When the embargo lifts. Okay. In this chart, we put into context the relationship between Health Spending and Economic Growth. And namely, the effective economics on projected Health Spending is an overarching theme of our paper. And as you can see, looking at nhe growth, both historical and projected, which is the blue dash line and nominal gdp growth which is the red dotted line. Youll see that theyve been growing at similar rates since 2010. And they are projected to do so in 2013, as well. Growth is projected to accelerate in 2014 as ive alluded to due to the coverage expansions under the aca. However, in 2015 and after, the historical relationship between Health Spending and Economic Growth which is that Health Spending tends to respond to changes in Economic Growth with a lag becomes more evident. While projected Economic Growth reaches a peak in 2018. We project that growth will reach a peak in 2020. Also, contributing to the acceleration in growth during that period for Health Spending is faster projected medicare spending growth. Which reflects both the effect of faster enrollment by the baby boom generation and faster for beneficiary spending growth as the population ages. So taken over the entire projection period, nhe growth is projected to increase 1. 1 Percentage Points faster than gdp on average. And so, to translate those relative growth rates into the effect on the health share of gdp, which is the purple line in our chart, because nhe and gdp have been growing at similar rates since 2010 and are expected to do so again for 2013, the health share has remained relatively stable since 2010. And again, is accordingly projected to do so in 2013. In 2014 and after, the Health Shares expected to rise as projected nhe growth further outpaces Economic Growth due to the effect of the coverage expansions faster projected Economic Growth and the aging of the population. And so, over the projection period, the health share of gdp is projected to rise from 17. 2 in 2012 to 19. 3 by 2023. And, again, to help to put the projected acceleration in nhe growth that ive been discussing into context, its important to remember another of our major findings, which is that while growth is projected to acceleration during the projection period, those growth rates are slower than experienced over the last two decades. Projected Health Spending growth is slower on average over the entire projection period by about 1. 5 Percentage Points. And thats comparing the growth rate of 7. 2 to the 5. 7 per year on average growth rate for the projection period. In addition, its also important to note that the projected growth during the key time periods of acceleration are also slower than experienced over the last two decades. And so that would be for 2014 and 2015, the first two years of the Affordable Care act coverage expansions as well as over the 2016 through 2023 period. Which is due to the effect of faster projected Economic Growth and the effect of population aging. Over the next three slides, ill provide a highlevel overview of our findings by servicing good, payer and sponsor. And then shawn will take you through a more detailed look at these points over the second half of the presentation. By servicing good, the distribution of Health Spending is not expected to change much over the projection period. With a projected shares of Health Spending devoted to the three largest sectors, hospitals, physician and Clinical Services and prescription drugs remaining the same by 2023. How we arrive there in terms of projected spending growth during each time period for the Major Services, however, does differ. Following continued projected growth in 2013, spending for each of the major sectors is projected to grow faster in 2014, the first year of the coverage expansions. Continued robust spending growth is expected for the Major Services over the remainder of the projection period due largely to the continued effect of the expansions, faster Economic Growth, the aging of the population and for drugs higher expected use of specialty drugs. The exception is the projected slowdown in growth for physician and Clinical Services in 2015. And this is attributable to the expiration of increased medicaid payments for physicians and lower payments to advantage plans. And now for our trends by payer. The effect of the coverage expansions starting in 2014 and the aging of the population are the two key trends evident in the projected spending trends by payer. The availability of expanded coverage through mid cade in states that choose to participate is expected to contribute to an crease in the shared Health Spending by two Percentage Points over the projection period to about 18 . Despite the presence of new enrollment in private Health Insurance plans through the coverage expansions and faster Economic Growth driving faster private Health Insurance spending growth in 2014 and after, the aging of the baby boom generation out of private Health Insurance and into medicare is expected to result in a decline in the private Health Insurance share of Health Spending from 33 to 32 . Correspondingly, the medicare share of spending is projected to increase from 20 to 22 over the projection period. Additionally, the share of the population comprised of medicare enrollees is expected to rise, as well, from 15. 8 to 19. 8 over the projection period. And expanding coverage and the trend into medicare out of pocket spending is projected to decline in share of total Health Spending from just under 12 in 2012 to just under 10 by 2023. And finally, ill take you through the trends by sponsor or ultimate source of financing for health care. And, again here, the effect of the coverage expansions and the aging of the population play a major role. The coverage expansions through medicaid, the 90 to 100 federal matching rates for states that and premium for marketplace plans are expected to increase the share of Health Spending sponsored by the federal government over the projection period. Correspondingly, these factors are expected to contribute to the decline in the household share of spending over the projection period. Also contributing to the increase in the federal share and the decline in the household share is the shift of the baby boom generation into medicare. It also plays a key role in a projected decline in the share of Health Spending, financed by businesses. And finally, by 2023, the share of health care financed by federal, state and local governments is expected to rise to 48 of Health Spending from 44 in 2012. And with that, ill turn the presentation over to shawn who will take you through the key findings by time period. Thank you very much. Okay. Thanks, andrea. I first want to thank everybody here in the room and anybody watching on tv or online for your interest in our work. We really appreciate it. Were happy to answer any questions you guys have after the presentation. Id also like to reiterate what andrea said and thank Health Affairs for their help in getting this paper published. And weve really had a great relationship over the years and certainly has continued this year. And i just really wanted to quickly point out one thing, which i think is a new innovation that at least i havent seen before. If you look at line charts and economic writings, you see recession bars all the time. The first time, at least what ive seen, youve seen a recovery bar. And ill discuss the significance of this in my first slide. But, again, thank you very much for everything and your staff. I think it really worked out great this year. Okay, so as andrea mentioned, im going to break this period down to three distinct time periods. And the first time period is 2013. And the first thing i want to mention is 2013 is still a projection. Later in a few months, our office is going to come out with historical estimates of Health Spending. But until that happens, 2013 is a projection. And as andrea mentioned, we are projecting 3. 6 Health Spending growth in 2013, which would mark the fifth Consecutive Year of growth under 4 . Gdp growth is estimated by the bureau of Economic Analysis for 2013 at 3. 4 . And so since these growth rates are similar, if this would mean that the share of gdp or the health share of the economy is projected to remain constant in 2013 at 17. 2 . Now, heres where i want to bring back in exhibit 2 and the value of it. In that andrea mentioned the relationship, the important relationship between Health Spending and Economic Growth. And this exhibit shows the recovery, the four years of the recovery for each of the last two recessions. And in 2013, the fourth year after the recession ended as i mentioned before, gdp was 3. 4 . And if you look at exhibit 2. It was much higher at around 6 for each of the last two recessions. Again, it was an important finding that its not its not primarily the recession the recovery from the recession which has been slower for this recession than past recessions, which is one factor leading to slower Health Care Spending growth. Okay. Now im going to break out 2013 by payer. And for medicare, were expecting growth to slow to 3. 3 . And this is as a result of Slower Growth and utilization across all types of services, but also lower projected growth from sequestration, which many of you know is caught for lower payments about 2 beginning in april, 2013 as a result that was included in the budget control act of 2011. For medicaid, were projecting growth at 6. 7 . And this slide gives a fouryear growth rate. And so it kind of masks the acceleration in 2013 because 2012 growth was just 3. 3 . And so it was a faster acceleration. Part of this was due from a rebound from a 2012 low. But the other part of it was aca mandated temporary payment increase to primary care physicians that was one factor in the higher spending growth projected for medicaid. For private Health Insurance, were expecting lower projected growth of just 3. 3 . In addition to having more people and High Deductible Health plans at the same time, in an environment of low Economic Growth. And as far as by by sector for hospitals, growth is projected to slow to 4. 1 . This subpoena mainly due to utilization, especially medicare utilization. Obviously impacted by sequestration. For physician, growth is projected to slow to 3. 3 . But the reason for the slowdown is the primary reason for the slowdown is different in that we are projecting they will be the slowest thats been in 2013 since 2002. Slow price growth was the main reason for the slowdown in physician and Clinical Services spending. For prescription drugs, were expecting acceleration. And this is coming off a low of 0. 4 in 2012. Mainly due to a large number of topselling brand name drugs that lost patent protection in 2012 or the last part of 2011 so the impact was felt mostly in 2012. That really kept spending growth down in 2012. And so in 2013, there was some additional brand name drugs that lost patent protection, but there wasnt as many, a lower dollar value of drugs that lost patent protection. That didnt push down growth as much. So there was, i guess, thatst the primary reason for the acceleration. The next period im going to discuss is 2014 and 2015 which are the two years that youre going to see the major impact of the coverage expansions. For medicaid and private Health Insurance, higher growth is of 12. 