National Health Care Reform 2009 Daniel B. McLaughlin

A New Healthy America

The heavy hand of Government

Health Care Town Halls

Outline Issues in American health care today A systems view of health care Health Reform proposals Potential impact on: Consumers, patients Providers of Care Health Plans Government Questions and Discussion throughout Goal – How can I successfully participate in, and contribute to, this new system

Issues in American health care today

A systems view of health care

Health Reform proposals

Potential impact on:

Consumers, patients

Providers of Care

Health Plans

Government

Questions and Discussion throughout

Goal – How can I successfully participate in, and contribute to, this new system

The Best Health Care System in the World

The Best Medical Research Drug and Device Development Innovative Care Delivery Minute Clinic Electronic Health Record Health 2.0 Health Services Research Passionate and skilled caregivers Engaged Consumers and Patients

Medical Research

Drug and Device Development

Innovative Care Delivery

Minute Clinic

Electronic Health Record

Health 2.0

Health Services Research

Passionate and skilled caregivers

Engaged Consumers and Patients

Paradox Geographic Practice disparity Quality: over use, under use, misuse and safety Acute care model for Chronic disability Professions shortage Primary care Nursing Emerging public health problems Access problems: uninsured, underinsured, bankruptcy Insurance: pre existing conditions, deductibles & co-pays, lifetime limits Welfare payment for aged and disabled Most costly system in the World – 17% of GDP

Geographic Practice disparity

Quality: over use, under use, misuse and safety

Acute care model for Chronic disability

Professions shortage

Primary care

Nursing

Emerging public health problems

Access problems: uninsured, underinsured, bankruptcy

Insurance: pre existing conditions, deductibles & co-pays, lifetime limits

Welfare payment for aged and disabled

Most costly system in the World – 17% of GDP

Total National Health Expenditures (NHE), 2009–2020 Current Projection and Alternative Scenarios NHE in trillions Cumulative reduction in NHE through 2020: $3 trillion Note: GDP = Gross Domestic Product. Data: Estimates by The Lewin Group for The Commonwealth Fund. Source: Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way (New York: The Commonwealth Fund, Feb. 2009).

Editorial, Minneapolis Star Tribune , March 31, 2002

An Estimated 116 Million Adults Were Uninsured, Underinsured, Reported a Medical Bill Problem, and/or Did Not Access Needed Health Care Because of Cost, 2007 Medical bill/debt problem 17.7 million 10% Cost-related access problem 25.9 million 15% Source: S. R. Collins, J. L. Kriss, M. M. Doty, and S. D. Rustgi, Losing Ground: How the Loss of Adequate Health Insurance Is Burdening Working Families—Findings from the Commonwealth Fund Biennial Health Insurance Surveys, 2001–2007 (New York: The Commonwealth Fund, Aug. 2008). Adequate coverage and no bill or access problem 61.4 million 35% Uninsured anytime during the year or underinsured 17.6 million 10% Medical bill/debt and cost-related access problem 54.4 million 31% 177 million adults, ages 19–64

The Uninsured Source: NY Times 8-23-2009 Category Description Number (millions) Working Poor Income < $44,000 per year – family of 4 30 Better Off Income < $88,000 per year – family of 4 4.7 Young Adults Age 16 – 19, 50% from families with income < $16,000 13 Already Eligible Eligible for Medicaid, CHIP but don’t know or enrollment issues 11 Underinsured High deductibles, restrictions 25 Non Citizens Receive care in ERs 9.7 (6 estimated to be illegal)

Market Share of Two Largest Health Plans, by State, 2006 Note: Market shares are for the combined HMO+PPO product market. For MS and PA, shading represents shares of top three insurers in 2002–2003. Source: American Medical Association, Competition in Health Insurance: A Comprehensive Study of U.S. Markets, 2008 Update ; J. Robinson, “Consolidation and the Transformation of Competition in Health Insurance,” Health Affairs , Nov./Dec. 2004 23(6):11–24; D. McCarthy et al., The North Dakota Experience: Achieving High-Performance Health Care Through Rural Innovation and Cooperation (New York: The Commonwealth Fund, May 2008). AK HI 70% – 79% Less than 50% 50% – 69% 80% – 100% WA OR ID MT ND WY NV CA UT AZ NM KS NE MN MO WI TX IA IL IN AR LA AL SC TN NC KY FL VA OH MI WV PA NY MD ME VT NH MA RI CT DE DC CO GA MS OK NJ SD

