The Affordable Care Act is underestimated in size and scope. It is still being written through regulation, and not even the Jeopardy super computer “Watson” could keep up with all of the changes coming out every day. Somewhere in the Act, and its ensuing thousands of pages of regulations, are a few things happening that will have an affect you, your family, and business.
Here are five things you need to know about healthcare that are either kept in the dark for political purposes or hidden in the policy weeds where only a few wonks have a real understanding:
1) The REAL cost of healthcare and how they “paid” for the ACA
Healthcare has national security implications, especially if we cannot afford to defend ourselves because we are broke. The fact is, healthcare is the fastest growing segment of our national debt, and entitlement programs make up the majority of our budget. The ACA is a new entitlement program and healthcare spending is on an upward trajectory. However, it has grown at a slightly lower rate the last couple of years or so.
According to a recent report this could start going back up again next year, and as a nation we face a huge debt problem to be dealt with. The ACA adds more people to public coverage as a result of the Medicaid expansion, and the fact nearly 80% of the people eligible for exchange plans received financial assistance means higher collective costs.
We spend $3 trillion per year as a nation on healthcare, about 1/3 of that is administrative costs, and total spending gobbles up around 1/6 of our total economy. Think of how would we handle a significant disease outbreak with how inefficient our system is. You thought Hurricane Katrina was bad.
The ACA was conceptually designed behind the premise of “if by getting everyone insured,” more people would seek care for prevention and lower costs over-time. This would then lower the problem with uncompensated care if everyone can get covered. However, from a financial standpoint, the problem is all of the savings and cost containment in the law are on the back end of a ten year implementation, and Congress often ignores tax increases and cuts when these provisions eventually begin. Congress and the White House often delay them in the last hours because they are politically costly.
2) Why taxes will have to go up and future generations will pay more
If we are adding more people to public coverage, then taxes will have to go up at some point if we are going to be able to finance a growing baby-boomer population and tens of millions with coverage through either Medicaid or Exchanges. Now there is potential talk of an insurance company bail-out.
One example of a tax that is politically unpopular. but difficult to get rid of from a public policy standpoint is the employer mandate because it is one of the biggest pay for mechanisms. This means it raises the most revenue for the government and getting rid of it would make taxes have to go up somewhere else. The nation really needs tax reform to stimulate economic growth. A wise package would also look at making it more attractive to employers to offer defined contribution plans.
There are 19 taxes in the law and cuts in reimbursement to healthcare providers and insurance companies to finance the law. The Congressional Budget Office recently said they can no longer estimate the cost of ObamaCare, but the latest projection for spending showed that it will increase spending by around $1.8 Trillion with some offsets coming from increased taxes and spending cuts.
3) The new burdens on healthcare providers
The big concern many do not talk about is what is happening in the healthcare industry from a labor perspective. We are facing a shortage of physicians, an aging population along with higher demands for services as a result of the ACA. What few know is all of the new things your doctor and local hospital are required to do as a result of the law. Massive technology investments, government requirements that have large penalties for non-compliance and a new payment formula tying physicians to patient outcomes is challenging the industry behind the scenes. They are supposed to promote prevention, but we have a shortage of primary care doctors and many students sub-specialize so they can earn more as a specialist.
The focus of prevention is good, but there has to be an element of personal responsibility. The doctor can tell us to quit smoking, exercise and eat healthy, but millions ignore that advice daily and wash down their “number one super sized” combo meal with a diet coke a cigarette for dessert.
Due to all of this rapid change, we are now seeing major consolidation in the healthcare industry. As a result some people are losing out because their doctor may be out of network under the new ACA compliant plans. How this all plays out will be something to watch closely especially if you or someone you care about needs to utilize the system and finds their primary care doctor or specialist out of network. This is something to pay attention to when shopping for insurance.
4) The death of a repeal effort…. a long time ago
There have been dozens of repeal votes in the House of Representatives and they are dead on arrival in the Senate. Plus, the President has indicated they will veto pretty much any major change in the mean time. A former CBO official said that the law is “partially baked in.” This means getting rid of it will be near impossible, so the focus should be educating the public so they can demand a 2.0 effort because there are some things that could be improved.
Here are a few ways to improve the system that could garner bi-partisan support, but unfortunately, the U.S. Senate is in a state of stagnation and the Majority Leader has not allowed amendments to be offer for quite some time. It looks like they are stuck in political exercise mode until after the 2014 election.
5) The complications with the exchanges beyond healthcare.gov
We already know that the roll-out of healthcare.gov was less than desirable. There are an abundance of reasons why it did not work outlined in a recent report released in the U.S. Senate and the new contractor will have a serious issues to contend with and fix. The back-end of everything still needs to be built, and millions will soon be receiving confusing paperwork asking them to verify subsidy eligibility. It is an IT and administrative nightmare and many states are looking to the federal model.
The other problem will be what happens to the states who designed their own exchange. Some are coming around to the federal exchange and if everyone eventually goes to the federal model, there will be issues of control. If you look closely at the legislative text this could cause a public option to be developed and this was a deal breaker when the law was being crafted.
Recently states are worried about how they can handle this massive technology undertaking. The other issue will be the Medicaid expansion. Around half have said no. The expansion and this creates other problems for state budgets as Medicaid is the largest expenditure for most states.
As the law continues to shape itself, the government has high stakes at the moment, and there is an effort to control the message for political purposes. As you are examining how the new health reform efforts apply to your situation make sure to keep these issues in mind and consider taking the time to educate yourself on both the ACA and how it affects you. It is paramount to understand how the industry is changing so you can become a better consumer of healthcare because out of pocket costs are going up for many. This could mean less take-home pay for you.