"A Governor's Perspective on Health Care Reform"

11th Annual AcademyHealth National Health Policy Conference

Washington, District of Columbia

February 8, 2011

 

Introduction

Thank you for the opportunity to speak today at the end of such an interesting, and well timed, national health policy conference. I am Anthony Brown, the lieutenant governor of the state of Maryland. This really is an important conversation and I’m honored to be a part of it. I’m also glad to see at least a handful of familiar faces in the audience.

Before I get too far along, I want to acknowledge and thank AcademyHealth Board member and Maryland’s former Secretary of Health and Mental Hygiene John Colmers.

Four years ago, Martin O’Malley and I took office and we set ambitious goals to improve public education, lower violent crime, create new job opportunities, and expand and improve health care for all Marylanders. Before taking office, Governor O’Malley asked me to lead our administration’s health care portfolio; and what an exciting and challenging four years it has been. I’ve had the privilege of leading change in Maryland’s health care system. I have learned quite a bit through this experience, but of course I don’t bring the level of knowledge and expertise that you do. My role, rather, is to provide you with a governor’s perspective on health reform: What governors are focusing on; what many governors are doing in response to the enactment of federal healthcare reform.

The Patient Protection and Affordable Care Act (ACA) offers states an unprecedented opportunity to change the face of our health care system to better support the vitality and strength of our families, businesses and communities: Opportunities to expand wellness and prevention; opportunities to reduce hospital readmissions and preventable complications; opportunities to expand health IT; and opportunities to address health disparities and chronic disease management. And the ACA provides an opportunity to save states money and reduce the number of uninsured.

Still, there are challenges. Challenges that indicate, if we do nothing, we do so at our own peril. There’s the challenge presented by the exponential increase in the overall cost of healthcare and what that means for state budgets and for the quality and cost of living within our respective states.

Success will require sustained and collaborative efforts on the part of all public and private stakeholders to bend the cost curve. And if we can rise to this challenge, we can change the face of health care in America.

Outline of Discussion

My focus today will be a broad perspective on how one state – Maryland – has approached health care reform. We know that each state is unique in its approach to health care – just as each state will implement and benefit from federal reform in a unique way. The ACA recognizes that we are all different, whether it’s our Medicaid eligibility system, our state population and its diversity, the current level of uninsured residents, the number of providers in our insurance markets, or our budgets.

Now, my remarks are divided into three parts: First, I’ll put the Affordable Care Act in the context of states’ efforts to make care more accessible and affordable, and what Maryland has accomplished. Second, I’ll discuss three of the many key challenges facing states in implementation, and how Maryland is addressing these challenges.

  • How to set up the health benefit exchanges;
  • How we strengthen our public assistance programs and systems, including most immediately a new eligibility system that recognizes that people’s income can be volatile, which might cause them to move in and out of Medicaid based on their income and the economy; and
  • How we develop our health care workforce to deliver care to the 100s of thousands of Marylanders who will gain access to coverage.

 

And third, I’ll talk about how Maryland is planning to seize this historic opportunity to address the long-term challenge of bending the cost curve by improving the quality of healthcare and health, by focusing on wellness and prevention, hospital readmissions and preventable complications, health IT, and reducing health disparities.

Reform in the States

The Affordable Care Act arrived in state capitols last spring, after years if not decades of states taking individual approaches toward comprehensive health care reform, some successfully, others not as successful.

By mid 2009, three states – Maine, Massachusetts and Vermont – were implementing reforms that sought to achieve near universal coverage of state residents. Governors and legislators in 14 other states had announced comprehensive reform proposals or had established commissions charged with developing recommendations on how to expand coverage. Perhaps most notably was Massachusetts’ individual mandate and Health Insurance Connector.

For years, states have considered, and either adopted or rejected, proposals ranging from the creation of statewide purchasing pools, expansion of public programs, premium subsidies for individuals at certain income levels, and insurance regulations, to wellness and prevention programs.