Health Care Costs Concentrated in Sick Few— Sickest 10 Percent Account for 64 Percent of Expenses 1% 5% 10% 49% 64% 24% Source: The Commonwealth Fund. Data from S. H. Zuvekas and J. W. Cohen, “Prescription Drugs and the Changing Concentration of Health Care Expenditures,” Health Affairs , Jan./Feb. 2007 26(1):249–57. 50% 97% $36,280 $12,046 $6,992 $715 Distribution of health expenditures for the U.S. population, by magnitude of expenditure, 2003 Expenditure threshold (2003 dollars)

Figure 19. Variation in Per Capita Medicare Spending by Hospital Referral Region, 2000 Source: The Commonwealth Fund, from Eliot Fisher, presentation at Academy Health Annual Research Meeting, June 2006.

Questions - Comments

Why is change so Hard? Medicine Most intense science of all 10,000 new articles a year 17 years from research to practice (AHRQ) Business Predominately privately owned and operated Still cottage industry in many places Many interests don’t want change Market failures abound Compassion Hippocratic oath Technological Imperative It’s Personal Everyone is part of the system Strong feelings about my health, my family’s health, my doctor

Medicine

Most intense science of all

10,000 new articles a year

17 years from research to practice (AHRQ)

Business

Predominately privately owned and operated

Still cottage industry in many places

Many interests don’t want change

Market failures abound

Compassion

Hippocratic oath

Technological Imperative

It’s Personal

Everyone is part of the system

Strong feelings about my health, my family’s health, my doctor

Federal Reform 2009 Reduce cost growth, Improve access, and Improve quality and safety In a way that is acceptable to the American Public

The legislative process House Energy & Commerce House Ways & Means House Education & Labor Senate HELP Senate Finance Full Senate Full House Conference Committee Old & New Agencies

House Energy and Commerce Committee Final Mark up SEC. 411. ELECTION TO SATISFY HEALTH COVERAGE PARTICIPATION REQUIREMENTS EXCISE TAX WITH RESPECT TO FAILURE TO MEET HEALTH COVERAGE PARTICIPATION REQUIREMENTS.— ‘‘ (1) IN GENERAL.—In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee to whom such election applies, there is hereby imposed on each such failure with respect to each such employee a tax of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.”

Health Care – A Systems View Professional - Patient

Health System – Core Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx

Health System – Tools Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Facilities Medical Technology Health Care Workers Information Technology

Medical Technology Drugs Possible for rapid step advances – genomics Challenge of “me too drugs” High cost of research and development The rise of generics – 70% of prescriptions filled today Devices Continued improvement in materials and electronics Higher levels of information technology. Remote care soon possible End of the office visit? Reform $80 Billion in discounts over 10 years from drug companies The tradeoff – no direct negotiations with Medicare, extended patent protection Transparency on drug/device company relationships with providers

Drugs

Possible for rapid step advances – genomics

Challenge of “me too drugs”

High cost of research and development

The rise of generics – 70% of prescriptions filled today

Devices

Continued improvement in materials and electronics

Higher levels of information technology.

Remote care soon possible

End of the office visit?

