Update on Health Reform the ACA in Ohio

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1 Update on Health Reform the ACA in Ohio J. B. Silvers, PhD Weatherhead School of Management Case Western Reserve University Note: I have no commercial or financial interests in the matters presented in this talk.

2 What do we need to know? What is health reform -- REALLY! Drivers, incentives, structure, intent What is next on the time table Exchanges, Supreme Court, Politics What is likely to happen in Ohio? Kasich/Taylor, implementation flexibility Where will we be in 2014? Weatherhead School of Managemejnt. 2

3 What do we need to know about it? 1. The Mandate and matching subsidies 2. Exchanges 3. Essential benefits & standardized plan design 4. Small employer refundable tax credits 3

4 How is it supposed to work? Poor Family Pays 4-8% ($50- $100/month) EXPAND PRIVATE COVERAGE: -Kids with parents until age 27 [S] 1 COVER 30+ MIL MORE EXPAND MEDICAID COVERAGE: -Mandatory to 133% of Fed Poverty $1,000 $800 $600 $400 $200 $0 $0 $25,000 $50,000 $75,000 $100,000 Individual Mandate + Employer Penalty Subsidize Low Income Individuals Subsidize Small Employers 50% 40% 30% 20% 10% 0% Health Exchanges Number of Employees High Income 100%($1000/month) REFORM COVERAGE: -Pre-existing Conditions -Guaranteed Insurability -Rate Limits -Rescission Moderate Family Pays 50% ($500/month) Subsidy of ~$2000/worker (if employer pays 50% prem) Initial Tax Credit Tax Credit 2 PROGRESSIVE meets E-Bay Subsidy of ~$3000/worker (if employer pays 50% prem) 4

5 But what will the Supreme Court & Ohio politicians do? 1. Process, people and Issues 2. Impact of potential repeal of the mandate 3. Impact of delay of exchange development 4. Impact of other features of ACA 5

6 ACO Implications for Practice Cooperation brings additional payment But savings come from lower utilization And higher quality indicators Organizational arrangements/contracts will change Large bonus pools > uncertain distribution Critical role of quality indicators Readmission rates, acquired infections, preventive services, etc. This is the key lever to change practice and organization ACO S WILL HAPPEN NO MATTER WHAT: Paid with Medicare $ Upside potential big No downside risk Issues after early yr 6

7 Center for Medicare/Medicaid Innovation (CMI), Sec 3021, 1/1/11 Purpose: to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care GOVERNMENT R&D UNIT Expansion: successful models go nationwide after certification by Chief Actuary of CMS Funding: $25 mil (2010), $10 billion ( ) INNOVATION CENTER: $10 bil clear target Could be slush fund Makes change easy Interest groups not strong enough to resist cuts 7

8 So what is the bottom line for Ohio? Clear potential revenue reductions to hospitals Less clear revenue additions through bonuses Major attempts at ACOs in every area Some may win but most will be breakeven Restructuring of delivery system happening Focus on quality metrics, Value Based Purchasing (VBP) Medical homes for financial, quality and efficiency Required community needs assessments external focus Private payers (ins co & self insured employers) will be doing much the same thing CPR (Center for Payment Reform) outstanding ideas Failure not an option with Rep Ryan in the wings! 8

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