Building a Sustainable Health Care System

Leslie A. Margolin

President, Anthem Blue Cross

UCI Health Care Forecast Conference

February 20, 2009

2

What Defines Health Care Reform?

Insuring the Uninsured?

Reducing Medical Inflation and Cost of Care?

Improving Access to Care?

Improving Quality, Performance, Service?

Eliminating Waste? Improving Efficiency?

Better Communicating via Technology?

Reforming the Insurance Market?

Expanding (and Funding) Public Sector Programs?

Eliminating Health Disparities – ethnic, racial, gender- based, geographic?

Investing in Innovation?

3

Quality & Safety:

• Medical errors account for more than 32,000 deaths annually.

• Antiquated, paper-based systems lead to inefficient and unnecessary care and expose patients to undue risk.

• Need to promote evidence-based medicine, transparency initiatives and innovative health IT.

When it comes to health care reform, we should get it right, not just get it done.

Pharmaceutical Safety

Complex Clinical Cost-of- Care

Comparative Effectiveness

Clinical Outcomes Research

INTEGRATED RESEARCH NETWORK

COLLABORATIVE OUTCOMES ARCHITECTURE

Cost ofHealth Care

Health Care Financing

Insurance MarketReform

Quality and Safetyof Health Care

Sustainable Health Care SystemAccessible to All

Cost:

• 30% of health care spending goes toward redundant or inappropriate care.

• Medical errors and drug safety events cost as much as $9B annually.

• Need to encourage the right treatment at the right time in the right setting.

Financing

• 46 million individuals, including over 6 million children, currently lack health insurance coverage.

• Need to expand public programs, expand the employer-based system, and establish tax deductibility for individual coverage.

Insurance Market Reform:

• Many Americans cannot obtain affordable coverage due to pre-existing conditions or cannot find coverage that meets their needs.

• Need to promote innovative plans and products to meet the needs of consumers at every stage of life.

Building a Sustainable Health Care System

4

Commitment to Physicians and HospitalsTotal Payments – WellPoint

Significant increases in provider payments driving up premiums.

Source: WellPoint actuarial analysis of provider payments, December 2008. Due to data restrictions, population definitions vary by state, and in some states an element of reasonable approximation was used. * Note: NY, CO, NV data not currently available.

WellPoint Affiliated Health Plan Payments to Hospitals & Physicians

(includes all WellPoint markets except NY, CO, and NV)

$32.0

$34.0

$36.0

$38.0

$40.0

$42.0

$44.0

2005 2006 2007

To

tal P

aid

in $

Bill

ion 18% increase over 2 years

*

5

Commitment to Physicians and HospitalsTotal Payments – Anthem Blue Cross

Anthem Blue Cross Payment to Hospitals & Physicians

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

2002 2003 2004 2005 2006 2007

To

tal

Pai

d i

n $

Bil

lio

n

70% Increase Over 5 Years

Anthem Blue Cross Payment to CA Hospitals & Physicians

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Health Care Reform:Treating the Disease, Not the Symptoms

Sources: WellPoint analysis of U.S. Census Bureau Current Population Survey statistics. (http://www.census.gov/hhes/www/cpstc/cps_table_creator.html). September 2008.Employer Benefits: 2008 Annual Survey. Kaiser Family Foundation. September 2008. (http://ehbs.kff.org/pdf/7790.pdf)

65.0%

66.0%

67.0%

68.0%

69.0%

70.0%

71.0%

2002 2003 2004 2005 2006 2007

$7,000.0

$8,000.0

$9,000.0

$10,000.0

$11,000.0

$12,000.0

$13,000.0

Percent of Americans in private coverage

Average family premium

As prices rise, private coverage decreases.

7

Health Care Reform:Treating the disease, not the symptoms

7

8

California Employment Status

16,850,000

16,900,000

16,950,000

17,000,000

17,050,000

17,100,000

17,150,000

17,200,000

17,250,000

17,300,000

2007 20082006

CA Employed WorkforceLoss of 246K jobs, or 1.4% of workforce

4.9 5.0 5.65.3 6.2 7.47.05.9 7.7Unemployment

Rate:

• Unemployment 9.3% statewide; 9.9% in L.A. County, highest since 1994.

