Affordability:The New ImperativeNortheastern University Open ClassroomOctober 27, 2010
Andrew DreyfusPresident & CEOBlue Cross Blue Shield of Massachusetts
2Blue Cross Blue Shield of Massachusetts
Advice to the Next Governor…
• Protect coverage advances– Reconcile state and federal reform
• Make affordability top priority– Understand Cost Drivers– Balance market and government interventions– Lead community to a shared solution: payment reform
3Blue Cross Blue Shield of Massachusetts
Protect Coverage Advances
Massachusetts: Uninsured as % of Population
10.20%
11.30%
9.2%
10.4%
5.4%
2003 2004 2005 2006 2007
Sources: Current Population Survey, 2003-2008, US Census Bureau
2.7%
2009
Division of Health Care Finance and Policy
4Blue Cross Blue Shield of Massachusetts
New Law, New Questions
2,167
5Blue Cross Blue Shield of Massachusetts
Reconciling National and Massachusetts Reforms
• Individual and Employer Mandate Penalties
• Income Qualifications for Subsidies
• Role of Exchange (Connector)
• Definition of Insurance Pools
• Actuarial Rating Rules
• Minimum Creditable Coverage Definitions
6Blue Cross Blue Shield of Massachusetts
Make Affordability Top Priority
Health Insurance Premiums Skyrocket
April 30, 2010
Boston’s Budget Includes $20m hike for health care
February 28, 2010
Runaway health costs are rocking municipal budgets
Rising health costs making small biz ill
March 25, 2009
7Blue Cross Blue Shield of Massachusetts
Massachusetts has the Highest Costs per Capita in the World…
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Massachusetts
United States
Germany
Canada
France
Australia
United Kingdom
Sources: Commonwealth Fund (2008), CMS (2007), U.S. Census (2009).Note: U.S. dollars are current-year values. Other currencies are converted based on purchasing power parity.
8Blue Cross Blue Shield of Massachusetts
…And per Capita Heath Care Spending is Projected to Nearly Double by 2020.
Note: The health expenditures are defined by residence location and as personal health expenditures by CMS, which exclude expenditures on administration, public health, and construction. Data for 2005 – 2020 are projected assuming 7.4% growth through 2010 and then 5.7% growth through 2020.Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007. Projections by the Division of Health Care Finance and Policy.
Massachusetts Per Capita Health Care Expenditures: 1991-2020
9Blue Cross Blue Shield of Massachusetts
BCBSMA Medical Trend vs. Inflation/Wages
MA Workers’ Earnings(Allowed Trend)
Overall Inflation
Renew As Is Trend
Sources:1) BCBSMA Medical Trend: HMO/POS fee-for-service Pricing trend. Projected values as of 1Q Rating.2) Overall Inflation: (http://stats.bls.gov/ro1/9140.htm).3) MA Worker’s Earnings: (http://www.earncentral.org/members/StateofWorkingXX/index.php) from the Economic Analysis and Research Network.
Note: Trend data points assume a margin of error of +/- 1-3% points
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
2004 2005 2006 2007 2008 2009 2010 2011
10Blue Cross Blue Shield of Massachusetts
Advice to the Next Governor: Affordability
• Understand cost drivers
• Balance market and government intervention
• Lead community to a shared solution: payment reform
11Blue Cross Blue Shield of Massachusetts
Understand Cost Drivers
Hospital/Facility
42.0%
Professional
32.0% Ancillary
3.8%
Approximately 90 cents of every premium dollar is used to purchase health care services on behalf of our members
Administrative Expenses
10.7%Prescription Drugs
13.2%
Operating Margin
-1.7%
12Blue Cross Blue Shield of Massachusetts
Understand Cost Drivers
Provider Mix
20%
Unit Cost
50%
Utilization
25%
Severity 5%
Total Gross Trend 10 – 11 %
BCBSMA HMO/POS fully insured12 months ending March 2009
vs. 12 months ending March 2008
13Blue Cross Blue Shield of Massachusetts
Market or Regulation – A False Choice
Government Regulation
Market Reform
14Blue Cross Blue Shield of Massachusetts
July 17, 2009 -- By Philip Shishkin
In Massachusetts,
A New Idea for How to Pay
Shared Solution: Payment Reform
BOSTON – A Massachusetts panel proposed that the state scrap traditional payments to doctors and hospitals for each office visit …and instead adopt a system, where they receive a monthly or annual fee per patient.
15Blue Cross Blue Shield of Massachusetts
Payment Reform: Pay for Quality Not Volume
Incentives for increased volume
Incentives to deliver more costly services
Little or no incentive for achieving positive results or for care coordination
Little or no incentive to deliver preventive services or other services with low financial margins.
Fee-for-Service AQC/Global Payment Emphasizes quality improvement
Quality-based incentives comprise as much as 10 percent of the overall budget
Eliminates incentives to increase volume, for all or most service types
Eliminates incentives to provide higher-cost services over lower-cost services that are equally effective, for all or most clinical needs
Emphasizes the role of primary care providers
Encourages integration and coordination for care, both within acute care episodes and for patients with chronic conditions
Reinforces the goals of medical homes.* AQC/Recommendations of the Special Commission on the Health Care Payment System
16Blue Cross Blue Shield of Massachusetts
Our AQC Partners
Lowell General Physician Hospital Organization
17Blue Cross Blue Shield of Massachusetts
AQC: Early Results
•Demonstrated Success–Quality–Global Budget
•Demonstrated Investment–Patient Education on Chronic Illness–Pharmacy Management
18Blue Cross Blue Shield of Massachusetts
State Must Advance Issue
• Payment Reform Commission Recommendations
• Medicaid
• Group Insurance Commission (GIC)
19Blue Cross Blue Shield of Massachusetts
Everyone’s Problem, Everyone’s Solution
20Blue Cross Blue Shield of Massachusetts
Questions?