Financial Implications of Changes in Health Care

Legislation

Roberta Riportella, Ph.D.

Professor, Health Policy Specialist

School of Human Ecology

Family Living Programs

UW Madison and UW Extension

How Do We Create Health?

Health Insurance

Today ACA (Affordable Care Act) in broad terms and then some

specifics for individuals and families, and for businesses. Why most of reform is still likely What roles Extension educators can play

Resources available

Extension’s research evidence based programming Current health care system What was wrong What is ACA poised to fix: access via insurance

The {Patient Protection and} Affordable Care Act (ACA)

Coverage: 32/46 million uninsured covered by 2014 (over 59 million, >1/6)

Paying for new coverage: ~$1 trillion Dozens of insurance reforms: to improve and

secure coverage Transformative reform: “Value” provisions Adequate access: infrastructure and workforce

Why reform is still happening

Pledges by some in Congress to repeal all of it

Legal challenges to mandate Some parts need budget

Workforce commission

What Role for Extension Educators

Helping consumers make decisionsPartner with AARP for Medicare populationWho else will do this? Insurers?

Lots of online information but is this education?

Do businesses/communities need more assistance in compliance?

Wellness aspects, health promotion programming

What Role for Extension Educators

A balanced voice to counter naysayers who do nothing but say no, it’s too expensive, etc. Reform can be effective and cost effective if we give it

a chance Anything that moves us in direction of having more

insured is a good thing for families, communities, the state and the nation

we all pay for the uninsured and we (or family member) may be one step closer to being

uninsured than we realize

What Role for Extension Educators: cont’d.

Value added, deeper understanding of how inter-related these issues are (think Linda Booth Sweeney’s system approach)

Relationship between Funding and Services

Medicare major payer of hospital care Any change in how Medicare is structured

(vouchers) would impact that infrastructure Particularly relevant for rural hospitals,

over 50%Markets not big enough to sustain services

without extra support

Counties’ Dependence on Public Health Insurance

Over 50% of health care dollars expenditures are paid for by government 32% Iowa County 33% Columbia County 35% Green County 37% Milwaukee County 39% Sauk, Rock Counties 43% Crawford County

2008 Medicare and BadgerCare numbers/population

Insurance in Our Current Health Care System

Combination of public and private insurance Private insurance is mainly employer-based

History of employer-based system from WWII Insurance was given as an extra benefit during wage

freezes Premium cost split between employer and employee

Employer control over employee share of that Choice depends on negotiating power of employer with

insurers Locks people into jobs without portability Particularly problematic in our troubled economy

Insurance in Our Current Health Care System, cont’d.

Also direct-purchase private insurance plansPay entire premium, but can deduct from taxesHigh deductibles

Self insured/funded plansLargest employersAlmost 50% of Wisconsin employer marketLargely exempt

Insurance in Our Current Health Care System, cont’d.

Public insurance includes:Medicare for those 65+ (no income limits)Medicaid (for certain low-income groups)

States have flexibility with eligibility and acceptance State Children's Health Insurance Program (SCHIP,

BadgerCare Plus in WI)

Military care (VA, TRICARE) Indian Health Services

US Health Insurance by Type

0

50

100

150

200

250

300

PrivateInsurance

PublicInsurance

Uninsured

Nu

mb

er (

in M

illio

ns)

Total

Employer

Direct-Purchase

Total

MedicaidMedicare

VATotal

Sources of Health Insurance Coverage, individuals under age 65, by family income, 2007

Source of Coverage by Income

0%10%20%30%40%50%60%70%80%90%

100%

<100%

FPL

100-

199%

FPL

200-

399%

FPL

>400%

FPL

In thousands of dollars

Public

Uninsured

Individual

Employer

Kaiser Family Foundation: The Uninsured, a Primer. October 2008

As family income increases, the likelihood of:

Employment-based coverage increases

Public coverage decreases

Individual coverage is fairly constant

Being uninsured decreases

“Health Policy Brief: ‘Grandfathered’ Health Plans,” Health Affairs, Updated: October 29, 2010 http://www.healthaffairs.org/healthpolicybriefs/

