Health Care Reform Today: The Federal Perspective

1. Health Care Reform Today: The Federal Perspective Jean M. Abraham, Ph.D. Division of Health Policy & Management School of Public Health University of Minnesota October 26, 2011

2. Motivation: Costs and Coverage • Costs • Projected U.S. spending on health care in 2011 • $2.7 trillion • $8,666 per capita • 17% of GDP • Since 2000, inflation-adjusted costs have been growing at about 5.5% per year, considerably faster than overall economic growth. • Coverage • 17.6% of < 65 population lacks health insurance

3. The Who and the What of Implementation • Who • Multiple Federal government agencies involved • Health and Human Services • CMS • Center for Consumer Information and Insurance Oversight (CCIIO) • http://cciio.cms.gov/resources/regulations/index.html • State governments • What • Federal agencies engaged in the administrative rule-making process • Generate detailed “rules” corresponding to legislative provisions • Proposed rules with comment periods; interim final rules; final rules

4. Key Populations and Provisions • Individuals • Uninsured • Individuals who directly purchase insurance • People with employer-sponsored insurance • Medicare beneficiaries • Health insurers • Health care providers

5. Coverage Expansion in 2014 • Medicaid • Expand eligibility to all individuals in families earning less than 133% FPL • Children • Current eligibility varies by state, ranging from 100% FPL to 300% FPL • 20 states directly affected • Adults • Eligibility varies by pregnancy, working parents, childless adults (not covered in 45 states) • CBO projected net increase of 16 million by 2019

6. Coverage Expansion in 2014 • Subsidized private insurance • Premium assistance credits • Individuals with family incomes of 133% FPL– 400% FPL who do not have an offer of employer-sponsored insurance • Subsidies based on a sliding-scale • 3%-9.5% of income is maximum dollar amount families would pay for coverage • Additional cost-sharing subsidies for very low income • CBO projects a net increase of 24 million in Exchanges

7. Exchanges • Organized marketplaces for individuals and small employers to purchase insurance • Functions • Certify qualified health plans (e.g., marketing, provider choice, quality) • Determine open enrollment period • Standardize enrollment process • Provide individuals and employers with price and quality information on available plans in standard format • Create a web portal to shop

8. Regulation of ‘New’ Private Health Plans • No lifetime limits on benefits (2010) • No ‘unreasonable’ annual limits • Cannot rescind coverage (2010) • No denials of coverage for children with pre-existing conditions (2010) • No exclusions or delays in coverage for particular services for children with pre-existing conditions (2010) • Require qualified health plans to provide certain preventive services with zero cost-sharing (2010) • Medical loss ratio regulation (2011)

9. Individual Mandate: A Political “Hot Potato” • U.S. citizens and legal residents must have qualifying health coverage • Tax penalty the greater of $695 per year up to 3 times that amount for a family or 2.5% of household income • Phased in through 2016 • Exemptions • Financial hardship waiver if lowest cost plan is more than 8% of income • < 3 month gaps • Religious objections • Undocumented immigrants • Prisoners • Playing out through the court system • Potential implications for Exchange functioning and premiums

10. Employer-based population • Dependent coverage expansion (Plan year after 9/23/10) • Up to age 26 • Included on family coverage policy • Flexible Spending Account changes • No OTC medicines without prescription (2011) • Limit contribution to $2500 / year (2013) • Small business tax credit (2010) • Very small (<25) , low-wage (< $50K/year average) • Wellness benefits • Small employers (2011) • Employer-shared responsibility requirement (2014)

11. Medicare Beneficiaries • Medicare Part D Prescription Drug Coverage • Higher income enrollees pay higher premiums • Aligns with current Part B policy • Affects about 5% of beneficiaries • Closing the “donut” hole • $2,830-$6,440 in total covered spending in 2010 • $250 rebate in 2010 for those who hit the gap • 50% discount on brand-name drugs in 2011 • Gradual reduction in gap cost-sharing until it hits 25% by 2020 • Medicare Advantage • Downward adjustment in health plan payment rates from the federal government

12. PPACA and the Delivery System

13. Implications for Providers • Annual Medicare payment rate updates reduced for most providers (2010/2012) • Medicare & Medicaid Disproportionate Share Hospital payments decline (2014) • Medicaid payment rates increase in 2013/2014 to 100% Medicare levels for primary care • Demonstrations in Delivery and Financing Innovation (2012-) • Medical Homes • Bundled Payments • Accountable Care Organizations • Increased reporting of data for quality improvement, resource tracking, and disparities reduction (2012)

14. Demand for Medical Care & Workforce • Increased demand for services • Evidence from research (Buchmueller et al. 2005) • Outpatient visits • 1-2 additional visits per year on average • Bigger response for women than men • Bigger response of going from uninsured to Medicaid than from uninsured to private insurance • Inpatient utilization • Small but significant increase in demand of .16 to .24 days per year going from uninsured to privately insured • Extensive geographic variation • Prior number/concentration of uninsured • Existing provider capacity

15. Pressure on Primary Care • Research Questions • How much additional primary care will be demanded across states, given the coverage expansion? • How many more primary care providers will be needed? • Methods • Medical Expenditure Panel Survey, American Community Survey, and MGMA productivity data • Findings • 15.07-24.26 million additional visits by 2019 • 4,307-6,940 additional primary care physicians Hofer, Abraham, and Moscovice, Milbank Quarterly (2011)

16. Nursing • Registered nurses are the largest occupation in the health care sector. • Nursing shortage (Buerhaus 2008) • 285,000 growing to 1 million by 2020 with demographic shifts • Upward wage pressure has had a slight effect, but vacancy rates are still sizable, particularly in certain areas • Factors • Shortage of nursing school faculty • Aging nursing supply simultaneous with increasing demand

17. Nursing-specific Provisions • Increasing the nursingsupply • Grants and loan programs for nurses • Advanced nursing education grants • Removes 10% cap on doctoral education • Eligibility includes nurse midwives • Loan repayment and scholarship programs • Funding for National Health Service Corps • Schools of nursing • Education, practice, and retention grants • Comprehensive geriatric education programs

18. Nursing-specific Provisions • Increased resources • Grants for nurse-managed health clinics to provide care to underserved/vulnerable populations • Maternal, infant, and early childhood home visit provisions • Increased analysis of workforce needs • National healthcare workforce commission • State healthcare workforce development

19. Concluding Observations • “Coverage first, cost second” approach to reform • Improvement in access to coverage, but not likely to slow the growth of costs. • Affordability through income re-distribution, not necessarily efficiency gains in delivery and financing • Important infrastructure investments relating to delivery system, but likely insufficient to bend the cost curve • Uncertainty about financing mechanisms and long-run costs • Implementation and impact • Administrative rule-making continues • State governments are working hard • Constitutionality is yet to be determined