Reform

$80 Billion in discounts over 10 years from drug companies

The tradeoff – no direct negotiations with Medicare, extended patent protection

Transparency on drug/device company relationships with providers

Facilities High capital investments Initial Ongoing upgrades Hospitals and LTC - highly regulated and inspected Lack of ease of movement of facilities makes markets non competitive Niche hospitals - Cardiac, orthopedics Reform – no change

High capital investments

Initial

Ongoing upgrades

Hospitals and LTC - highly regulated and inspected

Lack of ease of movement of facilities makes markets non competitive

Niche hospitals - Cardiac, orthopedics

Reform – no change

Workforce Over 400 health professions Licensure, credentialing, scope of practice Continuing education Current and predicted shortages Reform Improved payment for primary care services More funding for training primary care providers

Over 400 health professions

Licensure, credentialing, scope of practice

Continuing education

Current and predicted shortages

Reform

Improved payment for primary care services

More funding for training primary care providers

Information Technology Large opportunity Much of health care is information gathering or exchange Provides opportunities for use of Business intelligence tools Chronic Disease Management Reform $18 Billion for Health Information Technology (Stimulus bill) Poorly deployed compared to other industries Standards and Interoperability Electronic medical record High cost Implementation challenges 15% of MDs nationally now using

Large opportunity

Much of health care is information gathering or exchange

Provides opportunities for use of Business intelligence tools

Chronic Disease Management

Reform

$18 Billion for Health Information Technology (Stimulus bill)

Poorly deployed compared to other industries

Standards and Interoperability

Electronic medical record

High cost

Implementation challenges

15% of MDs nationally now using

Structure Midwest Integrated systems Mayo, Cleveland Clinic, Marshfield Clinic Most care in US provided by small groups of MDs, stand alone hospitals Quality/cost inversely related to size Reform Accountable Care Organizations

Midwest Integrated systems

Mayo, Cleveland Clinic, Marshfield Clinic

Most care in US provided by small groups of MDs, stand alone hospitals

Quality/cost inversely related to size

Reform

Accountable Care Organizations

Questions - Comments

Health System – Consumer Professional - Patient Illness Burden Consumer Behavior Tools – Dx & Rx Past Experience – Personal, networks Information Market/Clinical Financial resources & goals Knowledge

The Consumer Has historically been passive – “doctor knows best” Healthy Lifestyle opportunity Weight control, exercise, diet, safety, smoking, alcohol Chronic disease management – patient role Understanding costs and prices Direct to Consumer advertising Consumer Directed Health Care Shared decision making Reform Increased payment for health promotion and disease prevention Financial incentives to employers for wellness programs Payment for voluntary end of life counseling (living wills, advanced directives)

Has historically been passive – “doctor knows best”

Healthy Lifestyle opportunity

Weight control, exercise, diet, safety, smoking, alcohol

Chronic disease management – patient role

Understanding costs and prices

Direct to Consumer advertising

Consumer Directed Health Care

Shared decision making

Reform

Increased payment for health promotion and disease prevention

Financial incentives to employers for wellness programs

Payment for voluntary end of life counseling (living wills, advanced directives)

Health System – Illness Burden Professional - Patient Illness Burden Consumer Behavior Tools – Dx & Rx Genetics of the Individual Environment:- Air, food, water Economic Cultural Knowledge

Environment:- Air, food, water

Economic

Cultural

Illness Burden Chronic Disease is the most expensive segment of the system Obesity leading to diabetes and many other chronic diseases Positive results from demonstrations on chronic disease management Reform New funds for prevention research Payment for Chronic Disease Management Payment for Medical home Payment for Health IT to track chronic patients

Chronic Disease is the most expensive segment of the system

Obesity leading to diabetes and many other chronic diseases

Positive results from demonstrations on chronic disease management

Reform

New funds for prevention research

Payment for Chronic Disease Management

Payment for Medical home

Payment for Health IT to track chronic patients

Health System – Education & Research Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Primary Education Continuing Education Research

Education Workforce planning is a challenge 125 Academic Medical Centers in the United States Much of the funding comes through Medicare Many physicians leave medical school with debts over $100K – hence pressure to go to high paying specialties Reform Revised Medicare funding for training to emphasize primary care Increased funding for nursing education

Workforce planning is a challenge

125 Academic Medical Centers in the United States

Much of the funding comes through Medicare

Many physicians leave medical school with debts over $100K – hence pressure to go to high paying specialties

