The landscape of healthcare reform Published in The Times, New Orleans City Business and The Daily Advertiser, April 2010

Transcription

1 The landscape of healthcare reform Published in The Times, New Orleans City Business and The Daily Advertiser, April 2010 The Patient Protection and Affordable Care Act, as modified by a reconciliation bill, is now the law of the land. As the largest and oldest health insurer in Louisiana, Blue Cross must now bring our resources and expertise to bear in implementing this new law and explaining its provisions to our members. Making sense of this $950 billion, 2,800-page piece of legislation will not be easy. One thing is immediately apparent, however. The title of the act is, at best, only partially accurate. While its intent might have been to offer some forms of patient protection, it does nothing to address affordable care. This is a major missed opportunity, and we will all pay for it. Let me be clear. At the onset of the healthcare reform debate, our company went on record in support of legislation that would do three things improve the quality of care, rein in costs and extend coverage to all Americans. What the new law does is extend coverage. Whether the quality of care will be improved, given the projected cuts in Medicare and increased Medicaid-level funding, is highly questionable. One out of three might be good enough for government work, but it s not good enough for us, for Louisiana or for America. To his credit, President Obama in attempting to sell this new legislation to Americans recently said, We are not finished with healthcare reform. We still have a lot to do to bring down cost. We agree, and we will certainly work with our President, Congress and our partners in healthcare delivery to do just that. Put simply, we would not have a coverage problem if healthcare was affordable. If all Americans were given the opportunity to purchase health insurance for a reasonable cost, I believe that most of them would be buying it. And what drives up healthcare cost? Uwe Reinhardt, a Princeton economist and the dean of healthcare analysts, puts it this way: What drives prices is the amount of services people are getting, plus the prices doctors and hospitals charge for these services. Dr. Reinhardt is simplifying, but only slightly. He left out the rising cost of pharmaceutical products and the ever-increasing cost of medical technology. Finally, there is the need to free our physicians from the fear that drives them to practice defensive medicine which adds untold billions to cost by passing meaningful tort reform. It s true that for-profit health insurers add cost by creating profit for (more)

2 The landscape of healthcare reform, pg. 2 shareholders. But not-for-profit insurers such as Blue Cross and Blue Shield of Louisiana place their marginal earnings into emergency reserves that are there solely to protect their members from catastrophic events such as pandemics and hurricanes. We all agree that changes must be made to the current system. Left alone, it will allow costs to continue to rise. But the sad truth is that the Patient Protection and Affordable Care Act does nothing to curb rising cost because it does nothing to address the continued increase in underlying medical costs. Healthcare reform legislation that ignores the true drivers of healthcare costs will never bend the cost curve, much less lower costs. Healthcare reform legislation and the debate that preceded it and continues to surround it have left many of us confused and unsure how the law will affect them. As a Louisiana-based company owned by our policyholders, we work for our members. Just as we have done for the past 75 years, we will stand by them in times of uncertainty. Going forward, we are committed to the following: Implementing the law of the land, and working to help shape future legislation that addresses the true drivers of healthcare costs. Educating our members and all Louisianans on the substance and repercussions of the current legislation with rich, definitive content on our website ( through free, educational seminars across the state, and with educational literature that we will make available to you and your neighbors. Working with our partners in healthcare delivery physicians, hospitals, the business community and the people of this state to come up with new, innovative ideas to lower healthcare cost. Given that many observers feel our federal government, as presently constituted, is not up to this task, I think we, the people of Louisiana, should join together to make this our mission. I look forward to meeting and exchanging ideas with all of you who want to join me on this extremely important and very challenging journey. Mike Reitz President and CEO

