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Health Reform Update


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Dr. Kevin Fickenscher, Chief Strategy and Development Officer, Dell Healthcare Services, presented this on Wednesday, May 19, 2010 to highlight the recently passed health reform legislation. …

Dr. Kevin Fickenscher, Chief Strategy and Development Officer, Dell Healthcare Services, presented this on Wednesday, May 19, 2010 to highlight the recently passed health reform legislation.

Recognizing the important impact this sweeping healthcare reform law will have on healthcare providers and insurance companies, Dell Services felt it was critical to provide you with a detailed overview of how this legislation will change your operations and business models.

Participants will learn:
• How the healthcare reform bill impacts payers and providers
• Anticipated grants and incentive payments
• What the new regulations to focus on are
• Impacts health reform will have on EHR implementations
• Industry trends

President Barack Obama signed The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148) into law on March 23, 2010.

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  • 1. Health Reform Update May 2010 Send questions to Twitter: #HCRImpact or Email:
  • 2. Health Reform Update U.S. House President President Representatives Obama signed Senate passed March 21 March 23 March 24 Health Reform March 30 Obama passed Health Health Reform signed final bill Reform into law. Bill $940 billion during the next decade, while reducing the deficit by $143 Cost billion in the first ten years (2010- 2019) and by $1.2 trillion in the second ten years. Note: The CBO released a report last week claiming the overall cost of the legislation would rise $115 billion. Reaction 20 States have filed lawsuits in federal court arguing that the federal government has no right to force their citizens to buy medical insurance Coverage 32 million Americans will have insurance coverage 2 Confidential Healthcare Services
  • 3. Extending Coverage to the Uninsured Coverage 37M 31 M House Bill Senate Bill *Note: These are the original House and Senate CBO numbers prior to the 2010 reconciliation process. Healthcare Services
  • 4. Cost of Covering the Uninsured * Note: According to the Congressional Budget Office (CBO) the Senate Committee on Health, Education, Labor and Pensions does not have jurisdiction over certain areas, which is why it covers so few uninsured and does not raise taxes Healthcare Services
  • 5. Breakdown Of The Numbers Healthcare Services
  • 6. Providers (1/4) Key provisions in Health Reform have an immediate impact on your practice and your patients • 10% incentive payments for primary care physicians (2011–16) • 10% incentive payments for general surgeons performing major Medicare surgery in health professional shortage areas (2011–16) payment • 5% incentive payment for mental health services (2010) changes • Medicare quality reporting incentive payments extended for participants of the Physician Quality Reporting Initiative • Increases Medicaid payments to Medicare levels for PCPs (internists, family physicians, and pediatricians) starting in Medicaid 2013 and 2014 payment changes • 100% of federal funding to states for increased payments to Primary Care Physicians to increase rates to Medicare for 2013-2014 6 Confidential Healthcare Services
  • 7. Providers (2/4) Impact • Reductions in Medicare offset by increased Medicare cuts = $500 billion via payment reductions to number of insured individuals hospitals, long term care facilities, psychiatric hospitals, • Providers incentivized for improved quality and inpatient rehabilitation facilities. Also includes (e.g., outcomes, patient satisfaction, etc.) reductions for preventable readmissions • Intent = move the reimbursement system towards an outcomes-based model Medicare and Medicaid reimbursement rates decrease over time: • Government reimbursement decrease as • Decrease in hospital market basket inflation updates more uninsured get subsidies through the insurance exchanges or enroll in Medicaid • Reduction in Disproportionate Share Hospital (DSH) programs payments to hospitals • Effects may not be equal - hospital “winners • Increases in Medicaid and Medicare rates paid to and losers” primary care physicians Administration Simplification with national rules will be developed and implemented between 2013 and 2016 to • Cost reduction for all providers regardless of standardize and streamline health insurance claims payer type processing requirements • Newly insured may not continue to seek care at Healthcare coverage = 94% of Americans through the traditional safety net hospitals and clinics. insurance exchanges and expansions of existing • Government payment rates will have increasing government programs influence on provider’s payer mix so they should align operational costs with these payments 7 Confidential Healthcare Services