Reform

Revised Medicare funding for training to emphasize primary care

Increased funding for nursing education

Research More medical research done in US than the rest of the world combined Challenge of moving new discoveries into practice NIH has agenda set by interest groups Very little funding or prestige for research on existing practices Evidence Based Medicine – Use of best practices could save 30 – 40% Reform Funding for Comparative Effectiveness Research (Stimulus) Cannot be used to direct payment policy

More medical research done in US than the rest of the world combined

Challenge of moving new discoveries into practice

NIH has agenda set by interest groups

Very little funding or prestige for research on existing practices

Evidence Based Medicine – Use of best practices could save 30 – 40%

Reform

Funding for Comparative Effectiveness Research (Stimulus)

Cannot be used to direct payment policy

Questions - Comments

Health System – Financing Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Financing Sources & Structure Individuals Employers Government Financial resources & goals

Employers Remain Primary Sponsor of Coverage Distribution of 307 Million People by Primary Source of Coverage Employer Direct 164m 53% Uninsured 49m 16% Medicare 39m 13% Medicaid 42m 14% Medicare 41m 13% Individual Direct 14m 5% Employer Direct 55m 18% Total Employer 164m (53%) Total Individual 14m (5%) Source: The Lewin Group, The Path to a High Performance U.S. Health System: Technical Documentation (Washington, D.C.: The Lewin Group, 2009).

Financing Today The world’s most complex system Up to 4% of GDP in transaction processing Non standard payment system by most payers with Medicare as the most common model Payment for procedures not outcomes Distorted payment incentives by disease – e.g. cardiac surgery vs. psychiatry Price transparency and understanding is a challenge

The world’s most complex system

Up to 4% of GDP in transaction processing

Non standard payment system by most payers with Medicare as the most common model

Payment for procedures not outcomes

Distorted payment incentives by disease – e.g. cardiac surgery vs. psychiatry

Price transparency and understanding is a challenge

Insurance Reform Mandates insurance: both employers and individuals Subsidies available for both low income individuals and small business Expands Medicaid income limits – state match held harmless Standardized benefit levels Eliminates pre existing condition, lifetime caps, recissions and other insurance practices Simplified and standardized billing

Mandates insurance: both employers and individuals

Subsidies available for both low income individuals and small business

Expands Medicaid income limits – state match held harmless

Standardized benefit levels

Eliminates pre existing condition, lifetime caps, recissions and other insurance practices

Simplified and standardized billing

The Exchange

Exchange Issues Benefit sets and pricing Two Options beyond private insurance The “Public Option” Medicare clone? Payment rates to providers Lower overhead (marketing, profits) Could crowd out private insurance due to lower rates and eventually become the “Single payer” The Co-op Option Membership elects board and selects managers Health Partners, Group Health Co-op of Puget Sound Can hire private insurance companies as managers

Benefit sets and pricing

Two Options beyond private insurance

The “Public Option”

Medicare clone?

Payment rates to providers

Lower overhead (marketing, profits)

Could crowd out private insurance due to lower rates and eventually become the “Single payer”

The Co-op Option

Membership elects board and selects managers

Health Partners, Group Health Co-op of Puget Sound

Can hire private insurance companies as managers

Financing Strategy Medicare Advantage –Health Plans Drug Discounts Hospital Inflation (-1.5%), Re- admits, DSH Income Taxes - > $500,000 ? Taxes – Cadillac Health plans ? Subsidies for individuals and small business Medicaid eligibility buy down MD fees – repeal SGR Fix 50% of donut hole $ One Trillion 4% of total NHE

Bending the cost curve Competition between Health Plans New payment systems Bundled payments Increased payment for primary care/prevention P4P and penalties for hospital readmissions Payment to ACOs Geographic Adjustment (?) Comparative effectiveness research MedPac on steroids - IMAC Less Likely Tort Reform (Pilots?) Consumer Directed Health Care Direct insurance rate regulation

