Health Care Reform Proposals Including the President’s Plan


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Michael Bertaut, Senior Healthcare Intelligence Analyst for Blue Cross Blue Shield of Louisiana provides an update on Healthcare Reform efforts including a review of the President's Plan released on February 22nd.

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  • All these components are in both House and Senate reform bills, and are largely agreed upon by both Houses.
  • These issues are still very much “swing” issue on reform, and whether the House or Senate version dominates will determine which become law. Their effect on carriers can be very different from each other.
  • Health Care Reform Proposals Including the President’s Plan

    1. 1. Health Care Reform Proposals Including the President’s Plan A Product of Marketing Development Presented by: Michael Bertaut Senior Healthcare Intelligence Analyst February 23, 2010
    2. 2. How Government Insured Squeeze Medicine Note: Payment-to-cost ratios indicate the degree to which payments from each payer covers the costs of treating that provider’s patients. Data are for community hospitals and cover all hospital services. Imputed values were used for missing data (about 35% of observations). Most Medicaid managed care patients are included in the private payers’ category. Source: Adapted from the American Hospital Association and Avalere Health TrendWatch Chartbook 2007: Trends Affecting Hospitals and Health Systems Hospital Payment-to-cost Ratios for Medicare, Medicaid and Private Payers 1995-2007 Break Even (Payment = Cost) In Louisiana, Medicaid averages covering 83% of hospital costs. At BCBSLA we have hospitals at 185% of costs. Current Reform Data SGR Limits Enacted
    3. 3. The Uninsured: Who are They? Current Reform Data “ 46.3M Uninsured @ the end of 2008, Census 9/10/10” 10 September 2009 Census Bureau Conference Call: 2008 Update on Poverty and the Uninsured
    4. 4. How Your Carrier Spends Premiums. BCBSLA Audited Financial Results FY 2008 National Averages Adapted from Centers for Medicare and Medicaid Services (2008) 33 ¢ Hospital 30¢ Physician and Clinical Services 10¢ Admin Cost Including Taxes, Commissions 13 ¢ Prescription Drugs 6 ¢ Dental Services 2¢ Other Professional Services 1 ¢ Nursing Home 2¢ Home Health Care $783M; 37% $656M; 31% $338M; 16% In 2008, BCBSLA collected $2.115B in risk premiums, broken out like this: $338M; 16% 3¢ Future Claims Reserves/Profits NATIONAL AVERAGES 84+% of Premiums Went to Medical in 2008 7% Salaries/Admin 5% Commissions 2% Reserves 2% Taxes Current Reform Data
    5. 5. The President’s Proposal <ul><li>Targeted set of changes to Original Senate Bill (not manager’s amendment) </li></ul><ul><li>Suggest adjustments to make more palatable to House, plus a few others. </li></ul><ul><li>Focused on “agreed upon” principles, controversial aspects will look more like Senate than House Bill. </li></ul><ul><li>Special Nebraska deal gone, Louisiana deal probably gone too. </li></ul>Current Reform Data
    6. 6. The President’s Proposal <ul><li>New federal “Health Insurance Rate Authority” will supersede state administration of health insurance rates. </li></ul><ul><li>“ Grandfathered” plans will not be protected, will be required to add new insurance rules immediately including dependant coverage to age 26, no rescission, federal rate review, federally-mandated appeals processes. In 2014, must add no pre-x, G.I., no benefit limits. In 2018, all new first dollar tests must be included. </li></ul>Current Reform Data
    7. 7. The President’s Proposal <ul><li>Individual Mandate included, but weaker than either House or Senate proposals. </li></ul><ul><li>Reverts the Medicare Part D “doughnut hole” to regular cost-sharing by 2020. </li></ul><ul><li>Keeps fees on Health Insurers ($6.7B/year), Drug Companies ($2.3B/year) and Device Manufacturers ($2.0B/year) but delays implementation until 2014. </li></ul><ul><li>Makes federal subsidies to those below 400% of FPL more lucrative. </li></ul>Current Reform Data
    8. 8. Subsidy Limits in PBO Proposal Current Reform Data Average Family of 4 Premium Upon Implementation estimated to be $13,500/year. A Family making $55,000 cannot pay more than 8.1% of income for health insurance. Thus they will receive $13,500 - $4,455 = $9,045 in Federal Aid to purchase Health Policy, 67% Subsidy.
    9. 9. Cost-Share Limits in New Proposal Current Reform Data Fed will subsidize Cost-Sharing so that no one below 400% of FPL can have an actuarial value plan below 70%. Thus, our $55k family Will never pay more than 27% of all medical expenses out of pocket (100-73%) no matter what plan they buy, as long as they purchase through the exchange.