3 A single step Published in The Times, The TownTalk and The Daily Advertiser, June 2010 A weekend warrior, injured in a soccer game, fills a prescription from a sports clinic without checking with his family doctor and suffers a severe drug interaction. A doctor, worried about being sued for malpractice, orders a second CT scan, exposing his patient to unnecessary risk. A diabetes patient fails to follow the treatment prescribed by her doctor and is hospitalized. What do these three scenarios have in common? Two things: a patient suffers needlessly, and unnecessary spending known as healthcare waste increases the cost of healthcare for everyone. A white paper by the news and research organization Thompson Reuters estimates the cost of healthcare waste in America at $700 billion a year. That s about one third of the nation s healthcare bill. Here in Louisiana, this waste, which includes unnecessary care, fraud, administrative inefficiencies, medical mistakes and failure to coordinate care, amounts to $6.8 billion more than 30 percent of everything spent annually on healthcare in our state. The human suffering caused by healthcare waste is argument enough for working to control it. The additional money we all must pay to finance this waste is unacceptable, particularly in this time of skyrocketing healthcare costs. A point I frequently make is that, while the new healthcare reform legislation increases coverage, it does nothing to curb cost. Many feel that our federal government is incapable of lowering healthcare costs. If so, then it is up to the stakeholders in the private healthcare system health insurers, doctors, hospitals and the business community to work together to bring these costs down. For our part, Blue Cross will continue to do all we can to hold down our operating costs, which are already low by industry standards. We ll continue to negotiate with the hospitals in our networks to obtain reasonable prices for our members, and we will work with doctors to create a payment model that rewards performance rather than the number of services rendered. And, we will do our best to encourage our members to sign up for our free, state-of-the-art wellness program. All this will help somewhat, but truthfully, our company cannot make a meaningful difference acting alone. (more)

4 A single step, pg. 2 We realize the hospitals in our state particularly community hospitals face serious challenges, as a result of current Medicaid cuts and the probability of even deeper cuts in We know that any savings created by a pay-for-performance arrangement with doctors won t be realized for years. So, what do we do? Where do we start? If all players in the private healthcare system agreed to declare war on healthcare waste, we could make a dramatic difference. If we could just reduce this waste by half, our total healthcare spend would drop 15 percent a year. This is a great opportunity to create real market-driven savings. Add in the benefits of a healthier population, and the savings could be staggering. Federal health agencies report that approximately 70 percent of all disease is preventable. With good lifestyle habits and preventive healthcare, we could all but eradicate some chronic diseases, such as diabetes. I am not suggesting that we turn our backs on our laissez les bons temps rouler heritage, only that we think seriously about our health and the benefits that good health yields both personally and economically and do one small thing every day to improve our health. Take that first step. And to our partners in the private healthcare system, I can only say I am convinced we can cut healthcare waste and bring down healthcare costs in Louisiana significantly if we just take the first step of resolving to work together to this end. It is said that every journey begins with a single step. Let s begin ours. Mike Reitz President and CEO

5 Healthcare reform s winners and losers Published in The Times, The Daily Advertiser and The Advocate, November 2010 This year s midterm elections produced a new set of winners and losers, and with the dramatic shift in power that occurred, much of the legislation passed by the 111th Congress will be re-examined in the coming years. The Patient Protection and Affordable Care Act, a keystone accomplishment of our current Congress and the signature wealth-redistribution program of the Obama presidency, produced its own set of winners and losers. Now before this period of introspection begins seems an appropriate time to identify the PPACA winners and losers under the law as it is currently written. WINNERS The clear winners are as many as 30 million uninsured Americans who, in 2014, will be eligible to enroll in an expanded Medicaid program or qualify for federal subsidies to purchase health insurance And, it is possible that this number could increase by another 100 million or so if enough employers force their employees into the arms of the federal government by ceasing to offer health insurance and paying a fine that will be substantially less than funding an insurance plan. Which of these cast-off employees will be winners, and which will lose? It s a mixed bag. Lower income individuals who qualify for a subsidy could be winners; but those who earn too much to buy government-discounted health insurance on the exchange will pay more for their policies. This wild card could drive up the cost of this new government program far more than the authors of the legislation ever intended, and if this happens, American taxpayers will be the big losers. LOSERS Employers The consulting actuarial firm Oliver Wyman estimates that businesses in states like Louisiana will pay an average of 20 percent more for health insurance over a five-year period than they would have paid if the reform bill had not become law. Individuals The Oliver Wyman firm projects that individual policyholders who purchase insurance on the exchange in 2014 but don t qualify for subsidies will pay an average of 50 percent more as a result of health-care reform legislation. Doctors With the expansion of Medicaid and the enrollment of baby boomers, doctors who accept these patients will face sustained financial pressures as they are reimbursed at a rate far less than the cost of delivering care. Hospitals The new Medicaid mix will affect hospitals in the same way. In addition, new restrictions on purchasing, billing and other practices will result in even lower Medicare reimbursements. (more)

