May 15, 2013 Medicaid and Government Pricing Congress

Health Reform: Where we are now.Impact on Pharma.

Medicaid and Government Pricing Congress

May 15, 2013Grace-Marie Turner

Galen Institute

Americans agreed on goals for health reform

The U.S. needs health reform to:– make coverage more affordable– assure quality, and– expand access to insurance

Most people rate their own coverage as good or excellent

They want stability. Change was for others.

www.galen.org

But many say the ACA changes too much

40% view the law unfavorably

35% of Americans now view the Affordable Care Act favorably

Cost continues to be the biggest concern

www.galen.org

Kaiser Health Tracking Poll, April 2013 http://kff.org/health-reform/poll-finding/kaiser-health-tracking-poll-april-2013/

The Red Tape Tower

Source: Sarah Kliff, “Is ObamaCare too much work for the Obama administration?” The Washington Post, November 12, 2012, http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/12/is-obamacare-too-much-work-for-the-obama-administration/.

An ACA State Exchange

NOTE: Don’t know/Refused answers not shown.SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted March 5-10, 2013)

Majority Say They Don’t Understand How ACA Will Impact Them, Including Two-Thirds

of Uninsured and Low-IncomeDo you feel you have enough information about the health reform law to understand how it will impact you personally, or not?

Household income less than $40,000

Uninsured (under age 65)

Total

30%

33%

41%

68%

67%

57%

Yes, have enough information No, do not have enough information

Source: Avik Roy, “Fact-Checking the Obama Campaign's Defense of its $716 Billion Cut to Medicare,” Forbes: The Apothecary, August 16, 2012, http://www.forbes.com/sites/aroy/2012/08/16/fact-checking-the-obama-campaigns-defense-of-its-716-billion-cut-to-medicare/.

The health law in one graph

Source: “Health Reform Poses Biggest Challenges to Companies with the Most Part-Time and Low-Paid Employees,” Mercer LLC, August 8, 2012, http://www.mercer.com/press-releases/1472805.

Employers implementing workforce changesw Mercer study on what employers expect

Employers and health coverage

1. Employers with <50 FTE EE’s have no 3k/2k penalty

2. But employers offering qualified and affordable coverage may actually be hurting their employees

Example

Generous Subsidies in ExchangesExamples:

A person earning $42,000 a year with a family of 4 qualifies for $14,759 in new health insurance subsidies

A single person earning $20,600 qualifies for $5,156 in new health insurance subsidies

But only if employer doesn’t offer coverage or if it’s not “affordable” (ie costs >9.5% of income)

www.galen.org

Cost of Insurance, Family of 4

Impact of new rating rules

James T. O’Connor, Milliman, for America’s Health Insurance Plans. Comprehensive Assessment of ACA Factors That Will Affect Individual Market Premiums in 2014. http://www.ahip.org/MillimanReportACA2013/ Accessed 4-26-13

How to qualify for subsidies

Source: Sen. John Cornyn, Facebook, March 22, 2013, http://www.facebook.com/photo.php?fbid=10151499130834424&set=a.112318184423.92543.75755694423&type=3&l=83fcd3ca01&permPage=1

www.galen.org

Medicaid and the states

Health Insurance Coverage ofthe Nonelderly Population, 2011

266.4 Million

SOURCE: KCMU/Urban Institute analysis of 2012 ASEC Supplement to the CPS.

Private Non-group

5.7%

Source: Avalere State Reform Insights, Updated April 22, 2013

*AR is proposing to use Medicaid funds to pay for premium assistance through exchanges, pending federal approval;

TN has indicated interest in expansion

Key issues facing Pharma

Medicaid expansion

Drug rebates expanded to Duals

Success of coordinated care for duals

Supply chain integrity

Accountable Care Organizations

Drug benefits in the new Exchanges

Government’s ability to pay its bills

www.galen.org

Source: Kaiser Family Foundation. www.kff.org

SOURCE: Kaiser Family Foundation analysis of the Bureau of Labor Statistics Consumer Expenditure Survey Interview and Expense Files, 2002-2009, “Health Care on a Budget, The Financial Burden of Health Spending by Medicare Households, An Updated Analysis of Health Care Spending as a Share of Total Household Spending,” June 2011.

Health Insurance Spending

Prescription Drug Spending

Average Health Insurance and Prescription Drug Spending As a Share of Total

Household Spending by Medicare Households, 2002-2009

Part D: Many see it as a model

The Congressional Budget Office said that spending for the prescription drug benefit declined by nearly 40% compared to initial estimates of its 10-year cost

It is saving seniors money as well. The average monthly drug premium is about $30, far below the $53 forecast originally.

Federal spending as a % GDP

www.galen.org

Some realities:

States have a big role

Seeking ways improve their markets

Enhanced competition and more choices of affordable coverage

Medicaid expansion or other state-based options such as Florida Health Choice Plus

ACA implementation

www.galen.org

What we know for sure

• CHOICE: Americans value innovation, diversity and choice to accommodate 300 million people

• VALUE IN HEALTH SPENDING: Break down payment silos to realize the promise of personalized medicine and achieve cost saving

• FOCUS ON THE PATIENT: Doctors and patients, not government, should make health care decisions

A market-based solution“Defined contributions” for health coverage

A system that puts doctors and patients in charge of medical decisions

Slowing spending while preserving choice and quality

Restructuring financing for a 21st century health sector

• Medicare

• Medicaid

• Private Insurance

www.galen.org

Health insurance market

2013 questions

Will Exchanges be ready by Oct 1?

Will there be bi-partisan support for delay?

Will people enroll after they see the cost?

Will the number of uninsured be higher as people understand guaranteed issue?

Will private exchanges fill a market need?

www.galen.org

The future?The global move toward consumerism is real, driven by greater patient demand for more control over decisions.

People will seek more affordable options outside the ACA’s centralized control.

Grace-Marie Turner

Galen Institute

703-299-8900

gracemarie@galen.org

twitter.com/GalenInstitute

facebook.com/GalenInstitute

Subscribe to our free email alerts atwww.galen.org/subscribe