Download Interesting Times for an Actuary: Healthcare Trend and Healthcare Reform

Interesting Times for an
Actuary: Healthcare Trend
and Healthcare Reform
Medicare Industry Leadership Institute
Actuarial Scholarship Seminar
University of Minnesota
November 22, 2010
Kent Clemens, FSA
Office of the Actuary
Centers for Medicare & Medicaid Services
Role of the Office of the Actuary
Provide objective actuarial, economic, and other
technical assistance, on a nonpartisan basis
Administration
Congress
OACT
National
advisory
groups
Health
plans &
providers
Public
Nonpartisan Technical Assistance
Theory:
Practice:
Nonpartisan Technical Assistance
Theory:
OACT
Practice:
Nonpartisan Technical Assistance
Theory:
OACT
Practice:
Nature of the Problem
• Cost Growth
• Uninsured
• Affordability
• Federal, State budget challenges
6
25%
Past and Projected National Health
Expenditures, as a Percentage of GDP
Historical
Projected
20%
15%
10%
5%
0%
1970
1975
1980
1985
1990
1995
2000
Calendar year
2005
2010
2015
12%
Why Do Health Costs Grow Faster?
Average annual growth during 1965-2006
Average Annual Growth
10%
8%
6%
Health care use
& intensity
2.6%
0.4%
Excess
medical
inflation
1.7%
4%
2%
0%
Economy-wide
inflation
4.2%
Population
1.0%
Age-gender
effect
Real GDP
per worker
1.3%
Economy-wide
inflation
4.2%
Employment
1.9%
Personal Health Care
Source: Office of the Actuary, National Health Statistics Group.
GDP
Why Do Health Costs Grow Faster?
• Normal “market” doesn’t exist for health care
– Insurance insulates people from true cost
– Extreme value placed on health
– Complexity of “product”
• “Guaranteed market” for new medical innovations
– Demand for best possible treatments
– Medical research, development, implementation
companies have little incentive to focus on costreducing technology
– Most innovation to date has been cost-increasing
Why Do Health Costs Grow Faster?
• Inefficiency
– Medical care is fragmented
– Payment mechanisms reward more services, not
quality of care
Efforts to restrain cost growth:
PAST
• End cost-based reimbursement
• Introduce prospective payment & fee
schedules
• Manage care
– Health maintenance organizations
– Preferred provider organizations
• Address fraud & abuse
NHE Share of Gross Domestic Product (GDP),
1980-2018
25.0
Share of GDP (%)
20.0
15.0
10.0
5.0
0.0
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
Source: A. Sisko et al., “Health Spending Projections Through 2018,” Health Affairs 28 (2009): w346 – w357 (published online 24
February 2009).
Efforts to restrain cost growth:
CURRENT
•
•
•
•
Preventive care
Chronic care / disease management
Consumer-driven health plans
Medicare physician volume control systems
Patient Protection and Affordable Care Act
• Mandates coverage for health insurance
– Establishes Health Insurance Exchanges
– Provides Federal subsidies for Exchange premiums, cost sharing
– Provides temporary tax credits for small businesses that offer
coverage
– Imposes penalties on many individuals who forgo coverage
– Imposes penalties on large employers w/o plans
• Expands Medicaid eligibility, extends CHIP funding
– Income threshold increases from < 100% FPL to 138%
– Extends coverage to those w/o other qualifying factors
PPACA, continued
• Immediate insurance reforms
– Minimum coverage requirements
– High-risk pool for uninsured
– Federal reinsurance for employer-sponsored early retiree
plans
– Expansion of dependent coverage to age 26
•
•
•
•
CLASS program (Federal LTC insurance)
Comparative effectiveness research
Taxes, fees
Various Medicare provisions, net reduction in Medicare
spending
NHE Share of Gross Domestic Product (GDP), 19802019
Sept. ’10:
19.6%
20.0
Feb. ’10:
19.3%
Share of GDP (%)
15.0
10.0
5.0
0.0
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
Source: Sisko A et al., “Health Spending Projections Through 2019: the Estimated Impact of Reform” Health Affairs 29, no. 10 (2010) (to be published online 9
September 2010).
Impacts of PPACA: Total Health Spending
$250
(Estimated change in annual spending, in billions)
$200
Private health
insurance
$150
$100
Medicaid & CHIP
$50
Net total
$0
-$50
Medicare
-$100
Out-of-pocket
-$150
-$200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Efforts to restrain cost growth:
FUTURE
• Health information technology
• “Pay for performance”
Affordable Care Act provisions:
• Medicare productivity adjustments
• Medicare IPAB
• Accountable Care Organizations
• Bundled payments
• Center for Medicare and Medicaid Innovation
Impacts of PPACA: Insurance Coverage
(In millions, 2019)
180
165.9 164.5
160
140
Prior Law
120
PPACA
100
83.9
80
60
60.5 60.5
63.5
56.9
41.6
40
25.7
23.1
20
0
Medicare
Medicaid & CHIP
Employer-sponsored Individual coverage
insurance
(Exchange & other)
Source: OACT April 22, 2010 memorandum.
