Making the Transition to a Sustainable Health Care System

The Oregon Approach: so far …

December 6, 2011

Mike BonettoHealth Policy Advisor to Oregon Governor John Kitzhaber

Agenda

1. State and Federal Budget Issues

2. System Challenges

3. House Bill 3650

4. Next Steps

Oregon’s Long Term Budget

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

2009-11 LAB 2011-13 2013-15 2015-17 2017-19

Revenues (11/2010)

Expenditures

Best 4 Biennia

Worst 4 Biennia

Comparing the rate of increase in Medicaid and PEBB health care expenditures vs rate of increase in state General Fund revenue

100

150

200

250

300

350

400

2001-2003 2003-2005 2005-2007 2007-2009 2009-2011 2011-2013(proj)

2013-2015(proj)

2015-2017(proj)

2017-2019(proj)

Perc

ent C

hang

e (In

dex=

100)

Medicaid (TF) PEBB (TF) Statewide General Fund Revenue

2000 2025Number of beneficiaries 39.5M 69.7M

Beneficiaries as share of pop. 13.8%20.6%

2004 - Medicare accounted for 8% of all federal income taxes.

2015 – 19%

2025 - 32%

2075 – 90%

2024

Medicare Trust Fund assets are exhausted

Future of Medicare

U.S. National Debt & U.S. Debt Ceiling

Trill

ions

National Debt

Failure of the “Super Committee”

Two percent reduction in Medicare spending, which must come from:

Payments to hospitals Doctors Nursing homes Other providers

And not in benefits

Source: Organisation for Economic Co-Operation and Development, OECD Health Data, Feb 2011;U.S. Congressional Budget Office, The Long-Term Budget Outlook, June 2010, p. 42

Total Expenditure of Health as Share of U.S. GDP

%

Current

Projected

System Challenges: The cost-shifting cycle

Public Private

Those who do not fit into a

category(uninsured)

Change eligibility

Pressure on state/federal

budgets

Employers and/or employees drop

coverage

Increase in premiums, co-

pays, co-insurance

ER(uncompensated, expensive care)

System Challenges:Influence Factors on Health Status

Social 15%

Environmental 5%

Human Biology 30%

Lifestyle & Behavior 40% Medical Care 10%

Source: McGinnis J.M., Williams-Russo, P., Knickman, J.R. (2002). Health Affairs, 21(2), 83

System Challenges: Fragmentation of Care

Not working Better Even better

Payment Fee for service

Episode-based reimbursement

QualityGlobal budgeting

Incentives

Conduct procedures

Evidenced-based carePay for performance

Address root causesReduce obstacles to behavior change

Metrics Revenue improvement

QualityReduced hospitalization Reduced disparities

Better health Improved quality of lifeReduced costs

Governance

Informal relationships & referrals

Joint partnerships between organizations(e.g., mental health & behavioral health)

New community accountability linking ALL

System Challenges: Misaligned Incentives

House Bill 3650

• Creates a new vision for the Oregon Health Plan

• Passed with broad bipartisan support

• Emphasizes better health – recognizes if we deal with budgets alone, we won’t succeed

• Transforms the system to meet the outcomes we need

Ways to Reducethe Cost of Health Care

1.Reduce what we pay for it (provider cuts)2.Reduce the number of people covered3.Reduce the benefits covered

… or

4.Change the way care is organized and delivered

GOAL: Triple AimA new vision for a healthy Oregon

Employer

Wages

Common Pool Resources – Money for

Health Care

FederalMedicare

Tax

Insurance

Premiums

State Medicaid Funds

FederalMedicaid

Match

Out-of-pocket

Hospitals

Doctors PharmaceuticalCompanies

Medical EquipmentSuppliers

Other HealthProfessions

PROVISION OF THECOMMON POOL

Vision of House Bill 3650

Local accountability for health and resource

allocation

Standards for safe and effective care

Global budget indexed to sustainable growth

Integration and coordination of

benefits and services

Improved outcomes

Reduced costs

Healthier population

Redesigned delivery system

Coordinated Care Organizations

Community-based, strong consumer involvement in governance that bring together the various

providers of services

Responsible for full integration of physical, behavioral and oral health

Global budget

Accountability through measures of health outcomes

Key element: Global budget

Global budgets based on revenue/expenditure target and then increased at agreed-upon-rate rather than

historical trend

Management of costs – clear incentives to operate efficiently

More flexibility allowed within global budgets, so providers can meet the needs of patients and their

communities

Accountability is paramount

Opportunities for shared savings when patients remain healthy and avoid high-cost care

Key element:Accountability and metricsIncentives & measurements for: right care,

right time, right place by the right person

Activities geared towards health improvement

Hospital quality and safetyPatient experience of care

Health outcomes

Long-term

Begin to use redesigned delivery system platform for other state contracts:

Public Employees Benefit BoardOregon Educators Benefit Board

Redesigned delivery system could be core component of health insurance

exchange and an opportunity for private sector to participate

Better health & value comes from:

• Ability to reduce preventable conditions• Widespread use of primary care health homes

• Improved outcomes due to enhanced care coordination and care delivered in most

appropriate setting• Reducing errors and waste

• Innovative payment strategies• Use of best practices and centers of excellence

• Single point of accountability for achieving results

Challenges

Change is difficultTime is short

Federal approvals are necessaryTransitioning from current models

while maintaining access to care and community infrastructure

133 Oregonians – 4 work groups

Coordinated Care Organization CriteriaWho, how, where

Global Budget MethodologyCriteria for determining global budget funds, shared

savings arrangements, stop-loss, risk corridors and risk-sharing arrangements

Outcomes, Quality and Efficiency MetricsClinical, financial and operational metrics

Medicare-Medicaid Integration of Care and Services

Proposals for integrating care for those who are dually eligible for Medicare and Medicaid into CCO framework and for

creating virtual integration for long term care services

Oregon Health Policy Board Products

26

OHPB will deliver the following products to the Legislature in February 2012:

• Draft legislative language for implementation of Coordinated Care Organizations (CCOs)

• CCO criteria and process for CCO development; global budget methodology, and financial reporting requirements

• Medical liability/cost containment strategies

• Standards for specified health care workers: community health workers, peer wellness specialists, personal health navigators

TimelineDate Event

12/13/11Oregon Health Policy Board meeting: Review of draft materials

12/19/11 – 1/3/12Public Comment Period on Draft HB 3650 Deliverables

1/10/12Oregon Health Policy Board meeting: Review of draft materials

1/10-1/18/12Public Comment Period on Draft HB 3650 Deliverables

1/18-1/20/12 Interim Legislative Hearings

1/24/12Oregon Health Policy Board meeting: Approval of final HB 3650 Deliverables

2/1/12 Delivery of HB 3650 Deliverables to Legislature

3/2012If Legislature approves, apply for required permissions to CMS

3/2012 Oregon Health Authority implementation planning

7/2012Potential first CCOs certified and enrolling members

www.health.oregon.gov