The Reform After the Reform Webinar Series - Session 1: How Payers Will Be Impacted by the New Healthcare Reform Law and What to Do Now

The Reform After the Reform
How Payers Will Be Impacted by the New
Healthcare Reform Law and What to Do Now
May 19, 2010

Agenda
• Introductions
• Health Reform Overview
• Implications and Recommendations
• Questions

© 2010 Guidon Performance Solutions, LLC. All rights reserved. Guidon Performance Solutions is a licensee of LeanSigma®, a service mark of TBM Consulting Group. 2

With You Today
Ron Wince, President/CEO, Guidon Performance Solutions, LLC
• Two decades of experience in application of Lean and Six Sigma
• Co-founder of Guidon Performance Solutions – the pioneer in
applying LeanSigma® in non-industrial and non-traditional
companies
• Client experience in healthcare, insurance, financial services,
retail, information technology, telecommunications and hospitality
• B. S. Engineering, U.S. Naval Academy in Annapolis, MD

David Merritt, Vice President and National Policy Director, Center for
Health Transformation and the Gingrich Group
• Advises Speaker Gingrich and leads the Center’s work on
national health reform and health information technology
• Editor of Paper Kills: Transforming Health and Healthcare with
Information Technology, winner of the 2007 book of the year
award by the Health Information Management Systems Society
(HIMSS)
• Master’s degree in political science and government from Loyola
University Chicago


www.healthtransformation.net
Center for Health
Transformation

Health Reform and Health Transformation:
What Happened, What’s Next, What’s Needed

David Merritt
Center for Health Transformation

Copyright © 2010 The Center for Health Transformation

Center for Health
Transformation

Health Reform
Lower Costs
Improve Quality
Expand Coverage

5

Center for Health
Transformation

Expand Coverage
Health “Insurance” Reform
Medicaid expansion
Subsidies
Insurance rules
50+ insurance exchanges
Individual mandate
Employer penalties
6

Center for Health
Transformation

Financing
Taxes - $500 billion
Payroll taxes, investment income, employer
penalties
“Cadillac” plans
Device manufacturers, pharma, health plans
Medicare cuts - $500 billion
Home health ($39 billion); hospitals ($131
billion); skilled nursing facilities ($22 billion);
Medicare Advantage benefits ($101 billion)
7

Center for Health
Transformation

What’s Next – Immediate
Implementation
Rescissions prohibited
Lifetime coverage limits eliminated and annual limits
restricted
Insurers barred from excluding children with preexisting
conditions from coverage
Medicare Part D beneficiaries in the “doughnut hole” will
get $250 rebate
$5 billion program created for employers to provide
coverage for retirees between 55-64
8

Center for Health
Transformation

Immediate Impact
“Adult children” can remain on their parents’ health plans
until they are 26
Tax credit available for some small businesses (under 25
employees) for employee coverage
$5 billion high-risk pool created to provide insurance to
individuals with qualifying preexisting conditions who have
been uninsured for at least 6 months
10% tax on indoor tanning services that use ultraviolet
lamps begins on July 1, 2010

9

Center for Health
Transformation

2011
Medicare Advantage payments to insurers frozen at 2010
levels
Annual fee of $2.5 billion imposed on pharmaceutical
manufacturers
Insurers required to provide rebates to enrollees if they
spend less than 85% of large-group premium dollars and
80% of individual and small-group premiums on care as
opposed to administration, profits, salaries, etc.

10

Center for Health
Transformation

2012
Annual fee on pharmaceutical manufacturers increases to
$3 billion
Cap of $2500 in contributions to tax-advantaged Flex
Spending Account
Medicare tax rate increases by 0.9% to 2.35% on earnings
over $200,000 for individuals and $250,000 for families
CLASS program created

11

Center for Health
Transformation

2013
Companies with 50 or more employees will pay a fine of
$2000 per employee if one full-time employee receives
federal healthcare subsidy
A 2.9% excise tax is imposed on the sale of medical
devices – anything generally purchased at the retail level by
the public is excluded from the tax
New fee assessed on health insurance plans to fund
comparative effectiveness trust fund

12

Center for Health
Transformation

2014
Individual mandate requires individuals to purchase qualified
health insurance or pay a fine of $95 for each family member
or 1% of taxable household income, whichever is greater
Health plans can no longer exclude people from coverage
based on pre-existing conditions
Federal subsidies based on income available for qualified
individuals/families
Annual fee totaling $8 billion imposed on insurers
State-based health care exchanges created
Medicaid eligibility expands to 133% of the federal poverty
level ($29,327 for a family of four)
13

Center for Health
Transformation

2015
Mandate penalty for not having qualified health insurance
increases to $325 for each family member or 2% of taxable
household income, whichever is greater
The annual fee on insurers increases to $11.3 billion

2016
Mandate penalty for not having qualified health insurance
increases to $695 for each family member or 2.5% of
taxable household income, whichever is greater

