Health Reform in America: An Overview of the Patient Protection and Affordable Care Act

Adam Dougherty, MPH9/28/2010

The Law

•Most sweeping reform since Medicare•Provisions effective immediately, but major

pillars in 2014•$938B over 10 years, costs fully offset by

revenue and savings (2% of federal budget)

•2,568 pages (less words than a Harry Potter novel!)

•Nearly 60% of Americans don’t understand it (KFF poll)

Context

International Comparison of Spending on Health, 1980–2007

Note: $US PPP = purchasing power parity.Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).

Average spending on healthper capita ($US PPP)

Total expenditures on healthas percent of GDP

$7,290

$2,454

16%

8%

Note: * Estimate. Expenditures shown in $US PPP (purchasing power parity).Source: Calculated by The Commonwealth Fund based on 2007 International Health Policy Survey; 2008 International Health Policy Survey of Sicker Adults; 2009 International Health Policy Survey of Primary Care Physicians; Commonwealth Fund Commission on a High Performance Health System National Scorecard; and Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009).

    AUS CAN GER NETH NZ UK US

OVERALL RANKING (2010) 3 6 4 1 5 2 7

Quality Care 4 7 5 2 1 3 6

Effective Care 2 7 6 3 5 1 4

Safe Care 6 5 3 1 4 2 7

Coordinated Care 4 5 7 2 1 3 6

Patient-Centered Care 2 5 3 6 1 7 4

Access 6.5 5 3 1 4 2 6.5

Cost-Related Problem 6 3.5 3.5 2 5 1 7

Timeliness of Care 6 7 2 1 3 4 5

Efficiency 2 6 5 3 4 1 7

Equity 4 5 3 1 6 2 7

Long, Healthy, Productive Lives 1 2 3 4 5 6 7

Health Expenditures/Capita, 2007 $3,357 $3,895 $3,588 $3,837* $2,454 $2,992 $7,290

Overall Ranking

Country Rankings

1.00–2.33

2.34–4.66

4.67–7.00

Total Spending for Health Care (CBO)

6

% of

GDP

% of

GDP

Premiums Rising Faster Than Inflation and Wages

7

* 2008 and 2009 NHE projections. Source: K. Davis, Why Health Reform Must Counter the Rising Costs of Health Insurance Premiums, (New York: The Commonwealth Fund, Aug. 2009).

Projected Average Family Premium as

a Percentage of Median Family Income, 2008–2020

Cumulative Changes in Components of U.S. National Health

Expenditures and Workers’ Earnings, 2000–2009

Percent Percent

108%

32%

24%

Projected

8

Uninsured Rising With Costs

Gilmer and Kronick, Hard Times and Health Insurance, Health Affairs, May 2009

THE COMMONWEALTH

FUND

THE COMMONWEALTH

FUND

Insurance Underwriting

•Ability to deny/rescind coverage•Ability to ‘price out’ individuals with pre-existing conditions •2009 profit

increase: 56%

Source: Families USA 2010

11

Source: KFF statehealthfacts.org, 2009

America’s Health Coverage

Overview of Reform▫Expands coverage to 33 million

individuals by 2019, covering nearly 95% of Americans

▫Bending the cost curve Extends solvency of Medicare Trust Fund by 10

years through 2-3% annual reduction in spending growth (e.g. 6% growth to 4% growth)

Slows private health care expenditure growth annually by 1% (e.g. 6% growth to 5% growth)

Reduces federal deficit by $130B over 10 years, and over $1T in second decade

12

Sources: CBO Score of Senate Bill, White House Council of Economic Advisors

13

Near Universal Coverage

• The Individual Mandate▫ Every legal resident and US citizen will be

required to obtain qualified health insurance by 2014, or be subject to a monetary penalty (0.5%-2.5% of income) Must take employer coverage, buy private

coverage or enroll in public coverage Exemptions for financial hardship (i.e. more than

8% of income) Exemptions based on religious objection

•Employer mandate for 200+ employees•Pay-or-play requirement for 50+

employees

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Medi-Cal Expansion

•Medicaid eligibility expansion to 133% FPL for parents and MIAs; SCHIP eligibility expansion for kids to 250% FPL

• CBO projects 15 million individuals newly eligible

•UCLA estimates 1.7 million newly eligible in CA

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Health Insurance Exchanges

• State exchanges with federal oversight - 2014▫Regulated market for individuals and small

businesses▫ Incomes between 133-400% FPL eligible for subsidies▫ Individuals pay sliding scale premiums capped at 3%