8 for medicaid and 6. 8 for private Health Insurance due to higher use as a result of the coverage expansions where were expecting a reduction in the uninsured of 9 million in 2014. In 2015, were expecting additional 8 million reduction in the uninsured which is going to keep private Health Insurance growth strong at 6. 9 . For medicaid, were projecting a slowdown in growth of 6. 7 where the increase in coverage, the further increase in the coverage expansions, higher enrollment is going to be projected to be slightly offset by the expiration of the temporary increase in payments to medicare. Excuse me, the medicaid primary care physicians. Okay. So for out of pocket, we are expecting negative growth in 2014 and then low growth in 2015 as a result of the coverage expansions. People moving from uninsured where they pay 100 out of pocket to having Insurance Coverage. And some of that Insurance Coverage is going to have cost sharing subsidies which further reduces the out of pocket burden. For medicare, then in 2014, were expecting continued slow growth in use and in payments, which is keeping growth slow. But then in 2015, were actually projecting a further deceleration, 2. 7 . And the deceleration here is partially attributable to lower payments to Medicare Advantage plans. Now, by sector in this period, hospital is projected to gradually accelerate to 4. 5 in 2014 and 5. 1 in 2015. And this is as a result of increases in use due to the coverage expansions. For physician and Clinical Services, the acceleration is projected to be stronger the 5. 9 , as people that gain coverage are expected to use more physician and Clinical Services than hospital care as they get used to their new coverage. For 2015, though. Growth is projected to decelerate as andrea mentioned as a result of not just the temporary medicaid payment increases, but also the lower payments of the Medicare Advantage plans in that year. For drugs, were expecting higher use because of the coverage expansions. Not just the but also the folks that had less coverage and moved in 2014 to more generous coverage with cost sharing for drugs. Thats certainly, were projecting to contribute to higher use. Also not just impacting 2014, but 2015 growth is the expensive new hepatitis c treatments that has certainly made news lately that have certainly impacted 2014 and 2015 growth in drug spending. So the final time period im going to discuss is the final eight years of our projection period, 2016 to 2023. For medicare, were expecting average growth of 7. 3 . So the first factor here is continued strong enrollment growth of about 3 . But also; were expecting faster growth of 4. 3 . Which would be higher than what has been experienced in the recent past this is as a result of modest increases in use and modest increase in payment rates. Not getting as high as its been but coming off the low of the past few years. For medicaid, were expecting 6. 8 average annual growth during this period. And here overall enrollment is projected to stabilize. The subpopulation also the most expensive to cover in that population. And finally, in this slide, private Health Insurance growth is projected to be lower than medicaid and medicare at 5. 4 but also this is this growth rate would be higher than it has been in the recent past. And this is as a result of faster projected Economic Growth leading to higher use of services than weve seen in the recent past. By sector, andrea mentioned or showed the distribution slide and we saw that the distribution for the Major Services. And so therefore, we can expect that the growth rates will be similar. And thats what weve found. Thats what you can see in this slide. Hospital and physician growth is expected to be driven, again, by modest increases in use of these services as a result of not just improved economic nations but also population aging. Prescription drug spending is expected to be to be 5. 7 average during this period, a little bit lower than the other sectors. Here, were still expecting that majority of use of drugs will still be generics. However, the growth is projected to be driven by the expense of specialty drugs approved during this period. Health spending growth is expected to be slowed in 2014. And afterwards, 2014, 2015, growth is projected the be influenced by the coverage expansions. And then afterwards, growth is projected to be influenced by a faster Economic Growth as well as population aging. The growth rate that were projecting is would be higher than the recent past, but much lower than the previous two decades. And so, you know, were not projecting that growth will get back to the rapid pace of the 90s and early 2000s. We are projecting 1 Percentage Points of a differential between gdp growth, which would mean its expected to rise between 17. 2 in 2012 to 19. 3 by 2023. Okay. So with that, i guess, well take questions. We have ample time for questions. Id ask that you take the microphone, identify yourself and i see a question at the end. Good morning. I have a question about the line graph that was in the slide presentation. This one here showing, you know, nhe and gdp growth. In last years report, there was an additional line on here showing the estimated, you know, growth expenditures absent the aca. You dont have that here. And i didnt see anything in the report about that either. Which youd also concluded in recent reports. Did you have those numbers . Did you not do that analysis this time . Right. Were no longer estimating or quantifying the impacts of the Affordable Care act on national Health Spending. And the reason for that is because now that the Affordable Care act has been in place for well over four years, it is becoming increasingly difficult to accurate ly estimate, what te world would look like in the absence of the Affordable Care angt. So certainly, as we mentioned the coverage expansions and other aca provisions that are a part of our projections we know longer estimate a quantitative impact. Craig palmer, ada news, going to the charts take exhibit 1, for example. Do we read those charts in the same context as the everything is actual up to 2013 and then 2013 and so forth is projected . Yes, thats correct. Thanks. Hi, im sarah cliff with vox. I was hoping you could talk a little bit about whats different about the period Going Forward from the 1990s, if not the recession anymore why youre expecting kind of a little bit faster growth but Slower Growth than we saw in the 1990s and early 2000s. Okay. Well, one thing we highlight in the report, and something that we have discussed in recent historical papers from our office and certainly in our prior projections the effect of the slow recovery. That is something that certainly affects Health Spending as weve projects for 2013. And certainly having Health Reform legislation is something that would differentiate this period from the last as we discussed slightly faster growth in 2014 due to the leading edge of the coverage expansions. And also the demographic shift thats coming with the baby boom generation. And, again, as weve discussed in our reports and the analyses out of our office for many years the long runs relationship between Health Spending and Economic Growth. I didnt hear you talk about the changes in the Delivery System that we hear a lot about. Can i take from that or can we take from that you dont see that as impacting the trajectory of Health Spending growth over the next few years in any real, meaningful way . There are a number of demonstrations underway at the Innovation Center at cms. And to the extent there is any impact thats captured in our actuarial projections, they are here. But as for right now, its still too soon to say what the ultimate impact of these delivery reforms will be. Hi. Ricardo with a. P. And ive got two questions for you. Mmhmm . And you mentioned, were talking about a return to faster rate of growth and you mentioned growing economy, aging of the population and the coverage expansion. How would you rank those in order of importance . Well, im not sure if you would necessarily rate them in order of importance. I think its sort of a matter of chronological order. As we showed in our graph, theres certainly an effect of the coverage expansions in 2014. And the effect of faster projected Economic Growth goes through the remainder of the projection. And then also the baby boomers have already started to come into medicare in late 2011. And then that effect goes through the projection period and contributes to the peak as i mentioned in 2020. Okay. So youre kind of suggesting theyre all about equally as important and come into play at different times. They come into play at different times. Okay. And my followup question is, in the press release, you break down the time line mmhmm. And in the report, too, you break down the time line into chunks. You have 2013, 2014, 2015 and then 2016 through 2023. And it seems like the return to a faster pace of growth comes in that 2016 to 2023 period. So in terms of, you know, accurately reflecting whats in the report, i also see in the abstract that you say 2015 to 2023. So its just a question, what should we use, 2016 to 2023 as the return to the fast clip of growth . Or 2015 to 2023. 2015 can be included, as well. As well. Right, because in 2015, not only do you have the effect of somewhat faster projected Economic Growth but then you also have the effect of the continuation of the coverage expansions. Thank you. I might suggest, too, in addition to that, when you talk about your three perspectives and the three contributors to drivers of growth, the one that i might probably tap down a little bit might be on the aging side of those three. And really, that income and that change in the Economic Growth is one of the core drivers, particularly of private spending and so, that tends to be the one that we look towards often when we produce our projections. And that doesnt certainly trivialize the reduction in the uninsured that were anticipating or the projection period from roughly 45 million to about 23 million. I mean, these are all important, important drivers, but i would, i think i might suggest that the aging piece would probably be, might be third on the list. The coverage expansions, 2013 and 2014. After that, the expansion has has had a minor role. And Economic Growth would be the major role. Robert, new york times. The report and the slides. Estimate that million americans gain Health Insurance in 2014. Is that perception right . Okay. So we cant speak to lower or not. But we do have a projection of the uninsured. We have a projection of employer sponsored insurance enrollment, we have individual Health Insurance enrollment, individual Health Insurance enrollment. And we have medicare and medicaid. And, you know, if you look at that table, thats pretty similar to what we had in past years. So its not that different. And, you know, when youre talking about comparisons and most people cbo, thats not something