US Healthcare Reform Anticipated Benefits and Challenges

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1 US Healthcare Reform Anticipated Benefits and Challenges William P. Moran MD MS Director, General Internal Medicine and Geriatrics Chair, SGIM Health Policy Committee

2 Health Care Reform I agree with almost all of it I don t agree with some major things I hate almost all of it I have no clue what I think

3 American Health Care Reform: A Few Agenda Items Cost Quality of care Access to care Workforce There are many others but we only have an hour. 3

4 Cost: We spend twice as much as other industrialized nations... Per capita health care spending of select OECD nations, 2003 Source: The Commonwealth Fund 4

5 If US health care was a country, it would be the 12 th largest economy in the world

6 US Health care expenditures as percentage of GDP: Unsustainable cost growth 18% 2009 Source: CMS. Office of the Actuary, National Health Statistics Group.

7 US Health care expenditures as percentage of GDP: Unsustainable cost growth 18% 2009 Source: CMS. Office of the Actuary, National Health Statistics Group.

8 In 2082 healthcare becomes the entire economy! 100 Percent All Other Health Care Medicaid 10 Medicare Source: CBO Long-Term Outlook for Health Care Spending, Dec 2007

9 Insurance premiums exploding 9

10 Insurance premiums exploding 30% of expenditures DO NOT ADD VALUE to care CBO, IOM 10

11 But quality of care is high, right? Safe Patient centered Timely Effective Efficient Equitable 11

12 The Myth of The best health care in the world The great enemy of the truth is very often not the lie -- deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought. John F Kennedy

13 Quality: Although US costs are highest the quality of care is far from optimal RAND: Americans get evidence-based care only 55% of the time IOM: Up to 98,000 Americans die each year due to avoidable medical errors CDC: 2 million acquire nosocomial infections annually; 90,000 die WHO: US is 37 nd in the world 13

14 Uninsured: The Young Invincibles They re young and healthy, and insurance is expensive. As long as they don t t catch the flu, slip on the ice, crash a bike, snowboard into a tree, rupture an appendix, or get hit by a bus, everything will be fine. Right? 14

15 Access: The uninsured ~50 million uninsured >80 million under-insured 44,800 excess deaths annually due to lack of insurance 15

16 Uninsured are mostly young: Distribution of the Uninsured and Total U.S. Population under 200% of FPL by Age (2004) Source: ASPE tabulations of the 2005 Current Population Survey 16

17 Uninsured are not from a particular race or ethnic group: Distribution of the Uninsured and Total U.S. Population by Race/Ethnicity in 2004 Source: ASPE tabulations of the 2005 Current Population Survey 17

18 The majority of uninsured work at least part-time: Distribution of the Uninsured and Total U.S. Population by Work Status in 2004 Source: ASPE tabulations of the 2005 Current Population Survey 18

19 They are more likely to work in small business, but not exclusively: Distribution of the Uninsured and Total U.S. Population by Firm Size in 2004 Source: ASPE tabulations of the 2005 Current Population Survey 19

20 Other casualties Half of bankruptcies in the US (before the recent economic downturn) were precipitated by a health care event

21 The workforce Are we training the right people?

22 United States 22 million individuals 85 years of age or older 22% of growth is aging

23 Medicare Physician Advisory Committee (MedPAC( MedPAC) March 2008 Medicare s s FFS payment system does not systematically reward physicians who provide higher quality care or care coordination, and it offers higher revenues to physicians who furnish the most services regardless regardless of whether they add value 23

24 MedPAC March, 2008 We are especially concerned about the impact {of the current physician payment update mechanism [the RUC]} on access to primary care services, the increased use of which Medicare should be actively encouraging, not hindering, given the potential of primary care to improve the quality and efficiency of health care delivery 24

25 Family Medicine Residency Positions and Number Filled by U.S. Medical School Graduates 25

26 Proportions of Third-Year Internal Medical Residents Choosing Careers as Generalists, Subspecialists, and Hospitalists

27 Proportions of Third-Year Internal Medical Residents Choosing Careers as Generalists, Subspecialists, and Hospitalists

28 2% of Medical Students plan to pursue a career in General Internal Medicine 28

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32 Laws are like sausages. It's better not to see them being made. Otto von Bismarck German Prussian politician ( ) 32

33 Understanding the game: This is how our laws are made 33

34 And this is how sausage is made

35 18% of GDP: Who are the stakeholders? Hospitals including Academic Health Centers Providers: physicians, nurses, NP/PAs (usually through their member organizations: AMA, ACP, ANA, etc) Patients/consumers (AARP) and disease specificpatient organizations (American Cancer Society, AHA, Lupus foundation etc) Employers Large (IBM, Ford Motor Company, Wal-Mart) and small (less than 50 employees) Insurance companies: Traditional indemnity (Fee for service) and managed care Pharmaceutical companies and device manufactures Government departments, agencies and boards