  • 8. Providers (3/4) Focus on fraud and abuse to reduce waste Durable medical State Medicaid Federal and state Increased penalties and equipment (DME) database sharing and use funding States must terminate individuals and of a national provider Requires a 90-day withhold New penalties for period to conduct organizations from their identifier individuals who know of an enhanced oversight Medicaid programs if they CMS will establish a national overpayment or who make were terminated from healthcare fraud and abuse false statements on federal Medicare or another state’s data collection program for health program Medicaid program reporting adverse actions applications or contracts taken against healthcare providers, suppliers, and practitioners. They will then submit information on the actions to the National Practitioner Data Bank (NPDB) Impact These programs + expansion of Recovery Audit Contractors (RAC) audits = more provider compliance and oversight issues to manage 8 Confidential Healthcare Services
  • 9. Providers (4/4) Pilots Creates Independence At Establish a hospital value- Medicare pilot program to HHS will award five-year Home demonstration based purchasing program develop and evaluate a grants to states in order to program to provide Medicare in Medicare to pay hospitals bundled payment for: help create, implement, and beneficiaries with primary based on performance on • Acute and inpatient analyze medical liability care services in their home, quality measures and hospital services reform programs beginning allowing health professionals extend the Medicare in 2011 • Physician services to share in any savings for: physician quality reporting initiative • Outpatient hospital • Reduced preventable services hospitalizations • Post-acute care • Readmissions services • Improved health outcomes and efficiency • Reduced cost • Increased patient satisfaction Impact Providers should review all of the new pilots to see which ones may work for their organizations and be ready to respond if the effort is mandated for all providers. Hospitals that can align interests with physicians will be rewarded under these new programs 9 Confidential Healthcare Services
  • 10. Transparency – Provider Information Public disclosure leads to performance improvement Percentage of hospitals with quality improvement activities in reducing hemorrhage following poor results in OB performance 100 80 60 3X 40 88% 3X 20 27% 9% 0 Public-report Private-report No-report Reference: Hibbard et al. Health Affairs 2003:22(4):84 Healthcare Services
  • 11. Provider Timeline (1/3) 2015 2014 2013 2012 2011 2010 • Physician-owned hospital • Demonstration grants for medical malpractice reform Medicare provider agreements begin must be in effect prior to Dec. • 10% Medicare bonus for primary care and general 31 surgeons in a health professional shortage area • Tax-exempt hospitals must • Innovation Center for CMS established conduct community needs assessment and have certain • Prohibits federal Medicaid payments to states for services charity care policies in place related to hospital-acquired conditions • Federal funding of Medicaid medical home program • New funding for community health centers, school-based clinics, and trauma center program 11 Confidential Healthcare Services
  • 12. Provider Timeline (2/3) 2015 2014 2013 2012 2011 2010 • Medicare readmission reductions • Financial relationship disclosure required begin between providers and drug manufacturers and suppliers • Medicare Value-based Purchasing (VBP) program begins • Medicare bundled payment demonstration project begins • Medicaid bundled payment demonstration projects begin • Medicaid primary care payment must be at least 100% of Medicare payment 12 Confidential Healthcare Services
  • 13. Provider Timeline (3/3) 2015 2014 2013 2012 2011 2010 • Independent Payment Advisory Board (IPAB) submits • Reduce Medicare first recommendation on reducing Medicare payments for spending growth hospital-acquired conditions by 1% • Medicare DSH payments reduced by 75% and then modified based on uninsured and uncompensated care • Expand Medicaid to 133% FPL • Reduction in states’ Medicaid DSH allotment 13 Confidential Healthcare Services
  • 14. Medicare Spending Per Enrollee and Mortality Rate by State, 2003 Medicare Spending per Enrollee $4,500 $5,500 $6,500 $7,500 $8,500 2.5 Mortality Rate of Medicare Enrollees HI 3.5 MN CO AK 4.5 OR UT WY VT NH AZ DC DE NV FLMD CA ID NM WI NY WA VA SC KS MI CT IA SD MT US ND NE ME IN WV TX MA NJ NC GA KY OH 5.5 AR MS MO AL PA LA TN OK RI 6.5 Source: The Commonwealth Fund, calculated from The Dartmouth Atlas of Health Care, Healthcare Services
