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PricewaterhouseCoopers Issues Report On What Obama Presidency Means for Health Industry

November 12, 2008

NEW YORK, Nov. 12, 2008 (GLOBE NEWSWIRE) — PricewaterhouseCoopers LLP (PwC) projects that President-elect Obama’s proposed reform of the U.S. health system would cost the federal government $75 billion in 2009 dollars, the equivalent of $2,500 per newly insured person, according to a report released today entitled Healthcare Policy in an Obama Administration: Delivering on the Promise of Universal Coverage. This level of spending would extend health insurance coverage to 95 percent of all Americans, including two-thirds of those currently without insurance. But funding the near-universal healthcare plan, written before the financial crisis, will likely rely heavily on the reallocation of existing dollars within the health system, which will create challenges and opportunities for the health industry.

According to the report, released by PwC’s Health Research Institute, approximately $25 billion, about one-third of the cost of the Obama proposal, could come from existing funding for the uninsured, much of which now goes to hospitals for uncompensated care. These funds, which come largely from federal, state and local tax support, could come under scrutiny as sources of funding for the expansions in health insurance coverage under President-elect Obama’s plan.

“The financial crisis could accelerate health reform rather than be a roadblock to it,” said David Levy, MD, principal of PricewaterhouseCoopers’ health industries advisory practice. “Right now, we have an historic opportunity to fix our broken health system as many forces converge around bringing better value for patients, and those forces could become unleashed by a new President who has pledged to make healthcare reform a priority of his administration.”

The report examines the implications of the next administration’s health reform ideas, and the cost and implications for the existing health system. Some of the key findings identified in the report include:

   * The reforms proposed by President-elect Obama are aimed primarily    at increasing access to quality and affordable healthcare. Assuming    full implementation of his plan in 2009, the budgetary costs would    grow from about $75 billion in the first year to an annual spend of    $130 billion by 2018. The cumulative cost over 10 years would be    more than $1 trillion.   * Approximately $48 billion, two thirds of the $75 billion, would     be spent on covering the uninsured, according to     PricewaterhouseCoopers' analysis. However, not all of those who     would receive subsidized coverage under the new plan would have     been previously uninsured. PwC estimates that 4.5 million people     who have health insurance today are likely to trade their current     plans for the new government-subsidized plan proposed by Obama.     According to PwC's estimates, increased subsidies for the     previously insured would represent approximately $27 billion of     the $75 billion cost of the Obama plan.   * Of the 30 million Americans who would be newly insured, nearly 40    percent would obtain coverage through their employers, a reversal    in the current decline of employer-based coverage. Most of the    gains in coverage are likely to come from small employers.   * PwC estimates that 13.1 million previously uninsured individuals    would obtain insurance coverage with the help of government     subsidies, either in the non-group market or through Medicaid. 

PricewaterhouseCoopers’ estimate does not reflect potential savings from the yet-unspecified savings package that President-elect Obama discussed during the campaign, including modernizing healthcare, reducing costs and promoting public health and prevention. According to the PwC report, national health spending could be reduced by nine percent by 2025 if key policy changes included in President-elect Obama’s ideas were implemented. However, the changes proposed by President-elect Obama will take time to enact and are not likely to result in savings large enough to offset the costs of expansion in health insurance coverage in the initial years, according to the report. In fact, it points out that proposals like those with respect to health information technology and wellness are likely to add costs, not savings, in initial years.

Implications for Health Organizations and Employers

According to the report, expanding coverage is likely to increase revenues but could lower margins for healthcare organizations that are increasingly dependent on government payment. The report offers a comprehensive look at the implications of President-elect Obama’s proposed policies for commercial insurers, hospitals and other providers, pharmaceutical companies and life sciences firms and employers.

Included among PwC’s findings are:

   * Hospitals will benefit from a decrease in uncompensated care, but    uncompensated care funds could be reduced to academic medical     centers and safety net hospitals. In addition, a shift in the payer     mix to more Medicaid and Medicare may lower profit margins.  * More people being insured could translate into greater premium     revenue for commercial insurers coupled with new markets opening     up from the National Health Insurance Exchange. But if Medicare     reimbursement rates decrease and Medicaid's share increases,     hospitals may place even greater pressure on private commercial     insurers for higher reimbursement rates.  * A larger market for prescription drugs and a potential reduction     in pharmaceutical companies' programs for free or reduced-cost     drugs could positively affect revenue for pharmaceutical companies.    But, they face potential profit erosion because of Medicare Part D     drug negotiations and the growth in Medicaid and new public program     rebates.   * Employers may see lower costs for health insurance through the     insurance exchange but they could see increasing regulation of     employee benefits that are likely to be part of any employer     mandate.  

“New consumer expectations, innovations in medical science and disruptive market forces are already quickly changing the way that healthcare is financed and delivered,” added Dr. Levy. “Healthcare organizations that will thrive will be those that continue to look for and deliver on the enormous opportunities to improve health and productive longevity for all.”

A full copy of the report Healthcare Policy in an Obama Administration: Delivering on the Promise of Universal Coverage is available for download at www.PwC.com/obamahealthreport.

About PricewaterhouseCoopers’ Health Research Institute

PricewaterhouseCoopers’ Health Research Institute (http://www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries.

About PricewaterhouseCoopers’ Health Industries Group

PricewaterhouseCoopers’ Health Industries serves as a catalyst for change and is the leading advisor to organizations across the health continuum, including payers, providers, health sciences, biotech/medical devices, pharmaceutical and employer practices in the public, private and academic sectors. With a distinctive approach that is collaborative, multi-disciplinary and multi-industry, PricewaterhouseCoopers draws from its broad perspective and capabilities across and beyond the health industries to help solve the array of emerging complex problems health organizations face, lead cultural and clinical transformation, and create a new sustainable model for care delivery that is quality-driven, patient-centered and technology-enabled.

PricewaterhouseCoopers’ Health Industries’ clients include both 40 of the top 100 hospitals in the U.S. and 16 of the 18 best hospitals as ranked by US News & World Report; all 20 of the world’s major pharmaceutical companies; all of the top 20 commercial payers in the U.S.; municipal, state and federal government agencies and many of the world’s preeminent medical foundations and associations.

PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide and 1,200 professionals in the U.S. dedicated to the health industries. Our health industries professionals include a cadre of physicians, nurses, ancillary health providers and some of the nation’s leading minds in medicine, science, information technology, operations, administration and health policy.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

This news release was distributed by GlobeNewswire, www.globenewswire.com

 CONTACT:  PricewaterhouseCoopers LLP            Todd Hall           (617) 530-4185           todd.w.hall@us.pwc.com            The Hubbell Group, Inc.           Lisa Stearns           (781) 878-8882           lstearns@hubbellgroup.com 

 




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