1. Disruptive Innovation & Healthcare Reform: What's Ahead? Paul H. Keckley, Ph.D., Executive Director for the Deloitte Center for Health Solutions

2. 2009 Medical Professional Liability Symposium Chicago, Illinois ~ March 24 & 25, 2009 U.S. Health System Reform Paul H. Keckley, Ph.D. Executive Director Deloitte Center for Health Solutions

3. Budget Director Pick Sounds Alarm (Orszag Confirmation Jan. 13, 2009) “The principal cause of the nation’s long term budget problems is rising health costs”.

4. The public view: “The system is confusing…” Only 3 in 10 consumers feel they know how the U.S. health care system works. Source: 2009 Survey of US Health Consumers

5. The public view: “The system isn’t working very well…” Only 1 in 5 consumers give the U.S. health care system an above-average report card grade; those grading the system “F” outnumber those giving it an “A” by 6 to 1. Source: 2009 Survey of US Health Consumers

6. The American Recovery and Reinvestment Plan: $787 billion GoalDirect Investments ($144.8B)Indirect Investments ($159.3B) Increase Access $87B Medicaid $27B COBRA (6.5M) $32.3B SCHIP expansion (4M)* Reduce Costs Improve Quality $1.1B Comparative Effectiveness $10.2B Biomedical research $19 B Health Care IT $1.0B Prevention & wellness $3B National Science Foundation $.8B Nat’l Oceanic & Atmospheric Assoc. $19.9B Food Stamp increase $4.1B child care services Improve Infrastructure $1.2B VA facilities$7.2B broadband access $38.7B energy & electricity $2.8B Homeland Security $3.1B Indian facilities $2.3B DOD facilities $19.4B clean environment $27.5B highway $20.5B public transportation

7. Long term: health reform in two stages Stage One: 2009-2011 Stimulus Package Inclusions Focus will be expansion of benefits to newly unemployed, executive orders that extend coverage (SCHIP 2/2/09) and jobs related programs In additon, certain programs that buoy states against expected increases in Medicaid enrollment A few campaign promises: EX. HCIT Stage Two: 2010-2016 Systemic Reforms—Long Term Insurance market reforms Individual mandate + employer pay or play + FEHP2 Comparative effectiveness Episode based payments Medical Home Expansion of role: FDA, CDC Medicare eligibility Federalization of Medicaid

8. Message to Congress February 24, 2009 Energy, education and health care: focus of systemic reforms Two consistent themes:  Reduce costs  Expand coverage

9. FY10 Reserve Fund Proposal $634 B FY 10 Budget Preview - February 26, 2009: $634B 10 year health care investment to fund coverage for uninsured & underinsured Funding from… $318B tax increases (mortgage deduction decrease, Medicare premium increases for wealthy enrollees, $250K HH tax cuts eliminated 2011) $177B from Med Part D Competitive Bidding $139B lower payments including $24B Hospital Bundled Payments -- ($17B) and Substandard care ($8B)

10. Key Players CHUCK GRASSLEY: Senior Senator from Iowa TED KENNEDY: Senior Senator from Massachusetts MAX BAUCUS: Senior Senator from Montana ARLEN SPECTER: Senior Senator from Pennsylvania HENRY WAXMAN: Member of the U.S. House of Representatives from California's 30th district PETE STARK: Member of the U.S. House of Representatives from California's 13th district MIKE ROSS: Member of the U.S. House of Representatives from Arkansas's 4th district ROY BLUNT: Member of the U.S. House of Representatives from Missouri's 7th District

11. Key Players KATHLEEN SEBELIUS: United States Secretary of Health and Human Services – Nominee NANCY-ANN MIN DEPARLE: Director of the White House Office on Health Reform

12. Long term reforms focus in four areas Consumerism Focus: CDHPs, Transparency, PHRs, Incentives, Value Comparative Effectiveness/ Evidence – based Medicine Focus: (1) Personalized medicine, (2) comparative effectiveness; episode based payments to acute organizations 2 Health Care Information Technology Focus: (1) e-prescribing, ( (2) care coordination (3) administrative cost reduction 1 3 4  Decreased errors  Decreased care gaps  Reduced malpractice premiums  Improved efficiency  3 – 7 NMEs per year  Center for comparative effectiveness  Knowledge management  Prepare for tort reform  New medical homes  Reimbursement realignment  Primary care workforce  MD led clinical care coordination Coordination of care Focus: Primary Care 2.0 Model (The New “Medical Home”)  Respond to transparency & PC 2.0 –Connected care –Rx reimportation –Medical tourism  PHR (Shared Decision Making)  Incentives –Experience rating & differential premiums –Healthy behavior rewards  Complementary/Alternative Medicine 6 year implementation 1:8 to 1 ROI Savings: $530B (NPV) Balance: cost and quality

13. Contact Information For more information, please contact: Paul H. Keckley, Ph.D., Executive Director pkeckley@deloitte.com For more information on the Center's view of health care in the new administration, please visit: www.deloitte.com/us/healthcarereform And visit our website to subscribe to our content: http://www.deloitte.com/CenterforHealthSolutions/subs cribe Center for Health Solutions