A New Era in American Healthcare: Realizing the Potential of Reform

1. A New Era in American Healthcare:Realizing the Potential of Reform Karen Davis President The Commonwealth Fund www.commonwealthfund.org kd@cmwf.org University of Oklahoma Healthcare Reform Symposium February 24, 2011

2. What Are the Problems? Uninsured Rates Costs of Care Administrative Complexity Quality of Care Chasm

3. Uninsured Projected to Rise to 61 Million by 2020 Without Reform,Not Counting Underinsured or Part-Year Uninsured Number of uninsured, in millions Projected Lewin estimates Data: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2010; Projections to 2020 based on estimates by The Lewin Group.

4. Access: How Does Oklahoma Compare? Rank = 34 Rank = 41 Source: S. K. H. How, A.K. Fryer, D. McCarthy, C. Schoen, and E. L. Schor, Securing a Healthy Future: The Commonwealth Fund State Scorecard on Child Health System Performance, 2011, (New York: The Commonwealth Fund, Feb. 2011).

5. Seventy-Two Million Americans Have Problems with Medical Bills or Accrued Medical Debt, 2007 Percent of adults ages 19–64 Source: M. M. Doty, S. R. Collins, S. D. Rustgi, and J. L. Kriss, Seeing Red: The Growing Burden of Medical Bills and Debt Faced by U.S. Families (New York: The Commonwealth Fund, Aug. 2008).

6. Premiums for Family Coverage, 2003, 2009, 2015, and 2020 Health insurance premiums for family coverage Data sources: Medical Expenditure Panel Survey–Insurance Component (premiums for 2003 and 2009); Premium estimates for 2015 and 2020 using 2003-09 historic average national growth rate. Source: C. Schoen, K. Stremikis, S. K. H. How, and S. R. Collins, State Trends in Premiums and Deductibles, 2003–2009: How Building on the Affordable Care Act Will Help Stem the Tide of Rising Costs and Eroding Benefits, (New York: The Commonwealth Fund, December 2010).

7. Prevention and Treatment:How Does Oklahoma Compare? Rank = 51 Rank = 37 Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

8. Potentially Preventable Hospital Admissions:How Does Oklahoma Compare? Percent Rank = 46 Rank = 45 Rank = 48 Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

9. Medicare Spending Varies Dramatically Total Rates of Reimbursement for Noncapitated Medicare per Enrollee Source: E. Fisher, D. Goodman, J. Skinner, and K. Bronner, Health Care Spending, Quality, and Outcomes, (Hanover: The Dartmouth Institute for Health Policy and Clinical Practice, Feb. 2009).

10. SAFETY: Variations in Use of High Risk Drugs and Potentially Harmful Drug-Disease in Medicare 2007 High-risk range 11.4 to 44% Harmful Drug- Disease Range 9.5 to 30.6% Source: Zhang Y, Baicker K, Newhouse J. Geographic Variation in the Quality of Prescribing. N Engl J Med 2010; 363:1985-1988.

11. Healthy Lives and Outcomes:How Does Oklahoma Compare? Rank = 44 Rank = 47 Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009); S. K. H. How, A.K. Fryer, D. McCarthy, C. Schoen, and E. L. Schor, Securing a Healthy Future: The Commonwealth Fund State Scorecard on Child Health System Performance, 2011, (New York: The Commonwealth Fund, Feb. 2011). .

12. Aiming Higher -- Oklahoma • Overall Rank: 50 • Access: 47 • Prevention and Treatment: 48 • Avoidable Hospital Use and Costs: 44 • Equity: 49 • Health Lives: 44 • Potential Gains (match best performing state rates) • 315,072 additional adults would be insured • 122,351 additional children with a medical home • $59 million saved from reducing Medicare readmissions Source: D. McCarthy, S. K. H. How, C. Schoen, J. C. Cantor, D. Belloff, Aiming Higher Results from a State Scorecard on Health System Performance, 2009, (New York: The Commonwealth Fund, October 2009).