Uninsured

Other Government

Out of Pocket

Direct-Purchase

Employer-Based

Related CostsInsurance Type

Medicaid

Private Insurance& OtherPrivate

Medicare

Other Government

Medicaid

Medicare

Uncompensated

19%

15%

12%

40%

12%2%

Wisconsin’s Attributes

Ranked #1 nationally in quality (AHRQ, federal agencyHigh levels of health information technology

adoptionHigh levels of physician/hospital integration

Low per capita Medicare spending Low rate of uninsured (#2-4 nationally)

Health Care’s Three Main Problems

Access to care: Insurance Providers

QualityCosts

How Does Insurance Work?

Lots of people in pool, pay in for possible pay out Usually protects against financial risk for events that

do not occur for all (fire, auto) Health insurance

Most all use sometimesEspecially when preventive care is covered

No comparable insurance for home, etc. (premiums lower for preventive behaviors: double bolt locks, smoke alarms, no accidents/tickets)

Wisconsin’s Coverage Today

91% of all Wisconsinites insured Vast majority (74%) of insured ages 0-64 are

covered by employerAlmost all of those ages 65+ covered in some

part by Medicare 9% uninsured

2007 to 2008, 22% increase in uninsured to 595,000 people (30% increase for children, total 83,000 children)

Most uninsured work at least part-time

Counties Color KeyMost uninsured 25%

Second most uninsured 25%Second least uninsured 25%

Least uninsured 25%Hatched=No data

Problems with Health Care AccessAccess to Care: Insurance

59 million uninsured (at least part of 2009)1

up to 4 times more likely to lack a usual source of care

3.5 times more likely to have postponed seeking care due to cost

66% less likely to have had a recent physician visit nearly 4 times less likely to obtain dental care, and 4.5 times less likely to obtain prescription drugs

1. CDC 2010 estimates

General Problems with Insurance Some denied coverage outright: pre-existing

conditions Some denied after receiving service they thought

was covered Some dropped altogether Insurance often not complete coverage, limits,

deductibles, confusion Many initiatives expect us to be smart consumers

but different type of commodity

Summary: Why Insurance Reform?

16% of GDP Spent on Health Care Most of the industrialized world spends less than 10%

50.6 Million People Uninsured 6.6 million lost employer sponsored coverage 5.2 million more enrolled in Medicaid Growth in premiums crowding out wage

increases

Possible Responses

Market reformLet free market correct itself

E.g. Growth of managed care to control costs Health Savings Accounts

Legislative reformChange way insurers provide insurance or

what entity is the insurer Change way providers deliver care

What We Got in ACA

Legislative response that regulates insurers and puts in place new insurance entities

Yet leaves the current free market health insurance system largely in place as the base for these changes

ACA Will Move more uninsured to insurance by

Mandating coverageRemoving barriers to current coverage (insurance

reforms) Increasing options

Exchanges High risk pools (temporary)

Change some options for the publicly insured Be easier to implement in Wisconsin

Wisconsin Ahead of the Curve

Ahead of most states on reform: Investments in expanding coverageMaintaining eligibilityE-healthQuality initiatives

Reform will make other states look like WI Already expanded BC+ beyond levels

required in ACA

Big Picture Impacts

More than 125,000 WI citizens will gain access More than a million who are underinsured will see

policies improved and costs reduced Tax credits and lowered costs for small business

owners Increased affordability of prescription drugs for WI

seniors Increased federal funding saves state taxpayer

dollars

www.healthcare.gov

Wisconsin Office of Free Market Health Care (formerly Office of

Health Care Reform)

Health care reform puts decision making power in the hands of states

WI can set up reform in a way that works best here

http://www.healthcarereform.wisconsin.gov/

Wisconsin Office of Free Market Health Care

Encourage transparency in all efforts of the Office so that Wisconsin residents and employers may make appropriate health care decisions; and

Assess the impact of the Patient Protection and Affordable Care Act (PPACA) on Wisconsin insurance markets and programs; and

Seek council from a wide range of health care stakeholders including but not limited to consumers, small businesses, providers, insurers, labor unions, and other vested organizations; and

Conditionally develop a plan for the design and implementation of a Wisconsin health benefit exchange that utilizes a free-market, consumer driver approach; and

Explore all opportunities and alternative approaches that would free Wisconsin from establishing a health benefit exchange, including federal waivers.

