Presented at the National Academy for State Health Policy's 20th Annual State Health Policy Conference in Denver, Colorado. Author: John Shiels

1. Health Reform and Cost Control To: National Academy for State Health Policy By: John Sheils October 16, 2008

2. Limits on Family Premium Payments as a Percentage of Income – Massachusetts Model 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 2.3% 3.7% 4.5% 5.5% 6.5% 7.5% 2.8% 4.3% 5.3% 6.3% 7.5% 8.6% Annual Income in Thousands Individuals Families 3+ No Limit No Limit 0% 0%

3. Cost of Capping Premium Payments as a Percentage of Income Under a Mandate for All to Have Coverage $8,165 One Parent $10,824 Married with Children $8,794 Married Couple $4,397 Single Premiums at 50 th Percentile Health Plan 20.8 million Families Receiving Subsidies in 2008 $109.1 billion Program Costs 2008 Impact of Limiting Premiums as a Percent of Income in 2008

4. Projected Rates of Growth in Health Spending and Wages Based Upon OACT Projections Health Spending Growth Wage Growth a/ Wage growth assumed to be equal to CPI + 1.0 percent. See: National Health Expenditures Accounts; Office of the Actuary of the Centers for Medicare and Medicaid Services (CMS).

5. Federal Cost of Limiting Family Premium Payments to a Percentage of Family Income Using Massachusetts Limits $109.1 $119.0 $129.8 $141.5 $154.2 $167.9 $182.9 $199.2 $216.9 $236.1 Ten Year Cost: $1.66 Trillion

6. Cost of Limiting Family Health Insurance Premiums to a Percentage of Income Under Alternative Cost Growth Assumptions Ten Year at 8.3% Growth: $1.78 Trillion Ten Year at 7.3% Growth: $1.66 Trillion Ten Year at 6.3% Growth: $1.54 Trillion $109.1 $119.0 $129.8 $141.5 $154.2 $167.9 $182.9 $199.2 $216.9 $236.1 $107.8 $116.2 $125.2 $134.9 $145.4 $156.6 $168.6 $181.6 $195.5 $210.4 $110.5 $121.2 $134.5 $148.2 $163.4 $180.0 $198.2 $218.1 $240.0 $263.9 $100 $140 $180 $220 $260 $300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

7. Estimated Factors Driving Health Spending Growth: 2001-2005 Percent of Total Growth Volume and Intensity Excess Medical Inflation (provider prices) a/ Utilization/ Intensity a/ Demographics General Inflation Population Growth 39.0% 61.0% 49.7% 32.7% 12.8% 4.8% Average Annual Rate of Growth = 7.8% a/ Estimated split by excess medical inflation and utilization/intensity is based upon data published by OACT of CMS. Source: The Lewin Group analysis of data from the Centers for Medicare and Medicaid Services, Office of the Actuary. Volume and Intensity

8. The Health Savings Account (HSA) Model for Wisconsin $500 HSA Contribution $1,200 High Deductible Plan All Residents Enrolled in HSA Except Medicare and Medicaid 37.5% $10,000 40.1% $9,000 42.9% $8,000 46.2% $7,000 49.9% $6,000 54.3% $5,000 59.4% $4,000 65.5% $3,000 73.3% $2,000 81.7% $1,200 WHP 83.8% $1,000 Percentage Over Deductible Amount Deductible Amount Percentage of Total Health Spending in Excess of Selected Deductible Amounts for Non-Aged $403 million Estimated Heath Expenditure Savings of 2.1 percent $19.5 billion Spending for Covered Group Impact on Spending

9. Quality of Care: Over Use and Under Use of Health Services Utilization Cost Under Users of Care Over Users of Care Mode of Medical Practice

10. Health Expenditures for 11 Conditions Suitable for Patient Decision AIDS (PtDA) for Medicare Beneficiaries Potential Savings: $3.8 billion Per Year 2.1% 0.2% $11.1 Breast Cancer 11.9% 1.2% $12.2 Angina 20.3% 18.4% $53.0 Lower Back 0.7% 3.1% $1.0 Benign Prostate Hyperplasia 16.1% 18.7% $3.1 Hysterectomy 8.9% 14.7% $11.9 Prostate Cancer 41.0% 23.4% $8.2 Colon/Rectal Cancer 19.2% 0.2% $6.6 Chronic Obstructed Pulmonary Disease 39.0% 4.1% $10.7 Tube Feeding in Dementia 5.4% 38.2% $30.4 Hypertension -29.4% 4.4% $21.7 Atrial Fibrillation Estimated Percent Savings from PtDA Share of Care Subject to PtDA Total in Spending 2008 (billions) Condition

11. Impact of Clinical Guidelines Research with Financial Incentives to use Evidence-Based Annual Funding for Research: $450 million Patient Incentive: Lower Co-pays for Evidence Based Care Provider Incentive: Lower Payment where Care is not Indicated Chronic Care Management Savings: $10 - $20 billion Per Year 2.3% 58.8% 49.0% $1,834.0 2017 1.6% 41.4% 37.0% $1,316.2 2012 1.1% 28.2% 27.4% $1,004.1 2008 With Increased Research Current Law Savings from Chronic Disease Management Percent of Care With Evidence Based Research Spending on Chronic Conditions Year

13. Medical Home with Primary Care Case Management a/ Based on IPA HMO utilization savings. b/ E.T. Moriany et al., “A Cost Analysis of the Iowa Medicaid Primary Care Case Management Program”, HSR, August 2006. Decile Ranking of Beneficiaries from Least Costly to Most Costly Source: The Lewin Group estimates using the Health Benefits Simulation Model (HBSM). 4% Primary Care Case Management b / 4% Higher copay for specialty services without referral a/ None Required to declare Medical Home: no gate keeping incentives Savings Medical Home Model

14. International Comparison of Spending on Health, 1980 - 2004