Early in this decade, Maryland established a waiver program that provided primary care access and prescription drug benefits to low-income individuals. We were among more than 30 states to establish a high risk pool – the MD Health Insurance Plan, and we also created a subsidy – through tax credits – for small businesses to offer employees coverage at a reasonable cost. In 2007, we expanded Medicaid coverage to parents and strengthened the package of benefits in our waiver program. We also allowed young adults up to age 25 to stay on their parents’ insurance and took steps to close the donut hole for seniors. And finally, after a tragedy in Prince George’s County where a young boy died from a tooth infection, Maryland took a number of steps to dramatically expand access to timely dental care, including increasing reimbursement, so that we are now considered a national model.

I mention these efforts to make the point that many states, including Maryland, were innovating in health care long before the federal government enacted the ACA. And also because many of the potential savings to be realized by states from the implementation of the ACA will be the result of shifting the costs associated with these earlier reforms to the federal government. For that reason, and others that I will touch upon in my remarks, Governor O’Malley and I believe that this law gives states the tools and a historic opportunity to take the next big step towards improved health for our citizens.

ACA in Maryland

The morning after President Obama signed the ACA into law, Governor O’Malley established the Health Care Reform Coordinating Council to develop recommendations for state implementation – a Council I was honored to co-chair with John Colmers. Twenty five states and the District of Columbia have established similar entities to coordinate, implement, and oversee reform.

Over the last 9 months, we held more than 30 public meetings and received hundreds of comments from stakeholders, including physicians, hospitals, payers, unions, public and mental health advocates, brokers, patients, and lawmakers. We also partnered with a non-partisan healthcare think tank – to provide an independent analysis of reform’s impact on Maryland’s bottom line. This analysis found in part that because of the reforms already in place in Maryland, the implementation of the Affordable Care Act will save the state $850 million and cut the number of uninsured in half by 2020.

The major components of Maryland’s savings include an increase in federal assistance for children’s health insurance programs, revenue from phasing out Maryland’s high risk pool, an increase in revenue from existing premium assessments on commercial insurance products and partial reductions in direct state funding for state safety net programs. (And I emphasize partial because safety net programs will be needed for those that continue to go uninsured).

Last month, we presented Governor O’Malley with a final report covering the exchange, entry into coverage, safety net, workforce, and bending the cost curve. These 16 recommendations will help guide our state through the most critical aspects of implementation.

The first implementation challenge that I want to discuss is setting up the health benefit exchanges and making them self-sustaining by 2016. This is a challenge for government because we’re used to regulating markets, not operating them. Questions in the discussion of Maryland’s exchange include: Should we use an existing government agency? Establish a new independent government entity? A non-profit?

Other questions are not far behind. Should the exchange employ selective contracting? Should different insurance rules apply outside the exchange? How can states best utilize the resources we already have at our disposal, be it, insurance brokers and producers, third party administrators, or existing IT systems?

Following the recommendation of our Coordinating Council, the Governor and I have proposed legislation to establish a framework for the exchange as an independent governmental entity. Massachusetts, California and Utah chose the independent governmental entity route as well.

We believe this structure will provide the state with greater flexibility, more transparency, and allow better coordination among existing programs such as Medicaid and the provision of federal subsidies. This new entity will study the specific details of an exchange, and the key decisions that will have to be made to effectively implement the new law. This will be done in an open and transparent process and next winter they will come back to the Governor and the Legislature with proposed regulations and statutes to build out the exchange. This stepwise approach will give us time to review key federal actions (many of which have not yet been taken) – such as defining what are “essential benefits” –  that will have an important influence on the exchanges and other aspects of implementation.

A second challenge to implementation is how we address entry into coverage in time for the 2014 implementation of the major reform provisions: the individual mandate, the federal individual subsidy, and Medicaid expansion. During our work group sessions, stakeholders identified a number of encouraging options and strategies that could be part of an overall approach to entry into coverage: An approach that achieves the goals of simplifying the eligibility process; making eligibility integrated and seamless; embracing a culture of insurance; advancing no wrong door efforts; connecting eligibility and plan enrollment.

