cc >> Jeanan Yasiri: This is
Entrepreneurship in Society. It is a course that is offered
through the University of Wisconsin
School of Human Ecology. I'm Jeanan Yasiri.
As we begin today, I'd like to extend thanks to our partners
in supporting this course. The UW Office of Corporate
Relations, the UW College of Engineering for their technical
support, and the Ewing Marion Kauffman Foundation for their
financial support. They are a foundation that is
committed to advancing academic education in entrepreneurship.
Additionally, we'd like to thank our media partners, Wisconsin
Public Television and their University Place crew for taping
today's lecture. I am quite pleased to introduce
our special guest today, Kevin Hayden, president of WellPoint
State Sponsored Business. WellPoint is the largest health
insurance company in the United States.
In his role with WellPoint, Kevin leads the group's Medicaid
business which currently serves 1.8 million members in
10 states. His responsibilities include
management of health coverage through government programs such
as Medicaid, the children's health insurance programs and
other publicly funded programs for the uninsured and otherwise
underserved populations. Prior to joining WellPoint and
under Governor Jim Doyle, Kevin served as secretary of the
Department of Health and Family Services for the state of
Wisconsin, leading all public health and care delivery
services to over 900,000 residents.
And for a decade prior to that, he served as president and chief
administrative officer at Dean Health System, a billion-dollar
multi-specialty integrated healthcare delivery system with
a physician group practice of more than 500 doctors
and 3500 employees. I asked Kevin to join us today
as we conclude our semester and discuss entrepreneurial thinking
in the healthcare industry, particularly in this era of
healthcare reform. Please join me in welcoming
Kevin Hayden. [APPLAUSE]
Kevin Hayden: Good afternoon. I should disclose also, I'm a
proud graduate of the University of Wisconsin in 1984, have the
privilege to live in Madison and, on a deeply personal note,
it's great to connect again with the university and be in a
position to have a conversation with you today about a topic
that you may not be thinking a lot about and those are the tens
of millions of Americans that literally, as we sit here today
and have our conversation, don't have access to healthcare, may
be pregnant, are concerned about the health of their child but
they don't have the ability to get care.
So I want to begin a conversation with you to discuss
Medicaid around the business practices of Medicaid as it
affects Americans. And we have many Americans who
are currently on Medicaid. And of course I wouldn't ask you
to identify yourselves, but I suspect some of you may have
direct experience with public assistance programs either
through family members or people that you know.
And what I want to make certain that we leave the conversation
today with the ability to answer your questions or concerns as
you enter this society around the innovation about Medicaid
and the transformation of Medicaid as it becomes a very
rational delivery mechanism to providing healthcare for lower
income Americans. As Jeanan alluded to, I have a
unique background and a viewpoint on this.
The company that I represent we provide Medicaid managed care
services to almost two million Americans in the 10 states.
We do it in Wisconsin in the greater Milwaukee area.
We also do it in far away places like southern California, where
for many, many Americans without the safety net of Medicaid,
their lives would be extraordinarily difficult.
So I want to talk today about where Medicaid is going and also
where it's been, but most importantly how it fits into the
discussion around healthcare reform.
And as we approach, again, another presidential election,
the issue of healthcare reform accessibility, the ability for
Americans to understand and afford healthcare, Medicaid is
going to become, I'll suspect, much more of a household word.
So I want to educate you on and have a conversation with you,
and then I'll have plenty of time for questions and your
counsel about what you see.
Oops, excuse me, I want to go back.
I'm just going to-- Excuse me for just one moment,
please. I just clicked ahead a little
fast, so I'm just going to start from the beginning.
Thank you. I want to really talk about
background. I also want to talk about
demographic challenges so you understand that, discuss reform
and be in a position to talk about technology and innovation.
And I must say, while I just turned 52, I feel sort of old
because I never had the ability to have computers in my
classroom when I was in college here, and so as you take notes
or understand things, you understand exactly where
technology fits with healthcare. Things we want to know about
Medicaid is I want you to understand the role of Medicaid
in our system, who's covered, what drives the cost of
Medicaid, and what is covered under Medicaid because many of
you, I suspect today, are carrying some form of insurance,
either that you provide yourself or comes from a family member or
someone supporting you, and yet for folks who are on Medicaid,
they're supported by the government.
First of all, Medicaid was a program that was created in 1965
as part of the Social Security Act.
It's known as, in the government parlance, Title 19.
It's a program that, as we think about health insurance, as we
have more citizens who become either unemployed, do not have
access to the private healthcare insurance markets, they look to
the government for coverage. And as we're unfortunately
experiencing a multi-year recession in America, tens of
millions of Americans look to Medicaid as their primary form
of health insurance. It also covers moms and babies
who are part of the Medicaid program.
It also covers the disabled and members who require long-term
care. Many Americans who are in
nursing homes today are publicly funded through the Medicaid
program. So the point I'm trying to make
to you is it covers and spans both the old and younger
generation of Americans. It also is the largest source of
federal funding to state government.
As you know, with 50 states and six territories, the federal
government is a business partner with the states like Wisconsin,
and the majority of the funding for the Medicaid program comes
from the federal government. So as you think about it, with
the economy as we have citizens who lose their jobs, do not have
access to healthcare become financially eligible for
Medicaid, Medicaid is counter cyclical to the economy.
So the better the economy does, the less people need Medicaid.
The worse the economy does, and unfortunately that's the
environment we're in right now in America, more and more
Americans are seeking healthcare and payment through Medicaid.
This is a fact that you may not have thought about.