  • 15. Payers (1/8) $466 billion for subsidies $434 billion for to fund insurance for 32 million Americans will expansion of Medicaid and individuals and families up have insurance coverage Children's Health Insurance to 400 percent of the Plans enrollment poverty level ($18,310 for family of 3) Insurance companies can Encourages companies to no longer exclude people provide health coverage for $60 billion in new fees on early retirees between 55 insurance companies (2014- from coverage due to 2018) pre-existing and 64 through tax conditions subsidies (expires in 2014) Payments to insurers offering Medicare Compact with states to Premium increases highly Advantage services are allow cross-border policies regulated and reported by insurance policies. annually frozen at 2010 levels 15 Confidential Healthcare Services
  • 16. Payers (2/8) Policies that affect products and coverage take effect quickly … Medical Loss Ratio Mandatory coverage Ban on lifetime Restrictions on Guaranteed issue (MLR) requirements - for preventative limits and ratings - Premiums in and ban on pre- Beginning in 2010, services, primary care, restrictions on the individual and existing condition Payers will have to and emergency annual limits – small group markets exclusions - Payers report the amount they services - Payers must Payers can no longer may vary only by will be prohibited spend on medical pay for immunizations put a lifetime dollar family structure, from excluding services, known as as well as infant, child, limit on the insurance geography, the patients with pre- MLR. Large group and adolescent benefits covered by a actuarial value of the existing conditions or insurance companies preventive services plan, if those services benefit, age, and instituting policies must have an MLR of at without any cost- are deemed essential tobacco use that restrict eligibility least 85% and small sharing required from health benefits based on an group and individual members. Additionally, individual’s current market insurance health plans must cover health, medical companies must have women’s preventive history, or indicators an MLR of 80%. If they care and screenings. of future health. They do not, they must Payers can no longer cannot bar customers provide a rebate to require enrollees to from renewing plans their enrollees have prior authorization and cannot rescind before emergency enrollee coverage services are covered or because of a increase cost-sharing member’s health for emergency service, status whether provided by in- network or out-of- network providers 16 Confidential Healthcare Services
  • 17. Payers (3/8) Policies that affect products and coverage take effect quickly … Limits on executive Consumer coverage Temporary high-risk pool - Other requirements on compensation - Payers will navigation assistance - Within 90 days of health insurance only be able to deduct the Within 60 days of enactment, the companies effective six first $500,000 of enactment, Payers are government will establish a months after enactment: compensation to any required to develop and high-risk insurance pool for • Coverage of primary officer, director, or distribute a standard format those who are uninsured care and emergency employee of the health to present coverage and have pre-existing services insurance provider options. By July 1, 2010, the conditions. The high-risk • Dependent coverage for government will post a pools are a stop-gap children up to age 26 for website to help consumers measure that will terminate all individual and group identify health coverage when the exchanges open policies options as well as prices for in 2014 • Premium review process medical services by the Secretary of the HHS Impact State and federal oversight of plans will increase, and payers will have to act quickly to make sure that their plans are compliant with the new regulations 17 Confidential Healthcare Services
  • 18. Payers (4/8) Insurance exchanges • Individual enrollment in the insurance exchanges is expected to be more than 20 million. • Plans offered in the exchanges would have to provide a basic coverage plan, which is yet to be defined by HHS. • It prohibits out-of-pocket limits from being greater than the health savings account (HSA) limits, and, for the small group market, limits deductibles to $2,000 for individuals and $4,000 for families • Payers must offer a catastrophic plan that would cover essential health benefits and at least three primary care visits, and require cost sharing up to the HSA out-of-pocket limits. • Individual and small-group plans offered in the exchanges would have to fall into one of four tiers based on the percentage of costs paid for by the plan: › Bronze: 60% › Silver: 70% › Gold: 80% › Platinum: 90% • Participating Payers would have to offer plans at the silver and gold level. • Payers have to disclose in plain language information about payment, enrollment, denials, rating practices, out-of-network cost-sharing, and enrollee rights, and comply with marketing, choice of providers, reasonableness of premium increases, and other quality criteria set by the Secretary of HHS 18 Confidential Healthcare Services
