January 24, 2011

1. Reform, Deficits, Elections: What’s Next? Heidi L. Gartland, Vice President, Government Relations January 24, 2011 University Hospitals

2. AGENDA: • Health Reform • Elections • Current Federal Policy • Current State Policy University Hospitals

3. Health Reform • Elections • Current Federal Policy • Current State Policy University Hospitals

4. Health Reform: Drivers • Rising health care costs • Inferior quality of care • Lack of access, 47 million uninsured • Irrational payment incentives—reward volume not value • Economic downturn University Hospitals

5. Health Reform: Overview • Builds on employer based care • Creation of health benefit exchanges • Expands Medicaid & government subsidies • Bars certain health insurance practices • Individual mandate & minimum essential coverage University Hospitals

6. Health Reform: Two Sides “Obamacare” It’s “Armageddon” – Rep. John Boehner “Federal reform will increase Virginia Medicaid spending $1 billion over 12 years” – Governor Bob McDonnell 43 percent of Americans do not favor the new reform law – Kaiser Family Foundation “Affordable Care Act” “We are answering the call of history” – President Barack Obama “National health reform will save Maryland $1 billion over 10 years.” – Governor Martin O’Malley 41 percent of Americans favor the new reform law – Kaiser Family Foundation Sources: The White House, FOX News, Washington Post (March 21, 2010); and Kaiser Family foundation Health Tracking Poll (conducted December 2011) University Hospitals

7. Health Reform: Popular Provisions Percent who say they feel favorable: .Source: Kaiser Family Foundation University Hospitals

8. Health Reform: Popular Provisions Source: Kaiser Family Foundation University Hospitals

9. Health Reform: Keep or Replace? University Hospitals

10. Health Reform: What’s already Implemented Dependent coverage up to age 26 No annual/lifetime maximums No pre-existing conditions for children Accountable Care Organizations Hospital readmission penalty Value based purchasing P4P or bundled payments Medical loss ratio Innovation awards University Hospitals

11. Health Reform: What’s Next • Court challenges • March 26-28, 2012 U.S. Supreme Court hearing • Decision by June 29, 2012 • Post decision University Hospitals

12. Health Reform: U.S. Supreme Court University Hospitals

13. Health Reform: Road to the Supreme Court 03/23/2010 PPACA signed into law 11/14/2011 Supreme Court Grants Certiorari 03/23/2010through 01/21/2011 ~26 Judicial Challenges Filed 03/26/2012 through 03/28/2012 Supreme Court Oral Arguments* Anti-Injunction 3/26 Min. Coverage, 3/27 Severability, 3/28 Medicaid, 3/28 2010 2011 2012 June 2012 Majority of Cases Dismissed Notable Exceptions: 05/2010through 11/2011 SUPREME COURT DECISION EXPECTED *Longest allocated time for oral arguments before the SCOTUS since Brown v. Board of Education University Hospitals

14. Health Reform: Constitutional Challenges • Anti-Injunction Act: Does it bar the legal challenge to the Individual Mandate? • Individual Mandate: Is it constitutional? • Severability: If unconstitutional, can the “Individual Mandate” be “severed” from the remaining portions of the Affordable Care Act? • Expansion of the Medicaid Program: Is it constitutional? University Hospitals

15. Health Reform: Constitutional Challenges—Day 1 Anti Injunction Act • Amicus Argument: Anti-Injunction Act Applies penalty bears key indicia of a tax • Government’s Argument: The “Penalty” Is Not A Tax • Respondent’s Argument: The “Penalty” Is Not A Tax University Hospitals

16. Health Reform: Constitutional Challenges—Day 2 Individual Mandate • Buy minimum essential coverage or pay a penalty • Penalty is calculated on % of income University Hospitals

17. Health Reform: Constitutional Challenges—Day 2 Individual Mandate • U.S. Constitution—Article I, Section 8: Congress shall have the Power to: • To regulate commerce with foreign nations, andamong the several states….. • To make all Laws which shall benecessary and properfor carrying into execution the foregoing powers….. University Hospitals

18. Health Reform: Constitutional Challenges—Day 3 Severability • Severability: provides that failure of one provision in a law does not affect the remaining portions • No Clause: the ACA has no severability clause • Absence of a Severability Clause does not mean that provisions are not severable • It means the Courts get to decide University Hospitals

19. Health Reform: Constitutional Challenges—Day 3 Medicaid Expansion • Petitioner’s argument: expansion is unconstitutional/coercive • Government’s argument: expansion is a constitutional exercise of Congress’ Spending Clause Power University Hospitals

20. Health Reform: The Decision If Individual Mandate is Held Constitutional • Full implementation of Affordable Care Act (ACA) • Subject to November elections If Individual Mandate is Held Unconstitutional: • And Severable: Remainder of ACA is Valid • Not Severable: Entire ACA Invalidated University Hospitals

21. Health Reform: What’s Next Post Decision Impact of elections Provisions already in place Regulations pending Changes that won’t stop University Hospitals

22. Health Reform: What’s Next Post Decision University Hospitals

23. Health Reform • Elections • Current Federal Policy • Current State Policy University Hospitals

24. Elections in 2012 • Presidential year politics • Gridlock in election year • Bipartisan support doesn’t predict legislative action • Battles on budget size and role of government prevail • Intra-party debates on both sides of the aisle University Hospitals

25. Elections in 2012 U.S. Senate • Democrats now control Senate, with a slim 51 to 47 seat majority U.S. House of Representatives: • Republicans now control the House with a 52 seat Majority – 242 to 190 University Hospitals