Many of these issues are inter-related and will depend largely on federal guidance and state decisions related to the goals and functions of an exchange.

The challenge for Maryland and all states is that many implementation activities require significant IT systems changes which have long lead times in planning, procurement and implementation. Achieving all of these goals by 2014 is a tall order. Given our current information on federal rules, potential federal systems and more detailed technical analysis, it is premature to decide which of these strategies should be implemented. But over the next several months, Maryland will use the federal grant resources that we recently received to evaluate what is technically feasible to accomplish by 2014. With this assessment we will better understand how far Maryland can progress towards achieving these goals and how immediate system changes could be a part of a longer-term strategic vision for improving entry into coverage.

A third important challenge facing states that I’ll highlight, and not necessarily as an implementation issue, is how to develop our health care workforce for the increased number of insured and the need for enhanced capacity, particularly within the primary care community. In other words, how do we solve for the workforce shortages? While more individuals will have health insurance when federal reform is fully implemented, their coverage will be meaningful only if they have access to health care providers able to meet their needs.

We could simply let the law take effect and watch the health care system adapt – or struggle to adapt. Some states may choose this approach, but Maryland is going to be proactive.  

Shortages in Maryland‘s health care workforce already exist. These shortages will be exacerbated in the future by the increased demand for services resulting from reform and the increasing need for health services by an aging population. There are also trends in the health delivery system attempting to shift from acute to primary care, and from institutional to community-based settings, which will likely affect future workforce needs.

Our workgroups asked to what extent should Maryland use a broad range of tools to increase capacity and assure an adequate workforce and they looked at certain solutions, including:

  • Fostering educational and training programs designed for the workforce of the future;
  • Such as loan assistance and repayment (of course a budget constrained strategy);
  • Changing and streamlining credentialing and licensing policies;
  • Supporting recruitment and retention strategies; and
  • Changing liability laws and regulations.

 

It would seem that there are more questions than answers at this time and with assistance from a federal grant to Maryland’s Workforce Investment Board we have started to create a comprehensive workforce planning strategy.

Bending the Cost Curve

Lastly, let’s talk about bending the cost curve.

The Affordable Care Act presents a tremendous opportunity for states. The opportunity may not be easily seen by those pressed so close to all the individual points and details, which as I just discussed above may readily be seen as challenges. But when I take a step back and look at the whole painting, it is inspiring.

The favorable savings forecast that Maryland and many other states anticipate must not be permitted to weaken our commitment to reduce the overall cost of health care. We know that net savings to states begin to decline toward the end of the decade as the ACA shifts a greater share of the financial responsibility for Medicaid expansion to the states. As such, our public assistance programs, as well as the entire health care system, will soon be unsustainable, regardless of these savings, unless we succeed in improving quality while reining in the runaway growth in costs.

So, in addition to realizing the projected savings, states must reaffirm and strengthen their commitment to begin serious and sustained efforts to bend the cost curve and align incentives toward quality, safety, and efficiency. We must expand and leverage initiatives such as increasing access to primary care and improving chronic disease management through patient-centered medical homes; building a health information technology infrastructure; and reducing hospital acquired infections, preventable complications, and readmissions. And we must address the moral and financial responsibility to reduce health disparities associated with poverty, race and ethnicity.

Everyone – consumers, employers, providers, businesses, insurers, and taxpayers – has a stake in promoting quality and access while improving efficiencies and incentives to reduce costs.

In Maryland, we established a Patient Centered Medical Home program to strengthen primary care. Maryland is not alone in this approach. Other states, including Minnesota, Pennsylvania, and Vermont are using medical homes to improve the primary care experience and patient outcomes. We’ve also decided to do more than watch health information technology from the sidelines. One of our 15 statewide strategic goals – and they range from creating more jobs to reducing violent crime – is to establish the best in the nation statewide health information exchange and electronic health records adoption by the end of 2012. In partnership with hospitals, doctors and other providers, we are moving quickly to increase the use of HIT. In 2009 we passed legislation that leveraged the incentives and penalties under the HI-TECH Act, by requiring state payers to also offer incentives for early adoption of EHRs in their practices. We have also established our health information exchange by creating a non-profit dedicated to connecting hospitals and providers around the state.

