State Of The Industry 3.0
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State Of The Industry 3.0

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Michael Bertaut, Senior Sales Intelligence Analyst from Blue Cross Blue Shield of Louisiana, came into our office yesterday and gave the following presentation to a small group of our clients.

Michael Bertaut, Senior Sales Intelligence Analyst from Blue Cross Blue Shield of Louisiana, came into our office yesterday and gave the following presentation to a small group of our clients.
The information he shared with us is extremely timely, given the release of the new Senate bill and a weekend of President Obama’s scheduled visits to the major network news shows to discuss his health reform agenda. As we begin to see a little clarity in what may come, it is important for us all to be prepared.

I think everyone should pay particular attention to the discussion of Community Ratings. This is a concept that I believe the general public largely does not understand. It is also what will probably directly impact them the most – in that it will largely determine the price of the coverage they will be required to purchase. This is generally bad news for the healthy and young. It also eliminates the financial incentive for healthy lifestyle choices.

The entire video is about 50 minutes. But, it is well worth the time to gain a better understanding of what is happening and some important upcoming deadlines and their impact to business and individuals.

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    State Of The Industry 3.0 State Of The Industry 3.0 Presentation Transcript

    • Reform Takes Center Stage Healthcare Reform and the State of the Industry A Product of Marketing Development Presented by: Michael Bertaut Senior Healthcare Intelligence Analyst
    • Sources of Reform Legislation and Influence President Obama Senate Finance Committee--Baucus Senate HELP Committee--Harkin House Ways & Means, Energy & Commerce, Education & Labor. Rangel, Waxman, Miller House Single Pay Progressives(77) CBO Reform Concepts & Bills Current Reform Data House Blue Dogs (122; 52 Core)
    • The Bills Under Consideration
      • HR3200—America’s Affordable Health Choices Act . Passed 3 of 3 Committees.
      • Senate HELP Committee — Affordable Healthy Choices Act . Passed HELP Committee.
      • Senate Finance—Currently a Proposal, not a bill.
      • In President’s Speech “Affordable” (10) and “Choice” (5) fell back to “insurance” (67) and “reform” (34).
      Current Reform Data
    • 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
    • Who Are the Uninsured? Current Reform Data 10 September 2009 Census Bureau Conference Call: 2008 Update on Poverty and the Uninsured
    • How Your Carrier Spends Premiums. *Includes government administration and net cost of private health insurance Source: Adapted from Centers for Medicare and Medicaid Services (2007)/ BCBSLA “ CEO’s Perspective” 2007 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 $761M; 38.6% $598M; 30.3% $332M; 16.9% In 2008, BCBSLA collected $1.97B in risk premiums, broken out like this: $279M; 14.2% 3¢ Future Claims Reserves/Profits NATIONAL AVERAGES 85.8% of Premiums Went to Medical in 2008 7% Salaries/Admin 4% Commissions 1.5%Taxes 1.2% Reserves .5% MM/DM/CM Current Reform Data
    • Why Hospitals Increase Rates. 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) “ Medicaid is already under-reimbursed, with Louisiana hospitals only receiving 83 cents for every dollar they use for Medicaid” John Matessino-President, LHA Current Reform Data
    • Key Specialty Shortage Physician Salary offers on average are increasing at multiples of both inflation and wage growth in other sectors. Inflation Average Joe’s Wages Merritt Hawkins & Associates: 2007 REVIEW OF PHYSICIAN AND CRNA RECRUITING INCENTIVES Bidding War Nationwide for 5 Key Specialties Current Reform Data
    • Important Healthcare Reform Concepts/Levers
      • Individual/Employer Mandates —law that states everyone must purchase or sign up for health insurance.
      • Community Rating —No Underwriting except for age, geography, family status.
      • Public Plan Option —a government-sponsored healthcare plan available to everyone. Could be similar to Medicare in form and function.
