Presentation by Karen Davis at the Detroit Regional Chamber 2010 Health Care Forum

1. A New Era in American Health Care: What Does it Mean for the Economy? Karen Davis President, The Commonwealth Fund Federal Reserve Bank of Chicago – Detroit Branch 2010 Health Care Leaders Forum April 26, 2010 [email_address] www.commonwealthfund.org

2. What Are the Problems? Uninsured Rates Quality of Care Chasm Costs of Care Administrative Complexity

4. Premiums Rising Faster Than Inflation and Wages * 2008 and 2009 NHE projections. Data: Calculations based on M. Hartman et al., “National Health Spending in 2007,” Health Affairs , Jan./Feb. 2009 and A. Sisko et al., “Health Spending Projections through 2018,” Health Affairs, March/April 2009. Premiums, CPI and Workers’ earnings from Henry J. Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits Annual Surveys, 2000–2009 . Source: K. Davis, Why Health Reform Must Counter the Rising Costs of Health Insurance Premiums, (New York: The Commonwealth Fund, August 2009). Projected Average Family Premium as a Percentage of Median Family Income, 2008–2020 Cumulative Changes in Components of U.S. National Health Expenditures and Workers’ Earnings, 2000–2009 Percent Percent 108% 32% 24% Projected

5. International Comparison of Spending on Health, 1980–2007 Data: OECD Health Data 2009 (November 2009). $7,290 $2,510

7. The Affordable Care Act of 2010

9. Major Features of New Health Reform Law Voluntary Medicare payment innovations -- ACOs, Medical Homes, 10% increase in primary care, 1% productivity improvement, Medicaid primary care at Medicare levels, CMS Payment Innovation Center, Independent Payment Advisory Board Payment Reform Comparative effectiveness research; HIT; Medicare Advantage reform System Reform 2-9.5% of income up to 400% FPL; Medicaid to 133% poverty Income-related Premium and Cost Sharing; Medicaid expansions State, start in 2014 Insurance Exchanges Rules on enrollment, premiums, medical loss, consumer protections Insurance Market Rules Comprehensive; 70% actuarial value $2000 per employee for employers 50+ employees not offering coverage  Health Reform Law Benefit Standard Employer Shared Responsibility Individual Mandate

12. 32 Million Uninsured Covered Under Affordable Care Act, Employers Remain Primary Source, 2019 10 M (4%) Nongroup * Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: S. R. Collins, K. Davis, J. L. Nicholson, S. D. Rustgi, and R. Nuzum, The Health Insurance Provisions of the Affordable Care Act: Implications for Coverage, Affordability, and Costs, The Commonwealth Fund, (forthcoming) . Among 282 million people under age 65 Pre-Reform 162 M (57%) ESI 35 M (12%) Medicaid 54 M (19%) Uninsured 16 M (6%) Other 15 M (5%) Nongroup 159 M (56%) ESI 51 M (18%) Medicaid 24 M (9%) Exchanges (Private Plans) 16 M (6%) Other 23 M (8%) Uninsured Affordable Care Act

13. Small Business Tax Credits Under Health Reform Law for Family Premiums * To be eligible for tax credits, firms must contribute 50% of premiums. Firms receive 35% and later 50% of their contribution in tax credits. Note: Projected premium for a family of four in a medium-cost area in 2009 (age 40). Premium estimates are based on actuarial value = 0.70. Actuarial value is the average percent of medical costs covered by a health plan. Small businesses are eligible for new tax credits to offset their premium costs in 2010. Tax credits will be available for up to a two-year period, starting in 2010 for small businesses with fewer than 25 employees and with average wages under $50,000. The full credit will be available to companies with 10 or fewer employees and average wages of $25,000, phasing out for larger firms. Eligible businesses will have to contribute 50 percent of their employees' premiums. Between 2010–13, the full credit will cover 35 percent of a company's premium contribution. Beginning in 2014, the full credit will cover 50 percent of that contribution. Tax-exempt organizations will be eligible to receive the tax credits, though the credits are somewhat lower: 25 percent of the employer's contribution to premiums in 2010–13 and 35 percent beginning in 2014. Source: Commonwealth Fund analysis of proposals. Premium estimates are from Kaiser Family Foundation Health Reform Subsidy Calculator, http://healthreform.kff.org/Subsidycalculator.aspx . $4,718* $9,435—projected family premium 50% employer contribution Credit per employee

14. Total National Health Expenditures (NHE), 2009–2019 Before and After Reform NHE in trillions Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve , (Washington and New York: Center for American Progress and The Commonwealth Fund, December 2009). $2.5 $4.5 6.6% annual growth 6.0% annual growth $4.8

26. Thank You! Kristof Stremikis, Senior Research Associate, [email_address] For more information, please visit: www.commonwealthfund.org Rachel Nuzum, Senior Policy Director [email_address] Stephen C. Schoenbaum, M.D. Executive Vice President for Programs [email_address] Sara Collins, Vice President, src@cmwf.org Cathy Schoen, Senior Vice President for Research and Evaluation, cs@cmwf.org Stu Guterman, Assistant Vice President, Payment Reform [email_address]