National Health Care Reform and Michigan

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National Health Care Reform and Michigan

• December 4, 2012

Peter Pratt President
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Generally, What ACA Does and Doesnt Do

• (Most) everyone will be required to have health
  insurancepublic or privateDONE
• People with public or private coverage can keep
  itDONE
• Private insurers need more regulation (no denials
  for pre-existing conditions, no annual or
  lifetime limits)DONE
• Health care quality must improve, and the way we
  pay providers must foster this improvementMADE A
  START
• Health care costs are rising too rapidly and must
  be controlledNOT REALLY DONE

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Why Does the ACA Matter to Michigan?

• Cover many of the now uninsured through private
  insurance/the exchange (MIHealth Marketplace) and
  Medicaid expansion (PERHAPS)
• Individual taxor penaltywith exemptions
• Employer mandateor penaltywith exemptions (for
  firms with 50 or more FTEs)
• Tax credits/subsidies for premiums, copays and
  deductibles
• Medicaid expansion to 133 FPLperhaps
• Determination of essential benefits (Michigan
  Essential Benefits Benchmark PlanPriority Health
  HMO)
• Address increased demand for care
• Many more insuredbut who will care for them?
• Increased Medicaid payment rates to PCPs to 100
  of Medicare rates for 2013-14 only
• Foster quality improvement
• Cover proven preventive services and eliminate
  cost-sharing for them (Medicare)
• Offer incentive payments to providers for primary
  care and coordinated care
• Lower payments for avoidable rehospitalizations,
  hospital-acquired infections
• Bundle payments for acute and post-acute care
• Foster accountable care organizations, PCMHs

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Covering Everyone?

• New 2011 data 47.9 million uninsured, down by
  1.3 million from 2010
• ACA covers 32M (95 of population excluding
  unauthorized aliens), but may cover up to 40M if
  everyone eligible signs up
• Michigan
• Estimated 1M people will be eligible for
  subsidies through the exchanges 640,000 will
  actually enroll (includes insured and uninsured)
• Estimated 969,000 newly eligible for Medicaid
  400,000-600,000 will actually enroll

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Mandates for Individuals

• Must have coverage that meets minimum standards
• Penalties Higher of
• 95 (2014), 325 (2015), and 695
  (2016)/yr/family member up to 2,085 or
• 2.5 of household income, if above filing
  threshold (9,350/individual or 18,700/couple in
  2009)
• Exemptions financial hardship (income below
  filing threshold or spend more than 8 of income
  on insurance), religion, American Indians
• Individuals whose employers dont offer health
  insurance are NOT exempt
• Individuals who dont take employer-offered
  coverage are NOT exempt

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Subsidies for Individuals

• Two kinds for premiums and for out-of-pocket
  costs (copays and deductibles)
• Sliding scale premium tax credits up to 400 FPL
  (88K for family of four)if dont get affordable
  coverage from employer
• Subsidies set to limit premium contribution to 2
  of income if total income 133 FPL to 9.5 of
  income if total income 300-400 FPL (133
  FPL29,000 for family of four subsidy covers
  all but 600)
• Increases cost-sharing subsidies for lt250 FPL

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Requirements for Employers

• No employer mandate for employers lt 50 employees
• Penalty for employers gt 50 NOT offering HI is
  2K/year/worker
• If employer does offer HI and has one or more
  employees receiving premium tax credit, pay
  lesser of 3,000 for each employee receiving the
  credit or 2,000 for each FTE
• First 30 employees exempt from calculation of
  penalty
• Employers gt 200 must enroll employees
  automatically into employers lowest cost plan if
  they dont opt out
• 98 of businesses unaffected, either because
  already offer coverage or they are exempt.
• This all takes effect in 2014

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Subsidies for Employers

• Credits for small businesses (lt25 employees, avg.
  annual wage of 25K) 35 from 2010-2013 50
  starting 2014. Credits phase out as firm size
  average wage increase. As of 7/1/12, 7,000
  Michigan businesses have used the tax credits
• Credits may not be attractive enough to get
  smallest businesses to offer health insurance
  (and no penalty if they dont)
• No mandate, no credits for employers 26-50
  employees

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Cost of Covering More People