14

Center for Health
Transformation

2017-
2017-2018
The annual fee on pharmaceutical companies increases to
$3.5 billion in 2017 and $4.2 billion in 2018
The annual fee on insurers increases to $13.9 billion in
2017 and $14.3 billion in 2018
40% excise tax on employer-provided plans (a.k.a. Cadillac
plans) (2018)
The first $27,500 of a family plan and $10,200 for
individual coverage is exempt; higher exemptions for
retirees and people in high-risk professions

15

Center for Health
Transformation

Quality
National Quality Improvement Strategy (2011)
Center for Medicare and Medicaid Innovation (2011)
10% Medicare bonus payment to primary care physicians
and other providers for certain services (2011)
Value-based purchasing programs for hospitals, home
health, skilled nursing facilities, and ambulatory surgical
centers (2011-2012)
Medicare and Medicaid Accountable Care Organization
pilots on shared savings and coordinated care (2012)

16

Center for Health
Transformation

Quality
National Quality Improvement Strategy (2011)
Center for Medicare and Medicaid Innovation (2011)
10% Medicare bonus payment to primary care physicians
and other providers for certain services (2011)
Value-based purchasing programs for hospitals, home
health, skilled nursing facilities, and ambulatory surgical
centers (2011-2012)
Medicare and Medicaid Accountable Care Organization
pilots on shared savings and coordinated care (2012)

17

Center for Health
Transformation

19

IMPLICATIONS & RECOMMENDATIONS


Can You Match the Legislation to its
Length?
A. 1935 Economic Security Act 1. 4 pages

B. Civil Rights Act of 1964
2. 8 pages
C. Patient Protection and
Affordable Care Act 3. 1 page

D. 19th Amendment to the 4. 64 pages
Constitution

E. Constitution 5. 2074 pages


Welcome to “Implemageddon”


Implications for Payers
Key Themes Actions
• Under the Microscope • Move fast on
performance
• Regulatory Tsunami management and
• Funding, Fees & business intelligence
Taxes • How will matter as
much as What…maybe
• Coverage &
more
Portability
• Product & Business
• Explosion of Model Innovation
Information
Technology & Data • Value Chain Alignment
& Collaboration


Performance Management & BI
• Few payers have sophisticated approach to data to manage
performance of people processes & technology
– Few recognize the gap
– Even fewer take effective action on the data they do have
• Fragmented and misaligned strategic initiatives including new
products and services, information technology & performance
improvement
– Vertical versus horizontal focus
– Proliferation of strategic and technology projects consumes
critical resources with un-measurable impact
• Negligible focus on leveraging business process intelligence
=> companies aren’t sure they get the outcomes they
expect…or need
Transparency & reporting requirements from new
legislation will be painful for many

How vs. What
• MLR is driven by “how” things are done
• Reclassifying expenses will draw scrutiny
• Most insurers will struggle to meet standards
– Median MLR has grown from 83% in 2007 to 84% in 2009
=> half of all plans likely exceed the cap

• Regulatory Tsunami
• Litany of new regulations and implicit additional
corrective legislation will require agility in operational,
risk, compliance and reporting processes
• Changing customer mix will put pressure on
margins
• Expected shift from employer coverage to individual
coverage


How vs. What
Nearly 100% of Process Areas Impacted by 2018

Source: PwC Health Research Institute

Process focus may determine the winners from
the losers


Innovation
• Competitive advantage from legacy products
will be difficult as state health insurance
exchanges drive commoditization and
competition based on price and quality
• But…new market opportunities will emerge
– Outsourcing of Expertise/Capabilities?
• Management of state health insurance exchanges
• Management & reporting of quality/cost data for health
plans
– Value-add opportunities to providers
• Advisory
• EMR implementation


Value Chain Focus
Wellness
Outcomes
& Primary Diagnosis Treatment Payment
Reporting
Care

• Opportunities abound in partnerships,
alliances, “virtual” integration
• Wellness management and counseling in partnership
with providers
• Chronic condition management
• Focus on continuous flow of value delivery to the
patient


Summary
• Close gaps in performance management and business intelligence
– Accurate reporting is table stakes
– “The right data to take the right actions”
– Imbed practices into the culture through Cycles of Use
• Pay attention to “how” things get done as much as “what” needs to
get done
– Lean Six Sigma/BPR to streamline key processes
– Build speed and agility in at every opportunity
– Engage the entire organization – those who know the process best do it
every day
• Innovation and inspiration
– Incorporate ideas from outside the industry – Ritz Carlton; 3M;
Skunkworks
– Maturity and understanding of VOC will be critical
• Basic element of business in the future will be the end-to-end Value
Chain – systems thinking will replace functional thinking

Success in a post-reform world will require
“implementation” beyond MEETING requirements


Questions


Thank You
Guidon Performance Solutions
866-986-4414 or 480-986-4414
contact@guidonps.com
www.GuidonPS.com
Follow us on Twitter @GuidonPS


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