Formerly Wisconsin Office of Health Care Reform

WI focus will be on: Implement significant changes taking effect right away

and begin work on major components Raise awareness Influence reforms on national level

Market Reforms Effective Immediately

Consumer Assistance Office$30 M in grants available for states to establish

offices of health insurance consumer assistance to:

Assist with filing of complaints and appeals Collect, track, and quantify problems and inquiries Educate consumers on rights and responsibilities Assist consumers with enrollment Resolve problems with obtaining subsidies

Market Reforms Effective Immediately: cont’d.

Rate ReviewHHS is developing a process for annual

review of unreasonable premium increases Insurers must submit to Secretary and states

justification for an unreasonable increase$250M in grants to states over a 5 year period

to enhance rate review activities OCI has received $1M to work on this

Market Reforms Effective Immediately: cont’d.

Medical loss ratioPremium dollars must be spent on medical

care vs administration costs: 85% for large group coverage 80% for small group coverage

Uniform explanation of coverage documents

How Will Reform Change the Employer-Based SystemEmployer-Based System?

Health Care Reform builds on and expands the employer-based insurance system instead of limiting it

Overview of changes: Gives tax incentives for insuring employees Fines large employers for not insuring employees Requires very large employers to insure into

employer-sponsored plans

Changes Affecting All EmployersAll Employers

Early Retiree Reinsurance Program Counters trend of shrinking retiree coverage Provides 80% reimbursement to employment-based

plans for a portion of the cost of providing insurance to early retirees over age 55

More than 100 Wisconsin businesses enrolled Claims range between $15,000-$90,000

Eliminates tax-deduction for Medicare Part D retiree drug subsidy payments (Jan. 2013)

Changes for Large EmployersLarge Employers Fines businesses with 50+ employees that

don’t provide health insurance (Jan. 2014)$2,000 per person above threshold of 30

employees Requires businesses with 200+

employees to enroll workers automatically into insurance plans offered by the employer (Jan. 2014)

Incentives for Small Employers: Small Employers: Tax CreditsTax Credits

A 6 year program Employers must have avg. wages less than

$50,000 and pay 50% of employees’ premiums Effective immediately, covers businesses <25

FTEs who currently offer health care or who add coverage this year

Credit up to 35% of costs 2010, up to 50% 2014 90,000 Wisconsin non profit, for profit

businesses eligible

Exchanges and Small EmployersSmall Employers Health insurance Exchanges (Jan. 2014)

Currently small businesses pay 18% more in premiums and double the deductibles as large firms for the same benefits.

In 2014 businesses with up to 100 workers can buy coverage in state-based Exchanges

This allows small businesses to pool resources for greater purchasing power to lower costs

Employers must provide free vouchers to low-income employees to enroll

Mandates individuals have insurance by Jan. 2014Tax penalties for continued lack of coverage

Fines gradually phased-in

Tax credits to help pay for insuranceExemptions for financial hardship, those without

coverage less than 3 months, etc.Mandates similar to 2006 Massachusetts state plan

How Insurance Changes Affect Individuals & Families: Individuals & Families: MandateMandate

How Insurance Changes Affect Individuals & Families: Individuals & Families:

Removing BarriersRemoving Barriers

New “Patient’s Bill of Rights” (Sept. 23rd) for all new insurance plans

Insurance aspects Can’t exclude children with pre-existing conditions Policies can’t be canceled by companies No lifetime limits and restricted annual limits

Popular ACA Feature: Coverage of Adult Children

Adult children under age 26 required to be included under family plans (Sept 2010) However, most plan years start Jan 1, 2011. In-laws not covered (grandchildren, spouses).Until 2014, “grandfathered” group plans do

not have to offer dependent coverage up to age 26 if a young adult is eligible for group coverage outside their parents’ plan.

