It’s more than 1,800 pages long and requires no less than five federal agencies to administer it. Depending on whom you ask, it’s going to bring down the cost of health care while expanding access to care and improving delivery, or it’s going to quickly drive the country to fiscal insolvency without addressing the structural problems of the health care industry.
President Obama signed the Patient Protection and Affordable Care Act (PPACA) in March 2010 and the corresponding Health Care and Education Affordability Reconciliation Act of 2010, which make up what is referred to as federal health reform, but only some of its provisions are currently implemented. Many more will become active in 2014—if, that is, elected officials (and maybe a few judges) don’t alter or overturn the entire law or portions of it by then.
Here’s a look at how PPACA affects you now and how it may change the world of health care in the next few years.
What’s in place
Children can no longer be denied coverage because of a pre-existing medical condition. In other words, no company can cherry pick the children and conditions it will cover. Moreover, there can be no “lifetime limits” on their coverage. “If you have a child with cancer, you can burn through a million dollars in coverage very quickly,” says Kent Bottles
, a health care consultant who has worked as a physician, medical school professor, and health care administrator. “Because of PPACA, parents no longer have to worry about bankruptcy if one of their children needs extended treatment.”
Annual coverage limits for children have also been raised—they are now at $750,000—but not yet eliminated.
The end of annual limits. They will be $1.25 million in 2012, $2 million in 2013, and eliminated altogether in 2014.
What’s in place
Annual coverage limits must now be at least $750,000 per person. In addition, preventative services like cancer screenings, vaccinations (including flu shots), and cholesterol tests must be offered free of charge in all plans. Insurance companies can refuse to cover pre-existing conditions, but the federal government’s Pre-Existing Condition Insurance Plan (PCIP program) helps adults with pre-existing conditions who are unable to obtain insurance get coverage until 2014, when insurers won’t be able to deny coverage based on someone’s health status.
Adults under 26 can also be added to a parent’s plan if they aren’t employed or if their employer doesn’t offer a health insurance benefit.
Small business owners (those with less than the equivalent of 25 full-time employees) can apply for a tax credit of up to 35 percent of their contribution to a health insurance plan, increasing the chances of an employer-sponsored plan for small business employees nationwide.
In 2014, parents will be able to add their 25-and-under children to their health plans under any circumstances, exclusions for pre-existing for all adults will be prohibited, and insurance plans will be free of annual and lifetime coverage limits. The ceiling on the tax credit for small businesses buying group plans will also be increased to 50 percent by then.
The U.S. Department of Health and Human Services (HHS) is currently determining the details of minimum coverage standards all health insurance plans must have by 2014, but PPACA has mandated clinic services, emergency services, hospital care, maternity and newborn care, mental health and substance abuse services, preventive care, prescription drugs, rehabilitative services, laboratory services, and chronic disease management.
By October 2012, disabled adults (including seniors) will be able to participate in the Community Living Assistance Services and Supports Act (CLASS Act), which will help cover expenses designed to help maintain independence. This provision is in jeopardy of repeal by Congress.
What’s in place
Last year, PPACA authorized $250 rebates for those who reached the “donut hole” in Medicare’s prescription drug coverage, and now it mandates a 50 percent discount on most prescription drugs. The law also requires that Medicare offer a free yearly wellness exam, tobacco cessation counseling, and preventative care like cancer screenings, flu shots, diabetes testing, and cholesterol tests.
Drug discounts will gradually increase until the donut hole is completely closed by 2020. New integrated care delivery systems known as accountable care organizations
(ACOs) may result in significant changes in the way older adults (and others) receive their care and how providers are paid to deliver that care. (More details on ACOs are below.)
The health insurance marketplace
What’s in place
Very little. Large employer-based plans still dominate the industry, leaving individuals and small businesses at a disadvantage when purchasing insurance. In addition, individuals can’t easily compare insurance plans because there is no standard benefit package and they can be denied coverage or charged high premiums if they have a pre-existing condition. Finally, it is difficult to compare plans side-by-side.
