IOM Workshop The Impact of the Affordable Care Act on U.S. Preparedness Resources and Programs Session I Opportunities and Challenges within Financing Changes Jack Ebeler Health Policy Alternatives, Inc. November 18, 2013
Outline Overview of Affordable Care Act Coverage Financing Pressures for delivery system changes Implications 2
Overall Framework of Affordable Care Act (ACA) Coverage: build on current mixed model Shared responsibility Income-related subsidies Medicaid and tax credits Insurance regulation/exchanges Cost constraint: Traditional limits on Medicare program growth Long-term delivery reforms driven by Medicare Competitive market approach in Exchanges Public health: Range of authorizations, funding Financing: Public program savings; taxes Administration: Mixed public (fed/state), private 3
Employment-based coverage for those under age 65 was eroding in decade leading up to ACA enactment in 2010, and continues to erode Employment-based coverage has been eroding a decline of more than 10 million in decade leading up to ACA in 2010 Public programs picked up some of the slack, especially for children in low-income families The portion of the population uninsured increased Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2013 Current Population Survey, Employee Benefit Research Institute, September, 2013 4
Coverage: Incremental insurance reforms starting in 2010; comprehensive changes being implemented this year, effective for 2014 Insurance market reforms Guarantee issue, no pre-ex Rating rules Benefits Essential Health Benefits Cost sharing standards Affordability Medicaid for lowest income Sliding scale tax credits, cost-sharing subsidy Coverage provisions effective 2014 Shared responsibility Individual mandate/ tax Large employer freerider penalty (delayed until 2015) Exchange Organize individual, small group insurance market; Administer subsidies; Place to shop, enroll 5
Insurance Affordability Programs: Overview Medicaid (State option after Supreme Court ruling) for lowest income (income up 133%* of the federal poverty level): Expands Medicaid to adults who don t fall into other eligibility categories, i.e., not elderly, pregnant or disabled Income-related sliding-scale subsidies for those purchasing coverage in the Exchange with income above Medicaid but below specified percentages of the federal poverty level (FPL) Advance-payment premium tax credits Cost-sharing subsidies (increases in AV) and reductions in the maximum out-of-pocket limit on cost-sharing * Note: eligibility includes a 5% income disregard, so it is 38% of FPL. 6
Medicaid Coverage Options After Supreme Court decision, states can: Implement full Medicaid expansion to 133% of FPL, or Refuse to implement Medicaid expansion, without penalty That is 15-16 million individuals If state fails to implement Medicaid expansion: Those between 100% -133% of FPL can still get sliding scale subsidy in Exchange: that is 3.5 million individuals Those below 100% of FPL have no source of subsidy: that is 11.5 12.5 million individuals 7
Current Status of State Medicaid Expansion Decisions, as of October 22, 2013 WA VT MT ND MN OR WI NY ID SD MI WY 1 PA NE IA 1 OH NV IL IN UT WV VA CO KS MO CA KY NC OK TN 1 SC AZ NM AR 1 MS AL GA TX LA AK FL HI Moving forward Not moving forward at this time ME NH 2 MA CT RI NJ DE MD DC 26 (25 states plus DC), moving forward with Medicaid expansion at this time. 25 states not moving forward at this time. Some exploring approaches that will require waivers. Of 15 M potential eligibles, 6 million in expansion states, 9 M not. Of that 9M, 2M eligible for tax credits, 7 million remain uncovered. Kaiser Family Foundation: http://kff.org/health-reform/state-indicator/state-activity-aroundexpanding-medicaid-under-the-affordable-care-act/ ; Urban Institute, 2012 and 2013. 8
Sliding-Scale Premium Tax Credit Limits Premium as a Percent of Income Applicable percentage table, 2014 Household income as percent of FPL Initial percent Final percent Less than 133% 2.0% 2.0% 133% - 150% 3.0% 4.0% 150% - 200% 4.0% 6.3% 200% - 250% 6.3% 8.05% 250% - 300% 8.05% 9.5% 300% - 400% 9.5% 9.5% FPL: 2013: $11,490 for 1 person, $23,550 for family of 4 Applicable percentages increase in the future by statutory formula; the percentage increases on a sliding scale between the initial and final percentage within each income category Set in each Exchange based on premium for secondlowest bidding silver plan (70% AV) If consumer selects higher priced plan, they pay higher premium Advance payment, with EOY reconciliation Example: family of 4 at 150% of FPL ($35,325) pays 4% of income, or $116/month 9