that weve done an analysis of. So we cant give you any sort of specific answers. Just medicaid. Those arent uninsured, necessarily. But the growth is. Right. So for medicaid, whats interesting about this. Its a difficult problem. For example, there could be some people that had individual, individual individually purchased insurance in 2013 and 2014, theyre ineligible for medicaid. And so its theres a lot of moving around that the categories. So its difficult to determine, you know, its difficult to give a complete answer. Its theres a lot of moving parts to the enrollment questions. Right. We include both. It would be a mix of previously uninsured or shifts in coverage but we cant differentiate between the two. Jim landers of the dallas morning news. You say in the beginning that one of the things thats put a brake on spending this past year has been the rise of highdeductible health plans and more out of pocket spending. Those seem to decline in the future projections as private Health Insurance share of and the household share of spending both declined. Is that trend going to continue . Or are you sort of flat lining it . Whats going on with Consumer Spending in the future . Okay. Well, before we get started on that, its important to recognize that what we show is that an aggregate level, so all out of pocket spending, all Health Insurance premiums, et cetera. So sometimes the aggregate number for the entire country may not necessarily be the same as an individual persons experience. But after that, part of the reason why the out of pocket share declines as we mentioned, the effect of the coverage expansion having more people with insurance and potentially more generation coverage as well as the shift of the baby boom generation into medicare. So those are some of the primary reasons why thats the case in the projection period. And in terms of the increases in cost sharing, thats something that has been seen in the recent history. Thats a continuing factor. But in terms of whether that will continue i mean, certainly in terms of the economics of it through the recent through the recent recovery, growth has remained relatively slow. So as far as whether thats a lasting shift or a function of economics. The cost sharing issue is a little bit can be a little bit confusing in that, you know, you might expect that as cost sharing is passed on to the patient to the enrollee, that out of pocket expenditures would increase at a higher rate. But often times, those higher cost sharing requirements are a disincentive for someone to seek out care and can, in fact, and in some cases will offset what those you know, basically that ratio that wouldve been passed on to the enrollee. Certainly in somewhat tighter Economic Times these decisions factor into the care that people seek. Yes . Youre projecting a 6. 8 increase in private insurance premiums for 2014, which seems like a fairly high jump over 2013. Just go through, i know some of its economics, more people getting coverage in the marketplace. Elaborate a little bit more on why thats going up so high. Okay. So theres that number is a its a premium number. So increases in private enrollment factor in. So its not that everybodys individual premiums are projected to go up on 6. 8 . Because we have we are projecting 1. 5 million additional people on private Health Insurance. 1. 5 million increase in private Health Care Enrollment for that year. So as far as your question goes, its, you know, the the reasons for the increases in growth is some people were projecting are moving from less generous in addition to the higher enrollment, some people are moving from less generous to more generous plans. And therefore, the use would increase in those plans. And, you know, i believe those are the two main reasons for the higher growth projection for 2014. And thats because of the health law, theres more benefits that must be covered. Thats more generous plans youre talking about . Right. There are, you know, many people have moved from less generous plans to more generous plans causing higher use of services in addition to the higher enrollment. Theres the two factors there. I wondered if there were any findings that particularly surprised you, numbers that were lower, higher than you might have expected when you first started. Well, i think in terms of the projections results, over the last several papers, weve talked about a number of these themes. You know, i think its very interesting as i mentioned in prior questions being able to take a look chronologically at the effects of the Affordable Care act, a major piece of Health Reform legislation as well as the demographic shifts, as well as we often discuss, you know, a fundamental part of our model and our results is the effect of economics. So i think its very interesting that you have each of those factors figuring prominently within the projections. And also, the reduction in the uninsured over the projection period, as well. Im going to throw in a question of membership own. You mentioned that spending will increase but not to the same rate as in the last two decades. You compare 5. 7 as the full projection period to 7. 2 in 90 to 08. But you take out 09 to 2012 which had lower growth. So im wondering why you use 90 to 08 as the comparison period instead of 90 through 2012 as the comparison period. Well, i think the main reason is we didnt want the Great Recession and the slow recovery from the recession to influence the comparison. Because in the projection per d period, theres no recession thats forecast. And so obviously, recession impacts economic Economic Growth and Health Spending growth to a great degree. I believe the main reason for that is just to try to take out the Great Recession from the comparison. Yeah. This last recession did impact Health Spending more and more immediately than several of the previous recessions. And it really did distinguish itself and lent itself to being exclu excluded. I want to follow up on that question and sarahs question, as well, about the comparison between the projection period and the historical period. It seems like on the ledger balancing factors that might accelerate growth versus those that might slow down, youve got more people getting coverage in the future. Youve got an aging population. Which distinguish that from the previous period, but youre finding a slower Historical Rate of growth. And if i understand you correctly, youre suggesting that tamping down growth in the future will be pressure on medicare payments, some economic pressure, at least, in the shortterm. But it seems like those factors must be very, very powerful to outweigh the factors that would seem to suggest we should have faster growth than weve had historically given the higher rates of Insurance Coverage, the increased federal spending on coverage and the aging population. Does that question make sense . Yeah, i think so. I think one factor is that weve had these increases in cost sharing. Weve had these increases in highdeductible plans. And were not expecting the cost sharing to go away. And so, in the the projection period, theres going to be a higher level of cost sharing than there was in the 90 to 2008 period. Thats certainly going to be one factor to keeping growth lower than it was in that period. And i dont know if you guys want to say anything. Right. And also, in terms of the demographic shift while the population is getting older, at least in the shortterm its also bringing relatively younger Medicare Beneficiaries in. Which is, you know, somewhat of a factor, as well. One of the causes for the Slower Growth most recently, too, has to do with utilization of services and medicare. And weve been looking fairly extensively at that. And its our best analysis that those utilization rates will start to tick back up to something closer to their historical levels but not likely to some of the historical highs in the past. And so, the expectation is that overall spending, you know, at least in terms of medicares contribution, too, is not likely to accelerate. Growth is not likely to accelerate to some of those alltime highs as weve observed in the past. Can i quickly follow up on that . Can you talk a little bit more about what may be going into that lower utilization pattern in medicare and why it will take such a long time to recover . Well, i think part of it is an economic story that were investigating in the office, as well. There are other things that have kept general spending down in addition to the utilization piece. For example, theres been very low inflation most recently and as you might be aware, the inflation general inflation and certain components feed into the input prices that are used to update medicare payments. And so in addition back to the utilization side. As the baby boomers have started to come in beginning in 2011, the average age of the beneficiary has fallen somewhat. And so youve got a slightly younger, slightly healthier beneficiary. And that sort of plays out here in the immediate future as the baby boomers begin to enroll or continue to enroll. But as the as that population is on medicare and starts to age into the older age groups, expenditures and utilization are expected to tick back up. So that leads me to a question which is you mentioned in the paper that the as people move from private insurance into medicare, they move from being in the most expensive group within private insurance to the cheapest group in medicare on average. From an nhe perspective, given lower payment rates in medicare and the medicare benefit design relative to the typical commercial product that someone has when theyre 64, do we actually see a reduction in National Health expenditures associated with a person moving from being 64 and private coverage and 65 in medicare . Yeah, so we our office, we put out age estimates, Health Spending by age on an historical basis. But unfortunately, we dont have that those numbers that are people are age 64. So its difficult to make, i guess a definitive conclusion, thats the case. But certainly, you know, the benefit design is different. And other factors, were not sure what sort of coverage, the person who has moved from phi plant to medicare, you know, are they choosing, you know, a generous supplemental plan. They could be more generous than they had in the past. Its difficult to make that determination. Additional questions . Yes . Hi, internal medicine news. Just on that question of younger potentially healthier people going into medicare, what does that really mean. Are people choosing to enroll in medicare at 62 or 63 or 64 . Or is it just that theyre younger, not chronologically, but maybe healthwise at 65 than they have been in the past . Right. Well, the idea is that because there are a lot of people who are turning 65, the baby boom generation. So maybe not so much necessarily about individual people, but certainly that the baby boomers, you know, at 65, people do tend to be a little healthier than maybe 75, 85, and there are a lot of them. Shifting over that period. Thats what were sort of talking about in aggregate. Yeah, and i think andrea mentioned, too, in her part of