Update on the Affordable Care Act Kevin Shah, MD MBA 1 Goals Review major elements of the affordable care act Review implementation of the Individual Exchange Review the Medicaid expansion Discuss current state of legislation to repeal the Affordable Care Act 2 1
Agenda Overview of the ACA (i.e. Obamacare ) Insurance Reform Medicaid Expansion Overview of ACA Repeal 3 Disclosures I have no disclosures 4 2
Overview Prior to 2014, United States healthcare financed through several major sources Medicare Established in 1960s Funded by the Federal Government Target population - People age >65 - Disabled (after a waiting period) - End Stage Renal Disease (ESRD) Insurance design - National standard insurance product - Increasing role of private insurance Medicaid Established in 1960s Funded by federal AND state government Target Population - Citizens in poverty - Eligibility can vary by each state - Health care reform expanded eligibility Insurance design - Varies state by state, based upon local policy and politics Employer 1940s: tax exemption for employer health insurance Funded by employers Target Population - Employees at companies or in government - Dependents / families of employees Insurance design - Varies by employer and by state Individual Health costs paid for by the individual Insured individuals: - Premiums for employer coverage - Copays and deductibles within insurance plans - Purchasing of individual insurance Uninsured individuals 5 Overview Most Americans are covered through employers, but government finances a substantial portion of health care Insurance Coverage, by type 2011 Cost outlays, by entity 2011 Government spending on Medicare, Medicaid and newly created exchanges are growing, while employer based coverage is stagnating 6 3
Overview The PPACA had several major components Patient Protection and Affordable Care Act (PPACA) Expanding coverage: public insurance exchange, Medicaid expansion Financing: New taxes, reduced reimbursements to providers, individual mandate Insurance Reform: Ban on preexisting conditions and lifetime limits; children covered to age 26; Essential health benefits; Individual mandate; employer mandate Payment reform: pay for value initiatives, penalties for poor care Delivery system reform: new models of care Implications Increased focus on paying for quality and reducing cost Fundamental shift in how individual patient care is delivered 7 Overview There are many topics in the ACA we will not cover in detail today Financing - Medicare tax - DSH payments - Medical device Tax - Cadillac Tax - Reimbursement cuts Care Redesign and Payment Reform - Center for Medicare and Medicare Innovation - Accountable Care Organizations - Pay for performance programs legislated in the ACA Exchanges - Small business exchange - State based exchanges vs. federal exchanges - Catastrophic health plans Payer Specific Topics - Medical Loss Ratio - Special enrollment periods - Risk adjustment / Reinsurance / Risk corridors - Coverage of young adults to 26 Other - Details of legal cases surround the ACA - Specific insurer participation decisions for 2017 - Reproductive health coverage MANY OTHERS 8 4
Agenda Overview of the ACA (i.e. Obamacare ) Insurance Reform Medicaid Expansion Overview of ACA Repeal 9 Insurance Reforms The PPACA implemented community rating for all payers Ban on Preexisting Conditions Banned individual rating for health insurance Gender parity: women and men charged equally Ban on life time limits Limits on out of pocket costs Pricing adjustment can be made on 3 parameters: Age (up to 3x variation) Tobacco use (50% variation) Location (this can vary, ~ 4x based on 2017 plans) Individual Mandate In order to implement the ban on pre-existing conditions, payers needed an adequate number of low risk enrollees to minimizer risk Penalty in 2017: 2.5% of income OR $695 per adult / $395 per child, whichever is HIGHER Numerous exemptions for low income, high cost burden for insurance, individuals who don t need to file taxes Community rating requires some version of an individual mandate. Ban on lifetime limits and cap on out of pocket costs à higher premiums and deductibles Lacking an effective mandate could lead to both adverse selection and moral hazard 10 5
Insurance Reforms The PPACA standardized coverage parameters with essential health benefits (EHB) Ambulatory patient services Emergency services Hospitalization Pregnancy, maternity and newborn care Mental health and Substance use disorder services including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care (but adult dental and vision coverage aren t essential health benefits) Implications for the insurance market With few exceptions, no skinny insurance plans à richer coverage with higher costs Mandatory coverage and cost sharing requirements à limited ability to use benefit design to weed out customers Benefits consumers with underlying health care costs and conditions, especially those getting subsidies More expensive for those who are healthier with limited costs (i.e. the young and healthy) 