36 What Policy Tool(s) would you use? Write a law (regulation) without federal expenditures Appropriate new federal dollars to create a new program or expand an existing program (and where do you get the dollars - raise taxes, increase deficit, leverage state dollars e.g. Medicaid) Redirect existing federal expenditures ( Pay-go : who loses?) Create a commission and fund that group to make hard decisions, design solutions and oversee implementation (political cover e.g. base closing commission) Appropriate new funds to test solutions on a small scale Study the problem (don t do anything yet)

37 10 minutes: Propose solutions Bend the cost curve The myth The young invincibles The workforce 37

38 WASHINGTON, March 23 - President Obama signed the health care bill into law today, calling its historic expansion of insurance coverage "reforms that generations of Americans have fought for and marched for and hungered to see.

39 So what is in the Patient Protection and Affordable Care Act (ACA) of 2010? Market Reform Insurance Reform State insurance exchanges Coverage choices Changes to improve the quality and efficiency of health care

40 SC insurance coverage gap 2.2 million have employer-based health insurance 1.2 million rely on a governmentsponsored program for coverage 178,000 have coverage purchased in the individual market 760,000 South Carolinians have no coverage Kaiser Family and Robert Wood Johnson Foundations

41 South Carolina s 760,000 Uninsured 557,000 live in working families that pay taxes to support government coverage for others 357,000 live at or below 133% of the federal poverty level SC has no program to help childless adults *Source: Kaiser Family Foundation

42 Coverage expanded by 32 million in ,000 SC residents will be covered Medicaid expansion to 130% FPL Subsidies to 400% FPL Business tax credits Employer mandates Individual mandates 46

43 Affordable Coverage: PREMIUM TAX CREDITS AND COST- SHARING REDUCTIONS Refundable tax credit providing premium assistance for coverage under a qualified health plan. Reduced cost-sharing for individuals enrolling in qualified health plans. (Closes the Medicare donut hole in drug coverage over a decade, starting with a $250 rebate this year. The gap would gradually shrink until patients, by 2020, have to pay just 25% of the costs).

44 Small business and employees Credit for employee health insurance expenses of small businesses. Individuals required to maintain minimum essential coverage. Automatic enrollment for employees of large employers. Employer requirement to inform employees of coverage options.

45 Improved Access to Medicaid Medicaid coverage for the lowest income populations. Enhanced support for the Children s Health Insurance Program Additional federal financial participation for CHIP. Elimination of exclusion of coverage of certain drugs. $$ - Prescription drug rebates. $$ - Reduced disproportionate share hospital payments.

46 23 million residents remain uninsured in 2019 Illegal immigrants (~1/3) Not covered opt to pay annual penalty 2.5% of income, $695 for individuals, or a maximum of $2,250 per family) they will be ineligible for insurance subsidies or Medicaid (mostly younger) Eligible but do not enroll in Medicaid Coverage would cost more than 8% of household income (exempt) 50

47 IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE Transforming the Health Care Delivery System

48 Quality Across the US is Variable at best 55% of Care Episodes Baicker and Chandra, Health Affairs, 2004

49 LINKING PAYMENT TO QUALITY OUTCOMES IN MEDICARE Extends through 2014 payments under the PQRI program, which provide incentives to physicians who report quality data to Medicare. In 2014, physicians who do not submit to PQRI will have their Medicare payments reduced. 53

50 Improvements to the physician feedback program. Expands Medicare s physician resource use feedback program to develop individualized reports by Reports will compare the per capita utilization of physicians to other physicians who see similar patients. Reports will be risk-adjusted and standardized 54

51 Value-based payment modifier under the physician fee schedule. Directs the Secretary of HHS to develop and implement a budget-neutral payment system that will adjust Medicare physician payments based on the quality and cost of the care they deliver. Quality and cost measures will be riskadjusted and geographically standardized. The Secretary will phase-in the new payment system over a 2-year period beginning in

52 Payment adjustment for conditions acquired in hospitals Starting in FY2015, hospitals in the top 25th percentile of rates of hospital acquired conditions for certain highcost and common conditions would be subject to a payment penalty under Medicare. May eventually (2012) apply to nursing homes, inpatient rehabilitation facilities, long-term care hospitals, outpatient hospital departments, ambulatory surgical centers, and health clinics. 56

53 Workforce Reform 57

54 Lack of Primary Care Providers Baicker and Chandra, Health Affairs,

55 HEALTH CARE WORKFORCE Innovations in the Health Care Workforce National health care workforce commission. State health care workforce development grants. Health care workforce assessment. 59

56 Increasing the Supply of the Health Care Workforce (inducements) Federally supported student loan fund Nursing student loan program. Health care workforce loan repayment programs. Public health workforce recruitment and retention programs. Allied health workforce recruitment and retention programs. Expansion of National Health Service Corps. Nurse-managed health clinics. 60