the presentation that the projection of Medicare Beneficiaries as a percentage of the population is supposed to increase roughly 4 Percentage Points over the projection period. Thats just largely a function of so many of the baby boomers reaching medicare age and enrolling in the program as a result. Yes . A question about the physician spending projections. You mentioned that your projections included 21 , i think, reduction, thats coming april 1st. Actually, no. Actually im sorry, ill let you finish. No, i just wanted to clarify whether that was sure. The 21 reduction is in current law under the Sustainable Growth rate formula. But what our projections our projections are consistent with the projected baseline scenario in the Medicare Trustees report. And in that, payment rates are expected to grow at 0 for 2015. And then. 6 through the remainder of the projection period per year on average. So these projections do not include the cut under the Sustainable Growth rate formula. Okay. Thank you. Mmhmm. Yes . Jeff young with the Huffington Post again. In terms of the couple of times it came up, the increase in highcost specialty drugs and specific mention of the hepatitis treatments that are out there, does this analysis include any offsetting factors for someone getting cured of hepatitis and therefore not having ongoing costs in the future as a result of having that disease . Or any of the other types of drugs that may be out there . Thats, of course, the one everybodys talking about out there right now. No, not explicitly. This is something that our office is looking into. But, no, theres no explicit, no explicit, you know, reduction in a Hospital Service or Physician Clinical Services because of higher drug use. So theres nothing explicit, no. Yes . Just wanted to follow up on an earlier question about Delivery System reforms. Are there certain projects or experiments that your office is particularly curious about . Those are outside the context of this report. And certainly over time, we will continue to review the estimates from our office and, you know, examine the literature and other materials as we go forward. But at this time, its outside the scope of the project. Thank you. I would only add that we really rely on sort of the technical analyses to drive the decisions that we make and the judgments that we put into these reports. And so were optimistic that as the technical data comes out and the Empirical Research plays its way out that those types of things could be included, but were sort of eager to get those results and the empirical estimates to see where things lead. Craig palmer. Theres one of these Service Sectors that seems to jump off the page. And i dont really understand whats going on there. The dental services market. You show in a projection of the overall spending of 3. 6 in 2013. But only 1. 9 for dental, which by the way is the only Service Sector below 2 . And then, again, in 2014 while the health economys expanding at 5. 6 , you show dental at 3. 1 . Whats going on there . Well, two major things. In terms of the relatively low projected growth for 2013, certainly the impact of the recent slow Economic Growth is something that plays a key role in our projection for dental expenditures and then also in the historical estimates, as well. And for 2014, while there is somewhat of an increase, certainly with the coverage expansions, you know, the increase in projected spending for, yeah. . ,hathi, sara with fox again. Not to beat a deadr nn horse. Upa question. I was curious, im havingl trouble reconciling in my heady more people to our projecting costs will grow slower than they did in the past two decades, even when you the effect of the7b n recession i know you listed factors ofaw1 cost sharing and some5cn press on medicare. Makes the 2016 to 23 periodubi also coming off its important to note because of the slow recovery werenz1s coming p private Health Insurance again you have the shift out of private Health Insurance of the baby boom generation and into medicare also happening too and then, of course, the commensurate shift into medicare of the relatively younger baby boomers into a group of beneficiaries that tend to have much higher per beneficiary spending. What i would add to that, sara, is that in the late 90s and early 2000s we had really high drug spending growth and so, you know, so for the sector there was, you know, maybe 70 were brand name drugs. Even though specialty drugs were expected to drive the growth, you know, it still is relatively slow at 75 versus the, you know, the double digit growth that you saw between lets say 1998 to 2003. Double digit growth in drugs every year. Theres certainly factors that kept growth in that period high, but in the projection, especially as the economy grows, as the health share of the economy grows, its, you know, people are much more interested in controlling that growth and so, you know, and as far as the we mentioned the High Deductible Health plans but also the negotiation of payment rates is stronger were expecting it to be stronger than it was in 1990 when the health share of the economy was lower. I see no more questions. So i want to thank you for your interests in the topic. Remind you were under embarko until 4 00. Thanks to the team important the information and that concludes our session for today. Cspan campaign 2014 debate coverage continues thursday night at 9 00. Nebraskas second Congressional District debate between the incumbent rerepresentative lee terry and state center brad ashford. On friday amb at 2 00 the oregon governors debate between John Kitzhaber and dennis richardson. Sunday the iowa u. S. Senate debate between bruce braley and joni ernst. A panel of legal and health care analysts examine recent opposing federal Appeals Court opinions concerning federal tax subsidies pertaining to the health care law. In july a federal Appeals Court called into question tax subsidies that assist low and middle income americans saying Financial Aid can only be paid in states that established their own health care exchanges. 37 states have exchanges operated by federal government. A separate Appeals Court came to an opposite ruling saying the irs correctly interpreted the will of congress when it issued regulations allowing subsidies in all 50 states. The implications for states and consumers if subsidies in states with federally facilitated exchanges are ruled invalid. George Washington University hosted this event. It looks like no one else is coming and im used to things at gw starting at ten after. So actually this san early audience. Thank you very much for coming to todays session. Well be hearing about one of the many challenges for the Affordable Care act, though the Affordable Care act has been passed now for four years, it has remained controversial, faced political challenges, implementation challenges and legal challenges, probably many of you remember that there are three sort of main things that were occurring under the Affordable Care act to expand Health Insurance. One was an expansion of medicaid, one was development of the Health Insurance exchanges and the tax credits that went along with them and one was the individual mandate or the requirement that either you have to have Health Insurance or pay a tax penalty. Certainly some of these have already come up in court, the first and third were addressed by the Supreme Court and one of the changes that occurred a couple of years ago was the Medicaid Expansion was made optional. A month or so ago we held another session about a recent case that came before the Supreme Court concerning contraceptive coverage. The cases were talking about today deal with that second issue, the use of the Health Insurance exchanges as a mechanism for Health Insurance and in particular the application of federal tax subsidies to sort of help make them affordable for low and moderate income americans. Today we have three wonderful speakers to help us speak today and first we have soara rosenbaum. Shes wellrespected as one of the leading health scholars, health law scholars of the nation. Sara will be talking about the legal background at issues and will be followed by dr. Linda blumberg. Shes wellknown from the urban institute. Linda has done studies about what are the implications of some of the potential thing that might occur if the case is ultimately upheld for the plaintiffs. And then, third, we have professor lynn nichols. Lynn is the director for Health Center at george Washington University. Insulin a nationally known Health Economist built here hes here partly because hes a charming and witty fellow. Always wellliked. But in addition by virtue of being south of the potomac he represents the state of virginia which is one of the states that would be affected if there are changes that occur under this legislation. So lynn will give us some insights from south of the border as it were. The way this will work well have each speaker talk for about ten minutes. Then well open it up for questions and as im sure youve figured out, this is being televised by cspan so be on your good behavior. Thanks. Sara. Thank you very much. Okay. Now what i have to do is find my slides. Leighton said today and hes correct do i do custom show. From beginning. That its very unusual for me to use slides and im not a great slide maker and i hate it when people write their entire speeches on slides but i thoigt it would be good to have just a few to take us through this review. So the first starting point, obviously is what these cases are all about. Whats going on in these cases. Technically the cases concern a handful of words, depending on whose version of what is this all about, you hear some people say its about five words, some say its about eight words, some say seven words. I have seven words here. Thats what this case is all about. In a 1,000 page law, and the purpose this little section, these words are taken from a specific clause in the statute as passed by congress that simply describes the amount of subsidy that each person gets. This clause doesnt pertain to the entitlement of the subsidy itself, the premium tax credit, its part of the clause that has to do with how much. So if youre eligible you get x amount of dollars a month or x percent a month if you buy your insurance through an exchange established by the state. So thats the issue. How the cases began these are very political cases. There are four of them. Ill show you the four in a minute. Theres no secret here. They were developed by a group of theory, which is the way law reform works generally i might note. This very common in law reform. You get a group of 0 scholars together, a group of advocates and scholars and they have a mission because, of course, the courts are a place where you do battle. Courts are not a place to do impartial thinking and analysis, they are the modern battlefield. They are set up to be battlegrounds and thats how they are used. So a group of very conservative policy and legal scholars who were very opposed to the Affordable Care act spent a long time pouring over the act in great detail, people werent paying attention because we