THE COMMONWEALTH

FUND

Driving Competition, Efficiencies and Innovative Practices Throughout the Health Care System: A Public Health

Insurance Plan

Karen DavisPresident, The Commonwealth FundAlliance for Health Reform Briefing

April 27, 2009kd@cmwf.org

www.commonwealthfund.org

THE

COMMONWEALTH FUND

2Affordable Coverage for All:

Policies In Path Report• Builds on employer coverage and public programs

• New national insurance exchange

– Offers private plans and new public health insurance plan

– Pools risk and reduces administrative costs, easy enrollment

• All required to have coverage, with provisions for affordability

– Low income programs expanded

– Income-related premium assistance to make coverage affordable

• Shared responsibility for financing: all employers contribute

• Insurance market reforms

– Minimum national benefit standard

– Guaranteed issue, renewal & community rating

• Provider payment reforms in public plan, Medicare, and Medicaid

– Reward primary care; blended medical home fees and FFS

– Bundle hospital payment and post-acute care

– Slow cost growth over time and share savings with providers

• Insurers compete on basis of added value

Source: The Path to a High Performance U.S. Health System, Commonwealth Fund Feb. 2009.

THE

COMMONWEALTH FUND

3

Transforming Markets: Potential of an Insurance Exchange with a Public Health Insurance Option

• Exchange with Insurance Market Reforms– Enables continuity and choice: access to regional plans– Transparency: easy to compare and enroll; benchmarks– Reduces administrative costs: marketing, underwriting,

churning

• Public Health Insurance Plan – Broadens foundation for rapid implementation of

innovative payment and system reforms and slows growth in employer premiums

– Provides less expensive way to cover the uninsured; lower administrative costs; lower federal budget cost

– Expands choice/continuity with secure option nation-wide that will always be there

– Ensures markets work in the public interest: counterbalance to market power by insurers or providers

THE

COMMONWEALTH FUND

4

70%–79%

Less than 50%

50%–69%

80%–100%

Market Share of Two Largest Health Plans, by State, 2006

Note: Market shares are for the combined HMO+PPO product market. For MS and PA, shading represents shares of top three insurers in 2002-2003. Source: American Medical Association, Competition in health insurance: A comprehensive study of U.S. markets, 2008 update, ; J. Robinson, “Consolidation and the Transformation of Competition in Health Insurance,” Health Affairs, November/December 2004; D. McCarthy et al., “The North Dakota Experience: Achieving High-Performance Health Care Through Rural Innovation and Cooperation,” The Commonwealth Fund, May 2008.

AK

HI

WA

ORID

MT ND

WY

NV

CAUT

AZ NM

KS

NE

MN

MO

WI

TX

IA

IL IN

AR

LA

AL

SCTN

NCKY

FL

VA

OH

MI

WV

PA

NY

MD

MEVTNH

MARI

CT

DE

DCCO

GAMS

OK

NJ

SD

THE

COMMONWEALTH FUND

5Benefit Design for Public Health Insurance Plan

Offered in Insurance Exchange

Current Medicare benefits*New Public Health Insurance Plan

in Exchange

DeductibleHospital: $1,024/benefit periodPhysician: $135/yearRx: $275/year**

Hospital/Physician: $250/year for individuals; $500 for familiesRx: $0

CoinsurancePhysician: 20%Rx: Depends on Part D plan

Physician: 10%Rx: 25%Reduce for high-value & chronic disease care/medical home Preventive services: 0%

Ceiling onout-of-pocket

No ceiling$5,000 for individuals$7,000 for families

Insurance-related premium subsidies

Medicare Savings ProgramsLow-Income Subsidy

Premium cap ceiling of 5% of income for low-income beneficiary premiums or 10% if higher income

* Basic benefits before Medigap.** Part D coverage varies, often deductible. Most have “doughnut” hole and use tiered, flat-dollar copayments.Note: Benefit design also would apply to Medicare Extra supplement option available to Medicare beneficiaries. Source: Commonwealth Fund Commission on a High Performance Health System,  The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, Commonwealth Fund, February 2009.  

THE

COMMONWEALTH FUND

6

12.7

40.9

35.8

31.1

26.5

21.8

15.313.5

10.4

6.74.54.5

6.69.59.59.9

11.912.813.313.314.5

9.4

0

5

10

15

20

25

30

35

40

45 Current ExchangePercentage

Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, February 2009.

Cost of Administering Health Insurance as a Percent of Claims, Current Law Compared to Insurance Exchange with

Reforms, by Group Size

THE

COMMONWEALTH FUND

7Net Insurance/Program Administrative Cost as a Percent of Total

Spending, Various U.S. Insurance Markets

14

41

29

17

85

0

5

10

15

20

25

30

35

40

45

AveragePrivate

Insurance

Individuals Small Group* Top FivePrivate

Companies**

Medicaid Medicare***

Percent of claims

*Average for firms with 2 to 49 employees**Top five companies based on 2008 corporate financial reports and filings. Computed based on medical loss ratio***Medicare includes administrative costs of Part D private plans. Medicaid includes eligibility determination. Source: M. Hartman et al. “National Health Spending in 2007” Health Affairs for national, Medicaid and Medicare. Lewin group for market segments of private. SEC filings and corporate reports for top 5 private plans.

