Healthcare Reform: How It Will Impact Your Bottom Line

By Christin Melton
Published: Friday, May 14, 2010
Click here to view as PDF.

President Obama recently signed into law HR 3590, the “Patient Protection and Affordable Care Act,” ushering in dramatic changes to how healthcare coverage is paid for and dispensed in the United States. The Congressional Budget Office (CBO) predicts that it will extend healthcare coverage to nearly 32 million uninsured Americans. While the ink was still wet, Congress passed HR 4872, “The Health Care and Education Affordability Reconciliation Act of 2010.” This included changes to the new law, demanded by House Democrats in exchange for passing HR 3590. Congressional Democrats hailed the law as a good first step, whereas Republicans—who unanimously opposed the law—have promised to try to repeal it.

Public reaction has been no less volatile than last year’s discussions on healthcare reform, with the most vigorous opponents warning that the law puts the United States on the trajectory toward socialism, bankruptcy, and euthanasia. Some supporters of the final bill are pleased but not euphoric, lamenting that it falls far short of a desired singlepayer healthcare system (ie, “Medicare for all”) and rewards pharmaceutical companies and health insurers to the detriment of taxpayers.

Republican attorneys general in at least 14 states plan to challenge the law in federal court as unconstitutional, claiming it infringes on state powers. In addition, state legislatures in Idaho and Virginia preemptively adopted legislation to exclude their residents from being subject to various provisions of HR 3590, and other states are threatening to do the same. A group calling itself NJ Physicians has also filed suit.

Virtually everyone agrees the new law fixes some of the most egregious problems with private healthcare coverage. It prevents insurers from denying coverage to people with preexisting conditions, capping lifetime benefits, or dropping policyholders who become ill. It also includes tax breaks for businesses with fewer than 50 full-time employees that provide healthcare coverage to their employees and subsidizes insurance for people who cannot afford it.

The bill fails to fix the Medicare Sustainable Growth Rate (SGR), which mandates steep cuts in physician reimbursement every year; a 21% cut is scheduled for this year.

What’s in the law?

HR 3950 exceeded 2300 pages, and the Reconciliation Act added another 150 pages to healthcare reform legislation, so it may be a while before we figure out everything the law enacts. Several of the more widely discussed measures are highlighted in the table on the next page. As the table on page 21 shows, coverage for most uninsured adults aged >26 years is not likely to kick in until 2014, when insurance exchanges become operational. Prior to 2014, they have the option of buying an insurance policy from a high-risk pool in which premiums are limited to 4 times the rate of regular premiums, but the cost is likely to be prohibitive for many.

By 2014, each state will have to have an American Health Benefit Exchange and a Small Business Health Options Program Exchange in place. At these exchanges, individuals and businesses with fewer than 100 employers can choose from four different tiers of coverage, with coinsurance requirements ranging from 60% to 90%. Deductibles in the small group market are capped at $2000 per individual and $4000 per family. Out-of-pocket requirements cannot exceed Health Savings Account limits. The exchanges must also offer a catastrophic- only plan to people aged <30 years or those exempt from the mandate to secure coverage.

With an influx of 32 million “new” patients by 2014, a major concern is whether the shortage of primary care physicians in the United States and predicted deficits of surgeons, oncologists, and other medical professionals in the coming decades will lead to longer waiting periods to get needed care. Beginning with fiscal year 2010, HR 3590 designates $1.5 billion for training programs designed to increase the number of primary care physicians, nurses, and public health professionals. It also establishes a task force to examine ways to shore up the healthcare workforce.

States, already forced to make cuts to Medicaid programs, are worried that they cannot afford an influx of new enrollees. The federal government will fund 100% of costs for new subscribers through 2016, when it is hoped that states will be in better financial shape to bear additional expense. Governors from both parties have expressed concern that shifting Medicaid costs onto states in 2017 will require cuts to other important state programs and say federal assistance may be needed beyond 2016.

To help reduce costs and compensate for the physician shortage, the bill provides $11 billion to fund staff increases and expand facilities at the nation’s 1500 nonprofit community health centers. The goal is to double the number of patients served at these clinics over the next 5 years. HR 3590 also includes several provisions related to patient-centered medical homes, such as grants to states that develop medical home models and authorization for health insurers to cover services at an eligible medical home. It also allows pharmacists and clinicians to provide some services using telehealth resources.

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