Health Reform Is On The Way, Final 2 16 10

Michael Morrow
February 16, 2010

The context for reform
Health reform WITH federal action
Health reform WITHOUT federal action
The road ahead

Michael Morrow - Health Reform
michaelmorrow_mn@yahoo.com 2/16/2010 2

“ . . . more than 30 million American
citizens who cannot get coverage.”
“Those who do have insurance have never
had less security and stability ”
“We spend 1-1/2 times more per person on
health care than any other country”
“Finally, our health care system is placing
an unsustainable burden on taxpayers.”


Adults 18‐64 Covered by Employer
Benefits
70.0%
69.3%
68.0%

66.0%
66.9%
64.0%

62.0%
63.1%

60.0%


2003 Health Spending
Per Capita
U. S. A. $5,711
Canada $2,998
France $3,048
Germany $2,983
Italy $2,314
Japan $2,249
U.K. $2,317


Source: CMS, Office of the Actuary

Estimated Distribution of the Uninsured

How addressed in the
Category Millions* %‐age health reform legislation
Near‐poor: <150% FPL** 21 46% Medicaid expansion
Uninsurable 6 13% Insurance reform, subsidies
Uninsured by choice 12 26% Mandates, subsidies
Undocumented residents 7 15% Excluded from reform
Total 46 100%
* Adapted from Boston Consulting Group analysis, 2009 .
** FPL stands for federal poverty level = $18,310 for family of 3 in 2009.


From guaranteed issue to $329 billion in 3 easy steps

1) Require insurance companies to accept all
applicants (“guaranteed issue”)
2) Mandate that all individuals carry health
insurance or face penalties
No employer mandate, but penalties for
failure to offer coverage
3) Subsidize coverage for low income
individuals and small businesses


More consumer-friendly coverage, but at a price

Richer benefit
Average Individual Premium
Before & After Insurance Reform
levels required
Limited ability to
$10,000
$10,000
$9,000

vary premiums
$8,000
$8,000
$7,000
$6,000 Series4
$6,000
New rules on
$5,000
Series3
$4,000
$4,000
$3,000

insurer conduct $2,000
$2,000
$1,000
$‐ $‐

Insurance exchange, Individual
Individual
Family
Family
but no public option Source: Oliver Wyman, Inc. 2009

Average increase = 54%


Pilot efforts & studies with potential to reduce costs

Comparative effectiveness research
Medicare/Medicaid “Innovation Center”
Generic biologic drugs
Administrative simplification

Reforms passed in 2009 (HITECH Act):
Reforms passed in 2009 (HITECH Act):
•Incentives for electronic medical records
•Incentives for electronic medical records
•Electronic data interchange
•Electronic data interchange
•Tighter security and privacy rules (HIPAA)
•Tighter security and privacy rules (HIPAA)


Employer impact: $236 B direct; up to $330 B indirect

Medicare/Medicaid cost savings – independent
payment advisory board
“Cadillac” health plan excise tax
Other new taxes and tax increases
Health care sector annual fees
Current Minnesota health care taxes
Current Minnesota health care taxes
•2% health care provider tax
•2% health care provider tax
•2% premium tax (insured only)
•2% premium tax (insured only)
•2.5% MCHA assessment (insured only)
•2.5% MCHA assessment (insured only)

PROS CONS

31 million more people Too little effort to
are covered control costs
Core approach shares Premiums/prices will
a broad consensus increase faster
Serious effort to pay Too big or too little
for reform Federal role
Unable/unwilling to
If not now, when?
get bipartisan support
Focus on side issues
Deals to get 60 votes


State level reform efforts
Demand side initiatives
Supply side initiatives

Greater focus on costs than in Federal effort


Proposals

• Single payor plans • Insurance exchanges • Federal “opt-out”
• Insurance mandates • Medicaid restructuring • Med malpractice
• Regulatory reform • Health system reform • Regulatory reform

Minnesota Health Reform Initiative – 2008
Minnesota Health Reform Initiative – 2008
• Statewide Health Improvement Program (SHIP)
• Statewide Health Improvement Program (SHIP)
• Health care homes
• Health care homes
• Payment reform/measurement/transparency
• Payment reform/measurement/transparency
• e-Health
• e-Health
• Insurance coverage & affordability
• Insurance coverage & affordability


Increased consumer accountability
Linking benefits to lifestyle, wellness
Retiree health benefit caps
New products to support consumers in
managing their own health
◦ Insurance options
◦ Information and guidance
◦ Financial management
◦ Personal health records


Provider payment reform (public and private
sectors)
◦ Global fee arrangements
◦ Health care homes/chronic disease management
◦ Increased transparency
Care delivery innovations
◦ New types of providers
◦ Redesign of existing care models
Increased horizontal/vertical integration
◦ Position the organization for reform
◦ Increase bargaining power


Short answer = Don’t know
The “HillaryCare” precedent
◦ Costs dropped in the short term
◦ But bounced back up quickly
Any success is likely to be qualified at best
◦ Employer-based coverage will continue to shrink
◦ Hard-to-insure individuals will still find coverage
hard to find
◦ Any cost savings will be accompanied by job losses
and other economic dislocation


Federal law currently governs key areas
◦ Medicare coverage and payment rules
◦ ERISA for self-insured employers
◦ Federal tax treatment of health insurance
Federal action required to enforce national
standards


Private insurance
◦ High-risk pools and/or reinsurance
◦ Pre-existing condition, lifetime maximums
◦ Increase portability
◦ Permit interstate competition
Medicare
◦ Address Medicare Advantage rates
◦ Reduce payment differences between states
◦ Provider payment reform
◦ Comparative effectiveness


Reforming costs requires pain and dislocation
Government cannot or will not do this
Private sector candidates:
Insurers Providers Technology
Financials Retailers New entrants
Healthcare Arbitrage Opportunity
2009 health expenditure $2.5 trillion
Annual increase @ 6% $150 billion
Excess over GDP @ 4.4% $40 billion
Excess over CPI @ 3% $75 billion


Options
◦ Consumer-directed plans
◦ Plan design and contribution changes
◦ Employee wellness programs
◦ Shopping
◦ Premium-only Section 125
◦ Stable benefits as a differentiator
Retiree health benefits deserve specific
attention


Comprehensive Federal health reform
legislation now appears unlikely in the short
term, although still possible
Other public/private sector stakeholders are
pursuing their own reform efforts
Reform presents opportunities and dangers
for employers


Questions?


Contact Info
Michael Morrow
michaelmorrow_mn@yahoo.com
www.linkedin.com/in/michaeljmorrow
(651) 494-4762 (cell)

SÁLO and its affiliates Oberon, NumberWorks, and
SÁLO and its affiliates Oberon, NumberWorks, and
LawgicSearch are professional staffing firms that
LawgicSearch are professional staffing firms that
provide specialized finance/accounting, human
provide specialized finance/accounting, human
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resources and legal support to businesses in
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Minneapolis/St. Paul.

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Health Reform Is On The Way, Final 2 16 10

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