Health Care Reform:

How Will it Change the Delivery System?

SOUTH CAROLINA HOSPITAL ASSOCIATION

5/15/10

Today’s Talk

• Historical Background• Gaps in the US Healthcare System• Goals of Health Care Reform• How Reform Will Affect Consumers• How Reform Will Affect Employers• How Reform Will Affect Hospitals • What’s Next?

Evolution of U.S. Health Care Policy

• Our system is the result of several major policy decisions rather than one, unified health care policy.– Employer-based coverage– Government-sponsored coverage– EMTALA

Employer-Based Coverage

• During WWII, wage controls by the federal government led employers to offer health insurance instead of raising wages.

Medicare & Medicaid

• To cover the elderly and some of the very poor, the federal government enacted Medicare & Medicaid in mid 1960s.

EMTALA

• The Emergency Medical Treatment and Active Labor Act (EMTALA) of 1986 requires hospitals to screen and stabilize (treat) each and every patient who comes to the hospital ED seeking care.

Policy Decisions Have Left a Gap in Coverage for SC

• 2.2 million have employer-based health insurance

• 1.2 million rely on a government-sponsored program for coverage

• 178,000 have coverage purchased in the individual market

• 760,000 South Carolinians have no coverage*Source: Kaiser Family and Robert Wood Johnson Foundations

A Closer Look at South Carolina’s 760,000 Uninsured

• 557,000 live in working families that pay taxes to support government coverage for others

• 357,000 live at or below 133% of the federal poverty level

• SC has no program to help childless adults

*Source: Kaiser Family Foundation

What Happens When the Uninsured Need Care?

• Remember EMTALA?– Last year, SC hospitals provided

more than $1 billion worth of care for which they received no direct payment.

– Those financial losses were passed along to insured patients and their employers.

Premiums Are Growing Faster Than Paychecks

$3,515

$3,354

$2,713

$1,619

$1,543 $4,247

$1,787*

$2,137*

$2,412*

$3,281*

$2,973*

$2,661*

$9,860*

$8,824

$9,325*

$8,508*

$8,167*

$7,289*

$6,657*

$5,866*

$5,269*

$4,819*

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999 Worker Contribution

Employer Contribution

Patient Protection and Affordable Care Act

• On March, 23, 2010, the Patient Protection and Affordable Care Act was signed into law.

“Everyone is entitled to his own opinion, but not his own facts.”

Senator Daniel Patrick Moynihan

http://z.about.com/d/politicalhumor/1/0/p/L/3/Health-Reform-Fears.gif

The Myths• You’ll have no choice in what health

benefits you receive; a “health choices commissioner” will decide what benefits you get.

• Death panels will decide who lives.• Illegal immigrants will get free

health insurance.• Federal funding of abortions will

increase.• Care will be rationed.

The Facts

• The new law will expand coverage to almost 500,000 of the 760,000 uninsured South Carolinians.

• No government-run, public option included.

• The new law includes health insurance reforms intended to protect consumers.

• The new law includes delivery system reforms that hold great promise for improving care.

2010 Federal Poverty Levels

100% 133% 150% 200% 300%400%

Individual

$10,830

$14,404

$16,245

$21,660

$32,490

$43,320

Family of 4

$22,050

$29,327

$33,075

$44,100

$66,150

$88,200

Provisions Affecting Consumers

Provisions Going Into Effect in 2010

• Temporary high risk pool for persons with pre-existing conditions and non-Medicare eligible retirees over 55

• Transitional rebates to fill “doughnut hole”

• First round of insurance reforms

2010

High Risk Pool

• Temporary high risk pool to cover persons with pre-existing conditions and non-Medicare eligible retirees over 55

2010

Beginning to Fill Doughnut Hole

• Transitional rebates to help seniors in the prescription drug “doughnut hole”– A $1,720 gap in Medicare coverage

of prescription meds• Starts when annual drug costs exceed

$2,830• Ends when annual costs exceed $4,550

– “Doughnut hole” closed by 2020– First year rebate (2010) = $2502010

First Round of Insurance Reforms

• No cancellation of coverage when an insured person becomes sick

• No denial of coverage for children with pre-existing conditions

• Young adults up to age 26 may remain on parents’ policies

• No lifetime limits on coverage

2010

Provisions Going into Effect in 2014

• Premium assistance and subsidies for consumers

• Health insurance exchanges• Essential health benefits• Medicaid expansion• Additional insurance reforms• Individual mandate

2014

Cost Sharing Subsidies

• Beneficiary out-of-pocket spending will be capped for low-income persons purchasing coverage through the exchange.