11 Insurance Reforms The ACA needed to address adverse selection and moral hazard concerns in the insurance market Adverse Selection Applies to all types of insurance In health insurance, phenomena where the purchaser of insurance has information about when / how they may need insurance, OR only buy insurance when it s needed With the ACA, insurers limited in preventing adverse selection Implication: sicker people buy coverage, healthier people don t à Premiums rise or may not cover cost à Death Spiral ACA solution: Mandates for coverage Subsidize insurance cost Limiting off cycle enrollment Effective ban on catastrophic health coverage plans Moral Hazard Applies to all types of insurance In health insurance, phenomena where insurance lowers the price of health services and thus consumption of those services increase With the ACA, mandatory benefits and limits on out of pocket costs / life time limits would drive more health care use Implication: insured patients consume more care, but the value of that care is unclear ACA solution: Pay for performance / value programs Incentivize new care delivery models focused on controlling cost (i.e. accountable care organizations) 12 6
Agenda Overview of the ACA (i.e. Obamacare ) Insurance Reform Medicaid Expansion Overview of ACA Repeal 13 Enrollment* has exceeded 12 Million of people for 2017 Enrollment Facts 2017: 12,216,003 2016: 11,081,330 2015: ~10,200,000 * Enrollment numbers vary between people who sign up and those who actually pay premiums There is substantial interstate variability in total and potential enrollment There remains a large non-exchange individual enrollment from ACA compliant and grandfathered plans McKinsey 2017 Intel Brief on public exchanges 14 7
Many insurers are leaving the market and limiting choice Kaiser Family Foundation 15 Number of carriers varies by geography Kaiser Family Foundation 16 8
Remaining insurers are raising premiums 2014 2015 2016 2017 2014-2017 39.9% 42.2% 27.4% 44.4% There is substantial interstate variation Premiums are averages, and vary by age, location any smoking status Premium changes for family plans show similar percentage increases Kaiser Family Foundation, E-Healthinsurance report 17 Exchanges sell 4 levels of plans based on actuarial value Monthly Premium Patient Costs Plan Actuarial Value Premium Subsidies Money direct to enrollee Reduce monthly premiums Pegged to the cost of a silver plan Available to anyone with income up to 400% of the Federal poverty level Kaiser Family Foundation, Healthcare.gov Cost sharing subsidies Money direct to health plan Reduce out of pocket costs (deductible, co-pay, co-insurance) Available to anyone with income up to 250% of the Federal poverty level Under significant legal and political uncertainty 18 9
Deductibles and co-pays are a substantial burden In 2017, 94% of enrollees choose Bronze or silver plans, thus were exposed to very high out of pocket costs Higher income patients not eligible for cost sharing subsidies are exposed to higher costs Kaiser Family Foundation 19 Premium subsidies defray some of the up front cost Federal poverty level (FPL), by household size Premium subsidies are designed to cap an enrollees premium cost based on income Premium cap, by FPL People with income <100% of FPL are NOT eligible for premium subsidies Federal poverty levels do NOT adjust for locations 2016 estimated subsidy cost: $32.8 billion McKinsey 2017 Intel Brief on public exhanges; Department of HHS, Center for Health and Economy 20 10
Income affects premium and premium increases McKinsey 2017 Intel Brief on pulibc exhances 21 Cost sharing subsidies help defray consumer cost Key points Caps out of pocket costs AFTER premium payments. Adjustments made when enrollee purchases and payers get paid later If income <100% of FPL, no cost sharing subsidies are available Estimated costs in 2017: ~ $7 billion Under significant scrutiny in federal court prior to the current administration Kaiser family foundation; Congressional budget office; US Dept of Health and Human Services 22 11
There is a notable shift towards managed care McKinsey 2017 Exchange Market Report 23 Plans have employed narrow networks to hold down cost Broad patient choice of hospitals and providers Higher cost relative to narrow network plans Limited choice of hospitals and providers Variable out of network coverage Lower cost and cost increases over time McKinsey 2017 Exchange Market Report, New York Times 24 12
Notable conclusions 83% of exchange enrollees receive subsidies, and 58% receive cost sharing subsidies 94% choose either a Silver or Bronze plan Subsidies shield lower income consumers from premium increases and overall costs more than higher income enrollees Individuals with incomes less than 100% of the federal poverty level are NOT eligible for subsidies on the exchanges Kaiser Family Foundation 25 Agenda Overview of the ACA (i.e. Obamacare ) Insurance Reform Medicaid Expansion Overview of ACA Repeal 26 13