- 9.8% of income▫Up to 50% premium subsidy for small low wage

employers <50 employees (available now)▫Would cover 2.3 million uninsured in CA (UCLA) ▫Would subsidize 45% of individually purchased

private insurance in CA (CHIS calculation) • Initial focus -- small group and individual markets

▫CBO projects 25 million would purchase through Exchanges

▫Expands past 2017

Sliding Scale Premiums andOut of Pocket – tied to Price

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The Uninsured after Health Reform: California

Source: Health Policy Fact Sheet, UCLA Center for Health Policy Research, Oct 2009

Insurance Transformation• Exchange plans and new individual market plans

▫ Guaranteed issue and renewal▫ Risk-adjustment mechanisms to discourage insurer

‘gaming’▫ Rating variation: age, geography, family size, and tobacco

use▫ Mandatory data reporting▫ Compete on price and quality, not medical underwriting ▫ ‘Essential community providers’ must be included in plan

networks▫ New national non-profit insurer managed by OPM

• New protections across entire market▫ Minimum benefits package (grandfathering exceptions)▫ Minimum medical loss ratio (80% in small group, 85% in

large group▫ Transparency in claims, costs, enrollment, etc. ▫ Standardized administrative processes▫ No copays for effective preventive services

Insurance: Minimum Benefits

• Covered Benefits▫ 4 benefits categories ranging from 60 to 90% of the

cost of the covered benefit packages (Bronze, Silver, Gold, Platinum), mandate tied to bronze

▫ Grandfathers existing benefits (you like it, you keep it)

▫ Young invincible coverage: Prevention and catastrophic coverage for those up to age

30 or individuals exempt from mandate due to financial hardship

September 23, 2010• Young adults up to age 26 guaranteed can stay

on their parents’ insurance• Children can no longer be denied insurance

coverage because they have a pre-existing condition (adults in 2014)

• Ends the practice of rescissions, making it illegal for insurers to drop an individual who gets sick and 'unprofitable’

• Ends lifetime caps on insurance claims for all individuals, assuring individuals with a chronic disease or medical emergency the security to access vital services

• Requires new plans to offer proven preventive care with NO cost sharing or co-pays, assuring access to these vital services even in economic hardship

• Imposes a 10% sales tax on tanning services

Reform Financing: 1/2 savingsand 1/2 taxes

• Savings in Medicare and Medicaid▫ Provider payments: MA reductions and productivity

increase adjustments• Pay or play for employers with over 50

employees• Excise tax on Cadillac plans• Insurance industry, device and pharmaceutical

manufacturer fees• 0.9% Medicare payroll tax increase on

individual/joint incomes over $200K/$250K• 3.0% Medicare tax on unearned income of

individual/joint incomes over $200K/$250K• CBO finds law will reduce deficit by $130B

over 10 years, $1.2T over 20 years

System-wide Savings• Independent Payment Advisory Board (IPAB):

MedPAC with teeth• Care coordination and delivery integration pilots

▫ Pay for Performance incentives in Medicare▫ Accountable Care Organizations▫ HIT

• Patient Centered Outcome Research Institute▫ Clearinghouse for national comparisons on the

effectiveness of treatments • Medicare fraud and abuse programs• Program Simplification: Breaking down the silos

▫ County programs, State programs, federal uncompensated care

▫ Major relief to state and county budgets

System-wide Savings• Focus on primary care, prevention and wellness

▫$11B for community clinic infrastructure Lynchpin of reform

▫10% Medicare reimbursement increase for PCPs▫Medicaid reimbursement increase to 100%

Medicare levels for 2 years (2014)▫Prevention and Public Health Fund ($500M)▫Workplace wellness grant programs ($200M)▫Health disparity monitoring programs and

intervention grants▫Community transformation grants▫Nutrition labeling in chain restaurants

Strengthening the Health Workforce•National Health Care Workforce

Commission•Primary Care training ($255 million), loan

forgiveness ($125M annually) and expanded residency slot distribution

•National Health Service Corps ($1B annually)

•Public health fellowships•Nursing grants, nurse-managed clinics•Community health worker scholarships

Looking to the Future• Today: State based high-risk

insurance pool, closing the Medicare donut hole, strengthening consumer protections

• Tomorrow?: Health Exchange bills in CA

• Crystal ball: Massachusetts 2006 health reform▫Phase 1 complete: Near-universal

coverage (98.5%)▫Phase 2: Cost containment

• www.Healthcare.gov

Looking to the Future

•We have decided as a nation that basic access to health care is a nationwide responsibility

• Implementation needs to be effective and sustainable in order to improve long-term population and economic health

•95% of the legislation will be implemented by 2014: the next few years are crucial

• Implementation is forever: No system is perfect

Thanks!