State-run health insurance “exchanges” will be operational by 2014. The idea behind exchanges is simple: give individuals and small businesses more purchasing power by establishing a “one-stop shop” where they can compare and purchase health insurance plans. As LarsonAllen Health Care Consultant Nicole Fallon puts it, “The exchanges are designed to create a large-group purchasing pool,” which will, in theory, mean more competition and lower premiums for all.
She says, “The exchanges are designed to make it easier for individuals to evaluate and purchase insurance through a comparison of plans similar to the way you use Travelocity. For small businesses, it gives them the option to use an exchange plan as their employer plan by offering a defined contribution that their employees can put toward purchasing it. The exchanges will give employees more choice besides what their employers offer.”
Each state will regulate its own exchange and will be able to join with other states to offer regional exchanges with even bigger purchasing pools. The “state-run” nature of exchanges virtually guarantees that no two will be exactly alike. In fact, two exchanges that are up and running—in Massachusetts and Utah—show how different they can be. “Just about any plan can be on Utah’s exchange as long as it meets criteria for participation (e.g., hold an insurance license and is in good standing). But the state doesn’t try to control price,” says Fallon. “Massachusetts, on the other hand, requires plans to meet certain coverage and cost thresholds before they can be listed. A board evaluates the rates and can apply pressure on plans to keep those rates low.”
Starting in 2014, employers who offer unaffordable insurance to employees with household incomes of 133–400 percent of the federal poverty line (133 percent of poverty in 2011 is $14,484 for an individual or $29,726 for a family of four) will pay a penalty to the government. That penalty, along with other government subsidies in the form of sliding scale federal premium tax credits, will help such employees purchase health insurance through an exchange. Individuals and families below 133 percent of federal poverty line will be eligible for Medicaid in all states through a coverage expansion in the law.
In addition, in 2014, all members of Congress will have to purchase their health insurance from exchanges. So if the exchanges aren’t helpful by then, they should be soon afterward.
Health care delivery
What’s in place
The only significant changes being made right now come from the 2009 “stimulus package,” not PPACA. Money from this bill is now available to help providers switch from paper to electronic health records (EHR), which is anticipated to help streamline care and reduce errors.
In recent months, the Center for Medicare & Medicaid Services (CMS) and HHS have released numerous regulations and guidance explaining how health care providers will shift from being paid on a fee-for-service basis to being paid to deliver care that achieves positive patient outcomes in a cost-effective way.
And the Cost Will Be …
Kent Bottles and Ed Haislmaier agree on two things: Americans spend too much on health care, and health reform must happen if the country is going to meet its long-term fiscal challenges. After that, they don’t have much in common.
Bottles thinks PPACA will improve the value Americans get for their health care dollar and reduce deficits at the same time. The exchanges will indeed create a health insurance marketplace in which individuals and small businesses can finally compete with big companies, and he thinks the result will be lower premiums for all.
“To stay competitive, insurance companies and health care providers will have to find ways to reduce costs and improve their efficiency,” he says. It will be only natural for more insurance companies, following Medicare’s lead, to test new ideas like ACOs as a way of keeping costs down.
Haislmaier, on the other hand, is quite sure that PPACA will only accelerate the country’s fiscal problems. He says, “Since insurance companies will simply pass through their costs to consumers, the government—which is committed to extensive subsidies and tax credits—will end up footing a larger and larger bill, especially when companies realize that it will be cheaper to pay fines than to insure their employees.”
Like Bottles, Haislemaier believes making the individual and small business health insurance market more competitive will bring costs down. But he thinks that making more choices available—rather than mandating certain kinds of coverage—is the way to achieve that.
Right now, if someone on Medicare has a surgery at a hospital and then spends a week or two at a rehabilitation center, it’s likely that every provider—the surgeon, the hospital, the anesthesiologist, the rehabilitation center, the physical therapist—bills Medicare separately for the services provided. This fee-for-service model doesn’t give providers much incentive to share information, minimize unnecessary tests and procedures, or work together to ensure continuity of high-quality care.