Who's covered right now? One in three children in America
are covered in Medicaid. And the fact is that they are
your neighbors, people don't usually carry their Medicaid
card around with them to promote that, but the fact is that it
covers so many children. So the idea of prevention, being
able to address the needs of children and moms and making
certain that the young mom who is pregnant and she can carry
that delivery to term and that we don't have a preterm delivery
at 23 or 25 weeks, which, unfortunately results in
extraordinary expense and incredible hardship for the mom
and baby, our job in the Medicaid management business is
to identify that mom, get them the care and services that they
need so that they deliver a healthy very, very productive
baby. The other spectrum is that the
program covers over eight million Americans with
disabilities. These are usually members who
have needed care from literally birth and their funding stream
and source of services they receive come through the
Medicaid program. And then at the end of life
services, almost 70% of people in America's nursing homes are
covered by Medicaid. So the point of this is that
while Medicaid is not talked a lot about in dinner table
parlance, it's very, very important both from a standpoint
of coverage for many Americas and also provides the basic and
necessary insurance coverage for them.
What's covered? It's like, generally, the
insurance card that you may have.
It covers a comprehensive set of services.
It's also because it covers both young and old members, the
services between those age spectrums are fully covered by
the Medicaid program. And it provides from a
behavioral health standpoint almost 25% of the funding for
mental health services in the United States.
And so it's one of the programs that when you talk about
Medicaid, the historical viewpoint is that well that's
for those poor people. Well, as I think I'll show you
through this presentation is that Medicaid is a very
respectable and, frankly, increasingly important level of
insurance coverage for many Americans.
What drives the cost? And this is the point I tried to
make before the slide had a little administrative problem.
The fact is it's counter cyclical.
The better the economy does, less Americans on Medicaid.
If we have a recession like we're in now, more Americans are
eligible because of their lower income levels for Medicaid.
And as we look at the coverage limitations, there's more and
more groups like the disabled that are looking for additional
coverage because their income or status from a health standpoint
does not improve. And you also then have, just as
you have within the general medical population, you have an
ever increasing need for technology and better
improvement of quality of life for members, and therefore the
cost structure for Medicaid goes up.
It's one of the fastest growing programs in the federal budget.
So the slide portrays the number of people that are covered by
categories. And as you look at all
individuals, it covers almost 25% of the near poor, and these
are categories based on income levels, and as you look at then
families, it covers, for instance, almost 60% of low
income children and then 70% of people in nursing homes.
And this slide only portrays the point that it has a broad
spectrum of coverage and covers many Americans, whether they're
young or old or where they happen to reside, whether in
their own home or in a nursing home.
So how do you become eligible for Medicaid?
It's income driven and it's based on the moniker known as
the federal poverty level. And that is currently today, for
a family of four, approximately $23,000 in income.
So if you have come from a family of four, your income is
below $23,000, actually $22,350, you are eligible for Medicaid.
And it is, as you look at the national levels for children,
because the program has been designed primarily to make sure
that all children regardless of income have coverage, across all
states, as you look at all 50 states, generally children who
are covered under Medicaid if their incomes are about 250% of
poverty. 241% is the exact number.
So if you're at an income of about $60,000 a year for your
family of four, those children are covered for Medicaid, albeit
the parents may not be. And that is another policy
driver behind the creation of Medicaid was to make certain
that pregnant women got early coverage and great coverage for
themselves and their baby. And so you see coverage for
pregnant women of almost $40,000 a year.
If you have $40,000 a year of income, you're eligible for
Medicaid coverage. The newer categories that have
been added over the last 10 years really deal with what we
refer to as working parents or jobless parents so that as their
incomes, they lose their jobs, do not have income, they are
also covered in Medicaid. And I show you this because this
is, if we were here 10 years ago, you wouldn't have seen the
focus in on the jobless members or working parents.
And those are known as childless adults that come in the program.
But the point of this eligibility is that it's driven
by income and as members' income increases on an annual basis as
it's tested by the government, you have to report your income,
you may be eligible to continue on Medicaid or you may drop off
of Medicaid based on your income and go into the private
insurance markets. So what does it cover?
Within the low income families, prenatal care and delivery.
You've got the focus on children through immunizations, all the
proper things that I suspect you've had when you were a
child, and being in a position to make certain that they have
the ability to deal with the unexpected challenges of being a
child. So ER coverage, dental care,
hospitalization are covered under that.
Individuals with disabilities are covered.
Autistic children are covered. Children with cerebral palsy,
HIV/AIDS patients. Prescription drugs for those
services, etc. And I bring this slide to you
only to show you the broad coverage that a Medicaid member
is afforded. And then for those elderly
individuals that are covered by Medicaid, many of them are based
in the community, and the idea of Medicaid covering elderly
members is that the best way to take care of an older citizen is
to not put them in the nursing home, but rather keep them in
their home and have them provided with the activities of
daily living. And I know some of these are
awkward topics, but many senior citizens end up in nursing homes
because they don't have the physical support to be able to
go to the bathroom by themselves so they need additional services
provided by an in-home caretaker that through the Medicaid
program those services are provided.
So the member has a better quality of life staying in their
home as opposed to having to go to a nursing home because
there's no one there to help with it.
And so you see now much more of a focus because of the aging of
our national population, both at the national level and the state
level, where many members are being provided care in their
house as opposed to leaving the nursing home.
And as you look at the role of public nursing homes, the
reality of them is that many of them are old, they're funded by
public dollars and they cannot, frankly, compete with the more
private pay nursing homes that are, frankly, courting a
different type of population. And the fact is that as you
watch the Medicaid program over the years ahead, you'll see more
and more of a focus on investing in services to keep the member
at home as opposed to being in a nursing home.
And any of you who have relatives or friends who have
been in nursing homes, I think you understand precisely what
I'm speaking to from a quality of life standpoint.
And then we start to look at long-term care payments.
And long-term care payments are, again, those services for
long-term care, services such as nursing home services or in-home
services that supplant nursing home care.
And the reality of it is that the nurse long-term care
industry almost half of the funding nationally comes from
the Medicaid program. So as you either go back to your
home here in Madison or return to the communities in which you
live over the holidays, think about nursing homes that you see
as you're driving by them, etc, and think about the fact that
almost 50% of the funding for that facility comes from the
federal government through Medicaid dollars because many
low income Americans that's where they spend their final
days in the Medicaid nursing home.
The reality of it is that Medicare, which is the other
partner to the Medicaid program, also pays part of the share, but
the predominance of the funding comes through the Medicaid
program. The other item that's very
important is that the Medicaid program is set up as a
partnership between the state and federal government.