How Insurance Changes Affect Individuals & Individuals & Families: Families:

Care AspectsCare Aspects

Can choose any primary care doctor within provider network

Free screenings and preventive care No longer need referral for OB-GYN care

N.b.: “grandfathered plans” in place before the law was signed March 23, 2010 may still require a referral and are not required to provide free preventive care

OCI in our state will be the “sheriff”’

Increasing Options: Exchanges by 2014

Exchanges will be new market places where anyone can buy an insurance plan.

Private health insurance companies offering competitively priced and vetted policies.

Compare to options we have as state/county employees: lots of insurers vie for our business, within minimum standards.

Will make market more transparent Will see price, quality, physician measures

The larger the pool, the lower the premiums Subsidies will be offered to most families

Gives credits/subsidies for individuals and families to buy into Exchanges (Jan. 2014)For those between 133-400% FPLPublicly insured on BadgerCare may choose

these (more choice of providers)Uninsured not eligible for BadgerCare can

then use subsidies to help enter exchanges Taxes high income individuals and

couples (Jan. 2013)

Exchanges

Examples of Savings with Federal Premium Tax Credits

Between $500 M and $1 B in federal premium tax credits will be available to Wisconsin residents annually

Family of 4 earning $75,000 annually $11,104 annual premium $3979 in savings $7125 is amount family pays (~$600/mo)

Single woman earning $30,000 annually $4500 annual premium $1991 in savings $2509 is amount individual pays (~$200/mo)

Why Do Exchanges Matter

Could be key to increasing employer sponsored covered

2 million people could purchase their health insurance through exchanges

Individuals and families who purchase their own health care coverage will have access to better plans and lower premiums (160,000)

Why Do Exchanges Matter: cont’d.

Advance payment reform Partner with large payers (Medicare, Medicaid) Ensure greater portability in insurance and allow

for movement between jobs Create strong incentives for insurers and

providers to better align around value A choice for small businesses and their

employees

How Insurance Changes Affect Individuals & FamiliesIndividuals & Families:

Currently non-publicly insured

Privately insured: Increased restrictions on Health Savings

Accounts and similar plans

With employer coverage: Unknown effects due to undetermined nature of

small business health Exchanges Possibility of cheaper plans if employed by a

small business due to Exchanges’ larger purchasing power

How Health Care Reform Affects Individuals & FamiliesIndividuals & Families on

Medicaid States can’t lower eligibility requirements, maintaining for

adults to 2014, for kids to 2019 so for Wisconsin: Coverage for all kids to 2019 Pregnant women up to 300% FPL Parents/caretakers up to 200% FPL Childless adults up to 200% FPL

EXCEPT hardship exemption if state running deficit applies to Optional non-pregnant, non-disabled adults >133% FPL (WI

55,000 of these)

Increased Federal Funding

Enhanced federal matching funds for all kids and childless adults below 133% FPLFederal funds replace state dollars

Real savings to taxpayersAnnual Medicaid budget: $6 B, 20% WI budgetACA will bring $750-980 M in additional federal

funding 2014-2019

How Health Care Reform Affects Individuals & FamiliesIndividuals & Families on

Medicaid Attendant supports and services to individuals with

disabilities requiring an institutional level of care (CLASS program) Gives at least $50 per day Effective Jan. 2011

More generous eligibility levels and targeted-services disabilities (Oct. 2010)

New Medicaid state plan option for people with chronic conditions Will help fund home health related services to states taking up the

option

How Insurance Changes Affect Individuals & FamiliesIndividuals & Families on the

BadgerCare Programs When Medicaid is expanded to all adults up to

133% FPL Childless adults on BadgerCare Core and Basic

under this level shift to Medicaid

When health insurance Exchanges take effect in Jan. 2014 Parents, caregivers, and childless adults above 133%

FPL may be shifted from BadgerCare to Exchanges This may lead to higher costs for low-income adults Parents and children may have different coverage

plans

ExchangesExchanges in 2014:Wisconsin’s Choice

Option 1:• Lower BadgerCare eligibility to 133%

FPL so that low-income parents, caregivers, and childless adults above 133% will be shifted into Exchanges and pay higher costs.

