Texas Affordable Care Act Implementation: Challenges and Opportunities

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1 Texas Affordable Care Act Implementation: Challenges and Opportunities Texas Robert Greenwald Clinical Professor of Law Director, Center for Health Law and Policy Innovation of Harvard Law School January

2 Texas has Implemented Several Ground Breaking State New State Initiatives ( ) Child Obesity Pilot Project : Obesity prevention program for children enrolled in Medicaid/CHIP Tailored Benefits: enrollment of children with disabilities into managed care to improve their acute care services. Smoking Cessation: Pilot program that provides incentives to Medicaid beneficiaries to lead healthy lives. Long-term Care Partnership: State and private insurers partnership to encourage people to plan for their future longterm needs with purchase of high quality long term care plan. Quality-Based Payment: Developing initiatives & options for increased quality based payment in Medicaid and Chip to improve quality and efficiently provide care. 2

3 Challenge: Texas has the Highest Rate of Uninsured in the Nation TX 3

4 ACA Will Dramatically Decrease Uninsured Rates By Requiring Everyone to Have Health Insurance 450% 400% Federal Benefit Rate 350% 300% 250% 200% 150% 100% ACA Subsidized Private Insurance = 400% FPL ACA Expansion = 138% FPL 200% 185% 225% 50% 74% 0% Childless Adults (Not Currently Covered) 14% Low Income Families (Parents) SSI, Aged, Disabled Children including CHIP Pregnant Women Long-Term Care The area in red is the Texas Medicaid expansion population The area in blue is the Texas subsidized insurance population Source: Texas Health and Human Service Commission: Presentation.pdf 4

5 ACA Implementation with Medicaid Expansion = Income-Based Early and Comprehensive Health Care Coverage Rice University research estimates that up to 4.4 million out of 6 million currently uninsured Texans will obtain insurance, with Texas seeing the largest gain in insurance coverage in the country with only 5.8% of Texans remaining uninsured. Uninsured ~6 million 25% Insured 75% ACA Implementation 12% 5.8% 88% THHSC: Uninsured 2.9 million, 12% Rice University: Uninsured 1.6 million, 5.8% Texas HHSC estimates that ACA Implementation with Medicaid expansion would provide health care to 2.6 million of the 5.5 million uninsured people in Texas. Source: Texas HHSC, Pink Book 2013 ( 5

6 Waiting for People to be Disabled Before Providing Access to Care is Unsustainable $1,200 Average Monthly Cost Eligibility, Average Monthly Cost (Millions) $1,000 $800 $600 $400 $200 $765 $159 $339 $996 $192 $439 ABD Children Adults ABD = aged, blind, disabled $ Source: Texas Health and Human Services Commission, Texas Medicaid and CHIP in Perspective: Seventh Edition,

7 The Lack of Investment in Adults Preventive Health Care is Taking Its Toll on Texans In United Health Foundation s America s Health Ranking survey Texas was 39 th in 2009, 40 th in 2010, 42 nd in 2011 and 40 th in 2012 Texas is in the bottom 20% of the United States in terms of the health of its citizens. Source:

8 The Status Quo Isn t Working: Federal and State Policy Reform Matters Average per capita health spending % of GDP In all other industrialized democratic countries health care costs are low and every citizen is guaranteed access to health care 8

9 Challenge: Some See the Medicaid Expansion as Investing in a Low Value Program Medicaid is a broken system. Kyle Janek, Texas Health and Human Services Executive Commissioner 1/1/2013, Texas Medical Association Medicaid Expansion is a new Medicaid program. The Medicaid Expansion isn t a disability program. It is a preventionbased early access to affordable health care program. As Chief Justice Roberts stated in the ACA decision: Congress s decision to so title it is irrelevant The Medicaid expansion, accomplishes a shift in kind, not merely degree. 9

10 Current Medicaid Program = Disability (Not a Health Care) Program for Low-income Uninsured % of Medicaid Expenditures by Type of Service Long Term Care Inpatient Other Acute Outpatient Prescription Drugs 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% Source: Kaiser Family Foundation. Analysis of 2007 MSIS data provided by the Urban Institute ( 10

11 Medicaid Expansion is Not Just for the Unemployed: Low-Wage Workers and Small Business Owners are Increasingly Uninsured Percent of Small Business Owners in the United States Able to Provide Health Insurance to Employees Able to provide insurance Unable to provide insurance 33% 67% 62% 38% Small Businesses Hit Hard by Economy Consider Dropping Health Coverage, New York Times, Feb 3,

12 Increasingly Texas Has a High Rate of Small Business Owners and Low-Wage Workers Who Are Uninsured and Eligible for the New Medicaid Program Source: Health Texas, Report on Senate Bill 10, Section 25, 80 th Legislature Regular Session, Healthy Texas Phase II Report ( 12