Total Health System Model Professional - Patient Illness Burden Consumer Behavior Knowledge Tools – Dx & Rx Facilities Medical Technology Health Care Workers Financing Sources & Structure Information Technology Primary Education Individuals Employers Government Continuing Education Past Experience – Personal, networks Information Market/Clinical Genetics of the Individual Environment:- Air, food, water Economic Cultural Financial resources & goals Research

Environment:- Air, food, water

Economic

Cultural

Questions - Comments

Reform’s Impact on Stakeholders

Insurance Companies Gain 50 million new customers Cease most underwriting practices Participate in National insurance exchange No change with large employers Agree to standardization Benefits Payment systems Competition With Public Option or Co-ops (?) To consumers in addition to empoyers

Gain 50 million new customers

Cease most underwriting practices

Participate in National insurance exchange

No change with large employers

Agree to standardization

Benefits

Payment systems

Competition

With Public Option or Co-ops (?)

To consumers in addition to empoyers

Government Federal Enforce Insurance mandate Implement new Medicare payment policies (IMAC?) Implement Insurance Exchange Implement Public Option (?) Continue to fund HIT, Comparative Effectiveness Research Raise taxes States Expand Medicaid Form Co-op health plans (?)

Federal

Enforce Insurance mandate

Implement new Medicare payment policies (IMAC?)

Implement Insurance Exchange

Implement Public Option (?)

Continue to fund HIT, Comparative Effectiveness Research

Raise taxes

States

Expand Medicaid

Form Co-op health plans (?)

Direct providers of Care Reduced uncompensated care Bundled payments Incentives to form larger groups and structures Increased transparency and reporting Reduction in growth of hospital payments Remove SGR for physicians Incentives to purchase HIT Higher payment for primary care Changes in payment due to geographic variation (?)

Reduced uncompensated care

Bundled payments

Incentives to form larger groups and structures

Increased transparency and reporting

Reduction in growth of hospital payments

Remove SGR for physicians

Incentives to purchase HIT

Higher payment for primary care

Changes in payment due to geographic variation (?)

Consumers Negatives Insurance mandate Higher taxes for some Access issues to primary care Positives Improved access to health insurance Lowering of health care inflation 50% reduction in Medicare donut hole Improved information about system and provider performance

Negatives

Insurance mandate

Higher taxes for some

Access issues to primary care

Positives

Improved access to health insurance

Lowering of health care inflation

50% reduction in Medicare donut hole

Improved information about system and provider performance

Questions - Comments

“ Americans always do what is right, but only after trying everything else.” Winston Churchill

The Best Health Care System in the World

Future Sessions 2. Sept 22 - Health care reform – Minnesota and the Nation 3. Sept 29 - Medicare, Medicaid and private insurance – unscrambling the web of complexity 4. Oct 6 - Why are costs so high and where does the money go? 5. Oct 13 – Health 2.0 – the next wave 6. Oct 20 – Assuring quality in health care – hospitals, long term care and home health 7. Oct 27 - Do it yourself healthcare – The Healthcare Saving Account 8. Nov 3 – No session 9. Nov 10 - The Politics of Health care 10. Nov 17 - Final Wrap up session. This will be a facilitated group dialogue with the goal of discussing and indentifying the consumer’s role in successful implementation of a new American healthcare system.

2. Sept 22 - Health care reform – Minnesota and the Nation

3. Sept 29 - Medicare, Medicaid and private insurance – unscrambling the web of complexity

4. Oct 6 - Why are costs so high and where does the money go?

5. Oct 13 – Health 2.0 – the next wave

6. Oct 20 – Assuring quality in health care – hospitals, long term care and home health

7. Oct 27 - Do it yourself healthcare – The Healthcare Saving Account

8. Nov 3 – No session

9. Nov 10 - The Politics of Health care

10. Nov 17 - Final Wrap up session. This will be a facilitated group dialogue with the goal of discussing and indentifying the consumer’s role in successful implementation of a new American healthcare system.

Thank You May the road rise up to meet you. May the wind be always at your back. May the sun shine warm upon your face; the rains fall soft upon your fields and until we meet again, may God hold you in the palm of His hand. Dan McLaughlin [email_address] 651-962-4143