2014

If you make:Out-of-pocket cost will

be capped @:100-150% FPL 6% of the plan’s cost

150-200% FPL 15% of the plan’s cost

200-250% FPL 27% of the plan’s cost

250-400% FPL 30% of the plan’s cost

• To make it easier to shop for affordable policies

• To offer essential benefits as defined by HHS

• To serve businesses with fewer than 100 workers, self-employed, and unemployed

• To include a multi-state insurance plan similar to federal employee benefit plan

• To offer coverage to larger businesses beginning 2017

Health Insurance Exchanges

2014

Health Insurance Exchange

Links buyers and sellers of insurance

Insurance “Exchange” or “Connector”

Uninsured(Not eligible for Medicaid/CHIP)

Self EmployedSmall

Business

Others

Private Plan Private

PlanPrivate

PlanPrivate

Plan

Essential Health Benefits

• Effective 1/1/2014, creates package that includes comprehensive set of services

• Must cover at least 60% of actuarial value of covered benefits

• Limits annual cost sharing to current HSA limits

• Requires all qualified health benefit plans to offer at least the essential package

2014

Premium Credits

• Provides refundable and advanceable premium credits to eligible individuals/families to purchase insurance through the exchange.If you make: Your premium

contribution will be limited to:

Up to 133% FPL 2% of income

133-150% FPL 3-4% of income

150-200% FPL 4-6.3% of income

200-250% FPL 6.3-8.05% of income

250-300% FPL 8.05-9.5% of income

300-400% FPL 9.5% of income

2014

Out-of-Pocket Limits

• The law will limit the amount any person buying through the Exchange will have to pay out-of-pocket.

• Limits will be tied to federal government’s HSA limits, as follows:

2014

If you make:You won’t pay

more than:Based on 2010

HSA limits

100-200% FPL ⅓ HSA limits $1,983 ind/$3,967 family

200-300% FPL ½ HSA limits $2,975 ind/$5,950 family

300-400% FPL ⅔ HSA limits $3,987 ind/$7,973 family

Medicaid Expansion

• By 2014, states must extend Medicaid eligibility to all legal residents up to 133% of poverty and under 65 years old.

• 133% FPL is $14,404 for individual and $29,327 for family of 4.

• Feds will cover 100% of states’ costs from 2014-2016 and the following portions after 2016:

2017 – 95%2018 – 94%2019 – 93%Beyond – 90%

2014

Additional Insurance Reforms

• No annual limits on coverage• No denial of coverage for adults

with pre-existing conditions• No higher premium based on

gender or medical history• Insurers required to report share

of premium income spent on medical care

• Limits on out-of-pocket costs

2014

Individual Mandate

• Beginning Jan. 1, 2014, US citizens and legal immigrants must have coverage or pay a penalty when they file their federal tax returns.– Individual penalties

$95 per person in 2014$325 per person in 2015$695 per person in 2016

– Household penalties1% of household income in 20142% of household income in 20152.5% of household income in 2016*Exemptions for hardship

2014

Insurance Reforms & the Individual Mandate

• Many of the popular insurance reforms work only if we have an individual mandate. Why?– If you could buy auto insurance the day

you had an accident, would you buy it beforehand?

– If you could buy homeowners insurance the day your house burned down, would you buy it beforehand?

– If you could buy health insurance the day you were diagnosed with cancer, would you buy it beforehand?

– If only sick people bought insurance, what would happen to the premiums?

PROVISIONS AFFECTING EMPLOYERS

Provisions Affecting Employers• Provides tax credits to small businesses that

purchase health insurance for employees (2010)• Allows young adults up to 26 to remain on

parents policies (2010)• Requires employers to report health care

benefits value on W-2 forms (2011)• Pay or play for large employers (more than 50

workers) (2014)• Allows large employers to provide coverage

through state exchanges (2017)• Imposes 40% excise tax on Cadillac plans (2018)

Tax Credits for Small Employers• Tax credits for small employers with

less than 26 workers paying at least half of their workers’ health premiums

• Phase I provides tax credit up to 35% of employer’s contribution (tax years 2010 – 2013)

• Phase II provides tax credit up to 50% of employer’s contribution (tax years 2014 and beyond)

• Amount of tax credit varies with firm size and average wage

2010

Pay or Play for Large Employers

• Large employers (more than 50 workers) not offering coverage will pay $2,000 per year per worker minus first 30 full-time employees.

• Employers with 50 or fewer employees are exempt.

