The Massachusetts Picture The Last Twelve Months

1
The Massachusetts Picture- The Last Twelve
Months
Nancy Turnbull, Harvard School of Public
Health Massachusetts Medical Society State of
the State October 21, 2003
2
One Year Ago October 2002State of the State in
Massachusetts Health Care

• Better financial results for most providers
• But financial condition is not robust for many
• Growing distress among Massachusetts physicians
• Escalation of health premiums continues unabated
• Workforce shortages are 1 concern of most
  provider organizations
• Economy in distress
• State revenues in free fall, budget being slashed
  almost daily
• Deep cuts to public health
• Rising Medicaid costs threaten progress on
  expanding coverage
• Number of uninsured rising
• Continuing shift of intellectual capital to
  quality
• Cost control is just too hard, too political and
  too damn depressing

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Massachusetts Hospital Margins
Massachusetts Hospital Margins 1996 Q2
YTD 2003
Based on latest available DHCFP financial
statements (1996-2001) and MHA survey FY
2002(n55) and Q2 2003 (n52). Numbers are
weighted averages.
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Massachusetts Hospital Margins 2Q 2003

54 of Community Hospitals and 53 of Teaching
Hospitals Had Negative Total Margins 62 of
Community Hospitals and 53 of Teaching Hospitals
Had Negative Operating Margins
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Hospitals

• Financial results were worse in aggregate in last
  12 months
• Margins suppressed in part by stock market effect
  on funding of pension liabilities and required
  write-off of distressed assets
• Margins remain low by historical standards
• Wide range in performance
• Gap between haves and have-nots is getting wider
• Issues
• Expense growth gt revenue growth
• Capital needs
• Uncompensated care pool

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Deep Divisiveness over the Uncompensated Care Pool

• The foundation of the health care safety netone
  of which the people of Massachusetts should be
  proud
• a vital component of the health are safety net
  for all low-income uninsured and underinsured
  residents of Massachusetts
• VS.
• A Robin Hood-like mechanism that has turned into
  an expensive system of transferring payment from
  the majority of hospitals to the few.
• Broken beyond repairthe Humpty Dumpty of
  Massachusetts health care.
• A very, very tense issue in the hospital
  communitya difficult balancing act in a
  difficult time.
• EOHHS Secretary Ron Preston

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Physicians

• Shortages of certain specialties
• Critical shortages in certain fields
• Concerns about recruiting and retaining
  physicians
• Medical malpractice premiums rising at
  double-digit rates
• Worse in many other states but no consolation

9
Total and Operating Margins for Massachusetts
Community Health Centers
Source DHCFP and MLCHC
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Community Health Centers

• Growing number of patients without insurance
• Medicaid cuts, employer cuts, recession
• Expense growth gt Revenue growth
• No increase in Medicaid fees in several years
• Big cuts in grant funding
• Cap on uncompensated care pool funds
• Unmet capital needs

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Total and Operating Margins for Massachusetts
Nursing Homes
Source DHCFP
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Massachusetts Nursing Homes

• Relative financial stability compared to recent
  years
• Closure rate has slowed
• 10 homes closed so far in 2003, half the rate of
  2002
• Significant new revenues from user-fee generated
  Medicaid fee increases and some Medicare payment
  increases
• Huge improvement in labor situation
• Wage pass-through, scholarships, focus on
  developing career ladders, and slow economy
• 1 in 5 nursing positions still vacant
• 4,200 empty beds state-wide
• Too many for now vs. too few for the future?
• Many areas of state will reach full capacity if
  one additional nursing home closes

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Most Health Plans Continued to Be Profitable
Source Division of Insurance.
14
Health Plan MembershipBlue Cross Blue Shield
vs. Top 3 Competitors
845,000
-516,000
-199,000
-284,000
-33,000
Source Massachusetts Division of Insurance.
15
Health Plan Financial Reserves Blue Cross Blue
Shield vs. Top 3 CompetitorsNet Worth in
Millions Statutory Basis and GAAP/Adjusted
Source Massachusetts Division of Insurance. HPHC
adjusted net worth excludes surplus note.
16
Medicaid Enrollment Falling, Number of Uninsured
Rising(Numbers in thousands)
644 (CPS)
?
Source DHCFP US Census
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Percent of Non-Elderly Massachusetts Residents
Without Insurance
Source Division of Health Care Finance and Policy
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After a Period of Stability, MassHealth Spending
is Growing Rapidly
FY 1995-2004p
Excludes disproportionate share hospital
payments. Source Mass. Taxpayers Foundation.
Data for 2001 - 04 from June 26, 2003 Bulletin
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MassHealth Is A Growing Share of the States
Budget, Reflecting Both Increasing MassHealth
Spending and Flat Overall State Spending
30.0
30.0
26.5
23.8
21.
20.3
20.4
20.6
21.6
Source MTF and DMA.
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AT CURRENT TRAJECTORY, MEDICAID SPENDING COULD
CROSS 12B BY FY2010
12.0 B
Annual spend (B)