• Childless adults below 133% FPL will be shifted from BadgerCare Core and Basic to Medicaid

ExchangesExchanges in 2014:Wisconsin’s Choice

Option 2:• Create a “Basic Health Plan” to fund and maintain

BadgerCare Plus for adults between 133-201% FPL• WI would get 95% of federal funding for Exchange

subsidies otherwise for these adults• This option would mean lower premiums and cost-

sharing than in Exchanges• “Crowd-out” restrictions limiting eligibility wouldn’t be

as strict• Possible problem of limiting access to care due to

lower provider payments

Changing BadgerCare Programs’ Eligibility

63

Medicaid&

HealthyStart

PregnantWomen

Children Parents

Kids 6+

185%

100%

44%

CaretakerRelatives

YouthChildless

Adults

300%

200%

225%Self-Employed / FarmersOver the

proposed 133% level

Over the proposed

133% level

% of Federal PovertyLevel (FPL)

BadgerCareCore

Green = Current BadgerCarePlusOrange = BadgerCare Core & BasicBlue = Current WI Medicaid levels

Red = Those at risk of being shifted to Exchanges in 2014

Ages0-5 | 6+

What Could Happen in 2014 for BadgerCare Core and Basic?

ChildlessAdults

200%

133%

% of Federal PovertyLevel (FPL)

Over the proposed

133% level

100% Those below 133% FPL will

shift to Medicaid

Those above 133% FPL shift

to Exchanges

WI creates a new “Basic Health Plan”

For those 133-201% FPL

OR

How Insurance Changes Affect Older Adults on Older Adults on

MedicareMedicare Reduces Medicare Part D drug gap

$250 rebate 50% discount on drugs and 7% discount on generic

drugs (Jan. 2011) Completely closes the gap by Jan. 2020.

Reduces out-of-pocket amount that qualifies for catastrophic coverage (2014-2019)

How Insurance Changes Affect Older Adults on Older Adults on Medicare, cont’d.Medicare, cont’d.

Medicare Advantage PlansProhibits Medicare Advantage plans from

imposing higher cost-sharing requirementsReduced federal payments to Advantage

plans Some insurers could stop offering additional

benefits such as glasses and gym memberships Basic Medicare benefits can’t be cut

How Insurance Changes Affect Older Adults on Older Adults on Medicare, cont’.dMedicare, cont’.d

Higher federal funding to support relocating seniors who wish to live in community settings

$50M to support Aging and Disability Resource Centers Better care

Incentive payments for hospitals meeting higher quality standards

Higher payments for primary care providers Free preventive screenings (Jan. 2011) Free annual wellness visit (Jan. 2011)

How Insurance Changes Affect: : The Hard to InsureThe Hard to Insure

Uninsured with Pre-Existing Conditions Approximately 25% of Wisconsinites have a pre-

existing condition As of Sept 23, 2010, no children can be excluded As of Jan 1, 2014, no adults with pre-existing

conditions can’t be denied insurance coverage

Complications of mandating pre-existing conditions coverage without cost limits

Temporary national “high-risk” pool for uninsured with pre-existing conditions

Why “high risk” pools? Some people with medically expensive pre-existing

conditions become “medically uninsurable” Denied coverage because of a condition Only can access restricted or very expensive plans

“High Risk” pools are government-created Plans spread risk and costs of this population among

insurers Cost higher than regular plans, but rates are capped

by law

Expected to disappear with Exchanges

High Risk PoolsHigh Risk Pools

Eligible if:Lost employer-sponsored insurance Been rejected for coverage in private marketHave HIV/AIDSHave Medicare because of a disability

