HEALTH CARE REFORM – An Overview

1. HEALTH CARE REFORM – An Overview Kenneth W. Kizer, MD, MPH Alaska State Hospital and Nursing Home Association Fairbanks, AK September 7, 2010

2. Presentation Objective • Place the recently enacted health care reform legislation in context • Provide an overview of the legislation and highlight some of the changes that it will bring and their implications • Help you understand that a sea change in health care is under way

3. HEALTH CARE IS ENTERING A PERIOD OF “CLASS 5 CHANGE”

4. WHAT’S CAUSING THE ‘RAPIDS’? • The need to control the growth of health care costs • The need to improve quality and safety • Not enough caregivers • The need for new facilities • Changing patient needs and expectations • Biomedical science advances • New technologies • The struggling economy • The health IT revolution • The health care reform law

5. THE CONFLUENCE OF THESE FORCES IS DRIVING A FUNDAMENTAL TRANSFORMATION OF HEALTH CARE

6. THE FORCES DRIVING HEALTH CARE CHANGE ARE NOT CAUSED BY THE HEALTH CARE REFORM LEGISLATION.THE LEGISLATION IS MERELY THE WAY THAT ELECTED POLICY MAKERS HAVE CHOSEN TO ADDRESS THE PROBLEMS WITH HEALTH CARE WITHIN THE CONTEXT OF AMERICAN CULTURE. 6

7. What is the Health Care Reform Law? • The most far-reaching health care legislation since Medicare was enacted in 1965 • Refers to 2 specific legislative acts • The Patient Protection and Affordable Care Act of 2010 (PPACA) - PL 111-148, enacted March 23, 2010 • The Health Care and Education Affordability Reconciliation Act of 2010 (HCERA) - PL 111-152, enacted March 30, 2010 • The legislation seeks to: • Expand access to health care by increasing insurance coverage and pay for the expansion • Reform health insurance practices • Improve the quality of care • Control the rate of increase of health care expenditures • Changes are incrementally implemented, beginning in 2010 and extending well beyond 2014 • Legislation that affects everyone involved with health care

8. Selected Statistics About the Health Care Reform Law • Expands health insurance coverage to 34 million persons • Guarantees that 94% of Americans will have health insurance of some type • Is projected to cost $938 B over the next 10 years • Is projected to extend solvency of the Medicare Trust Fund by 12 years (to 2029) • Is projected to cut the federal deficit by $143 B over the next decade • Medicaid will become larger than Medicare

9. Patient Protection and Affordable Care Act of 2010 • Quality, Affordable Health Care For All Americans • Role of Public Programs • Improving the Quality and Efficiency of Health Care • Prevention of Chronic Disease and Improving Public Health • Health Care Workforce • Transparency and Program Integrity • Improving Access to Innovative Medical Therapies • Community Assistance Services and Supports • Revenue Provisions • Strengthening Quality, Affordable Health Care For All Americans

10. A Dozen Highlights of the PPACA • Requires all individuals to have health insurance • Fundamentally reforms the health insurance market • Expands Medicaid coverage • Provides incentives for employers to provide coverage • Creates state health insurance exchanges • Changes the tax laws related to health insurance • Makes numerous changes to Medicare • Links provider payment to performance and establishes new payment models • Expands coverage for health promotion/disease prevention services • Increases availability of long term care services • Increases performance reporting for providers • Funds numerous research and demonstration grants

11. Title I. Quality, Affordable Health Care For All Americans • Changes health insurance practices • Prohibits discrimination based on pre-existing conditions, health status and gender; lifetime or annual limits; recissions • Restricts age rating • Guarantees renewability of individual coverage • Expands health promotion/disease prevention care • Sets acceptable medical loss ratios • Creates a temporary high risk insurance pool for uninsured persons with pre-existing conditions • Creates state health insurance exchanges for individuals and small businesses (allows interstate exchanges) • Establishes tax credits for small businesses who provide coverage and cost-sharing assistance • Establishes performance reporting requirements for private health plans (quality, how premium is spent) • Requires that individuals maintain “minimum essential coverage”

12. “Minimum Essential Coverage” Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care 12

13. Title II. Role of Public Programs • Expands eligibility for Medicaid to persons <65 with incomes below 133% FPL (federal government to fund 100% of the cost for newly eligible persons from 2014-2016, decreasing to 90% in 2020) • Increases Medicaid payment for PCPs in 2013 & 2014 • Increases federal contribution to CHIP (2015-2019) • Requires states to offer home and community-based services and supports • Reduces Medicaid DSH allotments (2014-2020) • Requires performance measures for Medicaid (adult) • Establishes demonstration projects for: • Episode of care bundled payment for Medicaid • Medicaid global payment system • Expands MCH home visiting programs • Creates a special office to coordinate coverage and payment for dual eligible beneficiaries

14. Title III. Improving the Quality and Efficiency of Health Care • Establishes a Medicare value-based purchasing (VBP) program with incentive payments based on performance • Reduces physician payment if quality measures not reported; adjusts payment based on performance metrics • Establishes a VBP program for SNFs and HHAs • Reduces hospital payments if hospital is among the top 25% for hospital-acquired conditions • Calls for a national strategy to improve health care quality • Establishes the Center for Medicare and Medicaid Innovation • Establishes a Medicare Shared Savings program using accountable care organizations and a pilot program on payment bundling • Reduces DSH payment and payment to hospitals, SNFs, HHAs, hospice, lab, other • Creates an Independent Medicare Advisory Panel to reduce rate of growth of Medicare spending