And so for every dollar that is spent on Medicaid, roughly
43-cents of that dollars comes from a state government and 57%
comes from the Feds. And what we're seeing is that
the budget deficit discussion right now as we watch TV tonight
or on the Internet, the discussions around how do we
fund healthcare going forward is really based on the dilemma of
the spend of dollars for Americans who are out of work
that are now on the Medicaid program states are needing to
come up with more of their percentage of the funding and
the federal government has to cover more of that.
So you see the direct effects of states being providing more
money also being matched by the federal government and you see
then the indirect of the Medicaid program because as more
Medicaid members seek care, they need vendors or healthcare
partners to provide those clinical and other social
services so jobs are created by that and you also have employees
who are now in the healthcare sector serving the Medicaid
member. So the Medicaid dollar is not
only fueling the direct investment in the member but the
downstream effect on jobs and other, if you will, community
investment assets. I hope I make a couple points,
but this one I want to leave you with.
As you think about Medicaid, the increase of Medicaid is
counter cyclical to our economy. The last three to four years the
amount of dollars that have been spent on Medicaid have risen
dramatically because our economy has been challenged.
And so as we recover in our economy and the economy gets
better, the Medicaid program investments generally taper
off. So it's counter cyclical.
So as we have a good economy, less Medicaid spending.
Unfortunately, now a challenging economy, more Medicaid spending.
And the reality of it is that 1% in the national unemployment
rate equals a decrease in 3% to 4% of state revenues.
Well, why is that? It's because the state isn't
collecting taxes from workers so when people are unemployed
they're not paying payroll taxes, etc, to the state and
state income tax, and therefore states have less dollars.
So therefore the reality of it is that 1% of increase in the
unemployment means another million Americans are in public
health programs. The counter-cyclicality of it
is very critical as we think about the funding issues.
And this is why, regardless of what paper or website you read,
the focus in on what do we do about funding the public
assistance programs, as Medicaid is referred to in the press, is
so critical because millions of Americans are out of work, they
are not paying taxes but yet there's an increasing demand for
healthcare. And that's why Medicaid is
counter cyclical to the economic cycles that affect the nation.
The other significant point is that very candidly moms and
babies are generally pretty healthy.
The majority of births are normal and healthy, but the
reality of it is that the dollars that are spent in the
Medicaid program are spent by a disproportionate number of old
folks. So my point is that children
generally don't spend a lot of resources.
The elderly citizens spend a tremendous amount of resources.
And this slide indicates that as we look at the number of the
population splitting it, 25% of the population spends 70% of the
funds in the Medicaid program. And the dollars are skewed
towards the elderly population because of the needs they have
on a daily basis and the acuity of their healthcare.
So the constant 24/7 care that a member requires in the nursing
home is quite different than a mom who has a normal delivery
and the baby and the mom go home three or four days later.
And the point is that this is so important for you to think about
in the years ahead because as you hear about the Medicaid
program and the national debate or the debate in your state
about healthcare, a lot of the focus from the policymakers is
what do we do about this spend at the end of life because as we
are aging, we will consume more healthcare resources and
therefore the ability for the state government and the federal
government to fund this is really critical.
And I think we all know in this room the demographic trends
around aging. So this slide, if I came back
five years from now and we came back for a reunion with Jeanan's
class, the reality of it is I suspect we'd see this proportion
driven even higher, a smaller proportion spending a lot more
of the healthcare dollar. Population health factors are
very, very critical. And the reality of it is that
where we live, the socioeconomic status into which we're born,
drives a lot of the cost issues of our healthcare.
And I can tell you, and I know I don't know how many of you are
from Madison or from Wisconsin historically, but generally
Wisconsin is a very healthy state as a state.
However, if we were to jump in a UW Madison bus and go about 75
miles to the east in Milwaukee, or frankly to be very candid
with you, 10 miles from university campus, parts of
Madison, you'd find a whole different story.
You'd find children that are challenged with the lifestyle
they've got, their home environment and all the things
that drive good development of children, if those factors are
missing, it creates more expense and more challenge.
And the reality of it is that people of lesser income are
affected more due to the population health factors in
which they're born. And so the discussion around
poverty and socioeconomic issues are key drivers and key partners
in trying to improve the quality of life for our Medicaid
members. And I really like this quote
because living in an environment that often fails to support
undermines healthy practices and behaviors.
And the point here is that our life condition drives a lot of
our cost factors which are really referred to as population
health factors. So as we look at Medicaid, when
Medicaid was created in the 1960s by President Johnson, the
theory was let's take care of moms and babies and make sure
that young moms can have healthy children because there's not a
person in this room or in the United States that would
disagree with that ambition. The reality of it is that as our
society has continued to age is that there's, not only the
current population of children and moms that need to be taken
care of, but the new poor. And these are folks, and I have
friends that three or four years ago, and they were graduates of
UW Madison, that were engineers that worked for an auto plant
maybe about 50 miles from Madison, their children are on
CHIP, Children's Health Insurance Program, publicly
funded Medicaid program. Never in their wildest dreams
did they think that their kids would be on a public assistance
program, but they lost their jobs, their children needed
healthcare, their benefits ran out after their jobs were
eliminated, they couldn't find work and so their children
needed care and their kids on are on Medicaid.
I tell you this not to spook you or scare you, I tell you that
because this is a whole new confounding factor of the
challenges with our economy in the last 10 years.
Citizens who never thought with their good degrees and education
that their children would ever be exposed to a public
assistance program. We then have the aged, blind and
disabled and these are the members who are because of
genetic and birth challenges are in a position that require 24/7
support from the federal government and state government
through the form of Medicaid. The emerging cohort, and the
cohort is a term that we use to segment the different types of
population that we serve, is a group called childless adults.