• Scenario 1
• 2 enrollee growth
• 8 PMPM growth

8.5 B

• 1999-2004 Growth
• 4.8 enrollee growth
• 5.3 PMPM growth

6.7 B

• Scenario 2
• 0 enrollee growth
• 4 PMPM growth

4.1 B
Actuals DMA estimates
Projections
Actuals DMA estimates
Projections
Note FY 2004 spending projection from Mass
Taxpayers Foundation analysis 6-23-03. Source
Massachusetts DMA, BCBSF analysis.
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Whats driving MassHealth Spending?

• Rising health care costs
• Gaps in Medicare coverage
• Eligibility expansions
• Complex and expensive members
• Restructuring other state services to capture
  federal Medicaid matching funds
• Care that is too often fragmented, uncoordinated
  and inappropriate

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Recent MassHealth Spending Growth Per Person Rose
Slower Than Employer Premiums
Annual Change in Costs per Member 2000 - 2003
Source Premium data from Kaiser Family
Foundation (national averages). 2003 increase
projected by Hewitt Associates. MassHealth
figures from DMA and Boston Consulting Group.
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23
Most MassHealth Spending Is For Elders and
People with Disabilities
LT Unemployed 5
LT Unemployed 6
Elders 12
Elders 34
Disabled 20
Disabled 36
Families 62
Families 26
Source Division of Medical Assistance
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Gaps in Medicare Coverage

• 40 of total MassHealth spending is on the dual
  eligible population (people with Medicare and
  Medicaid coverage)
• 2.2 billion annual cost to MassHealth of benefit
  gaps in Medicare
• Benefit Annual MassHealth cost for duals
• Outpatient drug coverage 500 million
• Nursing home care 1.25 billion
• Community-based LTC 250 million
• Medicare cost sharing 172 million for Medicare
  co- payments and deductibles

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Expansion populations account for a relatively
small proportion of recent MassHealth
spending.Expansions accounted for two-thirds of
spending growth from 1998-2000 but only about 20
of growth in past 3 years
Expansion Populations 37
Base Populations 63
Spending Growth 1998-2003
Spending Growth 2000-2003
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Members with DisabilitiesAccounted for 45 of
MassHealth Expenditure Growth Between FY1997 and
FY2002
Long Term Unemployed 12
Children and Families 28
Elders 15
Disabled 45 (vs. 17 of total membership growth)
Source MassHealth Claims Data
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Annual Premiums for Most Popular Individual
Health Insurance Products
Increase since last year Medex 9.9 HPHC
14-18 BCBS 21 Tufts 43.
Source DoI
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Annual Premiums for Individual Health Insurance
as Percent of 2002 Median Family Income in
Massachusetts
Source Division of Insurance and US Census
Bureau
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For once, the experts agree...
Costs are up the economy down, and there are no
big solutions on the horizon..- Drew Altman,
October 22, 2002
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The Predictions are Mixed For Consumer-Driven
Health Products

• Potentially as radical an innovation as HMOs
  were 30 years ago.
• Jon Kingsdale, Tufts Health Plan
• A niche product.
• Stuart Altman, Brandeis University
• Another nail in the coffin of health insurance
  as a form of social insurance.
• -Victor Fuchs, Stanford University

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Hot Issues for Next 12 Months

• Rising health costs, although at a somewhat
  slower rate
• Growing federal deficit and constrained state
  revenues
• Increasing number of people without insurance
• Rising number of underinsured people
• Medicaid in the cross-hairs
• Potential for radical reform of uncompensated
  care pool
• More demand for other major reforms
• Little consensus on broader solutions

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Top Reasons to Feel Good About Massachusetts
Health Care

• We could be in Texas, where 26 of the
  non-elderly population is uninsured.
• We could be in California.
• Its less than a four-hour drive to get cheaper
  prescription drugs in Canada.
• You can still get a full body scan here for under
  1000 (and wait less than a week)
• With the Red Sox and health care, theres always
  next year.