Medicaid Medicaid is a complex federal / state partnership primarily focused on lower income workers Before the ACA, Medicaid has various roles in the American health care system Primary insurance (children, disabled, pregnant women, parents of dependent children) Long term care Poor Medicare eligible patient (i.e. duals ) Notable gap: Childless poor adults Split funding between states and federal government States have substantial flexibility to design and implement a Medicaid program tailored to their needs Federal matching for eligible expenses is open ended 27 Medicaid Medicaid has federally specified mandated and optional coverage domains for states Required Benefits** Inpatient and outpatient hospital care Physician services Lab / Xray Family planning Screening services for individuals <21 (including dental, eye, hearing) Home Health Nursing facility ** Not a complete list Optional Benefits Non-nursing facility / long term care services Personal care attendants Adult day care Care for intellectually disabled Optometry / Eyeglasses Dental care / dentures Physical therapy PACE Hospice ** Not a complete list - States have some flexibility to manage scope of coverage of benefits - With some exception, states must offer similar coverage to all residents 28 14
Medicaid Medicaid expenditures cover a variety of services CY16: $558B Long term care costs represent a substantial portion of costs Many states provide payments to managed care organizations to facilitate their costs 29 Medicaid The Affordable Care Act expanded Medicaid Eligibility and funding Income limits: broadened eligibility to nearly all adults up to 138% of the federal poverty level Some state have higher income limits for different populations No Coverage Gap childless adults are now eligible for Medicaid coverage Increased Funding: Federal government subsidized 100% of cost of expansion for 3 years, 90% there after Standardized and simplified enrollment and outreach Still preserves state flexibility 30 15
Medicaid Medicaid has increased insurance coverage, but has only been expanded in a subset of states Incremental ~18M patients enrolled in Medicaid / CHIP relative to pre-aca In states that have expanded Medicaid, there has been ~38% increase in enrollment CMS 2017 Enrollment data; Kaiser Family Foundation; MACPAC.gov There is substantial state by state variation in enrollment changes - KY: >100% enrollment increase - 22 states with >25% enrollment increase - VT: 4% increase 31 Medicaid The lack of expansion has created coverage gaps for low income workers In states that have expanded Medicaid, all adults with income <400 of the federal poverty level are eligible for Medicaid or exchange subsidies CMS 2017 Enrollment data; Kaiser Family Foundation 32 16
Medicaid In states that have not expanded, ineligible adults are the population most at risk of being in the coverage gap In states that have not expanded Medicaid, childless adults with income <100 of the federal poverty level are ineligible for exchange subsidies CMS 2017 Enrollment data; Kaiser Family Foundation 33 Medicaid Notable conclusions Larger numbers of incrementally insured patients from Medicaid expansion than from Individual exchanges Large interstate variation in coverage gains between expansion and non-expansion states In non-expansion states, there is a coverage gap for adults making <100% of the federal poverty level Patient cost sharing (premiums, co pays, co-insurance total out of pocket) is limited Kaiser Family Foundation 34 17
Agenda Overview of the ACA (i.e. Obamacare ) Insurance Reform Medicaid Expansion Overview of ACA Repeal 35 ACA Repeal No one ever knew that health care could be so complicated. - President Trump 36 18
ACA Repeal The data presented in this section are based upon: The Better Care Reconcilliation Act which is the proposed legislation currently under discussion in the Senate Major Conclusions: Total savings of $321Bn Increased uninsured population by 22 million Implementation of changes occurs over 10 years Slides were made July 2017, and content is likely to change Conclusions are representative only! The full CBO report is 46 pages, and the following slides summarize selected highlights 37 ACA Repeal Broad contours of legislation Patient Protection and Affordable Care Act (PPACA) Expanding coverage: public insurance exchange, Medicaid expansion. Reduce subsidies for exchanges; Reverse the Medicaid expansion; limit future growth of Medicaid Financing: New taxes, reduced reimbursements to providers, individual mandate. Reduce or eliminate taxes; Repeal the individual mandate tax Insurance Reform: Ban on preexisting conditions and lifetime limits; children covered to age 26; Essential health benefits; Individual mandate. Grant states waiver for essential health benefits; change individual mandate to a coninuous coverage requirement Payment reform: pay for value initiatives, penalties for poor care. Not a major target Delivery system reform: new models of care. Not a major target 38 19