Cost-Sharing Reductions for those with income up to 250% of federal poverty level Income-related cost-sharing reductions, 2014 AV MOOP: self/family Standard silver plan 70 $6,350/ $12,700 Income as % of FPL 100-150% 94 $2,250/$4,500 150-200% 87 $2,250/$4,500 200-250% 73 $5,200/$10,400 250-400% 70 $6,400/ $12,800 For those individuals, the AV is increased (cost-sharing reduced), and the maximum out-ofpocket (MOOP) limit is reduced Note: even at lowest income levels, there is cost-sharing, and MOOP limits of up to $2,250/$4,500. FPL 2013: $11,490 for 1 person, $23,550 for family of 4 10
Status of State decisions about Exchanges 17 (16 States plus District of Columbia) implementing a Statebased Exchange 27 are defaulting to a federally-facilitated Exchange; 7 have a partnership model. Characteristics of plans: Cost sharing Tight networks http://kff.org/health-reform/state-indicator/health-insurance-exchanges/# 11
Nationwide summary: over time, the number of uninsured is projected to decline by about half Sources of Coverage, Non-Elderly in Millions Congressional Budget Office, May, 2013 Baseline Medicaid and Exchange coverage increases, and the net number of uninsured declines by about 25 million. That still leaves about 30 million uninsured. The undocumented (cannot get coverage in Exchange or through Medicaid) Those in States that have not expanded Medicaid Those who could get coverage but opt not to enroll, including those exempt from tax penalty 12
Spending and Financing the ACA: Estimates for 2010-2019, at time of enactment Net Other $40B,4% Sources = $1+ Trillion Revenue $563B, 53% Net Medicare & Medicaid Cuts $455B, 43% Uses = $1+ Trillion Deficit Reduction $124B, 12% Coverage Expansions $938B, 88% Source: CBO/Joint Committee on Taxation 13
Major Medicare and Medicaid Savings Ten-year total (2010-2019), in billions Provision Savings Productivity adjustment and other update reductions $196 Medicare Advantage payments $138 Disproportionate share hospital payments Medicare ($22) and Medicaid ($14) $36 Medicaid prescription drug payments $38 Independent Payment Advisory Board $16 Total (net of all changes, including those not listed) $455 Source: CBO Letter to Speaker Pelosi, March 20, 2010. 14
Signal from public and private payers similar Public and private budget pressures yield a future of increasingly tight limits on total spending. Those are reflected in limits on the rate of increase in fee-forservice payments and those will continue if not accelerate Private insurers, with traditional underwriting tools constrained, continue to emphasize cost-sharing and managed care, narrow networks and provider pricing and we now see that in the Exchange plans Payers will present options for changed payment, linked to revised delivery approaches, accountability and risk. Goal is to lower underlying cost growth while improving the delivery of care. 15
A menu of policy tools Elements of policy reflected in public, private approaches Traditional Approaches Eligibility Benefits, cost sharing Payment policy, by provider type Managed care Fraud and abuse Crosscutting Tools/ Infrastructure Infrastructure Quality strategy HIT/EHRs PCORI Resource use feedback Admin. simplification Initial steps Pay for quality/value Readmissions reductions HAC reductions System Changes, Delivery Reforms Approaches Broader units of payment (across providers, time) Partial risk, risk-sharing Tiered benefits, networks Policy products Medical home Bundling ACOs Gov/structure CMMI, IPAB Derived and revised from MedPAC framework, 2008 16
Thinking about long-term directions: fundamental changes in financing / delivery Shift measurement, payment, accountability, and some risk: From discrete fee-for-service transactions and payments for each type of provider for each element of service To more clinically and economically relevant episodes for patients and providers, and/or for population(s) Across provider types and over some period of time With some degree of risk transfer to provider Shift care management capacity (information, systems and people) to one that is used by providers (virtual and real groups of providers), to better provide and coordinate care and manage costs given that risk and accountability 17
