The inefficiency and excess costs associated with the healthcare system in the United States has been of primary concern to lawmakers since the early 1990’s, when the Clinton administration tried unsuccessfully to get a bill passed that would have fundamentally changed the way healthcare is delivered and administered in America. Since that time the primary cost issues associated with the healthcare system have continued to worsen, and with the rise of chronic disease reached an unsustainable level. The rise in costs has both facilitated and resulted from the enormous number of people who are uninsured, topping 50 million in 2010 (1) . With this level of lack of access given the amount of resources being devoted, it was unsurprising that the Obama administration decided to make healthcare reform one of it’s most immediate priorities.
The country engaged in a heated national debate on the best strategy to address the given system issues. An early casualty of this debate was the idea of transitioning to a single-payer system similar to those previously implemented in many other industrialized countries. While most of the research showed that this would dramatically reduce costs associated with administration, it also made people uncomfortable in that to some, it brought to mind images of a socialized political system getting dangerously close that of China or communist Russia. This fear was used as a tool by lobbyists and politicians to fight against the notion of any fundamental change in the structure of the current system.
One of the other major points of contention was the proposed “mandate” for insurance coverage. This is a provision that established a time period (ending in 2014) for people to gain access to the system and then face a significant tax-penalty ($95 in 2014, moving to $325 in 2015, and $695 in 2016, then based on cost of living thereafter) if they were still without coverage (2) . The thought process behind the mandate seems to be that it would reduce the costs associated with catastrophic illness suffered by those without coverage and become a significant financial burden for the institution where they are treated. A well-publicized counterpoint to this argument was that it’s unconstitutional to “mandate” that an individual purchase any product. It’s important to note that this has been the case with car insurance in most states for many years now.
At the conclusion of the healthcare reform debate, President Obama signed the Patient Protection and Affordable care act into law on March 23, 2010 (2) . While it doesn’t fundamentally change the way healthcare is delivered, it does contain several important alterations to government programs as well as the individual mandate for insurance coverage. Over the course of the next several paragraphs I will attempt to summarize the major ACA (Affordable Care Act) provisions and the projected effect on costs and access. I’ll also touch on what those cost projections were before the bill was passed.
The Affordable Care Act will significantly affect Medicare, the government program tasked with providing medical benefits to the elderly in several key ways. One is through a reduction in Medicare Advantage payments that began in 2010 and is estimated to save $34.9 billion by 2020 (4) . This provision is operating off of the belief, backed by data, that the Medicare Advantage program has been severely over-funded and inefficient in the way that it allocates coverage.
The bill also expands a system of oversight designed to reward/penalize high and low quality plans. This is based on a 5-star rating system and rewards those plans that receive 4 stars or more with payment increases (1.5% in 2012, 3% in 2013, 5% in 2014 and beyond). Poor performing providers are judged based off of the “medical loss ratio” and must maintain a ratio of at least 85% or pay the difference between their figure and .85 multiplied by total revenue under Medicare part C. The government retains the right to cancel a provider’s contract that fail to meet the 85% threshold for five consecutive years.
Furthermore it addresses two critical issues in the Medicare part D, or prescription drug section. There had been a well-established “gap” in coverage that left many elderly without access to prescription drugs, that is at least partially remedied with a $250 annual rebate to be provided until 2020 (2) . It mandates that coverage for generic and brand name drugs that are currently in the coverage-gap be extended to Medicare enrollees. For generic drugs this started in 2011 with a minimal amount of coverage, only equaling 7% of the overall cost, enrollees were expected to cover the other 93% through coinsurance. Coverage is expanding each year and Part D will be responsible for 75% of the cost by 2020. In regard to brand-name drugs, coverage will begin in 2013 at 2.5% and while this level will also rise each year, is much more limited, and will equal 25% in 2020 (2) .
The second government program that has been significantly affected by the Affordable Care Act is Medicaid. Changes to this entity are the primary strategy for increasing access to the healthcare system. According to OACT projections, 24 million individuals will gain enrollment in Medicaid by 2016 (6) . It accomplishes this by raising the level of eligibility to 133% of the FPL (Federal Poverty Line) standard an increase from a pre ACA threshold of 64% FPL (2) . This provision also opens up access to many who were previously uncovered because they were single, without children and not pregnant. A related component that will be simplified is the way by which Medicaid eligibility is determined. The MAGI (Modified Adjusted Gross Income) test that was used as the method for qualifying people has been streamlined. In addition this test will begin to be applied across all insurance affordability programs, available in the form of a single application. Since Medicaid is primarily a state-based program but is provided annual financial support the through the Federal Medical Assistance Percentage (FMAP), the federal government has guaranteed to cover 100% of the initial costs of covering the large number of newly eligible individuals, and then provide staggered annual financing. As it’s scheduled right now the maximum amount each state would be responsible for covering would 10% of the cost of the newly eligible (4) . Essentially it shifts the financial burden from the states to the federal government, eliminating what would undoubtedly be a significant obstacle to implementation of the Medicaid reforms.