  • 19. Payers (5/8) Insurance exchanges - • Plans will be rated on a system designed by the Secretary of HHS. States could set up additional criteria for their own exchanges, but they would be required to fund the cost of administering and overseeing these additional criteria. • Payers could continue to offer plans outside the exchanges, but only current enrollees will be grandfathered in to these. Impact Participating health insurance companies will have new state and federal regulations to cope with in the exchanges. Payers may consider standardizing their plans along the exchange’s four tier structure and compete more on price and service. According to CBO, enrollment in individual plans outside of the exchange will decline by 5 million below what would have been expected in 2016 and employer coverage will fall by 3 million 19 Confidential Healthcare Services
  • 20. Payers (6/8) Mandates will increase coverage • By 2014, individuals will be required to maintain a minimum level of coverage for at least nine months of the year. – Individual Penalty: › $95 in 2014 › $325 in 2015 › $695 in 2016 – Household Penalty: › 1% of income in 2014 › 2% in 2015 › 2.5% in 2016 and thereafter (Exemptions are allowed for religious objectors, incarcerated individuals, members of Indian tribes, those without coverage for less than three months, and undocumented immigrants) • Penalties are imposed on employers that do not provide coverage for full-time employees, as well as on employers whose coverage is inadequate or unaffordable for low-paid employees, beginning in 2014. (Employers with fewer than 50 full-time employees are exempt from this penalty) Impact The employer mandate will entice some companies to obtain coverage, although some employers may find it more cost effective to pay the penalty. Payers will need to scale their IT capabilities, including Web portals, to prepare for a larger volume and market products 20 Confidential Healthcare Services
  • 21. Payers (7/8) Industry fees and taxes • Fees do not apply to companies with total net premiums of $25 million or less. – $8 billion in 2014 – $11.3 billion in 2015 – $11.3 billion in 2016 – $13.9 billion in 2017 – $14.3 billion in 2018 and beyond • Provides a limited exemption for certain not-for profit health insurance companies with MLRs of 90% or more in the individual, small group, and large group markets and overall MLRs of at least 92%. • Beginning in 2018, health insurance companies also would be assessed a 40% excise tax on plans above the threshold of $10,200 for individual coverage and $27,500 for family coverage Impact Plan excise tax may be avoided if plans are redesigned to decrease benefits so premiums are below the dollar threshold. Industry fees cannot be avoided. Payers must reduce cost by focusing on administrative expenses 21 Confidential Healthcare Services
  • 22. Payers (8/8) Medicare Advantage payment cuts • Payments to Medicare Advantage plans are frozen in 2011, and cuts begin Impact in 2012. Most health insurance • Beginning in 2011, Medicare Advantage payments will begin a four-year companies will reduce phase-in based on the average of the bids from those plans in each market. benefits or increase Government payments to Medicare Advantage will be cut by $132 billion over premium requirements, 10 years. and some may withdraw from certain markets • There are performance bonuses for care coordination, care management and quality rankings Administrative simplification • HHS will adopt uniform standards and operating rules for electronic transactions between providers and payers governed by the Health Insurance Impact Portability and Accountability Act (HIPAA). Payers will make • Payers must adopt a single set of operating rules for claims status and large investment in eligibility verification, electronic funds transfer for healthcare payment and Health IT remittance, health claims and encounter information, enrollment and disenrollment, premium payments, referral certification, and authorization. (2013) • Payers that are not able to document compliance may be fined up to $1 per covered life per day 22 Confidential Healthcare Services