And ladies, you can pause for a moment, this won't be addressed
to you. Childless adults are generally
males between 19 and 64. They generally work in
occupations that are a little more high risk, high risk being
defined as auto mechanics, other jobs such as construction, etc,
where there's a little more potential for personal safety
challenges, and these are members that have not had health
insurance ever. And they tend to be the fearless
that I don't need to go to the doctor, I don't need to get my
immunizations, I tend to smoke and drink a little more than the
average person, and these are folks that have not had access
to healthcare because their employer doesn't provide or they
couldn't frankly afford the premiums.
I can tell you when I was 19 years old I couldn't afford a
premium of $1,000 a month for healthcare for myself or even
$150. And I tell you this in the
spirit of this population now, the childless adults, this
cohort is now being offered insurance through many Medicaid
programs, and let's think about this for ourselves.
If we have not had the ability of to access healthcare because
we've been scared of the bill that we're going to get from the
ER or the physician, we're in a position that we tend to avoid
healthcare, we don't get our immunizations, we don't get our
annual checkup, etc, and as that insurance card is provided
through the Medicaid program, I tend to go to the doctor, get my
knee fixed, get the prescriptions I need, get my
allergies taken care of because prior for having my Medicaid
card life was pretty difficult from a healthcare standpoint.
I was always avoiding the ability, I don't want to go to
the doctor because I can't afford it.
So these folks, when they receive their Medicaid insurance
card, they experience what's called pent up demand.
For every dollar that they receive in a premium, they spend
three dollars in healthcare expenses.
They're getting their knees fixed, they're getting their
prescriptions, etc. And the childless adults is
another coverage pool of members who are now covered under many
Medicaid programs. And the theory being is that if
they don't get coverage through the Medicaid program and they
end up going to the emergency room or to a hospital without
coverage, they're going to be in the position that the hospital
ends up having a large bill that can't be paid, and therefore the
hospital cost shifts those dollars they can't collect to
the private sector who have insurance which drives up the
cost of health insurance. And this is one of the
fundamental discussions going on in the debate as we speak about
what's the proper role of Medicaid and Medicare and
private insurance in how we deal with the financial crisis within
healthcare funding. But I point this out that these
populations are distinct, they're different, but yet
they're interrelated because they rely on state and federal
funding to move forward. The other piece that's important
is depending on the leadership, either republican or democrat,
democrats tend to have more of a political view that more
coverage for more Americans is better, where the traditional
republican view has been less coverage, more focused on
certain populations like children and moms but not being
in a position where it's a full coverage for all folks.
And I don't mean to give you a political observation, but it's
a dynamic that depending on what state you're in, your Medicaid
program will have a philosophy that's driven and frankly
reinforced by the political leadership about their views of
federal funding and entitlement. There's also incredible
challenges to effective care management.
Within the Medicaid population, and again I'm speaking at a high
level, we'd have to break this down by which age category, but
generally you have higher rates of asthma, premature births and
hospital readmissions. The other item that's very, very
challenging is that contrary to the insurance card that you may
be carrying, either yourself or through parents or someone
supporting you, is that many members in Medicaid only stay on
the program for less than eight months on average.
So when we talk about moms and babies, they're normally on the
program, the mom starts with Medicaid.
She is known as presumptively eligible because she's pregnant
which is, in effect, a coverage category for Medicaid.
She delivers the baby, the baby becomes Medicaid eligible upon
birth, and depending on, and this is where the administration
of Medicaid is difficult, in many cases the Medicaid member
then only stays with the program less than a year.
It's because they must re-enroll on an annual basis.
In many cases they have to go to the county human services
office. And I think if I asked you could
you tell me where your local county human service office is,
I don't know if all of you would know the answer to that, but you
must go through that process and endure long lines, bureaucracy,
etc, to do that, and for many Americans just like you and I
that's too much of a hassle, I'm not going to do it.
So they drop off of Medicaid, they're not covered and then
they're uninsured. The other item is that in many
cases these members are transient.
They don't have permanent homes and to be very honest with you
we don't have to go further than downtown Madison to meet
Medicaid members who are transient living in shelters but
they're not on Medicaid because they haven't gone to the public
office to sign up or they don't have a phone number or the paper
work that was sent to them never got to them because they're
moving between shelters. And if you think I'm presenting
sort of a woe is me sort of poor social service viewpoint, not at
all. I'm trying to give you a sense
of this is how the Medicaid member in Madison is affected
today. The other issue is that Medicaid
programs is multiple languages, multiple cultures, multiple
ethnicities, and so the program is challenged by dealing with a
population that's very, very disparate.
The challenge to the Medicaid business, and again just to give
you a very quick preview of our business model, our company,
WellPoint, we're known in the local markets as Anthem or
UniCare, our company will respond to a request for
proposal from state government. And what they will want is an
insurance carrier like ours to give them pricing and a vision
of the services that we'll provide to serve their state's
residents. And so whether we're doing
business in Wisconsin or Indiana or California, each of these
RFPs require us as a company to commit to a provision of level
of services, a level of access insuring that we have the proper
hospital and physician networks to support the needs of our
members and then all the social service supports they require as
well. But the challenge is that you
have not only state budgets that, again as state budgets are
challenged with funding Medicaid, the level of funding
and the eligibility levels are decreased so that you have fewer
people covered, you have the issues of population-based care
management challenges, which I alluded to, and programs very
from state to state. And to be specific, Wisconsin
has historically been viewed as a quite generous Medicaid
benefit state. Whereas, if we went to parts of
the deep south, you would find a different or more skinny benefit
structure provided for Medicaid members.
And that's driven, not only by the revenue of the state, but
also by the political philosophy of the state leaders who are
either governors or state legislators.
And I tell you this because depending on which state it is
and which election has just occurred, you can see a strong
flip in viewpoint towards how Medicaid members are served.
The other item is that we have skyrocketing medical cost.
Not only the great technology is afforded all Americans is
afforded to Medicaid members, but the reality of it is that
the cost structure in healthcare far exceeds the ability of the
federal government and state government to fund that.
