1. THE COMMONWEALTH FUND You Cant Have One Without the Other: Bending the Healthcare Cost Curve & Financing Health Reform Rachel Nuzum Senior Policy Director, The Commonwealth Fund Alliance for Health Reform Briefing July 31, 2009 rn@cmwf.org www.commonwealthfund.org

2. 2 NHE in trillions Source: C. Schoen, K. Davis, S. Guterman, and K. Stremikis, Fork In the Road: Alternative Paths to a High Performance U.S. Health System, The Commonwealth Fund, June 2009. $2.5 $5.0 $4.4 6.5% annual growth 5.2% annual growth Total National Health Expenditures (NHE), 2009–2020: Current Projection and Alternative Scenarios THE COMMONWEALTH FUND $4.1 4.6% annual growth

3. 3 Sources of Path Savings, Net Impact on Federal Budget and National Health Expenditures Compared to Baseline, 2010–2020 (in billions) Federal Budget Total NHE Affordable Coverage for All Net costs of insurance expansion and redistribution of coverage sources +$1,924–$432 Payment Reform: Aligning Incentives to Enhance Value Enhancing payment for primary care-$30–$71 Encouraging adoption of the Medical Home model-$101–$175 Bundled payment for acute care episodes-$211–$301 Correcting price signals -$407–$464 Improving Quality and Health Outcomes Accelerating the spread and use of HIT-$101–$261 Center for Comparative Effectiveness-$232–$634 Public Health Policies and Taxes on Harmful Products Reducing tobacco use-$95–$255 Reducing obesity-$154–$406 Total Net Impact, 2010–2020 +$593–$2,998 Source: The Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance Health System: A 2020 Vision and the Policies to Pave the Way, The Commonwealth Fund, February 2009.

4. 4 Savings Can Offset Federal Costs of Insurance: Federal Spending Under Two Scenarios Dollars in billions Data: Estimates by The Lewin Group for The Commonwealth Fund. Source: The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

5. 5 THE COMMONWEALTH FUND Implications for Stakeholders Coverage and Savings –Coverage for all with $3.0 trillion system savings 2010-2020 with public health insurance plan; $0.8 trillion without –Coverage for all with $200 billion federal budget cost 2010-2020 with a public health insurance plan; $700 billion without Employers and Employees –Public health insurance plan more affordable than premiums now in small business market: 20-30% lower premiums –Savings to employers including payment and system reforms of $231 billion over 2010-2020 Providers –Provider revenues enhanced by increasing Medicaid payment to Medicare levels and buying in uninsured at Medicare rates –Payment reforms reward primary care and high performers but slower revenue growth over time than current law Insurers –Rewards integrated delivery system and private insurers that enhance value –Administrative savings of $337 billion over 2010-2020

6. 6 THE COMMONWEALTH FUND Key Considerations Important to focus on both federal budget costs and total health spending Payment and delivery system reforms are needed to bend the health care cost curve Aligning patient and provider incentives to reward high value, effective care is important Need for a mechanism to measure and monitor progress

7. 7 THE COMMONWEALTH FUND Thank You! Karen Davis, President Steve Schoenbaum, Executive Vice President Stephanie Mika, Program Associate Cathy Schoen, Senior Vice President Stu Guterman, Assistant Vice President