Wisconsin Public Television University Place Entrepreneurship in Society  Kevin Hayden The Impact of Healthcare Reform  December 7, 2011 UP664  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.