Uninsured
New Report on National Health Expenditures
Posted by Nancy-Ann DeParle on September 09, 2010 at 03:00 AM EDT
“Today’s report by the Office of the Actuary confirms a central point of the Affordable Care
Act passed by Congress and signed by President Obama: The Act will make health care
more affordable for Americans. In fact, the Actuary’s report indicates that total health care
spending per insured American will be more than $1000 lower thanks to the provisions of
the new law than it would have been if Congress and the President had not acted.
Specifically, by 2019, overall health spending per insured person will average $14,720
instead of the $16,120 projected by the Actuary before the Act was enacted into law. ”
Nancy-Ann DeParle is the Director of the White House Office of Health Reform
Impacts of PPACA: Medicare Outlays
(as percent of GDP)
12%
2009 TR
10%
8%
2010 TR
6%
4%
2%
0%
2000
2010
2020
2030
2040
2050
2060
2070
2080
Impacts of PPACA: Medicare Outlays
(as percent of GDP)
12%
2009 TR
10%
8%
2010 TR
6%
Realistic?
4%
2%
0%
2000
2010
2020
2030
2040
2050
2060
2070
2080
Cumulative increase in provider input
prices vs. Medicare payment rate
(for providers subject to productivity adjustments under current law)
14
Relative price index (≡ 1.0 in 2010)
12
Provider
input
price
• Under prior law, Part A and most Part B payment rates
updated by growth in provider input prices (e.g., wages,
rent, energy, supplies)
10
• Under PPACA, Medicare payment rates will grow
~ 1.1% per year more slowly than provider input prices
8
• Unless providers can improve their productivity to
match adjustment, growing gap between provider costs
and Medicare payments per service
Medicare
payment
rate
6
4
2
0
2010
2020
2030
2040
2050
2060
2070
2080
Price as a percentage of PHI rates
Illustrative comparison of relative Medicare,
Medicaid, and PHI prices under current law
125%
s
PHI
100%
75%
Medicaid
50%
Medicare
25%
0%
2010
2020
2030
2040
2050
2060
2070
2080
Medicare Outlays: Illustrative Alt. Projection
(as percent of GDP)
12%
2009 TR
10%
2010 TR alt.
8%
2010 TR
6%
Illustrative alternative to current law assumes:
• Physician payment updates based on Medicare
Economic Index
• Productivity adjustments to other provider updates
are phased out over 2020-2034
Note: This is an illustration, not a recommendation
4%
2%
0%
2000
2010
2020
2030
2040
2050
2060
2070
2080
OACT Headlines
“Medicare actuary goes rogue?”
(Politico)
OACT Headlines
“Foster works for the Center for
Medicare and Medicaid Services, an
agency within HHS that would lose
funding under health care reform.”
(Slate)
OACT Headlines
“That assessment was of previous
versions of the legislation, so it's
completely wrong.”
(Senator Dodd)
OACT Headlines
“This report once again discredits Democrats’
assertions that their $1.3 trillion government
takeover of health care will lower costs, and it
confirms that this bill violates President Obama’s
promise to ‘bend the cost curve.’ It’s now beyond
dispute that their bill will raise costs, which is exactly
what the American people don’t want.”
(Representative Boehner)
OACT Headlines
“Medicare Report Confirms Health Care
Takeover Plan is a Fiscal Disaster”
(AOL News headline)
OACT Headlines
“It’s a long, somewhat dry
document…but it is an interesting
read (assuming the reader is
adequately caffeinated).”
(Mike the Actuary’s Musings)
OACT Headlines
“This is not something they normally do. It is an
interesting analysis but it is pretty speculative
though of what the impact will be on
providers and beneficiaries. Our recent
experience would indicate something quite
different.”
(Nancy-Ann DeParle)
OACT Headlines
“The CMS report is a blow to the
White House and House Democrats
who have vowed that healthcare
reform would curb the growth of
healthcare spending.”
(Capitol Hill)
OACT Headlines
“Actuaries sure know how to ruin a good
time” (Capitol Watch Blog headline)
Parting Observations
• Political debate is a good thing
• Political misuse of actuarial analyses is a
bad thing
• The debate over health care reform was
dominated by wild claims and
accusations
• The nation deserves better, but
heightening partisanship suggests it will
be a long time coming
Questions?