2014

Provisions Affecting Hospitals

Provisions Affecting Hospitals

• Payment • Access• Quality • Other

Medicare & Medicaid Payment Cuts

• Nationally, hospital payments will be cut $155 billion over 10 year period beginning in 2010 to help pay for expanding coverage to 32 million. – Medicare update factors to hospitals

will be reduced by $157 billion beginning 2010

– Medicare DSH will be reduced $22 billion beginning 2014

– Medicaid DSH will be reduced $14 billion beginning in 2014

Other Payment Changes(in order they take effect)

• Expands 340B drug discount to outpatients at children’s, cancer and critical access hospitals, as well as sole community hospitals and rural referral centers (2010)

• Prohibits federal payments to states for Medicaid services related to health care acquired conditions (2011)

• Allocates $400 million for additional payments to hospitals in counties with lowest Medicare spending (2011 and 2012)

Other Payment Changes . . . continued

• Requires plan for reforming hospital wage index system (2012)

• Reduces Medicare payment for excess readmissions (2013)

• Establishes budget-neutral Medicare Value-Based Purchasing Program (2013)

Other Payment Changes . . .continued

• Establishes Independent Payment Advisory Board (IPAB) to submit proposals to reduce Medicare spending (2014)–Most hospitals exempt for first 10

years• Requires penalties and public reporting

on health care acquired conditions for Medicare patients (2015)

Improving Access to Primary Care (in order they take effect)

• Establishes Teaching Health Centers to provide Medicare payments for primary care residency programs in federally qualified health centers (2010)

• Adds $11 billion for community health centers and the National Health Service Corps over five years (2011)

• Establishes new programs to support school-based health centers and nurse-managed health clinics (2011)

Improving Access to Primary Care . . .continued

• Provides 10% Medicare bonus payment to primary care physicians and general surgeons practicing in shortage areas (2011-2015)

• Increases Medicaid payments to primary care physicians to 100% of Medicare payment rates for two years (2013-2014)

• Increases graduate medical education slots for primary care by redistributing unused slots

Improving Access in Rural Areas

• Extends outpatient hold-harmless payments for certain hospitals in rural areas

• Improves payments for low-volume hospitals

• Ensures that CAHs are paid 101 % of costs for all outpatient services

Improving Access in Rural Areas . . .continued

• Extends and expands the Rural Community Hospital Demonstration Program

• Extends the Medicare Dependent Hospital program for one year

• Extends the Medicare Rural Hospital Flexibility Program through 2012

• Extends reasonable cost reimbursement for laboratory services in small rural hospitals

 

Improving Quality (in order they take effect)

• Supports comparative effectiveness research (2010)

• Improves care coordination for dual eligibles (2010)

• Establishes Center for Medicare and Medicaid Innovation within CMS to improve coordination, quality, and efficiency (2011)

Improving Quality . . . continued

• Creates new Medicaid medical home option for enrollees with chronic conditions (2011)

• Establishes voluntary, national pilot program allowing groups of providers to be recognized as Accountable Care Organizations (ACOs) (2012)

Improving Quality . . . continued

• Requires enhanced data collection, reporting, and analysis to identify and monitor trends in health disparities (2012)

• Establishes national pilot program for Medicare payment bundling (2013)

Medicaid Payment Demonstrations

• Authorizes new Medicaid payment demonstrations (2010-2016)– To make global capitated payments

to safety net hospital systems (effective FY 2010-2012)

– To pay bundled payments for episodes of care that include hospitalizations (effective CY 2012-2016

Medicaid Payment Demonstrations…continued

– To allow pediatric medical providers to share in cost-savings (effective CY 2012-2016)

– To provide Medicaid payments to free-standing psych hospitals (IMD exclusion) for adult enrollees who require stabilization of an emergency condition (effective 10/1/2011 thru 12/31/2015)

Other Provisions Impacting Hospitals

• Establishes Workforce Advisory Committee to develop national workforce strategy (2010)

• Increases workforce supply and supports training of health professionals through scholarships and loans (2010)

New Requirements for Maintaining 501(c)(3) Status

Effective for taxable year 2011, hospital must:• Implement strategies to meet community needs

based on health needs assessment • Develop, implement, communicate a charity

care policy• Limit charges to those qualifying for financial

assistance – To lowest amounts charged to individuals with

insurance

• Restricts use of extraordinary collection actions • $50,000 penalty to those who fail to comply!

Other Provisions Impacting Hospitals . . . continued

• Bans new physician-owned hospitals in Medicare (2010)

• Extends long term care hospital provisions in the Medicare, Medicaid and SCHIP Extension Act of 2008

• Increases funding to fight fraud and abuse  

Other Provisions Impacting Hospitals . . . continued

• Provides $50 million to states for medical liability reform demonstrations (2011)

• Simplifies health insurance administration (2013-2014)

What Happens Now?

• The new law contains broad concepts and requirements, but the details will come with regulations.

• Regulations will be drafted by a variety of federal agencies, and interested persons will need to track the proposed regulations carefully.

• In short, there’s still a lot of work to be done!

ANY QUESTIONS?

SOUTH CAROLINA HOSPITAL ASSOCIATION

Health Care Reform

For more information:

www.scha.org/advocacy/health-care-reform

5/15/10