    10. 10. The President’s Proposal <ul><li>Pays 100% of Medicaid expansion for 2014-17; 95% for 2018-19, 90% afterwards </li></ul><ul><li>Require Medicare taxes of 2.9% to all unearned income (rent, investments, etc) on all individuals over $200k/250k family. </li></ul><ul><li>10-Year Cost north of $950B </li></ul><ul><li>Keep “Cadillac Plan” tax, but raise thresholds to $10,200 & $27,500, delay until 2018. </li></ul><ul><li>Exchanges “seem” to be state-based, like in Senate Bill. </li></ul>Current Reform Data
    11. 11. Agreed upon by Both Houses <ul><li>Medicaid will be dramatically expanded to at least 133% of FPL, no means testing. </li></ul><ul><li>Insurance purchases will be subsidized for all who make less than 400% of FPL. </li></ul><ul><li>There will be government run exchanges where insurance will be sold with subsidies verified and managed by the IRS. FQHBP established. </li></ul><ul><li>Insurance reform will include no pre-existing conditions, no medical underwriting, limited age underwriting, guaranteed issue insurance, regulated medical loss ratios, dependants on parent’s coverage to age 26. </li></ul><ul><li>Large fees on insurance carriers, pharma, device makers. </li></ul>Current Reform Data
    12. 12. Disagreements V House & Senate <ul><li>Will Exchange be part of Federal Agency (HB) or operated by the states (SB)? </li></ul><ul><li>Will the marginal FIT rate go up 5.4% (HB), or will a 40% excise tax be put on high cost health plans(SB)? </li></ul><ul><li>Will there be an Individual Mandate and will it have teeth? </li></ul><ul><li>Will MLR requirements be 85% across the board (HB) or 80% on small group/individual and 85% large group (SB). Both require rebates. </li></ul><ul><li>Will businesses be forced to offer insurance to their employees at $250k of payroll (HB) or at 50+ FTE (SB) . </li></ul><ul><li>Abortion Language </li></ul>Current Reform Data
    13. 13. Premium Drivers in the PPACA (85% of Premiums Go to Medical) <ul><li>Individual “Suggestion” </li></ul><ul><li>Guaranteed Issue </li></ul><ul><li>No Medical Underwriting </li></ul><ul><li>No Pre-existing conditions </li></ul><ul><li>$10B Health Insurance “Fee” </li></ul><ul><li>$4-500B in Medicare Cuts over 10 years </li></ul><ul><li>40% Excise Tax on high-end plans </li></ul><ul><li>Very Rich Minimum Plans Required </li></ul>Current Reform Data Not Considered: New Emergency Room Network Rules
    14. 14. Family Premiums Rise Much Faster With Reform: PWC Study Current Reform Data Impact of Health Insurance Reform on the Cost of Private Premiums : Price Waterhouse-Coopers +$1,700 +$2,900 +$4,000 Reform will Cost Average Family $20,000 More Than Doing Nothing Differentials
    15. 15. Contact Information: [email_address] “Let’s see, I’ve been called a Villain (Pelosi), Immoral (Reid), Shark (Rangel), Untrustworthy (Boxer), Needs to be Kept Honest (Obama), Obstructionist (Waxman), Evil Profiteer (Pelosi again), Political Terrorist (Pelosi Again), Traitor (Hoyer), fanatic Aryan Support Group (Whitehouse) and “just like a supporter of slavery”(Harry Reid).”
    16. 16. To Understand the Current System, Identifying the Actual Consumers is Important Healthcare Expenses Incurred by Percentiles of U.S. Population The cost burden of disease is high, 5 percent of the U.S. population accounts for nearly half of all U.S. healthcare expenditures which total $2.2 Trillion in 2008. Percentage of U.S. Healthcare Expenditures Note: Figures are based on data from one year. Source: Stanton MW. The High Concentration of U.S. Health Care Expenditures. Research in Action, Issue 19. AHRQ Publication No. 06-0060, June 2006. Rockville, MD: Agency for Healthcare Research and Quality. Available at Annual Expenses per person ≥ $35,543 ≥ $11,487 ≥ $6,444 ≥ $3,219 ≥ $664 < $664 Is there a Better System?
    17. 17. Make-Up of the House—HR3962 House of Representatives 256 Democrats 178 Republicans 1 Independent Ways and Means Chair: Charles Rangel D-NY 26 Democrats 15 Republicans Energy & Commerce Chair: Henry Waxman D-CA 36 Democrats 23 Republicans Education & Labor George Miller D-CA 30 Democrats 19 Republicans Current Reform Data The Vote: 220 For 215 Against J. Cao votes For
    18. 18. Make-Up of the Senate—PPACA United States Senate 59 Democrats 39 Republicans 2 OTF Senate Finance Chair: Max Baucus D-MT 13 Democrats 9 Republicans 1 OTF Senate HELP Chair: Tom Harkin D-IA (formerly Ted Kennedy) 12 Democrats 10 Republicans 1 MIA (Mass.) Current Reform Data Years With Similar Majorities: 1937-39 1959-67 1975-79
    19. 19. Make-Up of the Cabinet—Obama Administration Current Reform Data 432 Members of the Executive Cabinet and less than 8% (32) have ANY private sector experience. American Enterprise Institute: Help Wanted, No Private Sector Experience Required (Nick Shultz 11/25/2009)