The alternative in PPACA, in heavily simplified terms, is to set care quality and cost targets, then reward providers who work together as an ACO (a group of providers and suppliers of services such as hospitals, physicians, and others that coordinate patients’ care) to achieve or exceed those targets. If the ACO provides the care for less than the established cost targets and demonstrates a certain level of quality, it keeps a portion of the amount of money they were able to save. If not, it has to dig into its own pockets.
“The idea is to reduce costs by shifting risk from Medicare to the provider,” says Bottles. In other words, give providers a financial incentive or reward for using more cost-effective ways to care for their patients. Right now, providers are typically paid more if they provide a greater volume of service, which is why they don’t follow up with patients to make sure they are taking their medications or checking their blood sugar levels, even though such calls have been shown to reduce hospital admissions and visits to emergency rooms.
“An ACO won’t just wait until a high-risk patient decides to come into a hospital for care,” says Fallon. “It will do everything it can to keep that patient healthy and out of the hospital, which will be good for the patient, and Medicare, as well as other payers experimenting with this idea.”
A big target of ACOs is hospital readmissions, which now happen at a rate of 20 percent within 30 days for Medicare patients. “Better coordinated care, especially when moving out of a hospital and into a skilled nursing facility or returning home, can bring that number down quite a bit,” says Fallon. She adds that with shared savings on the line, an ACO is much more motivated to share information in a timely manner as a patient moves to a new care site, which should reduce unnecessary or duplicative tests and procedures (not to mention medication errors).
Medicare has been experimenting with pilot ACOs for the past two years with mixed results. Some organizations have found that the complexity of the proposed ACO regulations and prohibitive start-up costs make them reluctant to embrace the program.
Though the rules and regulations for ACOs are currently being finalized, health care organizations can begin operating as ACOs in 2012. Other payment and care delivery models (e.g.,bundled or “global” payments, medical or health care homes, care transitions, value-based purchasing) will be tested through providers participating in Medicare. Many, in fact, are already in place and operating in the commercial insurance market.
There’s a lot more in the health reform law that may result in big changes for many Americans. PPACA distributes $15 billion to states in order to help fund public health projects like anti-smoking and HIV-prevention programs, for example. It also establishes the Elder Justice Coordinating Council, which will monitor care of senior citizens and make recommendations to the U.S. Secretary of Health and Human Services.
But PPACA is a law and laws can be changed. Not long after Republicans took control of the House of Representatives in January 2011, they voted to repeal it. The vote was primarily symbolic as the Democrat-controlled Senate rejected the repeal. “If a Republican defeats Obama in 2012, repeal of PPACA is a real possibility,” says Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation. At the very least, he thinks, many of its provisions would be significantly changed.
Then there’s the “individual mandate” issue. PPACA requires that, by 2014, nearly all individuals purchase health insurance or face a penalty. This provision has been ruled unconstitutional by two federal district court judges and is currently under review by several appellate courts. Most legal scholars expect that the issue could be taken up by the U.S. Supreme Court as early as fall 2011 or spring 2012. “If the cases follow the normal appellate process, a final ruling from the Supreme Court will probably be handed down before 2014,” says Haislmaier. And if it is ruled unconstitutional, “all bets are off,” says Bottles.
But if Obama is reelected and the individual mandate is upheld, PPACA will probably move forward unimpeded, even if both houses of Congress have Republican majorities. “And then it will be just like Social Security and Medicare,” says Bottles. “They were highly controversial when they were first proposed and passed … But gradually they became part of the American social fabric that everyone takes for granted.”
Fallon thinks that the broad payment reforms in PPACA “are here to stay, even if the law is overturned, because CMS doesn’t need legislation to implement it.”
Michael Lotti is a freelance writer and holds a PhD in philosophy from Swansea University in Wales.
Contact Michael at email@example.com.