The FUTURE of HEALTHCARE What to expect with

The FUTURE of HEALTHCARE: What to expect with President ROMNEY Obama v. Romney: Quite different paths? Tom Scully AIS Conference October 3, 2012

Debate 1 What a difference a day makes? ? CNN post debate polls (sample of 37% Dem and 33% rep) • 67% said ROMNEY won; 25% said Obama won (67% is highest number in debate history– no candidate over 60% since 1984) • Economy: Romney 55 -43% • Taxes: Romney 53 -44% • Deficit: Romney 57 -41% • Handling health care: Romney 52 -47% • Stronger leader: Romney 58 -37%

Presidential Outlook? ? Polls: Average of 7 National Polls (10/2): Obama 49. 1 Romney 46. 0 CNN Obama +3 ABC News Obama +2 Rasmussen Obama +2 Gallup Obama +4 National Journal Tie 9/3: Average of 7 National Polls: Obama 47. 0 Romney 46. 3 CNN TIE ABC News Romney +1 Rasmussen Romney +1 Gallup Obama +3 Will tighten; very polarized; very few undecided– can you say “BAD MONTH” for Romney? Bad day for Obama. in a +/- range of 4 % for the last 2 months Impact of Presidential race will have a massive impact on the health policy and the health economy

Election 2012: GOP Ticket

Election 2012: Democrats Running Away from ACA? You betcha!!

Can they run on this? ? CLOSE House: Will stay GOP. Probably losing 10 -15 seats due to redistricting (CA) and roll back some of 2010 GOP wave. Senate: VERY tight 47 safe Dems 43 safe GOP 10 Toss Ups CT (WWF ahead—unlikely D) MA (Brown R, D) MI (Stabenow , D) MO (Mc. Caskill, D) VA (Open ? ? ) MT (Tester D, R) ND (Open R) WI (Open R) IN (Open R) NV (Heller R) Each could either way? NM could also be in play 50 -50 SENATE possible. Likely 51 -49 D. How is that for productive?

It’s Not the Money-- It’s the MONEY! (yikes) Deficit and Budget 2011 2012 Revenue Outlays 2. 303 3. 603 2. 456 3. 627 Deficit 1. 300 Trillion 1. 174 trillion

after election? : THE FISCAL CLIFF 2013 A FISCAL MESS

The Moving Pieces: Medicare/ Medicaid– with HUGE expansions to come in 2014 FY 2011 Total Federal Outlays = $3. 6 trillion NOTE: FY is fiscal year. 1 Amount for Medicare is mandatory spending and excludes offsetting premium receipts (premiums paid by beneficiaries and state contribution (clawback) payments to Medicare Part D). 2”Other” category includes other mandatory outlays and offsetting receipts. SOURCE: Kaiser Family Foundation based on Congressional Budget Office, Budget and Economic Outlook, Fiscal Years 2012 -2022, January 2012.

Medicare Spending as a Share of Federal Budget Outlays, 1970 -2020 Actual Total Medicare spending in billions $7 $35 $110 $219 $524 Projected $949 NOTE: *Estimates for 1970 -2010 represent total Medicare outlays, estimate for 2020 represents projection of mandatory Medicare outlays. CBO (August 2010) projects discretionary Medicare outlays will be $9 billion in 2020. SOURCE: Congressional Budget Office, Budget and Economic Outlook, January 2010 (for 1970 data) and January 2011 (for 1980 -2020 data, except 2010 which comes from CBO August 2010 Baseline: Medicare). Historical total spending for 1970 -2000 from 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Historical and Projected Number of Medicare Beneficiaries and Number of Workers Per Beneficiary Number of Beneficiaries (in millions) Number of Workers Per Beneficiary SOURCE: 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

VOTERS: Medicare enrollment as Percent of State Populations, 2010 National Average, 2010 = 15% 18% 14% 17% 16% 15% 16% 14% 16% 17% 15% 12% 13% 14% 15% 16% 18% 17% 14% 15% 13% 10% 20% 17% 16% 18% 17% 18% 12% 21% 16% 17% 16% 15% 16% 14% 16% DC 13% 17% 12% 15% 18% 9% 16% 9%-14% (14 states and DC) 15% (8 states) 16% (12 states) 17%-21% (16 states) NOTE: Percent enrollment calculated using U. S. Census Bureau July 2009 population estimates. SOURCE: Centers for Medicare & Medicaid Services (CMS) Management Information Integrated Repository (MIIR), February 16, 2010. Medicare beneficiaries as a share of state population estimates are based on July 1, 2009 state-level population estimates from the U. S. Census Bureau.

My God we won! What do we do now? ?

CONGRESS? DEFICIT REDUCTION? ? –OR KICKING THE CAN DOWN THE ROAD. LEADERSHIP NEEDED!!!!

OBAMA HEALTH PLAN—IMPACT? § Exchange structure in itself not “radical” § THE “RADICAL” ISSUE is Size and scope of spending. § With a 9% of GDP deficit today, you are ADDING the largest entitlement expansion in history in 2014 § 20 M new Americans on Medicaid (already 65 M today) § 17 M new Americans on “subsidized health” via exchanges up to 400% of poverty ($94, 000 for a family of 4— 62% of America) § WILDLY FAST entitlement expansion at warp speed in a recession § Too many people? Too much “gold plated” coverage? § Federal government permanently at 25% of GDP (vs. 20% historically) -- Revenue too low? Spending too high?