We’re making progress, yet we still have challenges in health IT – small to medium hospitals continue to struggle with the capital investment necessary to establish robust IT systems and small practices struggle with the infrastructure and operational costs of new IT systems.

We’re also improving quality by reducing preventable complications. Maryland is using the only all-payer hospital rate system in the country to collect reliable data on every hospital admission. In fiscal year 2010, there were nearly 50,000 potentially preventable complications that cost our system approximately $522 million. And we are now analyzing and using this data to drive financial incentives and improvements in quality. The hospitals were ranked by rates of complications, and through our rate setting commission we redistributed $4 million from the hospitals with more preventable complications to those that had fewer. Maryland’s approach focuses on incentives for hospitals to reduce the rate of 49 potentially preventable complications, not on punishment for a few specific events. And as we anticipated, since starting this process, rates of preventable complications have declined substantially across the board – approximately 12% for an annual cost savings of $62.5 million – benefiting our payers, our hospitals, and of course, our patients.

We are also using the state’s all-payer system to rethink how health care is reimbursed. For example, using the state's unique all-payer rate setting system, we now have 10 community hospitals under global budgets – providing an incentive for hospitals to reduce unnecessary admissions, readmissions, and emergency department visits and to provide care efficiently. The hospitals with global budgets are enthusiastically looking for ways to improve care while lowering cost. For example, one is expanding its outpatient program for diabetes by hiring another endocrinologist. Another is planning to create multidisciplinary teams to plan for discharge and post-discharge care. As hospitals innovate, we will capture their best practices and share throughout our system. All told, $1.4 billion of the system’s $14 billion of revenue are under these global payment arrangements.

In addition, the agency in charge of this system is working collaboratively with other hospitals to adopt an episode based payment structure that includes both admissions and all readmissions. These initiatives, coupled with our pay-for-performance quality initiatives places Maryland at the cutting edge of bending the cost curve and improving quality in the United States.

We will be tracking the impact of these efforts publicly by developing a dashboard for health care quality to include as part of our state accountability program – State Stat – with new data coming each quarter. I invite each of you to follow these efforts online.

Finally, let me touch on one important effort that will help bend the cost curve and is a moral imperative – health disparities: a national problem that strikes at the heart of America’s promise.

In Maryland in 2004, estimates of the hospital cost – excluding the physician component, emergency room and outpatient care costs – of excess African American hospital admissions for all diagnoses cost Medicaid $59 million and all other payers $481 million.

Reasons for Healthcare disparities abound. As we advance the reform agenda and expand access to coverage, we should take extra steps to make sure we are not leaving people behind. We need to ensure that geographic barriers are eliminated by providing incentives for primary care providers to deliver care in our poorer communities and our communities of color. We can not forget that unacceptable disparities in the delivery of health care are the very definition of poor quality care. We should use health reform to improve access to care, including proximity to care, for underserved populations.

And as we strengthen our data systems, we will be able to identify those health care providers with inexplicable and unacceptable gaps in quality between groups, and use financial incentives and penalties fairly and appropriately to drive progress.

Conclusion

Because in the end, health care reform is not just about reform – which has been going on for many years. It is also not just about care, which is a means to an end. It is about health. Health is why we’re all here. If we cannot change the paradigm of the health payment system, toward a value-driven health care system, we will fail to bend the cost curve and all of our best efforts to implement the Affordable Care Act will be jeopardized.

Health reform will not be sustainable if we continue to pay for volume rather than value; if we do not address the crushing burden of chronic disease; if we do not reduce preventable complications and re-admissions and disparities; if we do not improve quality while reining in the runaway growth in costs.

Maryland intends to seize the moment and use the tools provided by the Affordable Care Act to build a better future for our state.

Thank you very much.

 


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