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Next Steps for Health Care Reform Jason Furman Chairman, Council of Economic Advisers The Hamilton Project at The Brookings Institution October 7, 2015 1 The Affordable Care Act Has Driven the Nation’s Uninsured Rate to the Lowest Level Ever Percent 25 20 Percent of Population Without Health Insurance Creation of Medicare & Medicaid ACA 1st Open Enrollment 15 10 '15:Q2 5 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: CEA analysis of National Health Interview Survey, Cohen et al. (2009), Klemm (2000), and CMS (2009), and Gallup-Healthways Well-Being Index. Note: Data are quarterly starting in 2014:Q1. Data for earlier years are generally either annual or bi-annual. Because NHIS data are not yet available after 2015:Q1, Gallup data are used to extrapolate through 2015:Q2. 2 Premium Growth in Employer Coverage Has Slowed Sharply Growth in Premiums for Employer-Based Family Coverage Annual nominal percent growth 12 9.5 10 8 6 2000-2010 2010-2014 2015 7.9 7.3 5.2 4.2 4 5.3 4.8 4.8 2.7 2 0 Total premium Source: Kaiser Family Foundation, Employer Health Benefits Survey. Worker's contribution Employer's contribution 3 Deductibles Have Continued On Their Previous Trend As the Total Out-of-Pocket Share Has Drifted Lower Average Deductible in Employer-Based Single Coverage 2015 dollars 1200 Continuation of 2002-2010 Trend 1000 800 Out-of-Pocket Spending Share in Employer Coverage Percent 25 20 Medical Expenditure Panel Survey, Insurance Component 2013 Continuation of 2006-2010 Trend 600 10 400 KFF/HRET Employer Health Benefits Survey 200 0 2002 15 2005 2008 2011 5 2014 Source: KFF/HRET Employer Health Benefits Survey; Medical Expenditure Panel Survey, Insurance Component. 0 1997 1999 2001 2003 2005 2007 2009 2011 2013 Source: Medical Expenditure Panel Survey, Household Component; CEA calculations. 4 Medicare Has Seen Sustained Slow Growth in Per-Enrollee Spending Growth in Medicare Spending Per Beneficiary Annual percent growth 10 8 Nominal Medicare 2000-2010 Average Growth Spending per in Nominal Medicare Beneficiary Spending Per Beneficiary 6 4 2 GDP Price Index 2015 0 -2 2000 2005 2010 2015 Source: Office of the Actuary, Center for Medicare and Medicaid Services, National Health Expenditure Projections. Note: Medicare spending growth for 2015 is a CMS projection. GDP price index for 2015 is a CBO projection. The Medicare growth rate for 2006 has been adjusted to remove the effect of the introduction of Medicare Part D. 5 Quality of Care Received by Hospital Patients Has Improved Markedly Change in Rate of Patient Harm in U.S. Hospitals Percent change in harm rate since 2010 0 0% -2% -5 -10 -9% -15 -17% -20 2010 Source: Agency for Health Care Research and Quality; CEA calculations. 2011 2012 2013 6 Hospital Readmission Rates Have Fallen Sharply Following the Introduction of Affordable Care Act Payment Incentives Medicare 30-Day, All-Condition Hospital Readmission Rate Percent, 12-month moving average 19.5 2007-2011 Average 19.0 18.5 Dec-14 18.0 17.5 2008 2009 2010 2011 2012 Source: Centers for Medicare and Medicaid Services, Office of Enterprise Data and Analytics; CEA calculations. 2013 2014 2015 7 Next Step #1: Expanding Insurance Coverage by Expanding Medicaid in More States: Medicaid Expansion States and States with More Pre-ACA Uninsured Have Seen Larger Coverage Gains Fall in Uninsured Rate from 2013 to 2014 vs. Level of Uninsured Rate in 2013, by State Percentage point decline in uninsured rate from 2013 to 2014 7 6 Medicaid Expansion States 5 4 3 2 1 Medicaid Non-Expansion States 0 0 5 10 15 Uninsured Rate in 2013 Source: Census Bureau, American Community Survey. Note: Following Census, states are categorized by their Medicaid expansion status as of January 1, 2014. 20 25 8 Next Step #2: Realizing the Full Potential of Payment Reform Alternative Payment Models Have Expanded in Medicare; Goal is 50 Percent by 2018 Share of Traditional Medicare Payments Flowing Through Alternative Payment Models: Historical and Goals Percent of payments 60 50% 50 40 30% 30 ~20% 20 10 0 0% 2010 2014 2016 2018 HHS Goals 9 Next Step #3: Implementing the Excise Tax on High-Cost Employer Plans High-Cost Excise Tax Will Reduce Health Care Spending, Thereby Boosting Wages and Reducing Deficits Estimated Effects of the High-Cost Excise Tax on Deficits and Wages & Salaries Billions of dollars 50 40 Change in Wages & Salaries (Taxable Compensation) 30 20 10 0 -10 -20 Change in Deficits -30 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Congressional Budget Office; CEA calculations. Note: Deficit effects are taken directly from the CBO score. Effects on taxable compensation are computed from the CBO score using the methodology in the text. 10 “Cadillac Tax” Will Affect a Very Small Fraction of Enrollees and an Even Smaller Fraction of Plan Costs in 2018 Share of Enrollees and Costs Affected by Excise Tax in 2018 Percent 10 9 8 7 6 5 4 4% 3 2 1% 1 0 Percent of plan enrollees Percent of plan costs Source: United States Department of the Treasury, Office of Tax Analysis. 11 Next Steps for Health Care Reform Jason Furman Chairman, Council of Economic Advisers The Hamilton Project at The Brookings Institution October 7, 2015 12