13 For Most Texans Being Uninsured is Not a Short-Term Problem Percentage of Uninsured Texans in 2008 and 2009 Who Went Without Insurance for 6 Months or Longer 19% Uninsured less than 6 months Uninsured 6 months or longer 81% Source: Families USA, Report 2009 ( 13

14 Being Uninsured Results In Delayed Medical Treatment 60% 50% 40% 30% 20% Health Behavior of Adult Americans With and Without Health Insurance, % 51% 14% Insured Uninsured 19% 20% 30% 10% 0% Did not see doctor for specific medical condition due to cost concerns Took Medication at lower dose than prescribed to cut costs Skipped filling prescription because of financial concern Most Insured Adults Worry About Health Care Costs: Poll, HealthDay News, March 9,

15 Early Access to Comprehensive Health Care Matters People with a usual source of care have better health outcomes and lower health care costs Having a usual primary care provider increases the likelihood that patients will receive appropriate and cost-effective health care Access to early preventive services prevents illness and detects disease at an earlier, often more treatable and less costly stage See: 15

16 Early Intervention Is Cost-Effective and Improves both Individual and Public Health Outcomes Many interventions intended to prevent/control diabetes are cost saving or very cost-effective and supported by strong evidence.* Early intervention treatment for mental illness does not increase costs and is highly cost-effective when compared with standard care.** Clinical trial evidence has shown convincingly that pharmacological treatment of risk factors can prevent heart attacks and strokes.*** A combination of increased screening and increased access to treatment could avert 300,000 HIV infections in the United States over 20 years or approximately 17% to 24% of new infections.**** Medicaid expansion is cost-effective early intervention with a focus on prevention * Li Rui, et. al., Cost-Effectiveness of Interventions to Prevent and Control Diabetes Mellitus: A Systematic Review, 2010; ** Paul McCrone, Cost-effectiveness of an early intervention service for people with psychosis, 2010; *** William Weintraub, Value of Promordial and Primary Prevention for Cardiovascular Disease, 2011; **** E Long, et. al., The Cost-Effectiveness and Population Outcomes of Expanded HIV Screening and Antiretroviral Treatment in the United States,

17 Challenge: Some See the Solution as About Shifting Resources and Not About Need for Additional Resources "We could design a system that would be a Texas solution, and that solution may involve covering people who are currently not covered; though that would be with existing funds." Kyle Janek, Dallas Morning News Shifting resources can t help low-income uninsured individuals and families who are left outside of the health insurance system if Texas doesn t expand Medicaid. 17

18 Lack of Insurance Will Continue: This Leads to Uncompensated Care in Hospitals and Free Clinics and The Problem is Growing 20 Total Uncompensated Care Charges (Bad Debt and Charity), Billions of Dollars Over $20 Billion in Axis Title Source: 2010 Cooperative DSHS/AHA/THA Annual Survey of Hospitals and Hospital Tracking Database; Texas Fact Sheet by Hospital Survey Unit, Center for Health Statistics, Texas Department of State Health Services ( 18

19 High Rates of Uninsured is a Vicious Cycle Forcing More Texans to Drop Coverage Uninsured go to emergency rooms for free federallymandated care More uninsured Hospitals have higher uncompensated care costs Some employees or employers drop coverage due to high premiums Hospitals increase charges to paying customers to offset uncompensated care costs Insurance companies pay higher claims, passing cost to insured through higher insurance premiums Source: Texas Medical Association. 19

20 DSH Payments ~$1.6 Billion a year ~$1 Billion a year ~$600 Million a year Texas $ (millions) Federal $ (millions) Total DSH spending (millions) Texas was 1 of only 3 states to receive over $1 billion in DSH payments in 2010 Sources: GAO, July

21 With or Without Medicaid Expansion, Federal Support of Uncompensated Care Will Decline ~$14 billion decline over 5 years Not expanding Medicaid in Texas will cost the state s hospitals nearly $25 billion in reimbursement between 2013 and 2022* Sources: National Association of State Mental Health Program Directors, 2012; Kaiser Family Foundation billion-over-10-years/

22 Challenge: Some See Cost-Control as Mutually Exclusive of Accepting Billions in Federal Health Care Funding The short-term effect of getting 100% Federal money can put Texas into a dire state later on. Kyle Janek, 1/1/2013, Texas Medical Association (at 43:50) Controlling costs make sense. But turning down significant federal resources with a vague (and unproven) promise of state, local and private resources doesn t. 22

23 In Terms of Funding: Medicaid Expansion Brings Significant Federal Funding to Texas Texas vs. Federal Spending, % Percentage of Total Medicaid Spending 100% 80% 60% 40% 20% 0% 100% 100% 92.8% 90% 90% 61% 39% 7.2% 10% 10% 0% 0% Current State Federal Based on best estimate of participation. Source: Kaiser Family Foundation ( 23