• Nationally eliminated 3+ million jobs in 2008; January 2009 eliminated 600K more.

• Particular weakness in construction, finance, real estate, and manufacturing.

• LA and SF were the 2nd and 4th worst performing large cities in the US (June 08 YOY employment).

• Lack of credit beginning to squeeze many small businesses; CA now has the lowest credit rating in the nation.

• Consumer spending likely to slow further with continuing downturn in confidence.

The Conference Board announced that October 2008 consumer confidence dropped to 38, the lowest level on record (back to 1967), with the sharpest drop in 35 years.

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Quality & Safety:

• Medical errors account for more than 32,000 deaths annually.

• Antiquated, paper-based systems lead to inefficient and unnecessary care and expose patients to undue risk.

• Need to promote evidence-based medicine, transparency initiatives and innovative health IT.

Cost:

• 30% of health care spending goes toward redundant or inappropriate care.

• Medical errors and drug safety events cost as much as $9B annually.

• Need to encourage the right treatment at the right time in the right setting.

Financing

• 46 million individuals, including over 6 million children, currently lack health insurance coverage.

• Need to expand public programs, expand the employer-based system, and establish tax deductibility for individual coverage.

Insurance Market Reform:

• Many Americans cannot obtain affordable coverage due to pre-existing conditions or cannot find coverage that meets their needs.

• Need to promote innovative plans and products to meet the needs of consumers at every stage of life.

The Cornerstones

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Building a Sustainable Health Care System: Covering the Uninsured and Improving Coverage for All Americans

• Improve and expand programs for the most needy

• Provide a bridge to self-sufficiency through premium assistance

• Expand the employer-based system

• Equalize tax treatment for individuals purchasing coverage on their own

• Increase funding for public-private partnerships

Must enact financing strategies to place America on a sustainable path toward covering all of the uninsured:

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Plan to Address 45.7 M Uninsured

Building a Sustainable Health Care System

Element Eligible

Extend outreach to those already eligible for programs

12.0M

Kids expansion to 300% FPL 6.5 M

Parents expansion to 200% FPL 9.3 M

Childless adults to 100% FPL 5.1 M

Premium assistance 4.6 M

Total 37.5 M

Uninsured by Federal Poverty Level

For the remaining 18% of uninsured who make over 300% FPL ($67k for family of 4), focus on expanding the employer-based system and designing attractive products

Source: WellPoint analysis of U.S. Census Bureau Current Population Survey statistics. (http://www.census.gov/hhes/www/cpstc/cps_table_creator.html). September 2008.

300%+ FPL: 18%

< 100% FPL: 37%

100% - 300% FPL: 45%

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Participation in Public Programs

Still need to correct this CIGNA.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Blue Cross HealthNet Kaiser Blue Shield PacifiCare Aetna CIGNA

Ben

efic

iari

es

Healthy Families

Medi-Cal

Note: Does not include subcontracting membership. Sources: Medi-Cal numbers as of 7/04 as reported by California HealthCare Foundation. MRMIB numbers as of 8/08.

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Plan Participation in High-Risk Graduate Program

Tony/Ben: Can you give Leslie a sentence or two on the graduate program?

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Blue Cross Kaiser Blue Shield HealthNet PacifiCare Aetna CIGNA

Mil

lio

ns

of

Do

llar

s

From 9/1/03 to 6/30/05. Source: MRMIP Fact Book, Managed Risk Medical Insurance Board, 2006

$16.7 M

$2.5 M

$.2 M$0 $0 $0 $0

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Guaranteeing All Americans Access to Affordable Health Coverage

Approaches to Ensuring Everyone Can Access Affordable Coverage in the Individual Health Insurance Market

No Individual Mandate Effective, Enforceable (and Enforced) Individual Mandate

Enhance state high risk pools; and/or

Require all health insurers to offer a “guaranteed issue” product in the individual market with a capped premium that is supported via a broad-based subsidy; or

Traditional “guaranteed issue” in the individual market; and

Subsidy mechanism for high-risk individuals to limit cost increases for existing members

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Conclusion