as you go charge of 2.65% covered comp payroll Not guaranteed Governor suggesting pre- funding as a vested right VERY costly (normal cost + amortization of accrued costs) means more costs on payroll beyond pension costs BS High option not as “high” as you may think

11. CHALLENGES VI: IT’S MORE THAN THE PREMIUM Premium Deductible Co-pay Network

12. QUESTIONS? Don’t kill the messenger