Why Health Reform?
Are we getting bang for our health care buck? The United States spends more per person on health care than any other industrialized country, but this does not lead to better health outcomes.
The Affordable Care Act (ACA) remains controversial and this negative sentiment will likely continue well into the next decade, whatever political or legal revisions ensue.
Why was the law was passed in the first place, and more importantly, what if anything does it mean for you?
The short answer is costs continue to rise at an unacceptable rate and more and more people were left without insurance. The United States spends nearly one out of six dollars on health care, and this is expected to increase during the next decade, at a time when we’re adding record levels of red ink to our national debt.
What it means to you depends on lots of things, but if you don’t have a great insurance plan, it will require you to purchase a minimum essential benefit health insurance plan or face a penalty enforced through the tax code of about $695 for an individual with no dependents. For those middle and moderate income Americans, subsidies will be available to help with the cost of this coverage, and Medicaid is expanded to provide additional coverage options to low income Americans.
Why so expensive?
Rapidly developing technology, new expensive drugs and a growing uninsured population contribute to these rising costs and policymakers will have difficult jobs balancing the public’s thirst for the most innovative technologies with a fragmented health care system that is already having problems paying for these new programs.
This is because the cost of health care spending has been rising faster than wages since the 1960s, and with the baby boomer generation reaching retirement age earlier this year, Medicare will be expanding rapidly.
President Obama was not the first president to tackle health reform; the issue goes back to the Teddy Roosevelt in 1900 and since then leaders from both parties have attempted to revise the system. Meanwhile, other industrial nations have taken more aggressive action reforming healthcare systems. This is evidenced by the United States ranking the highest on health care spending per person but quite low on several important quality provisions.
But our health care system is much bigger than any other country, person or political party, and constant revisions will need to be made going forward.
How to bend the cost curve?
So, what does the health care law do to curb rising costs?
The ACA takes a few baby steps to curb staggering health care costs with promising projects. Most of these new pilot and demonstration projects intend to find ways to control spending.
Some of these have shown promise and have led to shifts in the health care delivery system and most projects will be administered by a new Center for Innovation, created under the Department of Health and Human Services to look for creative ways to bend the cost curve and provide high quality care. Many are already “field tested” at places like the Cleveland Clinic in Ohio, Mayo Clinic in Minnesota and Intermountain Health in Utah.
Other sections of the law include a new, independent board, charged with identifying and recommending changes to Medicare. While this could lead to a reduction in Medicare services, politicians are hesitant to step into setting criteria for medical decisions, even though they know they need to control the costs.
Finally, a center for comparative effectiveness research seeks to capitalize on research that compares the most effective treatments for a given illness. Is a new expensive drug or device better than currently effective ones?
Are these steps enough?
While these projects have shown promise, their true impact will not be known for at least a decade.
Meanwhile, we have a growing number of uninsured because providers charge more when costs rise, which impacts consumers directly through higher taxes and insurance premiums, therefore less take home pay.
The other challenge is the individual health insurance market is much more expensive than large groups because there are not as many people in the risk pool. This must change, and one idea for fixing this will be the health insurance exchanges. Employer sponsored coverage will also need to remain strong for the legislation to work like it was intended to.
These issues and others must be addressed in the short term in order to load the bases for the key pieces of implementation beginning in 2014. Access to health insurance for the millions of uninsured is important because of the large strain on the health care system through un-compensated care. In 1986 Congress passed a law requiring hospitals to treat anyone in an Emergency Room regardless of their citizenship status, lack of health insurance, or ability to pay. Unfortunately, when they cannot afford the bill, those with private insurance pick up the tab through a hidden tax called cost-shifting. This along with rising health care costs is why the Affordable Care Act was considered in the first place.
Access to coverage
Arguably the largest portion of the ACA was dedicated to insurance market reforms. Approximately 46 million uninsured Americans exist, and the law is projected to cover some 30 million by the year 2019.
Universal health insurance coverage looks like a three-legged barstool. One leg is the individual mandate, the second is subsidies to purchase coverage for lower and middle-income individuals and families, and third a state based health insurance exchange where individuals and small businesses can shop for coverage. Nearly 150 million Americans have private coverage now.
The federal government will also determine “essential benefits” which must be covered under all new health insurance policies. Essential benefits are exactly what they sound like – benefits that must be included in all new insurance policies sold on an insurance exchange.