ACA Repeal The current Senate will fund a substantial tax cut by cutting insurance premium support and Medicaid growth Medicaid and premium subsidy cuts are the bulk of the savings in the senate proposal Bridge payments to insurers to stabilize the market Innovation funds for States Elimination of the employer and individual mandate penalties Elimination of many of the ACA s taxes, including the Medicare tax on high income earners Delay of the Cadillac Tax on high cost insurance 39 ACA Repeal Topic ACA Current Law BCRA Senate Proposal Ban on Individual Rating Community Rating rules Essential Health Benefits (EHB) Individual Mandate Employer Mandate INSURANCE REFORM Insurers cannot use prior health status to determine premium Gender parity; Tobacco use 1.5x; Age: maximum 3x difference Most plans required to offer set of essential benefits Individuals must have insurance or pay a tax (with some exception) Employers of a certain size must provide insurance or pay a fine Preserved. This ban stays in effect. Changed. Age rating increased to 5x difference Changed. States may obtain waivers to modify EHB Eliminated. New requirement for Continuous coverage Eliminated. - Insurers will not be allowed to discriminate on pre-existing conditions - Individual mandate repeal will potentially cause a large drop in insurance for younger healthier patients - Continuous coverage: patient will be locked out of insurance for 6 months if they were not continuously enrolled - Strong support in the Senate bill for states to develop and submit ACA waivers 40 20
ACA Repeal Topic ACA Current Law BCRA Senate Proposal Amount of premium subsidy Income eligibility for subsidy Cost Sharing Subsidies INDIVIDUAL EXCHANGES Based on income and comparable Silver plan - 70% AV Available for 100% to 400% of the FPL Available for patients 100% to 250% of the FPL Changed. Based on income and comparable plan with 58% AV Changed. Available for enrollees up to 350% of the FPL Eliminated. - Reduced premium subsidies will yield $408Bn in savings - Reduced premium subsidies à more patients will enroll in plans with lower actuarial value plans OR will face increased premium costs for equivalent Silver plans - Higher out of pocket costs for: - Patients in plans with lower actuarial values - Patients with income <250% of the FPL who are no longer eligible for cost sharing subsidies - Expanded subsidies for people <100% of the FPL, but absent cost sharing subsidies and lower premium support model, likely will have little impact on coverage 41 ACA Repeal Topic ACA Current Law BCRA Senate Proposal Medicaid Eligibility Expansion Medicaid matching funds for newly eligible Federal govt. funding model for Medicaid MEDICAID Expanded eligibility to all adults up to 138% of the FPL Federal govt. covers 90% of cost for newly eligible Medicaid population Entitlement. Federal govt pays matching funds for eligible services Largely preserved. States that have previously expanded eligibility may continue Changed. Fed govt. Medicaid matching for newly eligible reduced to matching rate for other enrollees (~57%) Changed. States would be reimbursed on a per capita basis, - Increase costs for states for newly eligible à limit further expansion, potentially threaten viability of current expansion - Reduce future Medicaid expenditures from the federal government by $772Bn - Index Medicaid to consumer inflation after 2025, which is substantially lower than historical inflation 42 21
ACA Repeal The Senate proposal will phase in over time Immediate: Individual / Employer mandate Medicare tax on high income earners Changes to state based waiver process 2018: Health insurer funding for market stabilization and growth 2019: Continuous coverage requirement State funding for innovation program Age rating adjustment 2020 Premium subsidy adjustments Elimination of cost sharing subsidies Indexing future Medicaid growth on per capita basis with varied inflation adjustments by Medicaid subpopulation 2021-2024: Reductions in Medicaid matching funding for the ACA expansion 2025: Per capita Medicaid growth funding adjusted to non-medical consumer price index (CPI-U) for all Medicaid beneficiaries 43 ACA Repeal Notable conclusions Substantial reductions in both Medicaid and individual markets, with a significant impact on lower income populations Medicaid is converted from an entitlement to a fixed cost program Bulk of the ACA regulatory and administrative framework remains intact, but the relaxed rules for state waivers could change this over time Kaiser Family Foundation 44 22
Conclusions ACA has expanded coverage to millions of new consumers both through premium support and the Medicaid expansion Individual exchanges are plagued by increased premiums, but the current law limits financial impact of these costs to consumers eligible for subsidies Current proposals from the Senate and the House will Reduce premium subsidies Substantially curtail Medicaid growth Cut many revenue streams that financed the ACA Current repeal proposals do not change the broader volume to value transition that was in part financed by the ACA and now embedded within MACRA Kaiser Family Foundation 45 Questions 46 23