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PrintHealth Care Reform, Part 2
A Primer, Continued:
Dr. Jesse Hsieh
Last month, I wrote about how the new Health Care Reform Act will increase access to insurance. 32-50 million previously uninsured will now be covered. The question is how does the new law try to accomplish this? The statistics and hard data provided here is from the H.R.3590 - Patient Protection and Affordable Care Act 3/23/2010. The interpretation is my own.
1. Individual and employer mandates.
The new law requires employers to offer benefits, or else penalties will be imposed. Since most people get their insurance through their employers, and 80% of all uninsured are employed, this mandate attempts to help those people, an admirable goal.
But if the penalties are smaller than the actual cost of providing the insurance, companies may be more likely to just drop coverage. For example, 6-8% of income is the estimated penalty, but health insurance may actually cost 15% of a worker’s salary. So, many employers may choose to just pay the penalty, and if coverage gets dropped, those workers will go into a government insurance program. (Opponents claim that this is a scheme to move towards a total government takeover.)
Currently in Massachusetts, the penalty is only $295/yr per employee. McDonald’s this month has said it will drop health insurance for their employees, due to the new law. Employers have also claimed that this provision will discourage hiring more people. All US citizens also will have to obtain/purchase health insurance, or pay a penalty---it’s the law.
2. Insurance Exchanges
Even just the process of looking at which insurance plan to buy is enough to make anyone go nuts.
The aim of insurance exchanges is to have competition among plans, on the prices of covered services, deductibles, copayments and out-of pocket limits, by organizing and standardizing them to make plan comparisons easier. The hope is this will minimize the tendency for plans to vary benefits in order to attract healthier than average enrollees.
So far, policymakers haven’t agreed yet what an exchange actually is and what it would do. At one extreme, it is only a tool for organizing the private insurance marketplace. To others, it’s a mechanism providing oversight of insurers beyond current insurance regulations, in essence, opening the door for a complete overhaul of the insurance industry.
Insurance companies aren’t the most popular folks in the world, but the concern is the government would just take over instead of setting better consumer rules.
3. Insurance Reforms
You’ve already heard about some of them—keeping kids covered until their late 20’s, eliminating pre-existing conditions, denials based on technicalities, those awful confusing forms and numerous other insurance practices that are probably the reason blood pressures go up (how ironic). Insurance companies complain that the new law “allows one whose house is on fire to sign up for insurance just before the fire trucks show up.”
4. Medicaid Expansion
As noted earlier, if employers don’t have insurance, and you’re too young for Medicare, Medicaid programs are expected to grow exponentially. The obvious concerns: how will it be paid, and who runs it? Since across this whole country there’s not one Medicaid program that is popular amongst patients and doctors, there’s a whole lot of skepticism about doubling or tripling the programs.
How will the expansion of care be funded?
Here’s where it gets really interesting.
Eliminate or Reduce Medicare Advantage Programs--$136Billion.
These are similar to HMOs where private companies work with the government on administering Medicare benefits to the patients. Although it will be eliminated, it has been a fairly popular program by covering some things such as medications and other services that Medicare doesn’t.
3. Reduce Medicare Fees Paid to Doctors and Hospitals by 30%---$157Billion.
If someone told you that all of a sudden you’d be paid a third less for what you do now, how would you react? According to the government, all of their calculations are based on no reaction—that it would be business as usual for everyone who treats Medicare patients. Unless they are able to respond to the new incentive models that the law provides, many doctors may either retire or just quit seeing patients, especially if the rate cuts affect their ability to pay for rent, their nurse’s salaries and malpractice insurance. Many hospitals that cannot evolve will not survive, and worse yet, in some areas of the country, Medicare patients may have a really hard time finding a doctor.
4. Fraud and Abuse Enforcement--$350Million.
We all hate stories of fraud—where the health care provider or organization deservedly needs to be punished. The government, however, now has contractors to audit and seek out non-compliance with commissions to these companies. These “hired guns” have just been deputized with the full force of the law, and for every dollar they find, they get a significant percentage of it. Many honest doctors and hospitals already spend quite a bit of time and energy away from patient care to document and comply with regulations.
5. Introduce Incentives to Move Towards More Organized Systems of Care Emphasizing Less Volume, More Value.
See last month’s column on Accountable Care Organizations, Bundling and Pay for Performance. These are the new models of pay the new law is encouraging doctors and hospitals to move towards. The intent is to reduce waste and inefficiencies in our system.
6. Cost controls through numerous new agencies will be set up by the law, such as the Independent Payment Advisory Board. This is a group of 15 appointed by the president of the US who will decide whether certain medical procedures, tests, medicines and treatments will be covered or not. Their decisions are law, unless the US Congress overturns them. In reality, an eight person majority of that board can and will determine if certain levels of care will be covered for the entire country.
The Concerns Going Forward:
Partnering with the Government.
Many of the innovations in medical care today such as electronic records, chronic care management and quality standards adherence requires a large amount of time and cost for infrastructure and management. The worry is that anytime the government is involved, the rules can change midstream because of the political process.
That may create a reluctance of many providers to invest in change that is needed quickly.
- Will employers continue to provide coverage for employees?
- Will insurance companies take just the cream, the government the rest resulting in a two-tiered system?
- Are the incentives for primary care and coordination of care generating enough interest to supply our primary care needs of the future? If not—what happens to access?
- Nothing in the new law addresses malpractice lawsuits, tort reform and defensive medicine.
- Finally, the fifteen-member commission who will make all the decisions on what care is not going to be covered are only accountable to the President—is this how health care will be rationed?
Health care is 17%of our GDP and increasing by 6-8% a year, yet it does not cover everyone who needs it. Yes, there is waste, disorganization and lack of coordination and, therefore, a great need for improvement. We as a nation must deal with it, and soon.
The next few years will see changes that are fast moving in health care. And throughout those changes, The FAMILY Magazine will keep you informed.
