A Framework for Health Reform

          September 2010
PPACA H.R. 3590
                                      CBO: $940 billion over 10 yrs
                        Estimated Fede...
Two Underlying Assumptions


   1. The federal deficit cannot grow forever.




  2. The United States has neither the pol...
Health Reform Framework
                         CORE THEMES: Federalization, Risk Allocation, and Value Driven Integratio...
Evolving Models
 Corporate Network                       Collaborative Network                   Regulatory Network
E.g. C...
Structural Shifts
Federalization



                  1. Increased Regulation and More Federal Control
                   ...
Structural Shifts: Federalization
FEDERALIZATION

                                                    From                ...
Structural Shifts: Risk
                                                  From                            To
    RISK     ...
Structural Shifts: Integration
                                                 From                         To
 INTEGRATI...
A Framework for Shift Analysis
                                        STRUCTURALSHIFTS
                                 L...
Shift Analysis (2010-2013)
                                                                    STRUCTURALSHIFTS
      Left...
Shift Analysis (2013-2018)
                                                                     STRUCTURALSHIFTS
         ...
Leavitt Partners, LLC
Salt Lake City Office                 Washington DC Office
299 South Main Street                 177...
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Framework

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Framework

  1. 1. A Framework for Health Reform September 2010
  2. 2. PPACA H.R. 3590 CBO: $940 billion over 10 yrs Estimated Federal Deficit Reduction: $138 billion over 10 yrs 94% of American lives covered Spans 2,409 pages Funding Sources Benefits Taxes & Fees ̴ $416B Coverage ̴ $794B • Excise tax on high cost insurance plans • Immediate access for pre-existing conditions • Individual mandate • Exchange subsidies & spending • Employer responsibility • Medicaid expansion • Medicare tax on high income individuals • Part D “Doughnut Hole” • Pharmacy tax • Increased health insurance regulation • Device tax • Community health centers • Business-related taxes Efficiency ̴ $146B • Health-related fees • Strengthening quality infrastructure • Fraud prevention measures Reductions & Spending Cuts • Low cost/high quality in Medicare Advantage • Medicare provider reductions ̴ $572B • CMS innovation center • Reported LTC CLASS savings reduction ($48B)
  3. 3. Two Underlying Assumptions 1. The federal deficit cannot grow forever. 2. The United States has neither the political will nor the economic capacity to resolve this issue through benefit cuts or new taxes.
  4. 4. Health Reform Framework CORE THEMES: Federalization, Risk Allocation, and Value Driven Integration INFLUENCERS STRUCTURAL SHIFTS EVOLVING MODELS Government Increased Regulation and More Federal Control Corporate Legislation Regulation Integrated Deficit Spending Tiered System of Access Health systems Market Reapportionment of Wealth and Risk Collaborative ECONOMIC: Network integration Health care spending Flow of capital Reordering of Insurance Markets Regulatory DEMOGRAPHIC: Aging Information Transparency Single payer system National Health TECHNOLOGICAL: Reimbursement Design Standards EMR/HIT adoption Delivery Models CONSUMERISM: Accountability Utilization Smart Medicine
  5. 5. Evolving Models Corporate Network Collaborative Network Regulatory Network E.g. Cleveland Clinic, Mayo Clinic, E.g. Accountable Care Organizations, E.g. Government Regulated Utility Geisinger, Intermountain Medical Homes Employer Facility Payer Facility Physician Federal Government Rx Other New Entity ASO ASO ASO ASO Rx Rx Physician Physician Facility Patient Patient Patient
