the reform after the reform webinar series - session 1: how payers will be impacted by the new...

The Reform After the ReformHow Payers Will Be Impacted by the New Healthcare Reform Law and What to Do Now

May 19, 2010

Agenda

• Introductions

• Health Reform Overview

• Implications and Recommendations

• Questions

© 2010 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. 2

With You TodayRon Wince, President/CEO, Guidon Performance Solutions, LLC

• Two decades of experience in application of Lean and Six Sigma

• Co-founder of Guidon Performance Solutions – the pioneer in

applying LeanSigma® in non-industrial and non-traditional

companies

• Client experience in healthcare, insurance, financial services,

retail, information technology, telecommunications and hospitality

• B. S. Engineering, U.S. Naval Academy in Annapolis, MD

David Merritt, Vice President and National Policy Director, Center for


David Merritt, Vice President and National Policy Director, Center for Health Transformation and the Gingrich Group

• Advises Speaker Gingrich and leads the Center’s work on

national health reform and health information technology

• Editor of Paper Kills: Transforming Health and Healthcare with

Information Technology, winner of the 2007 book of the year

award by the Health Information Management Systems Society

(HIMSS)

• Master’s degree in political science and government from Loyola

University Chicago

Center for HealthCenter for Health

TransformationTransformation

www.healthtransformation.net

David Merritt

Health Reform and Health Transformation: What Happened, What’s Next, What’s Needed

Copyright © 2010 The Center for Health Transformation

David MerrittCenter for Health Transformation




Health ReformHealth Reform

� Lower Costs

� Improve Quality

Copyright © 2010 The Center for Health Transformation5

� Improve Quality

� Expand Coverage




Expand CoverageExpand CoverageHealth “Insurance” Reform

� Medicaid expansion

� Subsidies


� Subsidies

� Insurance rules

� 50+ insurance exchanges

� Individual mandate

� Employer penalties




FinancingFinancing� Taxes - $500 billion

� Payroll taxes, investment income, employer penalties


penalties

� “Cadillac” plans

� Device manufacturers, pharma, health plans

� Medicare cuts - $500 billion� Home health ($39 billion); hospitals ($131 billion); skilled nursing facilities ($22 billion); Medicare Advantage benefits ($101 billion)




What’s Next What’s Next –– Immediate Immediate ImplementationImplementation� Rescissions prohibited

� Lifetime coverage limits eliminated and annual limits


� Lifetime coverage limits eliminated and annual limits restricted

� Insurers barred from excluding children with preexisting conditions from coverage

� Medicare Part D beneficiaries in the “doughnut hole” will get $250 rebate

� $5 billion program created for employers to provide coverage for retirees between 55-64




Immediate ImpactImmediate Impact� “Adult children” can remain on their parents’ health plans

until they are 26

� Tax credit available for some small businesses (under 25


Tax credit available for some small businesses (under 25 employees) for employee coverage

� $5 billion high-risk pool created to provide insurance to individuals with qualifying preexisting conditions who have been uninsured for at least 6 months

� 10% tax on indoor tanning services that use ultraviolet lamps begins on July 1, 2010




20112011� Medicare Advantage payments to insurers frozen at 2010

levels

� Annual fee of $2.5 billion imposed on pharmaceutical manufacturers


manufacturers

� Insurers required to provide rebates to enrollees if they spend less than 85% of large-group premium dollars and 80% of individual and small-group premiums on care as opposed to administration, profits, salaries, etc.




20122012� Annual fee on pharmaceutical manufacturers increases to

$3 billion

� Cap of $2500 in contributions to tax-advantaged Flex Spending Account


Spending Account

� Medicare tax rate increases by 0.9% to 2.35% on earnings over $200,000 for individuals and $250,000 for families

� CLASS program created




20132013� Companies with 50 or more employees will pay a fine of

$2000 per employee if one full-time employee receives federal healthcare subsidy

� A 2.9% excise tax is imposed on the sale of medical


� A 2.9% excise tax is imposed on the sale of medical devices – anything generally purchased at the retail level by the public is excluded from the tax

� New fee assessed on health insurance plans to fund comparative effectiveness trust fund




20142014� Individual mandate requires individuals to purchase qualified

health insurance or pay a fine of $95 for each family member or 1% of taxable household income, whichever is greater

� Health plans can no longer exclude people from coverage


� Health plans can no longer exclude people from coverage based on pre-existing conditions

� Federal subsidies based on income available for qualified individuals/families

� Annual fee totaling $8 billion imposed on insurers

� State-based health care exchanges created

� Medicaid eligibility expands to 133% of the federal poverty level ($29,327 for a family of four)




20152015� Mandate penalty for not having qualified health insurance

increases to $325 for each family member or 2% of taxable household income, whichever is greater

� The annual fee on insurers increases to $11.3 billion


� The annual fee on insurers increases to $11.3 billion

20162016� Mandate penalty for not having qualified health insurance

increases to $695 for each family member or 2.5% of taxable household income, whichever is greater