were busy with the big constitutional case that leighton referred to, challenging the individual mandate, socalled mandate, challenging the Medicaid Expansion and those cases were winding their way through the courts. By 2011 this group of scholars had figured out that there was this peculiar little section of the clause that seemed to say that the premium subsidies get paid when you buy your coverage in an exchange established by the state. You can actually watch online an aei, American Enterprise Institute Meeting at which this clause was discussed, and people realized that this might really be a huge issue. And the case was essentially joined when the Internal Revenue service with the authority to implement the statute published a rule that said that it was interpreting those magic words as recognizing an exchange either established by the state, working on its own, or as youll see established by the state via a direction to the secretary of hhs to come in and establish the exchange for us. The irs said we interpret these words as meaning, you know, if youre in a state exchange, which can be either directly established by the state or established by the secretary pursuant to the direction of the state. So that is what triggered the case, the irs rule. So what this really is, is a lawsuit testing not the legality of the statute. This is not like the constitutional cases, its a statute about the legality of a rule and there are four of these cases. Theres the hal big case. The Fourth Circuit case, the court of appeals now that sits in richmond which is why lynn is here, i too am a virginia resident so were all here because were south of the border and lynn will speak to that. Theres a case called pruitt versus sebelius which was brought in oklahoma. And pruitt is the attorney general of oklahoma who brought the case. Then the state of indiana has brought its own case and so these cases are at an earlier point. But its very, very common to have lots of versions of the satisfaction. For example in the contraception cases there are over 50 cases brought by religious organizations objecting to the federal regulations on religious accommodation. You bring this many cases just for the same reason you path lot of soldiers on the battlefield because some are going fall. Some are going to fall apart and you need a lot of cases moving in order to move up as it were. So heres the plaintiffs theory of the case. All these cases are the same. Same lawyers working on the cases, same lawyers working on the defense of the cases, same lawyers writing amicus brief. Gw filed an amicus brief on behalf of the government and leighton did lots and lots of wonderful original research to help support the arguments we advanced in our amicus brief. Heres the plaintiffs theory. These are people opposed to the subsidies now. And were talking about theory in a legal sense, right. Not talking about moral theory, this is a bad thing or politically opposed. This is the legal theory. The legal theory is built on the law which says that when you have a regulation challenged, there is a protocol to how you challenge the legality of the regulation. So the first argument they make is that the words, these eight words are utterly clear, they speak for themselves, its obvious right on the face of the statute, given these eight words that unless an exchange is established by the state literally there can be no subsidies. You dont need to think about the history or the context or anything, it doesnt matter if it makes no sense, given the entire Affordable Care act. These are the words thats what congress wrote, end of story. But, if you want to consider the context then we have to tell you that when you look at the history of the act and you have to remember that the act, of course, is the senates bill, right . We never had a conference agreement. Its the senates bill. Nobody cares what the house thought. In the senate according to the plaintiffs there was a discussion among the senators about making sure that states would establish exchanges by tying the subsidies to their establishment. If you want History Court well show you arguments through the Senate Deliberations process, that the senate intended this kind of result. The defendants theory of the case sof course, very different. The defendants theory of the case, for the start, the government says the law is clear the state can tloekt have a secretary come in and set up an exchange and thats the same given the statute as if the state established the exchange itself. The feds stand in the shoefts state. Thats number one. Number two, if congress had intended anything less than the stand in the shoes version, it would have said so. There is nowhere in this statute that congress notified the state, which is absolutely critical under a program like this that if you dont set up your own exchange, your residents get no money. We can set it up for you but whats the purpose if you cant get dollars. If you cant get dollars then basically you dont have Critical Mass of people buying in the exchange. So you would think if Congress Really intended to do this to states that it would have said so and it didnt. Third, you know, every part of the aca makes clear congress intend National Health reform not Health Reform in states that set up their own exchanges. Trial court, government won in both the d. C. Circuit at the trial level and Fourth Circuit at the trial level. At the appellate level this is where the fireworks really began because the d. C. Circuit sided with the plaintiffs and in the Fourth Circuit the court of appeals sided with the government. So now you have whats called a split in the circuits. The d. C. Circuit actually has the power to tell the irs you are prohibited from sending subsidies to any federal exchange but they stayed, the order got stayed automatically because the case was appealed to the full d. C. Circuit which is like 18 judges. Once the government does that, that stops the clock on the d. C. Circuits case. So theyve appealed which means that the d. C. , the d. C. Circuits initial ruling doesnt have any force in effect in law right now, subsidies will flow in the fall just like they would have flowed in the absence of the case. So what explains the difference. How do you get into a situation where two circuits of the highest judges almost in the land, were one step below the Supreme Court could end up with such a different outcome with the same words . Now, i mean you could say its all politics. Thats what explains the difference. But thats really not true. What explains the difference here is the way in which the judges under stood the words in the context of whats known as chevron rule. Chevron versus Natural Resources defense counsel. A landmark Supreme Court case that is designed to tell the courts how to decide cases when the challenge is to the validity of a rule. In chevron, basically the court set up a two step process. One, you decide if the words are clear on their face. If the words are clear on their face, end of discussion. The issue is, does the regulation conform to the clear words. If it doesnt thats it for the regulation. Federal government, the executive branch cant write a regulation thats contrary to a statute. Here the d. C. Circuit said no r. G is not consistent with the statute. Its obvious right from the face of the statute we dont need to go any further. Fourth circuit said oh, no this statute is very unclear. We really dont know what it means because of these other parts of the law. You cant pick eight words out of a 1,000 page bill and say its clear or its not clear. You got to look at more. So, d. C. , the d. C. Circuit ended the case right then and there by finding that the words of the statute were clear. The Fourth Circuit kicked the thing over into whats known as chevron two. Chevron two is what do you do when its an ambiguous statute. Were not sure how to read this thing. Its a close call. When we look at the history and they didnt find any history about the senate, you know, theres no legislative history saying we intend only for certain states to get these monies and theres no history at all. There was someodd discussion but no written history of any Senate Intent to withhold money from states that elected to have the federal government set up the exchange. We dont find any history, it doesnt make any sense given every other part of the law and most importantly if the fed, if Congress Really intended to only let states have this money for their residents if they set up the exchange then they would have said so. The first rule in whats, in this kind of law, laws that spend money on people through state programs is you have to be very clear. Its called the notice rule. You have to be very clear. And nowhere did congress advise states what would be the consequences for opting for a federal set up. That explains why the different outcome. Ill stop here. What happens next, well were all waiting now. Again, think of it as a very elaborate fight, right . A war. Is the d. C. Circuit going to agree to hear the case, the full circuit. They tend to do this when huge issues are on the line, and, you know, theres not a bigger issue as youll hear from linda than this. This is a pretty big rule to throw out. And if it agrees to hear the case will it end up reversing its three judge panel. If so that has effect of eliminating the split in the circuits. Then you have two circuits that both agree that the rule is a valid rule. The plaintiffs in the Fourth Circuit know this and so they were the first at the courthouse door. They went to the Supreme Court, they didnt go the full Fourth Circuit, they jumped right over the full Fourth Circuit which they knew was not their friend, went to the Supreme Court and said you must reach down and take this case now. You may not wait for the d. C. Circuit to decide things. Very inappropriate for the d. C. Circuit to take this. Theres a split in the circuit now. We want you to take the case now, immediately. Its a waste of the d. C. Circuits time, this thing will end up with you anyway and so what we dont know is whether at the beginning of october when the Supreme Court comes back its going to look at the case and say, yes, we want to hear this case. If they want to hear this case, in theory, of course, everybody defers to them, but meanwhile the d. C. Circuit is expected to act any time now and if it says its the most powerful court of appeal except for the Supreme Court. If the d. C. Circuit says we want to reconsider this it would be the norm to let the for the Supreme Court to let the d. C. Circuit think about its decision and decide whether they want to reverse the three judge panel. So theres this cat and mouse game going on. Everybody is sort of drumming their fingers waiting to see what the d. C. Circuit does including probably members of the Supreme Court. But the most important thing is that open enrollment happens in the fall just like it would. Subsidies go on. They flow just like they would and we all sit and wait. Okay. Im not sure i know how to go from here to right click on mine. Im sorry. Thank you. Great. Now that sara has explained what the