15. Title III. Improving the Quality and Efficiency of Health Care (con’t) Provides support for: Health care delivery system research Quality improvement technical assistance Community health teams to support PCMH Medication management Regionalized systems for emergency care Trauma care centers Shared decision making Patient navigator programs Reduces payment for excess readmissions to a prospective payment system hospital and establishes a hospital readmissions reduction program Increases payment for certified nurse midwives and ambulance services provided by critical access hospitals Changes how Medicare payment is computed Establishes a community-based care transition program 15

16. Title IV. Prevention of Chronic Disease and Improving Public Health • Eliminates co-pays and deductibles for preventive care and health education • Improves education on disease prevention and public health and supports research on delivery of preventive services • Establishes the National Prevention, Health Promotion and Public Health Commission and authorizes development of a national prevention and public health strategy • Establishes a Preventive and Public Health Fund and preventive services task forces in AHRQ and CDC • Provides grants for community preventive health activities, healthy aging, and worksite wellness programs • Calls for demonstration projects for individualized wellness plans using community health centers • Calls for a prevention and health promotion outreach and education campaign

17. Title V. Health Care Workforce • Increases funds for the National Health Service Corps • Provides grants, loans and other support to expand the health care workforce (especially primary care practitioners and public health workers) • Provides incentives for primary care practitioners and for providers to serve underserved areas • Establishes a National Health Care Work Force Commission and a National Center for Health Care Workforce Analysis • Provides funds for nurse managed health clinics • Creates a Primary Care Extension Program

18. Title VI. Transparency and Program Integrity • Requires physicians to disclose ownership of hospitals, medical equipment and nursing homes • Enhances efforts to combat waste, fraud and abuse • Will establish a private, non-profit entity to identify priorities for and provide for the conduct of comparative outcomes research • Requires Pharmacy Benefits Managers to disclose performance information • Requires SNFs and Nursing Facilities to have ethics program • Establishes demonstration projects for SNF best IT practiced • Establishes a Patient-Centered Outcomes Research Institute and Research Trust Fund

19. Title VII. Improving Access to Innovative Medical Therapies • Will establish a regulatory pathway for FDA approval of biologically similar versions of previously licensed products • Expands scope of the existing 340B drug discount program to increase access to medicines at lower cost for children’s hospitals, cancer hospitals, critical access hospitals and underserved communities • Requires manufacturers to offer covered drugs for purchase at reduced prices

20. Title VIII. Community Assistance Services and Supports (CLASS) • Provides for a lifetime cash benefit for long-term supports and services to help persons with severe disabilities remain in their homes through a national voluntary, self-funded insurance program provided through employers

21. Title IX. Revenue Provisions • Adds requirements for charitable hospitals to maintain tax incentives • Assesses fees for medical device manufacturers and pharmaceutical companies • Increases Medicare Hospital Insurance tax by 0.5% for persons with annual incomes greater than $200K (couples > $250K) • Establishes a tax on high cost health insurance plans • Multiple other miscellaneous new charges

22. Title X. Strengthening Quality, Affordable Health Care For All Americans • Creates an incentive payment program for states that offer home and community-based LTC services • Requires development of more outcome performance measures for hospitals, physicians and other providers • Protects prospective payment hospitals in frontier states • Creates pilot pay-for-performance programs for long-term care, psychiatric, rehabilitation and some other hospitals and hospice programs • Requires public reporting of physician performance • Provides grants for community-based collaborative care networks for low-income populations • Establishes a Family Nurse Practitioner Training Program • Provides grants for training rural physicians and public health programs

23. PPACA Implementation Timeline

24. PPACA Implementation Timeline Highlights 2010 Numerous health insurance practice reforms Dependent coverage Medicaid expansion – state option Small business tax credits Coverage of preventive care 2011 Medicare Part D discounts CLASS offerings 2012 Quality reporting by health plans 2013 Insurer administration simplification rules Health care choice compact regulations 24

25. PPACA Implementation Timeline Highlights 2014 Individual requirement to have health insurance Further health insurance practice reforms Medicaid expansion Guarantees availability and renewability of coverage State health insurance exchanges operational Employer shared responsibility penalties Increase in small business tax credits 2016 Health care choice compact implementation 2018 Excise tax on high-cost employer-provided health plans becomes effective 25

26. The PPACA entails an enormous amount of detailed change.

27. A FEW THINGS TO KEEP IN MIND

28. IT’S A JOURNEY PPACA IS A MAJOR MILESTONE IN THE TRANSFORMATION OF AMERICAN HEALTH CARE, BUT THE JOURNEY HAS BEEN UNDERWAY FOR SOME TIME HUNDREDS OF SETS OF IMPLEMENTING REGULATIONS HAVE YET TO BE WRITTEN THERE WILL BE UNPLANNED OCCURRENCES AND UNINTENDED CONSEQUENCES COURSE CORRECTIONS WILL BE NEEDED THERE WILL BE MORE HEALTH CARE REFORM LEGISLATION 28

29. THE WAY WE THINK ABOUT HEALTH CARE HAS TO CHANGE It’s about the quality, not quantity, of services provided Payment will be increasingly based on value – and constrained Historical levels of waste and inefficiency can no longer be accepted Performance improvement is an essential business strategy 29

30. “ALL HEALTH CARE IS LOCAL”

31. THE FUTURE IS NOT WHAT IT USED TO BE!