20172017--20182018� The annual fee on pharmaceutical companies increases to

$3.5 billion in 2017 and $4.2 billion in 2018

� The annual fee on insurers increases to $13.9 billion in 2017 and $14.3 billion in 2018


2017 and $14.3 billion in 2018

� 40% excise tax on employer-provided plans (a.k.a. Cadillac plans) (2018)

� The first $27,500 of a family plan and $10,200 for individual coverage is exempt; higher exemptions for retirees and people in high-risk professions




QualityQuality� National Quality Improvement Strategy (2011)

� Center for Medicare and Medicaid Innovation (2011)

� 10% Medicare bonus payment to primary care physicians and other providers for certain services (2011)

Copyright © 2010 The Center for Health Transformation

and other providers for certain services (2011)

� Value-based purchasing programs for hospitals, home health, skilled nursing facilities, and ambulatory surgical centers (2011-2012)

� Medicare and Medicaid Accountable Care Organization pilots on shared savings and coordinated care (2012)

16




QualityQuality� National Quality Improvement Strategy (2011)

� Center for Medicare and Medicaid Innovation (2011)

� 10% Medicare bonus payment to primary care physicians and other providers for certain services (2011)


and other providers for certain services (2011)

� Value-based purchasing programs for hospitals, home health, skilled nursing facilities, and ambulatory surgical centers (2011-2012)

� Medicare and Medicaid Accountable Care Organization pilots on shared savings and coordinated care (2012)

IMPLICATIONS & RECOMMENDATIONS


Can You Match the Legislation to its Length?

A. 1935 Economic Security Act

B. Civil Rights Act of 1964

C. Patient Protection and Affordable Care Act

1. 4 pages

2. 8 pages

3. 1 pageAffordable Care Act

D. 19th Amendment to the Constitution

E. Constitution

3. 1 page

4. 64 pages

5. 2074 pages


Welcome to “Implemageddon”


Implications for Payers

Key Themes

• Under the Microscope

• Regulatory Tsunami

• Funding, Fees &

Taxes

Actions

• Move fast on performance management and business intelligence

• How will matter as Taxes

• Coverage & Portability

• Explosion of Information Technology & Data

• How will matter as much as What…maybe more

• Product & Business Model Innovation

• Value Chain Alignment & Collaboration


Performance Management & BI• Few payers have sophisticated approach to data to manage

performance of people processes & technology

– Few recognize the gap

– Even fewer take effective action on the data they do have

• Fragmented and misaligned strategic initiatives including new

products and services, information technology & performance

improvement

– Vertical versus horizontal focus– Vertical versus horizontal focus

– Proliferation of strategic and technology projects consumes critical resources with un-measurable impact

• Negligible focus on leveraging business process intelligence

=> companies aren’t sure they get the outcomes they

expect…or need


Transparency & reporting requirements from new legislation will be painful for many

How vs. What

• MLR is driven by “how” things are done• Reclassifying expenses will draw scrutiny

• Most insurers will struggle to meet standards

– Median MLR has grown from 83% in 2007 to 84% in 2009

=> half of all plans likely exceed the cap

• Regulatory Tsunami • Litany of new regulations and implicit additional • Litany of new regulations and implicit additional

corrective legislation will require agility in operational,

risk, compliance and reporting processes

• Changing customer mix will put pressure on margins

• Expected shift from employer coverage to individual

coverage


How vs. What

Nearly 100% of Process Areas Impacted by 2018


Source: PwC Health Research Institute

Process focus may determine the winners from the losers

Innovation

• Competitive advantage from legacy products will be difficult as state health insurance exchanges drive commoditization and competition based on price and quality

• But…new market opportunities will emerge– Outsourcing of Expertise/Capabilities?

• Management of state health insurance exchanges

• Management & reporting of quality/cost data for health plans

– Value-add opportunities to providers • Advisory

• EMR implementation


Value Chain Focus

Wellness & Primary

CareDiagnosis Treatment Payment

Outcomes Reporting

• Opportunities abound in partnerships, alliances, “virtual” integration


• Wellness management and counseling in partnership with providers

• Chronic condition management

• Focus on continuous flow of value delivery to the

patient

Summary• Close gaps in performance management and business intelligence

– Accurate reporting is table stakes– “The right data to take the right actions”

– Imbed practices into the culture through Cycles of Use

• Pay attention to “how” things get done as much as “what” needs to get done– Lean Six Sigma/BPR to streamline key processes

– Build speed and agility in at every opportunity

– Engage the entire organization – those who know the process best do it every dayevery day

• Innovation and inspiration – Incorporate ideas from outside the industry – Ritz Carlton; 3M;

Skunkworks

– Maturity and understanding of VOC will be critical

• Basic element of business in the future will be the end-to-end Value Chain – systems thinking will replace functional thinking


Success in a post-reform world will require “implementation” beyond MEETING requirements

Questions


Guidon Performance Solutions

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