entire situation is for you, im going to talk a little bit now about the potential implications if the plaintiffs in these cases and i refer to hallberg here. If the plaintiffs are successful and their side is upheld through all of the appeals process. And the first thing that i think its really important to understand is that as sara was saying the crux of these case is whether or not exchanges set up by the federal government in the states are entitled to pass Financial Assistance to those who are purchasing coverage in them, but what is a state based marketplace or exchange and what is one that is federally run . Its a lot mushier and vague in terms of defining these categories than a lot of people i think recognize. So what actually constitutes a federal marketplace . Society originally categorized 18 states as the Agency Within the department of health and Human Services that oversees and manages the implementation of the Affordable Care agent. They originally categorized 18 different states as having state based marketplaces. Or sbms. When we look at those and peel back and look at the details we recognize 2005 those, new mexico and utah were only running the Small Business exchange. There was an intent on the part of new mexico to move in and run all of it but they werent ready with their i. T. Systems yet so those two states were managing the Small Business piece of the marketplaces but not the nongroup part. That was being done by the federal government. At least on the i. T. Side, the federal government was running those. In nevada they were using and will continue to use through at least 2015 the healthercare. Gov i. T. System which is the federal marketplace system but that was because they were having problems with their i. T. System but doing Everything Else aside from that. We look at the state of oregon. Oregon started out in 2014, and we looked at them before 2014 as a frontrunner, right . They were a state that was very progressive, well organized and it seemed like they were well managed and they were going to be doing their own state based marketplace. Their i. T. System crashed and burned once open enrollment began and they have had serious problems. While they are doing all the other tasks associated with running a marketplace they are using healthercare. Gov in 2015 as well. We look at a state like maryland also in a situation like oregon, very gung ho. Had a terrible problem with their i. T. System and the contractors that they were working with and so now they are going to be using in 2015 some version of the connecticut i. T. System. So were looking at all these state based marketplaces but they all have their own nuances and issues, some of which involve the federal government having a role. Now lets look at the ones that were set up to be quoteunquote federal market places. What does that mean . Five states, illinois, new hampshire, west virginia, arkansas and delaware are using the i. T. Systems from the federal government but they do Everything Else. They took on the responsibilities of planned management and enrollment and outreach. So they have a federal i. T. System and didnt feel they have the time and resources to contract with an outside vendor but Everything Else they are doing at a state level. Is that a state level marketplace or federal marketplace. Two more states have a Partnership Arrangement with federal government but instead of taking on planned management and outreach and enrollment activities like those other five are doing these two are only doing the planned management part and they are leaving outreach and enrollment activities to the federal government. Thats iowa and michigan. They too are straddling state and federal. Several more states are doing planned management very uncomfortable with referring to themselves as being in partnership with the federal government for political reasons and so they are doing the exact same things as iowa and michigan are doing, but they are not formal partnerships. I like refer to them as the partnership that must not be named. I think they go, the federal government refers to them as quasi partnerships. What do we call them . What characteristics are determinative of whats a state based marketplace versus federal. If youre using one contractor, buying services from one i. T. Contractor versuses using the federal government as your i. T. Contractor is there any rationale defining for what you are and are not. The urban Institute Analysis which ill talk about now with i did with my colleagues, takes, assumes 17 state based marketplaces, so were excludeing utah but keeping new mexico and were categorizing those state based marketplace implying the partnerships and quasi partnerships dont get subsidies and states dont change status. States can change their status and these definitions are mushier than many would understand but lets for purposes of doing the analysis were taking the worst Case Scenario here. Okay. So our analysis relies on urban institutes microsimulation model which weve done extensive work on analyzing various different aspects of the Affordable Care architect and so that is, if youre interested in that model i can give you some more information later on where you can see the analysis where we use it. So, in states that have expanded the Medicaid Program which includes the ones up here, arkansas, arizona, delaware, et cetera of the ones im categorizing as federal marketplaces, individuals in those states who are between 138 and 400 of the federal Poverty Level who are not eligible for public coverage like medicaid, medicare and who dont have access to affordable employer medical insurance are eligible for Financial Assistance under the law through the marketplaces. In states that have not expanded medicaid, those between 100 and 400 of poverty with the same qualifications as i just mentioned are eligible. The income eligibility groups move a little bit depending whether or not the states have expanded medicaid. To give you a benchmark 100 of the federal Poverty Level, this year was about 11,676 and for a family of four it was 23,850. That gives you a sense of the income range of the folks were talking about here. In addition to the premium subsidies, the tax credits to lower the cost of Health Insurance premiums through the marketplaces, those who with incomes up to 250 of the federal Poverty Level are also eligible for cost sharing assistance to lower the size of their deductible, copayment, coinsurance, et cetera. Okay. So this is the population thats at risk of losing Financial Assistance under the decision. Okay. So in 2016 we estimate that about 7. 3 million individuals would receive subsidies in all of the states affected. Kay. Theres many more who are eligible for subsidies in these states, but these are the ones under our microsimulation model we anticipate would actually take up those subsidies, take advantage of them and use them to help them buy Health Insurance. This is, this 7. 3 million individuals is about, is almost twothirds of the total estimated enrollment in the marketplaces in those states. Okay. The majority of individuals who are anticipated to buy coverage in the marketplaces are eligible for Financial Assistance. The remainder will buy with all of their own funds. The value of these lost subsidies in aggregate is over 36 billion in 2016. The largest effects that we see are going to be in the largest states. Okay. The model takes into account in terms of estimating who is going to make a decision to actually enroll takes into account lots of characteristics and the availability of employer based insurance and medicaid and other characteristics that Health Status, et cetera that influence peoples decisions about whether they will take up or not. In essence the biggest decision on the aggregate loss, size of the aggregate loss is population size. So in texas were talking about over 1 Million People losing 5. 6 billion in subsidies in 2016. Almost 5 billion lost for 931,000 people in florida. And over a 2 billion lost for over 400,000 people in pennsylvania. Now all of these states that i mentioned here are examples and i got in our paper up here, if youre interested, we got all of the states that would lose subsidies under such a decision, they are all listed out here. All of the states here and most of the rest of them also made decisions not to expand medicaid coverage. So what that means is not only are they giving up medicaid dollars that were coming from the federal government, but they would also be losing the federal dollars that were intended to flow through the subsidies. So were talking about very large aggregate losses of potential federal revenue coming into those states. It not only hurts the residents who cant afford Health Insurance as a consequence but also has significant economic effects on the hospitals and other Health Care Providers in those states and on the state treasuries because much of the care that individuals without Insurance Coverage receive is financed through state programs and so once, if youve got expanded coverage in a state, states can lower their spending on uncommon pen saided care and other Health Care Service but they cant do that if all these people are uninsured. Okay. So let me just talk about what the potential implications are down the road, aside from the loss of these subsidized dollars and lower Insurance Coverage, whats the implication here . Many more people, when you take away the Financial Assistance from the subsidies, become exempt from the individual requirement to have Health Insurance coverage. The law says basically we want everybody, we expect tomb have Health Insurance coverage but if its not affordable to you under the terms of the law which means if buying this coverage cost us more than 8 of your Family Income youre not required to attain it. So we take away the financial subsidies, many more people in these states no longer have affordable Health Insurance coverage available to them and they are no longer required to obtain coverage under the law. The individual mandate relied on the subsidies to make the coverage affordable. You cant require somebody to do something if they cant afford to do it. Right . The individual mandate becomes much weaker, fewer people required to buy. Regulatory reforms that were also a very important component of the Affordable Care act that laid the ground to end a lot of the discrimination against people with Health Problems in private Insurance Markets. For example the prohibition on excludeing preexisting conditions from individuals coverage, the prohibition setting premiums as a function of an individuals Health Status or past claims experience or their other Health Status related pieces. All of these things, the limited waiting periods, et cetera. All of these pieces were put in place saying listen, most people are going to be in the pool because of individual requirement as long as we keep people in whether they are healthy or sick, then we can keep the premiums set not as a function of Health Status but with little variations, modest variations for age. If most people are not going to be in the pool any more because you took