24 Texas will receive the biggest share of federal expansion funds in the country = $120 billion in next decade Texas Spending estimates for the next decade vary: $9.6 billion most credible given minimum of 90% federal funding (Urban Institute, commissioned by Kaiser Family Foundation: Texas Health & Human Services Commission estimates $20 Billion $6 billion of this estimate is for the cost of those already eligible for Medicaid but not enrolled. They are not part of the expansion ( Costs will be lower as both estimates include 100% participation and no government program has ever had 100% enrollment. Texas can opt out of expansion at any time! 24

25 With Medicaid Expansion, Texas Will Realize Net Savings & Without Medicaid Expansion, Costs Will Continue to Rise Again, in addition to individual and public health related cost savings, Medicaid expansion will dramatically reduce state uncompensated care costs If Texas doesn t expand Medicaid, Texas costs will increase, as preventable high-costs interventions and hospitalizations will continue and federal funding to cover uncompensated care will be reduced in favor of funding states Medicaid expansion In first 10 years, Texas will save between 5.8 and 11.6 billion on uncompensated care (5.8 billion assumes uncompensated care declines by only 25% - conservative estimate) Source: Urban Institute and RWJF, 2011 based on 5 year estimates ( 25

26 With or Without Medicaid Expansion, Federal Support of Uncompensated Care Will Decline ~$14 billion decline over 5 years Rising cost of uncompensated care in non-expansion states will be detrimental to the economy. (Republican Gov. Brewer, AZ) Source: National Association of State Mental Health Program Directors,

27 ACA Will Reverse The Trend of Fewer Medicaid Providers: Greatly Increasing Access to Cost-Effective Primary Care Providers 80% Health care providers will increasingly accept Medicaid as all primary care providers are entitled to receive higher payment rates = equal to Medicare payment rate Percentage of Texas Physicians 70% 60% 50% 40% 30% 20% 67% 49% 45% 38% 42% 42% 31% 58% 10% 0% Based on Best Estimates, 27

28 Medicaid Expansion Is Increasingly Non-Partisan and Being Assessed on Its Merits Conservative Republican Governors are starting to see Medicaid Expansion as cost saving and a great deal for their states Medicaid expansion greatly reduces state mental health services burden - Nevada anticipates saving $16 million in just 2 years on mental health and predicts the state would spend and extra $16 million without expansion. Governor Sandoval, Nevada Federal funds from Medicaid expansion boost state economies and will protect rural and safety net hospitals from being pushed to the brink - Arizona estimates saving $353 million in just 3 years. Governor Brewer, Arizona It comes down to are you going to allow your people to have additional Medicaid money that comes at no cost to us, or aren't you? We're thinking, yes, we should. Governor Dalrymple, North Dakota Medicaid expansion will not only save money each year, we can expect revenue increases that will offset the cost of providing these services in the future. Governor Martinez, New Mexico 28

29 Challenge : The Affordable Care Act and Its Medicaid Expansion Will Hurt the U.S. Economy Governor Perry: the Court ruling upholding the ACA is a stomach punch to the American economy. Let s all hope this turns out not to be the case and that the Congressional Budget Office (CBO), which provides nonpartisan analysis to the U.S. Congress, is correct. The CBO says that health care costs will decline and the federal deficit will be reduced through ACA implementation. Regardless, the Supreme Court decision in behind us and the elections are over. The ACA is the law of the land and moving forward. And certainly, the Medicaid Expansion will be a great deal for the Texas economy as $120 billion will flow into Texas creating new revenue and jobs! 29

30 Healthcare Sector is an Economic Engine According to the Texas Hospital Association: Every hospital dollar spent generates $2.30 in general business activity In 2010 Texas employed 369,000 individuals in hospitals and their payroll generated $177 Billion in business activity For-profit hospitals pay $530 Million in state taxes each year What will $120 Billion in federal funds mean for the Texas Economy? Source: Fact Facts on Texas Hospitals, THA, ( 30

31 The Medicaid Expansion Will Have A Multiplier Effect on the Economy With $120 billion in funding over the first 10 years of Medicaid expansion implementation, economic gains will include: ~ $276 Billion in general business activity ~ Over 300,000 new jobs 31

32 Final Challenge: Doing What is Right For Texans In the Short and Long Term A concern is: whether or not the federal government will keep its commitment to pay the 90% rate over time The answer is: if the federal government stops paying, or the costs are too high, Texas can drop the Medicaid expansion at any time If Texas doesn t expand Medicaid, Texans federal tax dollars will instead go to fund health care in states that do, like NY and CA! 32

33 For an electronic copy of this presentation and other information about the Affordable Care Act, see: This presentation was funded in part through a grant from Bristol-Myers Squibb, with no editorial review or discretion 33