13. A New Era in American Healthcare:Realizing the Potential of Reform Health reform has the potential to help usher in a new era in American health care Requires new strategies for health care organizations to succeed Old Paradigm: Fee-for-service rewards volume of services, high occupancy, hospital admissions, specialized services; undervalues primary care Siloed provision of services; hospitals and physicians independent Financial solvency requires limiting provision of uninsured services and patients New Paradigm: Emphasis on primary care; patient-centered medical homes Value-based purchasing and bundled payment reward quality, reduced hospitalization and readmissions, and evidence-based care Accountability for patient outcomes requires coordination of care across settings and providers; hospitals and physicians interdependent Reaching out and serving low-income and uninsured communities is the new market growth area

14. Four Health Reform “Game Changers” Affordability provisions Income-related assistance with premiums and medical bills; essential benefits; Medicaid expansion New federal insurance market rules Restrictions on underwriting, minimum medical loss ratio requirements, review of premium rate increases, and important consumer protections New health insurance exchanges Lower administrative costs and more choice of affordable health plans for eligible individuals and small businesses Provider payment and delivery system reforms Patient centered medical homes Bundled acute and post-acute care payment Accountable Care Organizations CMS Innovation Center and Independent Payment Advisory Board Source: K. Davis, A New Era in American Healthcare, (New York: The Commonwealth Fund, June 2010).

15. Major Reduction in UninsuredPercent of Adults 19–64 Uninsured by State 2019 (estimated) 2008-2009 NH ME WA NH VT ME WA VT ND MT ND MT MN MN OR NY MA WI OR MA NY ID SD WI RI MI ID SD RI WY MI CT PA WY NJ CT IA PA NJ NE IA OH DE IN NE OH NV DE IN IL MD NV WV UT VA IL MD CO DC WV UT VA KS MO KY CA CO DC KS MO KY CA NC NC TN TN OK SC AR OK AZ NM SC AR AZ NM MS GA AL MS GA AL TX LA TX LA FL FL AK AK HI HI 23% or more 7.1%–13.9% 19%–22.9% 14%–18.9% 7% or less Data: U.S. Census Bureau, 2009–10 Current Population Survey ASEC Supplement; estimates for 2019 by Jonathan Gruber and Ian Perry of MIT using the Gruber Microsimulation Model for The Commonwealth Fund. SOURCE: Commonwealth Fund State Scorecard on Child Health System Performance, 2010

16. Major Growth in Medicaid and Coverage of Small Businesses and Individuals Through Health Insurance Exchanges -- 32 Million Uninsured Covered, 2019 23 M (8%) Uninsured 16 M (6%) Other 54 M (19%) Uninsured 16 M (6%) Other 162 M (57%) ESI 159 M (56%) ESI 51 M (18%) Medicaid 35 M (12%) Medicaid 24 M (9%) Exchanges (Private Plans) 15 M (5%) Nongroup 10 M (4%) Nongroup Pre-Reform Affordable Care Act Among 282 million people under age 65 * Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, (New York: The Commonwealth Fund, forthcoming).

17. Total National Health Expenditures (NHE),2009–2019, Before and After Reform NHE in trillions 6.3% annual growth $4.6 $4.3 5.7% annual growth $2.5 Notes: * Estimate of pre-reform national health spending when corrected to reflect underutilization of services by previously uninsured. Source: D. M. Cutler, K. Davis, and K. Stremikis, TheImpact of Health Reform on Health System Spending, (Washington and New York: Center for American Progress and The Commonwealth Fund, May 2010).

18. Estimated Annual Premiums Before and After Reform, 2019 9.2% Source: D. M. Cutler, K. Davis, and K. Stremikis, The Impact of Health Reform on Health System Spending, (Washington and New York: Center for American Progress and The Commonwealth Fund, May 2010).

19. Affordable Care Act: Delivery System Change THE COMMONWEALTH FUND Triple Aim of Better Population Health, Better Care Experiences and Slower Cost Growth

20. Small business tax credit • Prohibitions against lifetime benefit caps & rescissions • Phased-in ban on annual limits • Annual review of premium increases • Public reporting by insurers on share of premiums spent on non-medical costs • Preventive services coverage without cost-sharing • Young adults on parents’ plans Timeline for Coverage Provisions • State insurance exchanges • Medicaid expansion • Small business tax credit increases • Insurance market reforms including no rating on health • Essential benefit standard • Premium and cost sharing credits for exchange plans • Premium increases a criteria for carrier exchange participation • Individual requirement to have insurance • Employer shared responsibility penalties • Phased-in ban on annual limits • States adopt exchange legislation and begin implementing exchanges • Penalty for individual requirement to have insurance phases in (2014-2016) • Option for state waiver to design alternative coverage programs (2017) • Insurers must spend at least 85% of premiums (large group) or 80% (small group / individual) on medical costs or provide rebates to enrollees • HHS must determine if states will have operational exchanges by 2014; if not, HHS will operate them Source: Commonwealth Fund Health Reform Resource Center: What’s In the Affordable Care Act? (Public Law 111-148 and 111-152), www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx

21. State Insurance Exchanges:Eight Difficult Issues for HHS and States How should the exchanges be governed? State entity or non-profit? How should adverse selection against exchange and among plans sold in exchange be further deterred – what are options for states and HHS? Opening the exchanges to large employers or not? What are the key considerations for states and how should federal government reduce risk to the exchanges from self-insured and large employers? How can the exchanges be made to work well for employers to encourage their participation? Exchanges must certify qualified plans – how should they exercise their regulatory role in this regard? Allow all plans to participate or restrict participation to high value plans? Standardize plans beyond ACA? Exchanges must provide information to consumers to facilitate informed choice about health plans – how should the exchanges meet this responsibility? How should exchanges ensure expedient and continuous enrollment of those eligible for Medicaid/CHIP and premium/cost-sharing credits? How might exchanges reduce their own administrative costs and those of their users, and how will they finance their activities? Source: T. S. Jost, Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues, (New York: The Commonwealth Fund, September 2010).

22. Timeline for Payment and System Innovation 2010 2011 2012 2013 2014 2015 Productivity Improvement 10% Medicare Primary Care Increase Value-based Purchasing for Hospitals Payment Bundling Pilot IPAB Value-based Purchasing for Physicians Reduce Payment for Hospital Acquired Infections Patient Centered Outcomes Research Innovation Center Improve Physician Feedback Medicaid Primary Care up to Medicare Levels Community Transformation Grants All-Payer Demos and HIZs Reduce Payment for Preventable Readmissions Extend Gainsharing Demo Medicare Shared Savings (ACOs) Source: Commonwealth Fund Health Reform Resource Center: What’s In the Affordable Care Act? (Public Law 111-148 and 111-152), www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx

23. Center for Medicare & Medicaid Innovation Beginning this year, new center in CMS to test innovative payment and service delivery models to reduce spending while preserving or enhancing quality of care Expanded authority to innovate and spread Selection based on evidence of population health focus Emphasis on care coordination, patient-centeredness Could increase spending initially Over time must improve quality without higher costs, reduce spending without reducing quality, or both Secretary can expand duration and scope

24. Accountable Care Organizations “A group of health care providers who give coordinated care, chronic disease management, and thereby improve the quality of care patients get. The organization's payment is tied to achieving health care quality goals and outcomes that result in cost savings.” Source: http://www.healthcare.gov; S. Kravet, “Preparing an Academic Medical Center for Health Care Reform,” 2010 Ohio State University Health Services Management and Policy Management Institute, Columbus, OH: October 2010.

25. ACO Requirements Source: S. Kravet, “Preparing an Academic Medical Center for Health Care Reform,” 2010 Ohio State University Health Services Management and Policy Management Institute, Columbus, OH: October 2010.

26. Promising ACO Models of Payment and Care Delivery Risk-adjusted global fee with risk mitigation (e.g., reinusrance) Global amb-ulatory care fees & bundled acute case rates Global primary care fees & bundled acute case rates Global primary care fees Blended FFS and medical home fees Quality bonuses for patient outcomes; large % of shared savings, some shared risk Less Feasible Quality bonuses of care co-ordination and intermediate outcome measures; moderate % of shared savings Continuum of Quality Bonuses and Shared Savings Continuum of Payment Bundling More Feasible Quality bonuses for preventive care; management of chronic conditions; small % of shared savings Patient-centered medical home networks Multi-specialty physician group practices Integrated ambulatory and inpatient systems Continuum of Organization Source: A. Shih, K. Davis, S. Schoenbaum, A. Gauthier, R. Nuzum, and D. McCarthy, Organizing the U.S. Health Care Delivery System for High Performance, (New York: The Commonwealth Fund, August 2008).

27. A New Era in Health Care Delivery: How Oklahoma Can Realize the Potential Realizing the potential of health reform will require skillful implementation by states Oklahoma can lead on primary care focus Oklahoma one of first states with primary care extension service Adoption of Access model of patient-centered medical homes Community Health Teams to support patient-centered medical homes (Sec. 3502) Invest in maternal and child health Oklahoma can also lead on chronic care and care coordination of frail elders and disabled Improve transitions in care and reduce hospital readmissions CMS Innovation Center pilots for dual Medicare and Medicaid eligible population Community-Based Care Transitions Program (Sec. 3026)

28. Realizing Health Reform's Potential: A New Series of Briefs on the Affordable Care Act

29. Thank You! Tony Shih, Executive Vice President for Programs, ts@cmwf.org Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Rachel Nuzum, Senior Policy Director rn@cmwf.org Sara Collins, Vice President, src@cmwf.org Kristof Stremikis, Senior Research Associate, ks@cmwf.org Melinda Abrams, Vice President, mka@cmwf.org For more information, please visit: www.commonwealthfund.org