away the subsidies and took away the requirement to get coverage then these guaranteed issue rules, the prohibitions on health rating, et cetera, what they do is they end up creating a situation where people can come in when they are sick and not come in when they are healthy and as a consequence the premiums in these pools go up and up and risk the stability of the Health Insurance pools overall. You take away the subsidies or weaken the mandate substantially and you threatened the viability in these states of the market reforms intended to protect those with Health Problems. In addition, much less significant from my perspective the employer mandate has to go away in these states because the requirement employers provide coverage or pay a penalty is triggered specifically by an individual worker in that firm going out and getting subsidized Health Insurance coverage. If no workers can do that the trigger can never be pulled on the employer mandate. Okay. Then what happens as a result of all of this . Whats the big picture implication is that disparities in Health Insurance coverage and Health Status which weve seen between socalled between red and blue states for many, many years become exacerbated. Many of these states, they have lower rates of Health Insurance coverage. Lower rates of private Health Insurance coverage. They had done less on public coverage. They have higher rates of uninsurance, higher rates of Health Problems and what youll see is in many of these states youre going to see a continued increasing miss parity between what we see in states that were more progressive versus those not the blue states will continue to improve with the expanded coverage through medicaid and marketplace, whereas the red states will go, many of these red states will go back to where they were before. In the prereform situation. And i think thats where im going to stop. Oh, one more one thing quickly. What are our options if the plaintiffs prevail . There could be, as i was suggesting earlier we could do some defining of what is a state based marketplace versus a federal one and we can do it in a broad way. Thats one option that folks ought to be exploring. And states can as we suggested earlier change the classification by taking on the necessary responsibilities under whatever definition is established. Thats always available. Not always feasible. Not all states have the resources either financial or capital wise to bring this together and make it happen. And not all states, obviously, have the sufficient political will to do so. So many of these states, i think, would still their residents would be left out in the cold. With that ill turn it over to lynn to talk about virginia. So sara explained the law. Linda explained the economics and Health Insurance market implications. And im supposed to explain virginia. [ laughter ] aside from the fact that i have ten minutes and theres not enough liquor in this building to talk about all of it ill tell you what i do know and then maybe well get to some questions. The first thing if you think about lindas characterization and i like that which will not be named and i prefer stealth. Virginia is a stealth partnership and i want to emphasize the point on her slide and that is it was not politically acceptable to use the word partnership in conjunction with the federal government when it came time to do this. Even though the fact that they wanted to play the role in virginia like most of the states in this category, they wanted to do planned management. They wanted to do planned management because the insurers trust them and by the way to be fair and i think its actually pretty accurate and important, state Insurance Departments know a lot more about their local Insurance Markets than the feds ever good and it actually probably was a very efficient endeavor. And so thats what they chose to do. They chose to do planned management but stay stealth. Its useful to remind you all if you continue to follow virginia politics quite as closely as sara and i do, its a purple state. By that i mean today every statewide office hold certificate a democrat. Governor, Lieutenant Governor, attorney general, all elected separately, barack obama has won the state twice. Not once, twice. Okay. But the senate is pretty evenly split in the virginia legislature. It was 2020 and republicans had a Lieutenant Governor before now democrats have Lieutenant Governor but due to an unusual resignation on behalf of one senator it switched over and now the republicans control the senate as well as house to. They control the house of delegates by quite a margin. You might ask yourself the question how could it be that the state votes for barack obama and the governor and the Lieutenant Governor and attorney general, but the house of delegates is roughly 21 republican. Thats a question i ask myself pretty often as i go to the bar. But it has to do with very clever gerrymandering and democrats are pretty good at it too when they have control. So i wouldnt call that a partisan feature. Virginia is purple, which means that even when the governor is whichever party the other side does have a fair substantial amount of power. So when mcdonnell, the previous governor, the one who blessedly just finished testifying in his own case there, when he was faced with the passage of the Affordable Care act within a few months he appointed a pretty high blue ribbon Level Commission of folks who became the virginia Health Reform Initiative Advisory council, but their job was to make recommendations to the governor and the legislature on what to do about this law, and i had the privilege, truly, of staffing it. Secretary hazel under mcdonnell and by the way to show you what people think of him, governor mcauliffe kept him because hes a smart guy and frankly hes my kind of republican and im his kind of democrat. We believe in data. Its possible. So it was quite a nice partnership. So anyway this commission did its job. It made recommendations to the governor and legislature in the fall of 2010 and the first recommendation was to create our own exchange. They were calling it exchanges not marketplaces. Debate over that issue i remember quite vividly took approximately four milliseconds because the choice was, let me get it straight, we could do it or let the federal government come down here dynasty. Okay down. No debate at all. No one had any idea about this theory that was going on, so ill just say it that way. So the next year in the legislature, the legislature only meets of course every couple of months. For a couple of months every year and then in one session its 50 days and in one session its 90 days. So we never go very long. But anyway january of next year after getting these recommendations the Legislature Pass ad law saying, okay, we liked what you did there, so you commission go back and bring us specific recommendations about how to organize an exchange. Consistent with the aca. So this is at the time be a republican legislature, a republican governor signing this law and directing this commission to go off and come back with specific recommendations. Of course we did our duty and came back with a recommendation and they included things like, you know, whether the exchange should be passive or aggressive, whether you should have more mandates or less, actually virginia has a lot of mandates, believe it or not, 70, in fact, quite a number. And whether or not, you know, you want the entity which is probably the most important question, whether you want the entity to live inside the executive branch or some kind of quasigovernmental thing like a couple of states like colorado have done and we actually voted for that. Anyway, the point is those recommendations then came back in the fall of 11 pursuant to the legislatures command and the governor by now first of all 11 is getting a little more nervous about being kind of out there on facilitating the implementation of the socialist obamacare, so he, i would say the proper word is sent a cover letter with the recommendation, he did indeed reveal them to the legislature and the cover letter was probably in saras terms just a tad harsh because by now you see the governor is probably on the short list for romneys Vice President and the governor has pretty the strong ambitions to run himself in 2016 whether romney wins or not. So thats kind of what happened in the real world. Well, but the recommendations came back. And the recommendations were duly reported to the house and anr establishment grant funds from the federal government remember the first grant everybody did that, that was planning. The big grant. The real money is establishment grant. So that application was produced in the spring of 12. 12 were into now. Right. It turned out, of course, that coincided with the Supreme Courts decision on constitutionality of the law and you may know, you may not. But the deadline for the application was the friday after the Supreme Court ruled on thursday. So it was timely. And so we had it all ready to go and the governor had indicated he would allow to it go forward because you see the governor has to sign these things. Im not sure exactly why but the governor had to sign the application because i guess money goes the government. So, Supreme Court ruled, and governor walked down the hall and said no, were not doing this. You could probably spend the rest of the day talking about why but ill just say its unambiguously true people who were staunch opponents of obamacare really, really, really thought that the Supreme Court was going to end this madness. And when it did not, it was a shock. It was a solar plexus blow 2 x 4 between the eyes whatever metaphor you want to use so they reacted badly and the governor said no were not doing that and so deadline passed, couldnt apply. So we could not establish, even though remember the Legislature Said do it. I give you that context just to say virginia is purple even when republicans are in power, okay. And so here we are now, expecting the subsidies to continue in the Exchange Even though we decided not to do medicaid ill come back to that. Linda is right now were in a situation where we might lose. Virginia has roughly a Million People who are uninsured. 400,000 of them are eligible for medicaid or roughly 400,000, 392 are eligible for the exchange and 200,000 are eligible to be sent back the home their country if somebody wins the election that doesnt like them. So 800,000 might get coverage and 400,000 are eligible roughly for the exchange. 216,000, according to the latest numbers select ad plan. We all know thats not exactly the same thing as being fully enrolled but they slaektd plan. Thats roughly if you dont have your calculator out, 55 which is dead on to the percentage of people, the average for all states that were federally facilitated. So one percentage point lower to those who were explicit partnerships and three Percentage Points lower than states who ran their own. While its not what you might dream of, aint too bad for a state where basically the governor and the executive branch was not talking about this stuff at all. So thats my point. You got about 200,000 people running around with this coverage. 