26. Elections in 2012 U.S. Senate • 33 Seats up for election • 23 Democrat (D) / 10 Republican (R) U.S. House of Representatives • 242 R / 190 D (3 Vacant) • All 435 seats up for reelection • 218 Seats needed to gain majority in House University Hospitals

27. Election: US House Redistricting Impact Source: The Cook Political Report University Hospitals

28. Elections: US House Ohio Map University Hospitals

29. Elections & House FY 2013 Budget House-Ryan Budget Reverses automatic sequestration Medicaid block grant Medicare reform-subsidized private insurance plans Obama Budget • Retain sequestration • Reduces $1.5 trillion in deficit reductions: • $500 billion-health entitlement reform • $487 billion defense cut • End Bush-era tax cuts and • Implementation of “Buffet-Rule” University Hospitals

30. Elections & Budget Control Act-Jan 2013: Potential Sequester Impact $1.2 trillion Sources of Cuts Impact of Cuts • New revenues • Defense • Total non defense • Medicare* • Medicaid exempt • Net interest savings *Medicare 2% across the board, no cuts to benefits University Hospitals $0 $492 billion $492 billion $123 billion ($43B hosp.) $0 $216 billion 30

31. Elections & Senate Democrat’s Budget Plan • Declined to pass a budget resolution-3rd year in row • House Republicans will reject any Senate Democrats budget plan • Allows Senate Democrats to avoid difficult votes in an election year. University Hospitals

32. Elections, Budget & Tax Outlook • Budget plans recommend tax reforms • Tax reform--post-election lame duck session • Bush-era tax cuts expire & extension requires congressional action • Reforms necessary to stimulate the economy & decrease debt • Cuts to health care likely University Hospitals

33. Post Election: Emerging Themes University Hospitals

34. Post Election—Lame Duck Action • Short window of opportunity for substantial legislative action • Outgoing Members of Congress--deal makers/breakers • Abnormally high congressional turnover--50+ • Behind the scenes negotiations University Hospitals

35. Post Election: Agenda Bush era tax cuts Fiscal Year 2013 budget – spending bills Continuing resolutions (CRs) until lame duck Sequestration Medicare physician fix Surface Transportation Reauthorization Bill Farm Bill University Hospitals

36. Health Reform • Elections • Federal Policy Changes • State Policy Changes University Hospitals

37. Federal Policy Changes • Avoided major cuts in deficit agreement • Medicare IPPS Rule • Medicare Value Based • Medicare Shared Savings Program • Medicaid payments for physicians @ Medicare rates • Hospital readmission penalty University Hospitals

38. Federal Policy Changes: Our Vulnerabilities Medicare • SGR/physician fix ($30 billion) • Bad debt ($15-30 billion) • Hospital outpatient departments ($8-11 billion) • Medicare GME ($9-15 billion) • Post acute ($42-50 billion) • Rural adjustments ($6-16 billion) • Coding offset ($5 billion) University Hospitals

39. Federal Policy Changes: Our Vulnerabilities Medicaid: ($100 billion) • Medicaid block grants • Medicaid provider assessment limits • Medicaid FMAP blending University Hospitals

40. Health Reform • Elections • Federal Policy Changes • State Policy Changes University Hospitals

41. University Hospitals

42. Medical Hot Spot:Per Capita Health Spending: Ohio vs. US Source: 2009 Health Expenditure Data, Health Expenditures by State of Residence, Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, released December 2011; available athttp://www.cms.gov/NationalHealthExpendData/downloads/resident-state-estimates.zip University Hospitals

43. “The critical flaw in our health care system … is that it was never designed for the kind of patients who incur the highest costs. Medicine’s primary mechanism of service is the doctor visit and the emergency room visit. It’s like arriving at a major construction project with nothing but a screwdriver and a crane.” Source: The New Yorker (Jan 24, 2011). University Hospitals

44. State Policy Changes: ER Utilization: Ohio vs. US Hospital Emergency Room Visits per 1,000 Population 29% Source: American Hospital Association Annual Survey (March 2010) and population data from Annual Population Estimates, US Census Bureau: http://www.census.gov/popest/states/NST-ann-est.html. University Hospitals

45. State Policy Changes: Hot Spotters 1% 23% 4% 72% 34% 1% of the US population consumes 23% of total health spending 45% 27% 5% of the US population consumes 50% of total health spending 50% 47% 28% 66% Most people (50%) have few or no health care expenses and consume only 3% of total health spending 3% Source: Kaiser Family Foundation calculations using data from AHRQ Medical Expenditure Panel Survey (MEPS), 2007 University Hospitals

46. State Policy Issues: Medicaid Eligibility + Spend-down University Hospitals

47. State Policy Issues: Medicaid Eligibility in Health Reform 2014 + Private Insurance 400% Health Benefit Exchange Subsidies? $89,400 (family of 4) Spend-down? 138% Medicaid Expansion Medicaid Expansion Medicaid $30,843 (family of 4) University Hospitals

48. State Policy Changes: Our Vulnerabilities Medicaid: • Pay for performance • Rebasing—APDRG • Managed Care expansion • Disabled • Dual Eligible's • Medicaid physician payment increase • Health benefit exchange • Medicaid expansion 2014 • 2015/2016 Biennial budget • Hospital UPL next generation University Hospitals

49. For More Information Contact: Heidi L. Gartland Vice President, Government Relations University Hospitals (216)844-3985 (work) (216)403-4050 (cell) heidi.gartland@uhhospitals.org University Hospitals

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