And as you experience in the traditional insurance markets,
we simply have a shortage of doctors, particularly in primary
care in the specialties of family practice, pediatrics and
internal medicine. So as we think about this
gentleman or lady climbing the ladder, the point here is that
we are, from a business standpoint, very, very
challenged because the risk related to serving Medicaid
members is much different than serving a traditional commercial
insurance population. So, we now are in the point
where we're talking in the neighborhood of 2012 to 2014
where we're going to be with healthcare reform.
And I'm not here at all to discuss a political viewpoint on
that, but there have been lots of things about reform that are
really based on the example of what's called discontinuity
agent of change. And this is something where a
crisis creates a different outcome.
We saw this and I've identified three crises that I think we're
all familiar with. One was not too many years ago
when there was a potential that the Tylenol that you took was
not good for you; it was actually bad so nobody was
taking aspirin. We saw the Lehman Brothers issue
with what happened the stock market a couple of years ago,
and then the offshore incident with BP with the oil spill in
the Gulf two years ago. These were major crises.
From that, you see then in discontinuity is the idea that
something forces a big change. Examples of that, and I
certainly carry one myself, is the iPad and all the Apple
innovations. And then price controls also are
driven through discontinuity. And out of that then you also
have the idea of creative destruction where an industry,
is anyone here carrying a camera that film in it right now?
Well, it's because we all carry digital cameras.
10 years ago, if I asked the same question, we all would pull
out our camera with film. And so you saw digital
photography basically replace Kodak.
You see the same thing happening in the airline industry, and
there's major changes that disrupt the current way of an
industry performing and being replaced by something else.
And the point here is that we see healthcare reform in this
same view. It's going to replace something
that's been in existence for a long time.
So as we think about the expansion of Medicaid post-2014
and the Affordable Care Act which the president signed into
law in March of 2010, is I will tell you, folks, while we might
have a couple years of age difference between us, I'm going
to share with you I think it is by far the most disruptive
public policy that we're going to encounter in our lifetimes.
Not in a negative or positive sense but because of the overt
attempt to make certain that more Americans have access to
healthcare. And regardless of your political
viewpoint on republican, democratic, etc, my comments are
not framed around that, it's the reality that post-2014 we're
going to have almost 20 million Americans that are eligible and
will be carrying an insurance card for the first time.
And, again, some of you in the room I'm sure have been exposed
to this with yourself or with family members or loved ones,
where you avoid care because you don't have the ability to pay
for care. You don't go to the doctor, you
don't get things fixed, you wait out the cold, you wait out the
infection because you just don't have the ability for the funds.
20 million Americans in 2014 who are going through that today
will not have to do that. And the Affordable Care Act,
regardless of your political view, is using the Medicaid
program, its past practices and its policies, as an expansion of
coverage lever for those Americans.
It also is going to be looking at not only the traditional
insurance that we're used to in health insurance, it's also
going to be affecting the ability to deal with long-term
care and the provision of those services for members who are
seeking daily assistance and also nursing home services.
But it's almost a one-third expansion of the population
that's going to be eligible today for insurance.
So if we're sitting here in 2015, there's 20 million more
Americans, many of them in the state of Wisconsin, who will now
have insurance coverage for the first time because they are
eligible from an income standpoint.
And it is, and I was only seven years old when the original
Medicaid Act was passed in 1965, and if I told you I remember it,
I'd be lying through my teeth, but I'll suspect that when we
look back if we met 10 years from now and say remember those
conversations around healthcare reform?
I think this is going to be from a public policy and national
debate standpoint one of the richest and frankly most
contentious discussions around is it the proper role of
government to expand coverage for Americans and have the
federal government pay the majority of that share.
And so it's going to be a debate that I know we're all involved
in and paying attention to, but this expansion is, this is a
mega trend in our lifetimes. The reality of it is that as we
look out into 2019, we're going to have approximately 28% more
people covered and we're going to have a lot more money being
spent by the federal government because one of the overt aspects
of ACA, the Affordable Care Act as that acronym is known as, is
the fact that states don't have the money to do this, and so the
federal government is overtly accepting the responsibility
under current federal law to fund the expansion of almost
that 28% of Americans. So this is a big deal for us as
citizens because the federal government has said it is time
for us to put it on our tab to cover these American who do not
have coverage. And the theory behind the
expansion is that if everyone has insurance, the cost shifting
that currently going on in the current system, meaning I, as
one who carries an insurance card, I pay more for my health
insurance because you don't have insurance, that's the argument
they're trying to get at. It's a very detailed discussion.
I could go on for a couple days about the politics and policy
behind it, but the reality of it is the Affordable Care Act was
passed with the intention of the federal government stepping in
and saying it's our job to pay for that.
And that's what spawned the extraordinarily contentious
debate around the proper role of the federal government and
therefore states to fund it. We also are going to see new
solutions coming out of the expansion.
And the eight nodes that I've identified is really the
emphasis around evidence-based care.
For instance, when you go to the doctor, physicians are trained
and maybe some of you are training to be doctors if you
have that privilege, most of medicine is driven off of an
evidence-based algorithm. The science says if I do this, I
will get this outcome. There's going to be much more of
that because in the hands of the practitioner are going to be
electronic medical records, web-based technology, things
that today are still emerging but over the next 10 years
you'll see these things become, frankly, very, very standard.
And the ability to manage not just simply your cold but if you
have diabetes, which is known as a chronic care disease, that
enabling technology and evidence of medicine will better be at
the position to really try to deal with the cost issues going
forward. And as you look at the explosion
of knowledge around, not only the basic disease issues, but
emerging issues, whether it's stem cell research, etc, there's
so much more knowledge in the body of medicine that we will
see really demanding new solutions for how do we export
that. And I can tell you as one who
has been intimately involved in prior life with the
implementation of electronic health records and medical
records, when you move to that new environment and you're away
from paper, it's much better for the provider, it's much better
for the patient and, frankly, for myself on my iPhone I can
talk with my doctor right now if I need to, and I'll show you a
couple examples of that. Now there's the other, in our
spare time of healthcare reform we've talked a lot about the
exchange. And the exchange is a
marketplace that will allow a consumer to purchase or
understand the choices in front of him or her about health
insurance. And it's going to be, in most
cases, electronic web-based, and what you'll be able to do is to
be able to go to an exchange, which will be in effect a
shopping mart, you will simply enter your information about
yourself, your age, where you reside, you're male or female, a
couple other variables, and you'll be able to go out and say
based on what you just told the database, it will come back to
you with the options based on your income of the health
insurance that you could purchase.