82 of whom got a tax credit. So multiply that its 175,000 people get be a subsidy today. That 82 of getting a subsidy is lower than the National Average of 87. Which says to me a little bit more people who didnt need a subsidy applied and are buying in virginia than in the nation as a whole which is somewhat surprising but indicative of the fact that even though the governor was against it, even though the legislature was against it, a lot of people paid attention to this. And just as many almost as in the states where they ran their own and spent way more than virginia spent on telling people about it. Now lets talk just little bit about prices in virginia, okay, because this is important, i think, to indicate how the market is working. The average, the weighted average price prior to tax credits so, the actual price of the policy chosen was 331 a month. That compares to usa average of 346. So virginia, even though they have a dominant insurer and one thats a household name and not known for being one that gives policies away, ended up with fairly low priced policies. My personal favorite thing to do is to take a 40yearold Second Lowest priced silver because thats kind of a benchmark, 40. Why . You get problems like i have, but you also are still young enough to be technically in the child bearing age so 40yearolds, Second Lowest price silver in virginia average 273. And the range on that baby is 252 to 295. Okay. Thats a competitive market. So, we had the minimum number of qualified health plans, virginia had 12 region, minimum Number Available was 14. The average number is 47. Even though we only had two to six issuers, two to Six Companies offering these plans. What it says to me is they are taking it seriously and those prices imply they really are shooting for the Second Lowest price, they want the majority of the market and next year we know united is coming. So its the case that insurers took it seriously. Its the case that the Virginia Department of insurance sort of knows how to do this now, it is the case that every elected official, republican or democrat expected this money to keep flowing, but obviously the serious question is if the plaintiffs prevail what will virginia do . Right . I obviously have no crystal ball. I just watch them. Im one. Truly proud. Ill say a couple of things. No they did not expand medicaid. And thats a whole other lecture. What ill say whats kind of interesting is when you think about the history of medicaid, go back, i highly recommend it, and look at what happened in 1965 when the law passed. Okay. The next year was the first year of implementation and think about it. 1965, what did we know about a Medicaid Program. Basically the first year we said whatever youre doing take care of the poor well pay half. All right. Then well figure out what to do. 26 states took it up. Pretty close to exact number today. In virginia it took until 1970, took five years. All right. You look at the deep south they look almost as long or as long. So it was largely a political thing. It was largely race, of course, back then. Medicaid being what is it. Its also true eventually math trumped ideology. That would be my bottom line. Math always trumps ideology, but for different people at different speeds. [ laughter ] hospital associations want this. They cant live without it. You cant expect a Delivery System which we sorely need to thanks form itself and to become more efficient unless you stop the hemorrhaging on the uninsured. What i would say if you think what Justice Roberts did when he did what he did in the first constitutional challenge, he put the decision to expand medicaid back in the hands of the states, if the plaintiffs prevail then the whole thing is in the hands of the states. And while it would be messy, and while it would be unpleasant for some people, i would take the medicaid creation example to suggest eventually the other states will dome their senses, but i wouldnt bet a whole lot on it happening real fast. Thank you very much. [ applause ] so its about 1 00 now. So if you must leave please feel free to. I hope the speakers are willing to stick around for another 15 minutes in terms of questions and then maybe some people will stick around a little longer. There are questions, we have a microphone. If so, say who you are and ask your question. Surely there must be someone. My question actually is to len, which is given the differences between medicaid and the exchanges, that is medicaid was never granted and then taken away. Today if the Supreme Court were to support the plaintiffs, unless virginia flipped, of course, it theoretically would lose the subsidies for its residents. Do you think that turning of the tables as well as the demographics of who is in what pool of insured people will matt matter . Thats a really great question. I would offer the following observations. I mean at the theres going to be a special session of the legislature starting next week. And in that special session, im told, there are republicans who will introduce legislation to basically say well do Medicaid Expansion if its like arkansas. Well do Medicaid Expansion if we can make it private. Theres been a lot of talk, and a fervent wish, to figure out how to make this possible without expanding a Government Program and private insurance is taken to be the avenue for that. Those who follow that stuff, virginia already does medicaid managed care. So that imimpetus was already present. The income of the people who would lose these subsidies is higher than those who would be in medicaid. They are all working. The medicaid people only 80 are working. So the question is would they have the courage to let it go away for the working population. I go back to the numbers. Approximately 170,000 people are getting a subsidy. Now thats not a lot in a big election, but in elections that are always purple and close, perchance. So what i would expect is some kind of way to dress it in private insurance and lets just do this and do an arkansas type thing and that would be more popular. Im not sure what happened instantly, but im quite sure if you go back to the history they want to do their own exchange in the first place. So i think its highly likely if the only. Path out is to do their own, they will do their own. Susan wood. I wanted to follow up with lindas discussion of the different options should the plaintiffs prevail in terms of a statebased marketplace or becoming some states converting to calling themselves. In the example of some of the cases on contraceptive coverage, the administration has been trying to provide incrementally different easy paper ways to get around any particular requirement in order to allow people to call themselves or do something which is in compliance with the particular ruling of the day. Is it possible for states to declare themselves a state do something by a revision of the rule or some state action that doesnt require them to spend millions of dollars and years of time to develop the i. T. Of an exchange or even the functioning of the exchange in order to satisfy a ruling that went. I guess it would take a determination of the ruling to rye to work that path. Sara might be in a better place. Shes the legal scholar. I think that the notion that we can define things pretty flex bli in federal regulation is one piece. I had not thought about what the states can e declare, but in the notion she explained it and ill give this to her is that this federal government was establishing these four on behalf of the states is the way that many are interpreting the law and as a consequence perhaps something as simplistic saying we had the federal government establish our statebased exchange at our direction maybe a way to go, but im going to let sarah respond. Needless to say, this is a hot topic. What if the what if issue. And the answer, as always the case when its legal, is that its rather complicated. Im being told to stand up. Its rather complicated because there is the practical side, which is exactly as linda described. When you unwrap it, theres got to be an office and an address and an i. T. Separatioperation. But the law specifies that there must be a legal act to establish. So that legal act could be the passage of a statute, which some states did. It could be an executive action. It could be the governor declaring an, change depending on the powers of the governor in any given state. There are states in which the Insurance Department basically has the power to simply set up a branch of itself. If you think of it, its just a subsidiary of the entire Insurance Market with special powers. And so where the administration might be very helpful would be in laying out a vast menu for states of what it would recognize as legal actions to establish. The administration already has been quite friendly to the states that way because it recognized that its not so much the politics, but that the legal functioning of a state works in many different ways. They were willing to take many forms of legal action. The one that i can think of thats in deep trouble really in terms of being able to reverse was missouri where i believe that the voters actually passed a constitutional amendment to the state constitution barring a legal action to establish an exchange. So they would have to undo the constitution of the state. But anything is possible. Mine has to do with tax policy. One thing thats fascinated me about that is federal tax policy is taken as a premise for a long time that it means the whole nation. So we dont have different federal tax laws that apply or whatever. This, to my mind, of the case depending how it turns out really could be something very radical where were saying the law applies quite differently in different states across the country. Are you guys aware of that or has there been much discussion about the implications of the federal income tax system or not . I think its important to note that that very argument was made in the briefs. That because this is tax policy and because it is clear from the structure of the law that it was supposed to be a national Health Insurance plan and they used tax policy to finance care that the very fundamentals of tax policy and the courts orientation towards tax policy would be totally stood on their heads were this rule to fail. I might add in fact in the ko contraceptive cases in hobby lobby the majority opinion, which of course, found for the challengers, one of the things the opinion turned on was only in the case of taxes is the need for uniformity such that you couldnt have variation in employee benefits. So the court has just come off of a case that emphasizes the importance in terms of judging of laws that affect tax policy in the u. S. Versus spending clause. I would also add thats precisely the logic by which Justice Roberts upheld the first challenge to the law. Because it was a tax. So that gives him a nice little added to say. Anymore questions . My question was for lynn. You talked about the sort of in 1965 sort of delay of states of implementation, that the data sort of won out. Theres a part of me thats