      • Insurance Connector/Exchange —quasi-government agency to manage public and private plan offerings with subsidies & tax credits. “Health Choices Administration.” “Health Choices Commissioner”
      • Guaranteed Issue —No one can be denied coverage, unlimited COBRA amendment (House).
      Current Reform Data
    • Important Healthcare Reform Concepts
      • Subsidies— range from expansion of Medicaid to supplements to small business to buy coverage.
      • Budget Reconciliation Process —special rules for Budget Items that allow passage through Senate with 50% +1 vote margin instead of 2/3 rds super-majority.
      • Medicare Changes— adjustments to the popular senior program include changing doctor payments up/down and reducing market-based adjustments
      • Patient Centered Outcomes Research Institute —new federal agency to study and recommend appropriate treatments for different medical conditions.
      Current Reform Data
    • Important Healthcare Reform Concepts
      • Lifetime Benefit Limits – outlawed under reform
      • Qualified Health Plans – Federal Government’s definition of health insurance. Very rich benefits.
      • Specified Actuarial Value/Benefit Options- - New Federal requirements for richness of benefit plans by level of payment.
      • Health Care Co-Ops- - “non-government” entities designed to offer health insurance as not for profits with federal start up money.
      Current Reform Data
    • The Proposal Grid: Resolving Differences Current Reform Data * Medicaid to 133% of FPL Provision Detail Finance HELP House Mandate Individual Y Y Y Mandate Employer Y, >50e Y, >25e 8% Pay Subsidies Individual 300% PL 400% PL 400% PL* Subsidies Small Group Y Y Y Public Opt Medicare-like Co-OP Y Y Reforms Community Rating Y; 5 to 1 Y; 2 to 1 Y; 2 to 1 Reforms MLR Rules Report Report Y; 85% Reforms Guarantee Issue Y Y Y
    • Public Plan Option: A Level Playing Field? (from HR3200)
      • Government Plan will pay Provider Medicare Rates
      • Government Plan will NOT be subject to State by State Mandates
      • Government Plan will NOT pay any state premium subsidies or taxes
      • Government Plan cannot be sued for damages, pain and suffering, or punitive damages.
      • Government Plan will not be required to follow RBC or Reserve requirements
      • Government Plan will negotiate one contract with Pharma for entire nation.
      • Government Plan will not have limitations on MLR.
      Current Reform Data
    • Effects of Reform on Rates: Individual Market (About 10 million people today, 200k in La.) Current Reform Data Assumes “weak” mandate. Provision Detail Projected Rate Increase Notes No Medical UW Community Rating 30% or 45% 5:1 or 2:1 Age Open Pool Guarantee Issue +25% Least Healthy will seek insurance first. Actuarial Standards 72-76% Minimum +12% Average Most Individual Insurance <80% AV Latent Demand Newly Insured ? New insured seek lots of care. TOTAL HR3200 67%+ on Average 93% of 10M Individual Insured get increase.
    • Effects of Reform on Rates: Group Market Current Reform Data Provision Detail Projected Rate Increase Notes No Medical UW Community Rating 30% or 45% 5:1 or 2:1 Age Open Pool Guarantee Issue +25% Least Healthy will seek insurance first. Open Pool New Uninsured +20% Uninsured tend to be less healthy. Actuarial Standards 72-76% Minimum +12% Average 50% of Individual does not meet new standard Latent Demand Newly Insured ? New insured seek lots of care. TOTAL HR3200 87% on Average 93% of 10M Individual Insured get increase.
    • FMAP/Medicaid/DISH Train Wreck!
      • FMAP reducing from 80% to 63% By 1/1/2011 (-$1.0B)
      • HR3200 adds 600,000 new Medicaid recipients in La. By year 2019, we are 35-40% responsible.
      • Reform lowers/eliminates DISH Funding
      • Uncertain future for Charity Hospital System
      • Louisiana already owes CMS for using $800m in DISH funds improperly
      Current Reform Data By 2019, State will have to find $4B annually in new funding!!!