(100% 2014-2016, 95% in 2017, 94% in 2018, 93% in 2019, and 90% for 2020 and beyond)
Given the significant expansion in the state Medicaid system it’s unsurprising that associated costs are projected to rise, at least in the short-term. The estimated increase in state expenditures between 2014 and 2016 is $12.6 billion, and $80.3 billion from 2012 to 2021 (4) . However there is also a large amount of expected savings coming from a sharp decrease in “uncompensated care,” once many of the existing uninsured/underinsured are covered under the expanded FPL threshold.
Another major state-based component of the ACA, is the establishment of health insurance “exchanges,” with the primary goal of boosting the ability of small businesses and low-income individuals to purchase private insurance coverage. Each state is initially provided the opportunity to establish and oversee an exchange. If they elect not to, the Department of Health and Human Services is compelled by the ACA to step in and implement an exchange, with the responsibility of oversight and regulation (7) . Health insurance providers who wish to operate in a state exchange must adhere to uniform guidelines with regard to levels of coverage and benefits offered. Coverage will be provided at four set tiers including platinum, gold, silver, and bronze based on the estimated value of provided benefits. There are ten medical services identified by the ACA as “essential health benefits,” and must be covered. These include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, hospitalization, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness and chronic disease management, and pediatric services (2) . In addition to the requirements of exchange insurers there are qualifications that people who wish to purchase coverage in an exchange must meet. Access is restricted to those who are U.S. citizens, legal immigrants, and those who aren’t incarcerated (7) .
One aspect of the state exchange system that seems a little out of place considering the content of the rest of the ACA, is the creation of a not-for-profit, member run insurance company in each state. There are specific organizational requirements that insurers of this type must meet. They must not be an existing insurer, not be sponsored by a state/local government, administration must be in the form of a majority vote of it’s members, and any profits must be used to lower premiums or improve quality of care provided to beneficiaries. In theory it appears that these insurance companies would be similar in administrative organization as non-profit credit unions like BECU. Although the initial funding to set up the program would come from a $4.8 billion federal appropriation.
Prior to the passage of the Affordable Care Act, the apparent consensus on healthcare costs in the United States was that they were rising at a rate that would become unsustainable in a relatively short period of time. This is evident in the projections published by the Congressional Budget Office (CBO) in November 2007. According to this report share of GDP devoted to healthcare would rise from 16% (already highest in the world, and a jump of 8% over the last years) to 25% in 2025 and would hit 49% in 2082. In addition the burden carried by Medicare and Medicaid would also increase substantially, from 4% in 2007 to 19% in 2082. Per capita spending on healthcare has been growing at a faster rate (4.2% since 1975, vs. 2.2%) then the economy overall.
The projected effect of the ACA on healthcare spending in the near future is available through a report compiled by the Department of Health and Human Services. According to this document the initial phase of the policy reform bill would increase overall costs by $828 billion between 2010 and 2019, as millions of individuals are added to state Medicaid plans (3) . Percentage of GDP is expected to be 21% in 2019, a .2% increase from pre-reform estimates. While it would seem that the ACA at least initially fails in controlling healthcare cost growth, in theory this may only be true in the short term. This is because the ACA does seem to be modestly successful in slowing the rate of healthcare spending after the first few years of implementation. This is reflected by a .1 and .15% decrease from a reduction in Medicare payments and a .05% decrease as result of newly implemented excise taxes (3) . There would also be a shift in expenses from out-of-pocket to government of $237 billion. This illustrates that while overall government spending would increase, the financial burden placed on individuals would be lessened. Conventional wisdom would assume that with less money devoted to healthcare, people would spend more in other sectors of the economy.
1 MNT. USA wastes more on health care bureaucracy than it would cost to provide health care to all of the uninsured. Medical News Today, 2004 May 28. Disponivel em: .
2 HENRY J. KAISER FAMILY FOUNDATION. Focus on Health Reform: Summary of New Health Reform Law. The Henry J. Kaiser Family Foundation. Washington D.C., p. 1-11. 2011.
3 FOSTER, R. S. Estimated Effects of the "Patient Protection and Affordable Care Act," as Amended. Department of Health and Human Services. Baltimore, p. 1-17.
4 CENTERS FOR MEDICARE AND MEDICAID SERVICES. Medicaid Program; Eligibility Changes under the Affordable Care Act of 2010. United States Government. Baltimore. 2011.
5 CONGRESS OF THE UNITED STATES. The Long-Term Outlook for Health Care Spending. Congressional Budget Office. Washington D.C. 2007.
6 NCSL. American Health Benefit Exchanges. National Conference of State Legislatures, 1 February 2012. Disponivel em: . Acesso em: 15 February 2012.