And what's really critical, where Medicaid becomes so
critical to discussion around healthcare reform is that the
federal income levels have been set so that approximately
20 million more Americans will be eligible for some form of
federal subsidy, meaning the federal government paying for
part of your health insurance premium.
So if you have not had access to health insurance, historically,
in 2014 based on your income. Let's give you a specific
number. If you're single and you're
making $30,000 a year and your employer does not provide
insurance, you'll be able to go to the exchange, to the website,
and based on the information you provide them, pick a plan that
will insure you. And so the exchange becomes very
critical because Medicaid members, the fact is they don't
always remain poor and stay in Medicaid.
As their income goes up, they'll be able to receive federal
subsidies from the federal government to purchase private
insurance in the insurance markets.
Our company has a lot of private insurance outside of the
government business. And so we'll be a player in
certain markets where you'll be able to access both our
government business if you're on Medicaid and then private
insurance. And the exchange is, to be
candid, it's an emerging policy issue.
The federal government is spending a large amount of money
and lots of resources developing the administrative rules behind
it, but in essence it blurs the concept of you're in Medicaid
and I'm not. And you'll see members moving
into Medicaid, you'll see members moving away from
Medicaid into the private insurance markets.
And this all starts in 2014. So as you're listening to the
national healthcare debate in the next presidential election,
a lot of it is around how do these exchanges work.
Now, because in the United States we have a strong
propensity toward state government control and states
control a lot of the decisions for their citizens, we're going
to have 50 different exchange markets.
So what you see in Wisconsin may be very different than what you
see in Minnesota. And let's say you live in
Wisconsin one year and you move to Minnesota the next, that's
going to impact you as well. Certain governors currently have
said they do not wish to participate in the development
of an exchange. They don't believe in the
philosophy of that, and so at that point the federal
government has said they will run the exchange for that state
that chooses to demit their opportunity to be in the
exchange business. And I know some of the stuff I'm
speaking to is very confusing and I'm doing it at a high
level, but I'm trying to give you a sense of the impact where
Medicaid fits in emerging policy.
It really becomes a foundational element for us as we think about
how more Americans become covered.
The other piece of it is that as I alluded to your ability to
take notes electronically, people expect technology with
them. You expect it in your health
insurance opportunities as well. There's been historical bias
that poor people don't carry cell phones.
Well, the fact is that even though $35,000 is a lot of
money, when you start to rank income it's still in the lower
quadrant of income, 60% of those households have cell phones.
And the reality of it is adults who live in poverty tend to only
have wireless service. They don't have what we call the
old land line. You pick up the phone off the
line. Our family just got rid of the
land line because we decided we don't need it anymore.
And I tell you that because technology is also driving a lot
of the consumer choices for the Medicaid consumer.
We are looking right now and have just announced the ability
if you have a smartphone and our company serving you as a member
in Medicaid, we can talk with you via video.
You can talk with a nurse about what your needs are.
It's in an encrypted, secure manner, but it's on your
smartphone to do that. And these strategies, we
believe, become game changers because rather than in the
middle of the night when you're feeling horrible have to get up
and go to the emergency room and say what do I do, you can call
one of our care managers electronically by video and
you'll be speaking to a live nurse who understands you, has
access to your healthcare information, and while we can
argue is it as private as being in the exam room behind closed
doors? Probably not, but for a consumer
it's quicker, it's more effective and it's in a way that
you want the information deployed to you.
And we really believe in this next phrase that we're trying to
connect Medicaid consumers to the right care in the right
setting at the right time. I can't even begin to imagine
the role that cell phones and other mobile technology play
in healthcare delivery. And a couple other examples for
you. Anybody here watch Jeopardy! ?
Well, Jeopardy!, as you know, the supercomputer
Watson basically beat the previous members, some of the
smartest Jeopardy! contestants.
Our company, I'm proud to announce, is in a partnership
with IBM which owns Watson, and what we're using it for is, and
again I know some of you have been through this and it's a
very awkward discussion, but assume that you've just been
diagnosed with cancer and your oncologist is deciding what
level of treatment for you and what to do.
And again I don't want to be too transparent on some of these
details, but the reality of it is in a matter of seconds,
Watson, as a supercomputer, can read millions of pages of
clinical data, scour the universe of cutting-edge
information on oncology treatment, cancer treatment, and
then provide an oncologist, the physician, with potential
sources of what to do about treatment.
And our company has just announced this partnership with
IBM recently and we intend to, as we stabilize the deployment
of this, this will be something that for consumers both in
Medicaid and in the traditional insurance markets will allow
physicians to use technology to improve care.
And some are very skeptical about this and have taken a lot
of shots at the idea of Jeopardy! in healthcare.
We see this as a very innovative idea because of the ability of a
supercomputer to literally scour through gazillions of documents
and evidence-based protocols to improve ideas.
And while we may want to laugh at the idea, I can tell you if
it's my kids or my wife, I want that right now.
And so as we think about these things, I don't do this to
market to you about this specific idea but to give you
the idea of the orientation and the marriage between technology
and improved clinical care for members and also helping
physician and hospital partners do their jobs more effectively
and more accurately. We are also piloting specific
programs where you have, if you have 4G, you can't have 3G,
I'm sorry, if you have 4G technology, video chat
capabilities, in two to three years 4G will not be the
entrance point, it will be across all mobile technology.
Text messaging reminding the pregnant mom to take their
prenatal vitamins every day. Sending them a text message
regularly. We also issue cell phones to
members that are, and these are not the top of the line Apple
iPhones. They're very solid quality
phones that we can give to members that button one is
programmed to your nurse manager, number two is to
another physician that you may be seeing and three is to our
care manager you can call 24/7, and you actually get some free
minutes on that phone too. And we're doing this not to be
cute about the role that cell phones play, but for many of our
members, they don't have technology.