    • Funding Mechanisms—Total Cost at least $1T over 10 Years
      • Tax employee health benefits (FIT, FICA, FUTA) ($60-190B/Year) (high cost plans as well)
      • New Fee on Private Insurers, Pharma, Device Providers (Market Share Tax $6,4,2B/year)
      • Lower (streamline) Medicare Payments ($30-60B/Year)
      • Wealth Tax on Individuals over $280k, families $350K ($40-$50B/year)
      • Lower uninsured compensation ($30-$60B/Year)
      • Eliminate charitable deductions for high income earners ($25-30B/Year)
      • Subsidy from Cap and Trade Legislation ($45-60B/year)
      • Adjust H.S.A. and H.R.A. contributions downward ($.5 to $1B/year)
      Current Reform Data
    • Healthcare Reform Fib of the Week!
      • “ In addition, Baucus would seek to raise a smaller amount by imposing a fee on all health insurance companies according to their market share -- a measure intended to extract some sacrifice from an industry that stands to gain 46 million new customers. Baucus proposes a variety of mechanisms to enhance competition and transparency to ensure that the firms do not simply pass the fee through to their customers. “
      Current Reform Data Shailagh Murray: Baucus Urges GOP to Support His $900B Reform Bill , Washington Post, 9/8/2009
      • • All Americans have health coverage regardless of pre-existing conditions
      • • Government subsidies help support a personal responsibility requirement
      • to obtain and maintain health coverage
      • • Payments for healthcare services are tied to quality outcomes and
      • patient safety
      • • Individuals are healthier, with a greater focus on wellness and better
      • management of chronic conditions
      • We support reforms that make the market work for everyone, by bringing more people in rather than creating a new government-run health plan that would cause millions of Americans to lose their private coverage.
      • For healthcare reform to work, it must include more than insurance reforms…..
      The Blue Official Position on Reform
    • Contact Information: [email_address] “Let’s see, I’ve been called a Villain, Immoral, Shark, Untrustworthy, Needs to be Kept Honest, Obstructionist, Evil Profiteer, Political Terrorist, Traitor, wow have I been busy!!!”
    • Appendix: Detail on Health Reform Levers
    • Cost Shifting
      • Biggest fear of Public Plan option is that if it pays Medicare Rates to docs and hospitals, and then becomes the dominant payer, irreparable damage will be done the delivery system.
      • Medicare on average covers 91% of the average hospital stay. Medicaid covers 88% nationally, about 83% in Louisiana.
      • House Bill specified Medicare payments to hospitals, Medicare +5% to docs.
      Current Reform Data
    • Recent Cost Shifting Quotes
      • “ It is with great sorrow that we file this lawsuit against the State Insurance Plan. We simply cannot continue to survive on government payments of $.64 for every dollar of care that we deliver”
          • -- Language in Press Release from Boston Medical Center, July 16, 2009
      Current Reform Data
    • Recent Cost Shifting Quotes
      • “ Medicaid is already under-reimbursed, with Louisiana hospitals only receiving 83 cents for every dollar they use for Medicaid!”
            • --John Matessino, President, Louisiana Hospital Association, June 4, 2009.
      Current Reform Data
    • Recent Cost Shifting Quotes
      • “ Both Medi-Cal and Medicare already severely underpay healthcare providers in California…If ½ of our private patients move to a government plan that pays like Medicare, every hospital in California will run net losses.”
            • --C. Duane Dauner, CEO & President, California Hospital Association, quoted in July 17, 2009 AHIP Study.
      Current Reform Data
    • Streamlining Medicare Current Reform Data
    • Individual Mandate Notes
      • Currently the law in Massachusetts.
      • Combined with subsidy program/tax credits.
      • Big questions about enforcement on National Scale, probably through income tax policy.
      • Blue Plans support the Mandate to spread costs more evenly
      • Exceptions already being mentioned (“hardship cases”).