57 Enhancing Health Care Workforce Education and Training Training in family medicine, general internal medicine, general pediatrics, and physician assistantship. Geriatric education and training; career awards; comprehensive geriatric education. Title VII reauthorization 61

58 Expanding access to primary care services and general surgery services. Beginning in 2011, provides primary care practitioners, as well as general surgeons practicing in health professional shortage areas, with a 10 percent Medicare payment bonus for five years. Half of the cost of the bonuses would be offset through an across-the the-board reduction in all other services. 62

59 Bending the cost curve: Encouraging Development of New Patient Care Models 63

60 Establishment of Center for Medicare and Medicaid Innovation within CMS Establishes within the Centers for Medicare and Medicaid Services (CMS) a Center for Medicare & Medicaid Innovation. research, develop, test, and expand innovative payment and delivery arrangements to improve the quality and reduce the cost of care provided to patients in each program. Dedicated funding is provided to allow for testing of models that require benefits not currently covered by Medicare. Successful models can be expanded nationally. 64

61 Medicare shared savings program. Rewards Accountable Care Organizations (ACOs) that take responsibility for the costs and quality of care received by their patient panel over time. ACOs can include groups of health care providers (including physician groups, hospitals, nurse practitioners and physician assistants, and others). ACOs that meet quality-of of-care targets and reduce the costs of their patients relative to a spending benchmark are rewarded with a share of the savings they achieve for the Medicare program. 65

62 National pilot program on payment bundling. Direct the Secretary to develop a national, voluntary pilot program encouraging hospitals, doctors, and post-acute care providers to improve patient care and achieve savings for the Medicare Requires the Secretary to establish this program by January 1, 2013 for a period of five years. Expand the pilot program if doing so will improve patient care and reduce spending. 66

63 Hospital readmissions reduction program. Beginning in FY2012, adjusts payments for hospitals paid under DRG payment system based on the dollar value of each hospital s percentage of potentially preventable Medicare readmissions Directs the Secretary to calculate and make publicly available information on all patient hospital readmission rates for certain conditions. 67

64 68 What happens to the RUC??

65 Improving Payment Accuracy: Mis- valued codes under the physician fee schedule. Directs the Secretary to regularly review fee schedule rates for physician services paid for by Medicare, including services that have experienced high growth rates. Strengthens the Secretary s s authority to adjust fees schedule rates that are found to be mis-valued or inaccurate. 69

66 Ensuring Medicare Sustainability: Independent Medicare Advisory Board. Creates an independent, 15-member Medicare Advisory Board tasked with presenting Congress with comprehensive proposals to reduce excess cost growth and improve quality of care. When Medicare costs are projected to be unsustainable, the Board s s proposals will take effect unless Congress passes an alternative measure that achieves the same savings. The Board would be prohibited from making proposals that ration care, raise taxes or Part B premiums, or change Medicare benefit, eligibility, or cost-sharing sharing standards. 70

67 MedPAC March 2008 medical home programs if designed carefully, may be a way to improve the value of physician and other health care services. 71

68 Grants or contracts to establish community health teams to support the patient-centered medical home. Creates a program to establish and fund the development of community health teams to support the development of medical homes by increasing access to comprehensive, community based, coordinated care. 72

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70 What will it cost? Total health care costs will rise Ultimately 32 million more insured at $800/person- current insurance is $5000/person Federal deficit reduced by $100 billion in 10 years, and a $1 trillion in second Gruber, NEJM 2010

71 What will it cost? Total health care costs will rise 2% GDP over 10 years Ultimately 35 million more insured at $800/person - current average ES insurance is $5000/person Federal deficit reduced by $100 billion in 10 years, and a $1 trillion in second Gruber, NEJM 2010

72 How it s is paid for: Taxes New taxes, including a tax on insurance plans that are worth more than $23,000 for a family of four. Couples making more than $250,000 would pay additional 2.9% Medicare payroll taxes. The Medicare payroll tax would extend to unearned income for couples making more than $250,000 a year. Penalties for employers whose employees use subsidies instead of coverage Gruber, NEJM 2010

73 How it s is paid for: Cuts Several billion in Medicare cuts, predominantly from excess payments to Medicare Advantage plans Reduction in hospital payment updates Reductions in disproportionate share payments (Medicare and Medicaid) Medicaid rebates/ Pharma reductions Gruber, NEJM 2010

74 Other potential savings mechanisms Reduced demand because of the Cadillac tax IMAC reductions in Medicare payments Pilots/demonstrations to reorganize care and provider incentives/payments Comparative effectiveness research Impact of reorganization on malpractice

75 Challenges Total repeal? Not this year but 2013? Court challenges Individual mandate States rights Medicaid cost transfers in 2016

76 Americans can be relied upon to do the right thing, when they have exhausted the alternatives.

77 Patient Protection and Affordable Care Act: What s next in Health Care Reform? Questions? 81