And for those who don't have access to a cell phone, giving
them a cell phone with preprogrammed clinical numbers
is a 24/7 lifeline. I can share with you, if I
had more time, specific stories where we both improved life for
folks and, frankly, saved a couple lives.
We members who were suicidal on the phone, were really having a
tough day and we were able to get a behavioral health
specialist on the phone to speak with them about those
improvements. And these are Medicaid members.
These are what society calls the poor people.
And so I'm very proud of our company and companies in this
industry that work to provide this level of technology
regardless of income. And then using visual
assessments for signs of disease or health.
You've got a rash and being able to take a quick picture of that
and that's sent back to the nurse so that they can diagnose
what you got going on. That stuff is going to be in our
lifetimes very commonplace clinical protocols.
Then we also, in Medicaid, contrary to the traditional
delivery systems, we also work very, very closely with what are
called federally qualified health centers or
community-based centers. And if you're from a larger
city, you've seen these. In Madison we have the Access
Community Health Centers, and these are community-based
clinics that primarily serve people of low income.
And they are set up to deal both with the needs to support lower
income Americans but also be in the position that the member has
a full complement of services. And they receive a different
funding level from the federal government than the traditional
payment system does, but they are very, very vibrant because
without those, and again whether you're in Madison or you're in
Milwaukee or New York City, many of these clinics are the
lifeline and safety net, and they're known as safety net
clinics, to millions of Americans that that's where they
get their care and their family gets their care.
Also, in long-term care, which I spoke to which is again if we
step back in our Medicaid quiz, there's fewer long-term care
members in Medicaid but they spend almost three-quarters of
the money in the Medicaid program.
In family care, which is a program in Wisconsin, this
program was designed under the premise of person-centered care.
So if I am a elderly resident and the choices are, you know,
Kev, you got to go to the nursing home or you want to stay
in your house. Well, I'd like to stay in my
house. The state designed a program in
partnership with the federal government that allows myself as
the member to determine what level of care I need on a daily
basis for the state to provide that financing for the care and
I'd be able to stay in my house being healthy, more functional,
not being in a position where I'm sent to the nursing home
where I frankly don't want to be, I'm isolated from my family
and care givers. And family care has allowed the
ability of long-term care service traditionally provided
in a nursing home to be in my house, and, frankly, as a
long-term care person that needs those services, I've got a
better quality of life. I'm not in a usually a 30- to
40-year-old building, known as a nursing home, that has two beds
in the room with hardly a flat screen TV and I'm sitting there
watching TV with someone I don't like.
And I say this not to criticize the current nursing home
industry, but the reality of it is if you've been exposed to
that, it's not a great environment.
And so you see in Wisconsin and you see other states doing this,
a tremendous and profound respect for the person-centered
care model which says the member determines what I need and the
state then helps in partnership with providers to provide that.
And I saw in my brief tour of duty in state government an
incredible quality of life for those members who are served by
these type of programs. And this is the direction that
the long-term care programs are going across the nation because
the recognition that the best use of the dollar is not at the
end of life in a nursing home, and I don't know if you know the
statistic, but this is an interesting one is in the last
six months of your life you will spend 85% of the dollars you put
away through your paycheck in Medicare taxes.
And so the point is as you get older, most the money that's
spent historically is the last six months of your life.
And so what we've tried to do in Wisconsin and other states that
do this is to make sure the money is invested to give the
quality of life for the member that they deserve and they
determine what goes on as opposed to I'm going to spend my
last few days in a nursing where I'm isolated from my family,
friends and the environment that I've been so used to.
So we're hopefully driving down a road, and I put a turn in the
road because I can't tell you what's around that turn but I
suspect what it is, is we've got an incredible intersection of
healthcare and technology. There's digital technology that
once was astronomically expensive we couldn't even talk
about that now has a return on investment for a member in
healthcare that's a great opportunity.
You know better than I, as well as I, the issues around what
Facebook and Twitter and others provide for being able to keep
track of my exercise and diet routines.
Digital tools such as pedometers, scales for
chronically ill members who have challenges with weight.
You step on the scale, it's transmitted via a wireless unit
to your physician and they can say it looks like you picked up
two pounds over the last couple days.
They could say, did you eat too much?
No. What you've got is you've got
fluid retention in you and you might have some problem with
your kidneys. That's the type of early
intervention with a wireless device on a scale that you can
save admissions that may cost $200,000 in healthcare.
So we're going to see so many of these things in our lifetime
because of the promise of the intersection of technology and,
frankly, preventive management provide.
And we see technology as really an open road and it's the
emphasis on it's not just for people that can afford private
insurance, it's really about how do we make sure we have a
partnership with the Americans who see Medicaid as their
primary form of insurance. So with that, I'll leave chance
for your questions, your comments, and on a personal note
I deeply enjoyed the opportunity to spend time with Jeanan and
you this afternoon. >> So the students know that I
walk around with the mic, and you can applaud for Kevin.
[APPLAUSE] I think that was worthy of
applause. In fact, we have some of our
students in the back saying how much they appreciated kind of
your explanation of some of the topics that are more complex.
And I know that Kevin has a particular ability to be able to
do that. So as you want to ask him
questions, just raise your hand and I'll be happy to hand off
the mic, and I think that he's demonstrated he's able to answer
almost anything. I'm going to throw something out
to Kevin that's somewhat broad, but it does feed to the
Affordable Care Act, and you've sat on both sides of the fence
as a public servant and certainly as a steward of the
private sector of both medical group practices as well as the
insurance side, when you think about what the act is hoping to
accomplish, what do you see in terms of it succeeding and where
do you think it fails? And I know it's not completely
been enacted yet but from a high level view.
Well, it's clear that if it's enacted in the current proposed
definition that you will have many, you'll have millions of
Americans that now have the proper right to seek care from
doctors and hospitals without worrying about how do I pay for
the bill. Because they have a form of
insurance that will allow for that.