OBAMA: What is he for? What if he wins? § Defend the ACA; universal coverage and don’t give an inch. Fight for 20 M new Medicaid covered lives and 17 M new “exchange” subsidized. § RAISE TAXES AND CUT DEFENSE to reduce deficit REALITY § Big deficit will drive a BIG budget deal in Spring 2013 § With a GOP House, Tax increases and defense cuts have limits OBVIOUS BIPARTISAN COMPROMISE: -Delay Obama expansions to 2015 or 2016 and phase the in more slowly -In exchange GOP agrees to reform tax code and RAISE REVENUE Ugly fights all spring---- will get this result in June 2013

Estimated Budgetary Effects of Insurance Coverage Provisions of PPACA and the Reconciliation Act 2016 2017 2018 2019 2020 Effects on the Federal Budget Deficit Medicaid and CHIP outlays $77 $84 $87 $93 $97 Exchange subsidies and related spending 87 104 115 123 130 Small-employer tax credits 5 2 2 Gross Cost of Insurance Coverage Provisions $169 $189 $204 $218 $229 Source: Congressional Budget Office, staff of the Joint Committee on Taxation ($-billions)

Romney: What is he for? What if he wins? • REPEAL AND REPLACE OBAMA! – REPLACE? What does that mean? ? – He is for significant Medicare and Medicaid reform (The RYAN- WYDEN plan) but still not much detail on coverage. – Romney unlikely to be forced to provide more detail this fall. Health debate is around RYAN (or RYAN-WYDEN? ? ) --may allow them to stay with existing hand? • REALITY – THERE WILL BE BIG CHANGEs IN HEALTH – He will probably REPEAL the entire bill with GOP Congress; if short on votes, there will be at least 5 -6 yr delay and “phase in”. – Will be MANY years before universal coverage “Obama- Style” comes back – Medicare age will likely move to 67 gradually; Medicaid will be delegated much more to state discretion. Deficit reduction=HEALTH

Industry Impact? Romney Wins: (no action until May—just finding offices? ) • PPACA will be hard to repeal. Even without REPEAL—all new spending will be delayed. No exchange $ or Medicaid is = $200 B+ per year. • May reduce pressure for traditional Medicare cuts to balance the Budget? ? (probably not!) • Still, IF Romney wins, GOP probably wins House and close in Senate— and BIG budget bill will still force health evaluation LONG before raising taxes. • Much friendlier tone from CMS for MA plans, Part D and other “risk ventures”. Improved relations for commercial insurers. • CMS regulatory environment friendlier (hospitals, SNFs, Rehab, home health) but will push all Medicare FFS to capitation and BUNDLES. • CMS will push all states to “waivers” and MCOs. Block grants won’t happen—but “PER CAPITA waiver allocation” will happen fast (TN, MO, MA) • Duals waivers will happen VERY fast

WILL MEDICAID BE EXPANDED? WHERE THE MONEY IS!

2013: CONGRESS RETURNS

Election Issues– And Beyond? ?

STARK CHOICES More Government - or less? OBAMA: - Plow ahead with ACA and BIG new health sending in 2014. - Stick with Medicare FFS (Government price setting/insurance) - Cut defense, tax increases; lock in 25% of GDP spending - VERY good for the health business? Bad for economy? ROMNEY: - Stop ACA/Obamacare expansions- central to deficit reduction - Stop all CMMI and other Obama efforts and reevaluate? - Move gradually to Medicare Advantage/premium support for younger beneficiaries (under 55); Medicare to 67 - Limit government to 20% of GDP. Deficit reduction from tax and entitlement reform. - CAPITATION is the word—Medicare and Medicaid. Not fun for providers. Tough calls in health

Medicare– It’s Magic Really! (some day we gotta fix it? ) 24

2015 Under OBAMA? • Big deficit reduction deal with GOP in summer of 2013 slows ACA. Delay until 2015 with a phase in over 2 -3 years 2015 will be THE big year of expansion. Exchanges kick in with subsidies to 275%? Medicaid expands to 115% of poverty on the way to 133% Virtually all states surrender and take Medicaid funds at 100% Medicare Advantage stalls at 26%--- FFS stays as dominate Medicare player CMS/HHS leadership stays-- (Tavenner, excellent) Trends • ACOs take off both in commercial and Medicare settings (instant replay of the 90 s? ? ? Bidding wars between hospitals and health “sponsors” to buy docs? ? ) • Big consolidation of health plans and health systems --is consolidation good?

2015 Under Romney? • • • Big deficit reduction deal in 2013. Tax reform with very modest revenue increase. Significant Medicare and Medicaid changes ACA probably not repealed—DELAYED for 4 -5 years with GDP “triggers”. Will be drastically reduced as CORE of deficit reduction. “Block Grants can’t pass– but “waivers” will be everywhere? TENNCARE or MISSOURI for all? HHS/CMS? -- probably Governor at HHS (Jindal? ? ) -- Charlie Baker (MA) or Tom Barker (MA) at CMS? ? More rational than some fear—but with far less $$ Trends • Much more action on state level—with fewer funds • CMS will push MA hard, as a lead in to “premium support” • CAPITATION and BUNDLING at all levels to move toward more private risk • “Replace” eventually will be high deductible, basic coverage for far fewer people. ACA like coverage delayed for decades. • Slower spending trends across the board