6 month waiting period for pre-existing conditions

Wisconsin’s High Risk Insurance Plan

Federal “High Risk” Pool Eligible if:

Citizen or national of U.S., or lawfully present Have a pre-existing condition and have been uninsured for 6

months before applying

Costs: Premium: $126-$473 per month Deductible: $500, $1000, or $2,500 Out of pocket limit: $1,000 for medical, $2,000 for pharmacy

Federal High Risk Pools

Example of a high cost enrollee in the federal plan

$2500 (deductible)

$1000 (out of pocket limit medical)

$2000 (out of pocket limit pharmacy)

+ $4800 ($400 monthly premium x 12)

= $10,300/year

High Risk Plan Costs

Both plans cover same medical and drug benefits

Federal pool is cheaper and has no waiting period

But if don’t meet criteria to get on federal plan (ex: being uninsured for 6 months, proving citizenship) WI plan is still an option

Wisconsin/Federal High Risk Comparison

How Insurance Changes Affect Veterans & Their FamiliesVeterans & Their Families

Continued free prosthetic devices Veterans and their families may enroll in

Exchanges in addition to VA and TRICARE (2014)

Not subject to insurance mandates

Sources of Coverage After Health Care Reform Implementation, 2019

Timing of implementation

http://www.healthcare.gov/law/timeline/index.html

Increasing Access to Care through Providers

Why Is AccessAccess a Problem?

Few health care providers in rural areas Strained public hospitals and clinics Increased ER use but decreased supply Health care professionals not trained to

meet national demandsGeographic (underserved rural areas)Specialization (few primary care doctors)

Creating Access by Increasing Primary Care ProvidersPrimary Care Providers

Increases funding for primary care physicians and programsTuition aid and remissionMore training

Funds and trains more dentists Free preventive care services required

from new insurance plans Increases Medicaid fee-for-service and

managed care payments for primary and preventive care

Increasing Health Center ProvidersHealth Center Providers in Underserved Areas

New school-based health centers (Jan. 2011)Expand primary care to school-aged children1000 awards$50 million annual funding

Community health centers Increases funding ($11 billion nationally)Particularly benefits rural communities

Access through NursesNurses and Nurse-ManagedNurse-Managed Clinics

Creates new nurse-managed clinics Trains nurse practitioners who will work in

underserved areas Nurse management clinics are access points in areas

where primary care physicians are in short supply Grants to employ and train nurse practitioners

who provide primary care (Oct. 2010) Loan repayment and retention grants for nurses

Other Access Measures for HospitalsHospitals and ProvidersProviders

Increases ER and trauma department capacity (Oct. 2010)Funds research on emergency medicine and

innovative emergency care systems New program network for providers to give

and coordinate care to uninsured and underinsured populations (Oct. 2010)

Important Public Health Investments

Wisconsin has work to do 43% of adults fail to meet physical activity recommendations 76% do not consumer 5 or more fruits/veggies per day 22% of women over 40 hadn’t had a recent mammogram 36% of men over 50 have never had a colonscopy 19.8% of adults smoke 65% of adults are overweight or obese

Reform goes beyond funding direct treatment, focusing heavily on prevention

Synergies with Healthiest Wisconsin 2020 http://dhs.wisconsin.gov/hw2020/report2020.htm

How Do We Create Health?

Health Insurance

Workforce Grants Wisconsin Has Already Received

$2M to support training for nurses and geriatric specialists

$3.8M primary medical care residency expansion

$7.2M for Health Profession Opportunity Grants that help train low income workers and tribal members for careers in health

Workforce Grants Wisconsin Has Already Received: cont’d.

$3.2M over 5 years to establish a Public Health Training Center

Grants have gone to: Marshfield Clinic, UW campuses (Madison, Milwaukee, LaCrosse and Eau Claire), Marquette, Gateway Tech, College of Menominee Nation, MCW and others

Workforce Grants Coming Opportunities

$230M for graduate medical education (residencies)

$10M for training direct care workers $100M to establish National Centers of

Excellence for Depression $50M for graduate nurse education