• Two kinds of costs are competing for publics
  attention cost to government and cost to
  individuals, families, and businesses
• Every dollar that defrays cost of health
  insurance for businesses, families, and
  individuals will add to the governments costand
  who pays for government?
• Individual and employer mandateseven with
  subsidies and limits, will people decide to buy
  HI or pay penalties?
• Equity How much should people and employers w/HI
  pay for those without it? (1,000 a year now)
• Firms with 3-9 employees offering HI (50, down
  from 59 in 2010)
• Equity How much should employer and employee pay
  for employer-sponsored HI? Family coverage in
  2012 15,745. Employer share 72 Employee
  share 28 (largely unchanged since 2000)

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Expansion of Public Programs

• Expand Medicaid to all individuals (133
  FPL)Michigan covers childless adults now up to
  35 FPL
• Feds fund
• 100 of expansion population from 2014-16
• 95 for 2017
• 94 for 2018
• 93 for 2019
• 90 after that
• State will save 1.3B over 10 years from
  expansion (mental health)
• Increase Medicaid payment rates to PCPs to 100
  of Medicare rates for 2013-14 only
• Increase payments to community health centers for
  new eligibles
• Why does this matter? For businesses, fewer
  uninsured. For providers, better (but not great)
  payment pent-up demand

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Health Insurance Exchanges

• State-based exchanges starting in 2014 called
  American Health Benefits Exchange Small
  Business Health Options Programs, administered by
  government or non-profit organization.
• Goal Sustainable, financially viable, and
  transparent options that offer meaningful
  coverage
• Michigan submitted short declaration of intent on
  November 16, 2012 for state-federal partnership
  (HHS approval by 1/1/13)
• State-based exchange still a possibility, but
  blueprint must be submitted by 12/14/12
• Applications to qualified health plans (early
  2013)
• Certification of QHP rates (Summer 2013)
• Open enrollment on exchange begins (10/1/13)
• Exchange in full operation (1/1/14)

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Health Insurance Regulation

• Guaranteed issue and renewability
• No pre-existing condition exclusionsfor
  children, went into effect 9/23/10 for group, but
  not individual, plans
• No lifetime limits or rescissions
• Limit rating variation to family size, geography,
  age, tobacco use (not allowed for health status,
  gender, occupation) for example, rate for
  63-year-old cant be more than 3x rate for
  21-year-old.
• Tighter oversight of health plans
• HHS secretary can require plans to lower rates
• More requirements for existing plans med loss
  ratios, cover lt26 years old, preexisting
  condition exclusion prohibition (2014), cover
  preventive services

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Cost Containment

• Encourage adoption and use of health IT
• Reduce fraud, waste, and abuse
• Simplify HI administration through
  standardization
• Reduce payments to Medicare Advantage plans
  after 2014, MA plans can earn 5 quality bonuses
• Add 9.9B in reductions for IP hospitals, SNF,
  home health, and others from expected
  productivity gains
• Reduce Medicaid and Medicare DSH allotments
• Increase Medicaid drug rebates
• Create Independent Payment Advisory Boardto
  rationalize and de-politicize cost control efforts

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Paying for Reform

• HC reform cant add to deficit, so must tax
  and/or cut spending
• Net cost is 940B, cuts deficit by 138B over 10
  years
• Higher taxes for high-income individuals/household
  s (2013)
• Medicare Part A payroll tax rate rises from 1.45
  to 2.35 for high-income taxpayers
• 3.8 assessment on unearned income for
  high-income taxpayers
• Taxes on policies with benefits over a certain
  threshold
• 40 tax on plan gt10.2K indiv/27.5K family
  (2018)
• Vision and dental plans excluded from calculation
• Penalties for individuals large employers who
  dont get/offer HI
• Cuts in plan and provider payments
• Insurers, medical device makers, Rx mfgers pay
  fees of more than 100B over 10 years, but with
  later start dates

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The Fiscal Cliff/Budget Deficit

• Budget sequester has 2 cut to Medicare (plus 27
  cut to physicians)
• Medicare and Medicaid on the block if were to
  address deficit (769B in 2011, 21 of federal
  budget)
• Simpson-Bowles Cut hospitals before 2020
• Raise eligibility age to 67
• Raise Medicare Part B premiums
• Give seniors vouchers (Ryan), but tie amount to
  HC cost inflation not GDP
• Limit Medicaid expansion?
• Limit subsidies to less than 400 FPL?