The challenge is going to be the sustainability of the funding
for this because this is a major investment and when you're
talking about, as I alluded to the childless adults, these
gentlemen who did not have insurance, evidence suggests,
and we know from our company and supporting the program in
Indiana, it was called the Healthy Indiana Plan, and these
were childless adults that didn't have insurance, they
spent a lot of money on getting care.
And I think the issue is the projections around what is it
going to cost and how do we agree to commit to that funding
going forward. My hunch is we've undersized the
investment. >> You know, if we were to have
time to dissect Medicaid benefits, as we haven't
necessarily had time today, but those who do sometimes say, well
they are the richest benefits in the world.
People who are on Medicaid have access to so many different
opportunities that maybe some of us with more traditional
insurance would not have. From that perspective, Kevin,
and again from both of your hats, both public and private,
why don't we start to do some cost containment by cutting back
what Medicaid beneficiaries would have or forcing some cost
sharing? Are there reasons for not doing
that? >> I didn't discuss this today
because this would take another hour, but as one moves up the
income scale, there is going to be the opportunity for more cost
sharing by the member. But, again, I think that the
Medicaid program was built primarily initially to serve
moms and children. And it's hard to argue against
immunizations for children. And when you really stack up the
Medicaid benefit next to a private insurance plan, the real
discussion becomes how did the employer structure that private
insurance plan. They had the choices to either
add or subtract from that benefit menu, the federal
government has taken more of a uniform approach and said if
you're in Medicaid you provide this level of service.
So employers, based on their fiscal appetite, have chosen to
include certain benefits that are, in some cases, equivalent
or less to Medicaid or increase them based on their ability to
pay. And one of the things, that's a
private sector discussion. The employer does have that
right. When I go to work for an
employer and they provide health insurance, I'm getting benefits
based on their philosophy, their financial capability to pay for
those. >> One of the groups that the
described in the course of describing who's on Medicaid
happened to be those childless adults, and they're increasingly
becoming a vulnerable group because many of them will lose
their benefits in some states, like Wisconsin, soon as there
is a pare-back on Medicaid. Can you describe for the
students what's likely to happen, at least for that
temporary time, if temporary, they start to lose their
benefits. Where will they go?
I think evidence would suggest that they will not seek
care because they don't have the ability to have it paid for,
which will further exacerbate their clinical or health
problems that they've had, and their ability to walk into
a hospital or clinic and say I'd like to get my healthcare,
but I have no ability to pay for it, that was the behavior
they exhibited before. So I think that you'll see folks
not seeking care, which then simply delays the investment in
chronic care management, etc.
It's possible it's a step backwards.
Hi, Kevin. My name is Brian.
You mentioned that in the news recently we hear a lot about
healthcare reform and on more of a state level we've heard a lot
about BadgerCare, can you maybe describe a little, just briefly,
I know it's a really complex issue, but basically kind of
what BadgerCare is compared to what Medicaid and Medicare is?
That's kind of a big question. >> BadgerCare, it is a long
answer but a great question, but in short summary, BadgerCare is
an expanded set of benefits and options above the basic Medicaid
program, both in terms of eligible, meaning those who are
eligible based on levels of federal poverty, and the benefit
schedule in which they receive the benefits from traditional
Medicaid. And the direction was made in
Wisconsin, and I believe you had former Governor Thompson speak
recently, he was one of the architects of this, was that the
focus was in on certain benefits of the population that was
uninsured before BadgerCare needed.
And what's facing the state right now is the ability to pay
for the schedule of benefits that's in front of them from a
benefit standpoint. But it's an enhanced program
above the basic Medicaid benefits.
And extra eligibility, meaning covering more folks than the
traditional Title 19 definition. >> Question over here, Kevin.
Yes. >> Hi, good afternoon.
My name's Malka. I had a question regarding how
the Medicaid programs reimburse hospitals because I know there's
a certain amount of money allotted to each
Medicare/Medicaid program, and what do you do when hospitals
and doctors can't get reimbursed towards the entirety of medical
expenses? Because I know you said for
every dollar that they spend, you guys spend three dollars on
them. So I just curious how that works
and what would you do in a situation where you can't
necessarily afford it? I don't know if that does
happen, so if you could answer kind of both of those questions.
Well, from a payer standpoint, meaning our Medicare
manage care company, we contract with hospitals at a specific
financial reimbursement amount. And that may be on a global
what's called DRG. So if you have a certain
clinical condition that fits this category, we reimburse the
hospital a fixed amount of money.
And it's the hospital's obligation to manage within
those funds. To be very practical, though, if
we had hospital executives in the room, they would counsel me
that in most cases, Medicaid reimbursement does not cover the
cost of the services they provide.
But it is, from an accounting standpoint, contributing to a
payment toward overhead of the hospital, whereas contrasting
the member having no coverage, they would have no incremental
benefit from that. The reality of it is for
hospitals, and they're in a very difficult position and I can
tell you and I don't know if you're from Wisconsin, but I can
tell you that I think the Wisconsin Hospital Association
in our state has been a national leader in working with our state
leaders to deal with the issue of the uninsured and
non-compensated care. Non-compensated care is a
sanitized term for not getting paid for the services when a
member comes in. And if you break your leg today
and are admitted to the hospital for a couple days, the bill
could easily be $10,000. Under the Medicaid program, the
hospital would not receive that full charge, they'd receive a
fraction of that, but that is an additional incremental stream of
money versus having no reimbursement for the member
who's uninsured. And so hospitals who participate
in Medicaid, under federal law, have to have the ability to
serve the poor and needy as part of their federal mandate.
But it's very difficult because in some markets we're paying 10%
of the total hospital cost or stay.
So the bill that the member would receive, Medicaid pays
10% of it and that's what the hospital accepts.
Well, oh, go ahead. >> I wanted to make sure I
answered your question. >> Oh, yeah, you did.
Thank you. >> Well, I know the students
join me in thanking you. Once again, Kevin Hayden,
from WellPoint. [APPLAUSE]
Kevin, the students and I wanted to offer just a quick gift.