  • 23. Independent Payment Advisory Board (IPAB) • 15-member panel to extend Medicare solvency and reduce spending growth through the use of a spending target system and fast-track legislative approval process. • By April 30 of each year—beginning in 2013—CMS’ actuary will project whether Medicare's per-capita spending growth rate in the following two years will exceed a targeted rate. • Initially, the targeted rate of spending growth will be based on the projected five-year average percentage increase in the Consumer Price Index • Beginning in 2019, the target will be set at the nominal gross domestic product per capita + 1.0 percent. If future Medicare spending is expected to exceed the targets, the IPAB will propose recommendations to Congress and the president to reduce the growth rate. The first IPAB proposal will be on January 15, 2014 • If Congress fails to pass legislation by August 15 each year to achieve the required savings, the IPAB's recommendations will automatically take effect. • The IPAB is prohibited from submitting proposals that would ration care, increase revenues, change benefits, modify eligibility, increase Medicare beneficiary cost- sharing, or change the beneficiary premium percentage or low-income subsidies under Part D. Healthcare Services
  • 24. Payer Timeline (1/3) 2018 2014 2013 2012 2011 6 months 2010 after enactment • Ban on pre-existing condition exclusions for children • Small business tax credits • Ban on lifetime limits and restrictions on annual limits • Temporary reinsurance program begins • Standard format for presenting information on coverage options (60 days after enactment) • Temporary high-risk insurance pool implemented (90 days after enactment) • Medicare Part D drug discount 24 Confidential Healthcare Services
  • 25. Payer Timeline (2/3) 2018 2014 2013 2012 2011 6 months 2010 after enactment • Minimum Medical Loss Ratio • Medicare Advantage • Plan administration (MLR) goes into effect reimbursement cuts begin simplification rules for and bonus payments eligibility and claims • Medicare Advantage rates implemented status go into effect freeze until 2012 • Comparative effectiveness • FSA contribution limit • Community Living Assistance research fee begins $2,500 per year and then Services and Supports (CLASS) grows by cost-of-living insurance begin adjustments 25 Confidential Healthcare Services
  • 26. Payer Timeline (3/3) 2018 2014 2013 2012 2011 6 months 2010 after enactment • Health insurer industry fee begins • Tax on high-value employer-provided • Guaranteed issue for individual plans, rating bands, and risk health insurance first adjustment requirements go into effect applies • Individual and employer mandates begin • Health insurance state-based exchanges begin • All exchange plans required to offer essential benefits 26 Confidential Healthcare Services
  • 27. And, Finally – Innovation • Delivery System: Allows provider organizations organized as Accountable Care Organizations to participate in Medicare savings via demonstration of quality and cost efficiency. • Innovation: Creates Center for Innovation in CMS to sponsor innovations in care delivery that reduce cost and improve quality. • Value-based Purchasing: Creates Value-Based Purchasing Program in Medicare to fund quality efforts in hospitals to 2012 with expansion to skilled nursing, home health, and ambulatory surgery centers in October 2012. • Quality: Create national strategy for healthcare quality improvement, with report to Congress by January 2011. Healthcare Services
  • 28. And, Finally – Innovation • Focus: Implement comparative clinical effectiveness program over 10 years › Align incentives with performance › Enhance transparency of safety, quality and costs › Deploy clinical information technology › Enhance the health care workforce’s skills › Increase supply of PCP and eliminate inappropriate regional variation • Connect Healthcare Providers: Create Community-based Collaborative Care Network to support collaboratives and consortiums Healthcare Services
  • 29. And, Finally – Innovation • Bundled Payments: Establishes a pilot program to develop and evaluate bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care that begins three days prior to a hospitalization and spans 30 days following discharge. • Medical Home: Creates a demonstration program to provide high-need Medicare beneficiaries with primary care services in the home and allow health professionals to share in any savings for reduced preventable hospitalizations, readmissions, improved health outcomes, improved efficiency, reduced cost, and increased patient satisfaction. Healthcare Services
  • 30. So, What Does It All Mean? • Anticipate: › Consolidation of the hospital segment › Consolidation of the physician segment • Increased pressure of the industry to “perform” – efficiency and effectiveness will become the watchwords • Information exchange results in: › Open structures for sharing among providers › Driver for standards and semantic interoperability › Consumerism • Data analytics will become increasingly important • Health reform will continue at the federal level, but take on much more significance at the state level 30 Confidential Healthcare Services
  • 31. Thank You Dr. Kevin Fickenscher Chief Strategy and Development Officer Dell Healthcare Services Follow me on Twitter: @MDKev 31 Confidential