THE

COMMONWEALTH FUND

8Estimated Premiums for New Public PlanCompared with Average Individual/Small Employer Private Market, 2010

$2,904

$8,988

$3,702

$9,816

$4,164

$10,800

$0

$5,000

$10,000

$15,000

Single Family

Public Plan with Medicare Payment Rates and System Reform

Public Plan with Private Payment Rates

Current Small-Firm Private Premiums*

Average annual premium for equivalent benefits at community rate*

Public plan with private payment rates saves 9%; public plan with Medicare

payment rates and system reform saves 17-30% relative to current small firm

premiums.

* Adjusted for Path benefits and average enrollees. Benefits used for modeling include full scope of acute care medical benefits; $250 individual/$500 family deductible; 10% coinsurance for physician service; 25% coinsurance and no deductible for prescription drugs; reduced for high-value medications; full coverage checkups/preventive care. $5,000 individual/$7,000 family out-of-pocket limit. Data: Estimates by The Lewin Group for The Commonwealth Fund.

THE

COMMONWEALTH FUND

9Three Insurance Exchange Scenarios:

Cumulative 11-Year Savings in National Health Expenditures, 2010–2020

$0.766

$1.510

$2.998

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

No public plan option, allother policies the same

Public plan option,individuals and smallemployers only

Public plan option,include all employers byyear 5

Cumulative National Health ExpendituresSavings compared with baseline (trillions)

Data: Estimates by The Lewin Group for The Commonwealth Fund. Source: Commonwealth Fund Commission on a High Performance Health System,  The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, Commonwealth Fund, February 2009.  

THE

COMMONWEALTH FUND

10Path Net Cumulative Impact on National Health Expenditures

(NHE) 2010–2020 Compared with Baseline,With and Without Public Health Insurance Plan, by Major Payer Groups

Total NHENet

federalgovernment

Net state/local government

Private employers

Households

With Public Health Insurance Plan

–$2,998 $593 –$1,034 –$231 –$2,325

Without Public Health Insurance Plan

-$766 $1,112 -$655 $905 -$2,128

Dollars in billions

Note: A negative number indicates spending decreases compared with projected expenditures (i.e., savings); a positive indicates spending increases.Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, (New York: The Commonwealth Fund, February 2009).

THE

COMMONWEALTH FUND

11Total National Health Expenditures (NHE), 2010–2020

Current Projection and Alternative Scenarios

$1

$2

$3

$4

$5

$6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Current projection

Reform proposals w/o public health insurance plan

Reform proposals w/ public health insurance plan

NHE in trillions

Note: GDP = Gross Domestic Product.Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, (New York: The Commonwealth Fund, February 2009).

$2.7

$5.2$5.0

$4.6

6.1% annual growth

5.5% annual growth

6.7% annual growth

THE

COMMONWEALTH FUND

12

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Current ProjectionPath Policy

Total National Health Expenditure Growth for Hospitals and Physicians, Current Projections and with Policy Changes, 2009–2020

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Current Projection

Path Policy

Hospital Expenditures (trillions) Physician Expenditures (trillions)

Data: Estimates by The Lewin Group for The Commonwealth Fund.Source: The Lewin Group, The Path to a High Performance U.S. Health System: Technical Documentation (Washington, D.C.: The Lewin Group, 2009).

$0.8

$1.6

$1.4

$0.7

$1.3

$1.1

THE

COMMONWEALTH FUND

13

Implications for Stakeholders of Path• Coverage and Savings

– Coverage for all with $3.0 trillion system savings 2010-2020 with public health insurance plan; $0.8 trillion without

– Coverage for all with $593 billion federal budget cost 2010-2020 with a public health insurance plan; $1.112 trillion without

• Employers and Employees

– Public health insurance plan more affordable than premiums now in small business market: 20-30% lower premiums

– Savings to employers including payment and system reforms of $231 billion over 2010-2020

• Providers

– Provider revenues enhanced by increasing Medicaid payment to Medicare levels and buying in uninsured at Medicare rates

– Payment reforms reward primary care and high performers but slower revenue growth over time than current law

• Insurers

– Rewards integrated delivery system and private insurers that enhance value

– Administrative savings of $337 billion over 2010-2020

THE

COMMONWEALTH FUND

14

Thank You!Stephen C. Schoenbaum, M.D., Executive Vice President and Executive Director, Commission on a High Performance Health System, scs@cmwf.org

Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org

Stu Guterman, Assistant Vice President, sxg@cmwf.org

Sara Collins,Assistant Vice President, src@cmwf.org

Kristof Stremikis, Research Associate,

ks@cmwf.org

For more information, please visit:

www.commonwealthfund.org

Rachel Nuzum,Senior Policy Directorrn@cmwf.org