      • Supposed to help alleviate 47+ Million uninsured
      Current Reform Data
    • Community Rating/Guarantee Issue
      • Implies very little or no UW; i.e. “fair” rates
      • None of the standard UW issues (weight, sex, medical history, etc) except age and geography.
      • Current proposals are age & geography only, 2:1 (HELP/House) to 5:1(Baucus) on age, depending on who’s bill.
      • No creditable coverage, no waiting periods
      • BCBSA says it will support Community Rating IF there is an Individual Mandate.
      • Would result in large rate increases for the healthiest groups, i.e. the “wellness focused” groups, and significant decreases for the sickest groups.
      Current Reform Data
    • Insurance Connector
      • Quasi-Government Agency to qualify customers and market insurance plan.
      • Funded by premium tax on carriers involved (3%).
      • May have authority to set standards for insurance plan coverage, commissions, non-producers.
      • May operate in a for-bid environment among carriers, or may stipulate pricing.
      • Will manage sliding scale subsidy for coverage based on ability to pay.
      • Mass. Plan has connector products from all carriers, but no government plan except Medicaid which cuts off at 150% FPL.
      • Likely to require plans in three or four actuarial value buckets: 93%, 87%, 82%, 76%, so far, nothing under 76% proposed.
      Current Reform Data
    • Budget Reconciliation Process
      • Normally, massive changes in Federal Programs with tax and revenue implications require super majority (58 Yeas) or 2/3rds majority (67 Yeas) for passage.
      • In recent years, to insure Fed continues to pay its obligations when fiscal years end, certain budget items are available for “reconciliation” where they can be passed quickly with a 51% margin and very limited debate, and then “reconciled” later.
      • 8 Years ago, Senate Republicans invoked the process to cut taxes, without Dem approval. Dems were furious.
      • Democrats in the House passed by 227-196 vote to use the reconciliation process to pass healthcare/insurance reform without Republican input or intervention. (4/22/2009).
      • Deadline for Bi-Partisan Solution is October 15, 2009. At that time, Dems will invoke Reconciliation and make their own bill which they will pass without Republican Support.
      Current Reform Data
    • Minimum Loss Ratios
      • Specifies what % of total premiums collected must be spent on Medical Expenses.
      • Favors inefficiency, non-profits, encourages raising premiums more quickly to keep ratios in line.
      • Supposed to nullify “obscene profits”!
      • Movement underway to reclassify Medical/Disease Management expenses into denominator.
      • Current suggestions range from 80-85% minimum.
      Current Reform Data
    • Appropriate Medicine Department
      • Officially the “Patient-Centered Outcomes Research Institute”
      • Funded, set up in ARRA
      • Government agency to establish standards for treatment and care
      • Likely to be the basis of the new “quality based physician reimbursement” program mentioned in all the bills.
      Current Reform Data
    • Sources of Reform Legislation and Influence (To Re-cap) President Obama Senate Finance Committee--Baucus Senate HELP Committee--Kennedy House Ways & Means, Energy & Commerce, Education & Labor. Big Dogs= Rangel/Waxman House Single Pay Progressives(77) CBO Reform Concepts & Bills Current Reform Data House Blue Dogs 122 Support
    • AHIP/Blues Goals for Reform
      • Reduce Growth in Healthcare Costs
      • Build information about appropriate use of technology
      • Optimize Healthcare workforce
      • Public/Private partnerships to address chronic diseases
      • Paying for value, not volume
      • Transparency from medical system to consumer
      • Integrated (Medical Home Model) delivery of care
      • Examine motives of provider consolidation
      • Properly Fund Government programs and pay fairly for services
      Current Reform Data
    • Timeline for Reform
      • All Three Versions of HR3200 have passed Committee, House Returns after Labor Day.
      • HELP bill passed committee.
      • Senate Finance Chairman has vowed to stay through recess to finish bill prior to leaving DC.
      • Senate will take up full measure on return from recess in September.
      • All changes in place prior to 1/1/2013. Some changes will happen sooner.
      • October 15, 2009 drop dead date for reconciliation vote.
      Current Reform Data