Insurance exchanges are the “online marketplace” where individuals will be able to purchase health insurance. They will be run by state governments and operate similar to travel sites like orbitz.com or Travelocity.com.
Essential benefits outlined in the law focus on prevention and include, but will not be limited to: outpatient, hospital, emergency, maternal, newborn and children’s care, prescription drugs, mental health and substance abuse treatment, rehabilitation, labs, prevention and wellness coverage. The most controversial of these is the addition of contraceptive services, leading to the dispute with the Catholic Church.
In order for individuals to afford coverage, the government will also subsidize lower income individuals or families to purchase coverage. This could be problematic for taxpayers if health care costs continue to rise at staggering rates.
Some current insurance plans may be grandfathered, but experts believe most insurance plans will eventually adopt the federal model by 2014.
At what cost?
This legislation is so large and complex, predicting the true cost is something without similar precedent, and this makes it a near impossible task at this moment. The Congressional Budget Office, the non-partisan scorekeepers for Congress, has released conflicting cost estimates. The latest, however, showed the ACA will save $84 billion over the next decade.
The cost of the bill is also hard to quantify because the bill exceeded 2,000 pages, and was highly conceptual when written. The law is also unmatched in its granting of power to the Federal government to determine essential details over a ten year implementation period. Many believe this statute could dwarf the IRS code once fully completed, because at least 10,000 pages of rules and regulations have been written thus far.
The legislation is paid for by a reduction in Medicare growth, and it raises revenues through taxes on health care providers, device manufacturers and tanning salons among others.
The bottom line is 30 million less individuals are expected to be left uncovered by insurance in 2019, if the law is fully implemented, but the fact those ineligible for or without insurance will still be able to receive care in emergency rooms, which remains a costly problem which may need to be addressed.
An aging health workforce will need to be replaced and expanded to deal with the newly insured, particularly those in rural and urban underserved areas, creating workforce challenges.
Impact on your employer
Rising costs will continue to strain businesses, hurting profits and depressing take home pay for employees. Insurance premiums are expected to continue their recent climb of around 7 percent annually for the next three years, and they have risen faster than wages steadily since the early 1970s. Technically we are not making much more than three decades ago because of health care costs.
With health care costs dramatically squeezing the bottom lines of businesses large and small, workers are being asked to pay a larger percentage of their health care, and rising insurance premiums translates to less take-home pay.
Employers large and small may elect to stop offering coverage if it gets too expensive, particularly in industries where health benefits aren’t as important. Those without coverage from their employer are mandated to obtain their own insurance policy through a government run health insurance exchange or face a penalty enforced through the tax code.
That would be the individual mandate that everyone has been talking about, the one upheld 5-4 by the Supreme Court. Subsidies are available to purchase coverage for individuals who make around $42,000 per year and families of four making $88,000 per year. The less you make, the more you receive in the form of subsidies. See the chart prepared by the Congressional Research Service based on 2010 Federal Poverty Level numbers.
Locally, states will be forced to take on more costs in a time when many of them have balanced budget amendments. Cuts to other programs, like roads and higher education, or raising revenues are likely. They will also be charged with determining the logistics of health insurance exchanges. Nebraska might allow its health insurance exchange to be administered by the federal government.
Health economists predict continued changes to the delivery system will focus more on outpatient care and home monitoring by electronics and mid-level providers.
Intensive care is expected to be the sole focus of more and more hospitals, because previously admitted patients can be handled as outpatients or online.
Some outpatients with chronic diseases are better managed at home, so such paradigm shifts will require both a new reimbursement structure and innovative ways to provide care.
At the federal level, 20 percent of hospitalized Medicare patients are readmitted within 30 days, according to a 2009 study in The New England Journal of Medicine, costing taxpayers approximately $17 billion a year. In half of these cases, patients haven’t seen a doctor between stays, which indicates the need for more efficient ways to follow patients.
The three most prevalent chronic diseases — heart disease, diabetes and obesity — contribute a significant amount to total health care costs. Coming up with new and creative ways to control costs will be paramount for policymakers in the next decade.
This legislation may not be the able to fix our fragmented health care system, but utilizing the benefits it does provide, and addressing some of the identified problems now, could help us control health care spending, and take the most important first step towards fiscal responsibility.