  6. 6. Structural Shifts Federalization 1. Increased Regulation and More Federal Control The federal government usurps state regulatory authority, methodically restricting private sector autonomy and profitability. 2. Tiered System of Access Decreasing government reimbursements and significantly expanded coverage changes patient access to care. 3. Reapportionment of Wealth and Risk Risk Allocation Funding for new entitlements is extracted from industry and individuals. Risk gradually shifts from rate payers to tax payers and from insurers to providers. 4. Reordering of Insurance Markets Three dominant and distinct payer markets emerge: large employers, exchanges and Government. 5. Information Transparency Consumers, employers, and the government demand new information and benefit designs that maximize “value”. 6. Reimbursement Design Fee-for-service payment will be converted to payment based on value. Integration 7. Delivery Models Cost pressures drive providers to coordinate care while utilizing more efficient locations, personnel, and technologies. 8. Smart Medicine Genetic information and comparative effectiveness research combine with information technology to empower providers and patients.
  7. 7. Structural Shifts: Federalization FEDERALIZATION From To Increased Regulation State Federal and More Federal Legislation Regulation Shifts in state Control Food or airline Utility coordination of care, payment, technology, and consumer engagement Tiered System of Ration by $$ Ration by Waiting Times & $$ Access Primary Care Shortage Major Primary Care Shortage
  8. 8. Structural Shifts: Risk From To RISK Insurer Provider Reapportionment of Wealth and Risk Rate Payers Tax Payers Industry & Individuals Government Shifts in regulation, Individual/Small Group Exchanges business Reordering of Self-insured Self-insured or Dumping model, and Insurance Markets Medicaid: Disabled/children Medicaid: Families, Childless individual adults Numerous MA Plans Fewer MA Plan Choice responsibility Quality Silent Quality Ratings Information Blind Purchaser Informed Purchaser Transparency High premium/low Low premium/High deductible deductible with HSA
  9. 9. Structural Shifts: Integration From To INTEGRATION Uniform Procedures Personalized Medicine Smart Medicine Best Guess/Habits Comparative Effectiveness Paper Records Electronic Health Records Blind Follower Empowered Patient (PHRs) Reg Apprvl: New & Safe Reg Apprvl: Cost-effective Shifts in state coordination of Silos (mainframes) Care Coordination care, payment, Delivery Models Emergency Rooms Urgent Care Sites technology, Hospital Inpatient Outpatient Services and consumer Doctor’s Office Retail Clinic/Home-based engagement Physician Physician’s Assistant Fee-for-Service payments Bundled Care Reimbursement Design FFS rate pressures Gainsharing for in-network “Reasonable and Necessary” Comparative Effectiveness
  10. 10. A Framework for Shift Analysis STRUCTURALSHIFTS Left Center With market forces largely Market and government silent, government forces forces combine to hasten are driving change profound transformation What is the catalyst for movement? GOVERNMENT INFLUENCE How fast is it moving? Where is it taking Right us? Irrespective of government involvement, market forces move incrementally forward MARKET INFLUENCE
  11. 11. Shift Analysis (2010-2013) STRUCTURALSHIFTS Left With market Center forces largely Market and silent, government government forces forces are driving combine to hasten change profound GOVERNMENT INFLUENCE Increased Regulation transformation and More Federal Control Reordering of Insurance Markets Tiered System of Access Right Irrespective of Smart Medicine government involvement , Reapportionment Reimbursement of Wealth and Design market forces Risk move Delivery Models incrementally forward Information Transparency MARKET INFLUENCE
  12. 12. Shift Analysis (2013-2018) STRUCTURALSHIFTS Increased Regulation Reordering of Left and More Federal Insurance Markets With market Control Center Tiered System forces largely of Access Market and silent, government Reapportionment of Wealth and government forces forces are driving Risk Delivery Models combine to hasten change profound GOVERNMENT INFLUENCE Reimbursement transformation Design Smart Medicine Information Transparency Right Irrespective of government involvement , market forces move incrementally forward MARKET INFLUENCE
  13. 13. Leavitt Partners, LLC Salt Lake City Office Washington DC Office 299 South Main Street 1776 I Street, NW Suite #2400 9th Floor Salt Lake City, UT 84111 Washington, DC 20006 Phone: (801) 656-9716 www.leavittpartners.com

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