6 Healthcare reform s winners and losers, pg. 2 Drug companies The pharmaceutical industry will pay a market-share tax starting in 2011, when it will total $2.5 billion, and increasing to $4.1 billion in Medical-device manufacturers This industry will pay a new 2.3 percent federal excise tax. Health insurers In 2014 all health insurers will be subject to an $8 billion market-share tax. Blue Cross and Blue Shield of Louisiana estimates its share of this new tax at approximately $30 million, and that it will climb to about $60 million by That is a known cost; what is unknown is the additional cost of taking all comers in 2014, regardless of their health status. This will create a situation in which individuals could buy health insurance after being diagnosed with a sickness and drop it when their health is restored. It s somewhat like applying for car insurance after the wreck, or taking out a homeowner s policy once a hurricane has blown your roof away. There are no guidelines to determine the magnitude of this cost. Insured Americans Sadly, much of the cost of paying for guaranteed-issue policies will be passed along to policyholders. Also, their premiums will continue to be increased by health-care providers who attempt to compensate for government underpayment by demanding more money from private insurers. This phenomenon, known as cost-shifting, presently accounts for an estimated 14 percent of all private health-care premiums, and likely will increase substantially after In addition to this, premiums will be further increased by new, mandated health-care services, and by taxes imposed on drug companies, health insurers and others, which will be factored into premiums. Citizens Many American citizens will pay higher Medicare and federal income taxes, major sources of funding for health-care reform. Along with many other stakeholders, I believe that yesterday s health-care system was broken and needed fixing. But I m certain that the Patient Protection and Affordable Care Act, as presently drafted, is not the fix we need. While this ambitious legislation will benefit millions of Americans who cannot afford health insurance, I am convinced it does not have to place such an onerous burden on their fellow Americans. I can only hope that when the 112th Congress is convened, lawmakers of both parties will closely study this important, imperfect law to determine if and how it can be fixed, and work together to modify it, or as House Republican Leader John Boehner suggests begin to lay the groundwork to repeal PPACA and start fresh with a commonsense approach that will work for all Americans. Mike Reitz President and CEO

7 Out with the old Published in The Times, The American Press, and The Town Talk, February 2011 In the healthcare industry, it s been a familiar formula for decades. The federal government underpays hospitals for treating Medicaid and Medicare patients. Most, unable to cover their costs with these payments, charge private health insurers extra to make up for these shortfalls, and for the money they lose treating the uninsured. Many times, insurers are forced to recoup this money by raising premiums for the businesses and individuals they cover, and the cost of private health insurance goes up. This is called cost shifting. Now, the changes brought about by healthcare reform are making it necessary for hospitals and insurers to reexamine the cost-shifting formula and seek other solutions. The practice of cost-shifting, unfair to the businesses and policyholders who finance it, worked to some degree in the 1990s when the government insured about 20 percent of Louisiana s population through Medicaid and Medicare. Today approximately 39 percent of Louisianians get their insurance from the government. This number is expected to climb to more than 50 percent by 2014 because of the expansion of Medicaid eligibility by the Patient Protection and Affordable Care Act (PPACA). Industry experts estimate that today, some 17 cents of every private insurance premium dollar offsets government underpayment for Medicaid and Medicare patients and uncompensated hospital treatment for the uninsured, and this number is certain to rise as the government-insured population increases. Also, because of other PPACA provisions, in 2016 Louisiana hospitals could lose hundreds of millions of dollars the government currently pays them to treat the uninsured. This new law also requires private health insurers to subject any rate increases to a new federal standard of reasonableness. Reasonable has yet to be defined, but since the Obama administration denies that cost-shifting even exists, it seems unlikely that raising rates to cover higher levels of costshifting will be considered reasonable. This means that health insurers will no longer be able to ask the business community and privately insured citizens to pay higher premiums to compensate hospitals for government underpayments, since this would surely cause premiums to rise to unreasonable levels. So the federal government has health insurers and hospitals boxed in. By refusing to admit that public sector underpayment inevitably shifts costs to private insurers, and failing to acknowledge that Medicaid and (more)

8 Out with the old, pg. 2 Medicare cuts take even more out of the pockets of business owners and privately insured individuals, it has created a model that will no longer work. At this watershed moment in the history of employer-based health insurance, hospitals and insurers must work together to find other financial models. Working together, in partnership, the healthcare industry in Louisiana needs to take the first bold steps toward a model that rewards efficiency and quality of care. Together, we must search for and agree upon levels of payment that will sustain quality care for our patients and customers, but not cause excessive pain for our business community and privately insured citizens. If we could achieve this balance and work together as partners, I am convinced we could then begin meaningful discussions about new, innovative payment models and other measures that would increase the quality of care and lower the cost of healthcare in our state. Mike Reitz President and CEO