Framework for thinking about delivery reform: shifts in measurement, payment and accountability Global payment per enrollee FFS w/ risksharing Acute, postacute bundle Blended FFS, fixed payment for primary care Fee-forservice Continuum of payment Independent MDs and hospitals Degrees of collaboration and systems Continuum of delivery Derived from Commonwealth Fund Relatively Easier Integrated delivery systems It is relatively easier to implement combinations of payment, accountability and risk if delivery is more collaborative or integrated. And that shift to more delivery collaboration and integration, and global payment, is likely. The assumption is that there will be different approaches at different times in different communities 18
What might it mean for emergency preparedness? Coverage: phasing in fewer uninsured: undocumented; lowest income in states that do not expand Medicaid; hard to reach and willingly uninsured Financing and delivery system heading to less fragmentation: stronger relationships, to some degree, real and virtual, among components of delivery in the community managing risk More data/information through EHRs, and population-based information on use, costs, within delivery system Operating within lower total per capita cost growth Transition period difficult for delivery 19
Thank you Jack Ebeler Je.hpa@sso.org 20
Selected 10 year net spending items, in billions Coverage Medicaid and CHIP $434 Exchange subsidies and related spending $464 Small employer tax credits $40 Gross cost coverage $938 Penalty, uninsured -$17 Penalty, employer -$52 Excise tax (-$32), other tax effects (-$48) -$80 Net cost, coverage $788 Selected other provisions of interest in public health Community Health Centers, NHSC $12 Prevention, Public Health Fund $13 21
Provision Major Revenue Provisions Ten year total (2010-2019), in billions Medicare tax on high earners: Additional tax of 0.9% on income >$200k/$250k couple; 3.8% tax on unearned income of these taxpayers Revenue $210 Shared responsibility penalties on individuals and employers $65 Tax on health insurance providers $60 Tax on high-cost health plans (begins 2018); 40% tax on amounts >$10,200/$27,500 family, indexed prior to 2018; premiums adjusted for age and gender; extra $1650/$3450 for retirees and high-risk professions Tax on branded drug manufacturers and importers $27 2.3% excise tax on device manufacturers and importers $20 1099 reporting requirements $17 Total $563 $32 Source: Joint Committee on Taxation, March 20, 2010. 22
Percent of GDP Total national health spending (public and private) grows as share of GDP 25 20 National Health Spending as Share of GDP Historical Projection 15 10 5 0 1960 1970 1980 1990 2000 2010 2021 Year CMS Office of the Actuary; historical data and projections through 2021 23
Nationwide data on Medicaid expansion Of the 15 million adults who could gain Medicaid coverage: @ 6 million will become newly eligible in the 26 states that have opted to expand Medicaid; @ 9 million won t be eligible for Medicaid, as they live in the 26 states that are not expanding or are still undecided; Of that 9 million individuals: @ 2.0 million will qualify for Exchange subsidies (income between 100-133% of FPL) but @ 7 million won t be eligible for Medicaid or subsidized Exchange coverage (incomes below 100% of the FPL) Sources: Urban Institute, Opting in to the Medicaid Expansion under the ACA, Who are the Uninsured Adults Who Could Gain Health Insurance Coverage? August 2012 http://www.urban.org/publications/412630.html, and 11.5 Million Poor Uninsured Americans Could Be Eligible for Medicaid if States Opt for ACA Expansion, September 2013. http://www.urban.org/health_policy/health_care_reform/map.cfm?utm_source=icontact&utm_medium=email&utm_ca 24 mpaign=public%20affairs&utm_content=sept-2013+1st+thursday
Examples: State Adoption of Medicaid and CHIP Medicaid: State effective dates # of States* Cumulative January 1, 1966 6 6 Later in 1966 20 26 1967 11 37 1968 2 39 1969 3 42 1970 7 49 1972 1 50 1982 1 51 CHIP: State effective dates 1998 45 45 1999 4 49 2000 2 51 * Includes 50 States plus District of Columbia 25