Transcript John C. Render, Esq.

The Transformation of Healthcare:
The Affordable Care Act–Policy & Practice Update
May 8, 2014
JOHN C. RENDER, ESQ.
HALL, RENDER, KILLIAN, HEATH & LYMAN, P.C.
I. The Affordable Care Act (“ACA”)
A Long and Incomplete Journey
A. BACKDROP TO HEALTH REFORM (OR CHANGE)
1.
2.
Seven decades of discussion about health reform, universal
coverage, national health insurance, and similar descriptions.
(President Truman discussed the concept after World War II).
Rare political and economic confluence usually required for
significant legislatively embraced social change. (Social
Security Act passed in 1935 in midst of the Great Depression.
Vote in the House was 372 – 33 with 284 Democrats and 81
Republicans voting aye. In the Senate, the vote was 77-6 with
60 Democrats and 16 Republicans voting aye.
2
I. ACA Journey (cont.)
A. BACKDROP (cont.)
3.
4.
Similarly, Medicare passed in 1965 with the House voting 307 –
116 with 237 Democrats and 70 Republicans voting aye.)
Passage of both Social Security and Medicare required public
support, calamitous conditions or events in the country, as well
as political majorities in the Congress and White House to
achieve the goal.
Contrast this with the ACA which was accomplished with the
requisite political majorities, but without the public or political
consensus or otherwise significant national emergency. Note
the vote: Senate 60-39 with no Republicans voting aye and the
House, 219-212 with no Republicans voting aye.
3
I. ACA Journey (cont.)
A. BACKDROP (cont.)
5.
The origins of the ACA and the partisan voting patterns
reflected a divided country on the issue of health reform
and ensured a contentious and divisive implementation.
6.
A major reason for development and passage of the ACA
was dire projections and expectations regarding the
economics of health care in the United States, with
particular concern over alarming projections in future
decades.
4
I. ACA Journey (cont.)
A.
BACKDROP (cont.)
a.
b.
While health care spending and health insurance premiums
costs leveled off in 2012 and 2013, studies attributed that
moderation (3.7% increase in health care spending and 4%
increase in health insurance premiums) to the slow down in
the economy from 2008 – 2012) (Source: Kaiser Family
Foundation, March 5, 2014).
Expectation and fears of dramatic increases in health care
costs and spending were supported by various studies. From
the period 2010 – 2020, it was expected that average annual
health spending growth would be 5.8% which would outpace
average growth in economy which was anticipated to be
4.7%.
5
I. ACA Journey (cont.)
A. BACKDROP (cont.)
c.
Unabated, national health spending in 2020 would reach $4.6
trillion and comprise 19.8% of the GDP (in 2011, health
spending was 17.9% of the GDP).
From the perspective of the federal government, Medicare and
Medicaid (as well as Social Security which will be part of
another discussion) represent enormous programs which
consume increasing amounts of the federal budget. Those
three programs account for about 45% of primary federal
spending in 2012 (up from 25% in 1975). Medicare and
Medicaid will be responsible for 80% of the growth in the three
entitlement programs over the next 25 years. It is further
projected that net federal spending on Medicare and Medicaid
will rise in 2009 to about to about 10% in 2035 and over 17% in
2080.
6
I. ACA Journey (cont.)
A. BACKDROP (cont.)
d.
(Source: Congressional Budget office (“CBO”), which is
considered by many to be the gold standard for reliable
data). These data are responsible in large part for the
impetus to move forward with health reform in its many
variations.
Aside from spending and per capita health care costs
increases, demographic and the expected increase in
utilization of health services in the next few decades is the
primary driver urging change in health care economics and
use. In the U.S., the share of people age 65 or older is
projected to grow from 13% to 20% by 2035. (Source:
CBO)
7
I. ACA Journey (cont.)
B. POLITICAL ASPECTS OF THE ACA
1.
2.
With the election of Barack Obama as President in 2008, it
soon became apparent that the President had decided that
health care reform would be the centerpiece of his
administration. This policy initiative was not entirely
without merit as approximately 45.7 million people lacked
health insurance during all or part of 2007. How coverage
for these individuals as well as other reforms would be
accomplished would become the source of extensive debate
and partisan division that continues today.
Democrats generally favored a program that would be
largely administered by the federal government, would
insure national coverage and would be mandatory in
nature.
8
I. ACA Journey (cont.)
B. POLITICAL ASPECTS OF THE ACA (cont.)
3.
4.
While many Republicans favored health care reform, they
generally opposed Democratic proposals that made the
federal government as the principal overseer and
participant in the provision of health care. They generally
favored a free-market approach to achieving additional
coverage for Americans.
When ACA passed into law (in a highly partisan way, as
previously noted), Republicans generally united in
opposition to the law and Democrats generally supported it
and lauded its benefits. Republicans soon dubbed ACA as
ObamaCare. Whatever the strengths and weaknesses of the
ACA, this divisive, partisan division along political lines has
hampered implementation of the Act.
9
II. The ACA Short Explanation
A. COVERAGE EXPANSION AND MARKET
REFORMS
1.
Temporary high-risk pools; individual mandate;
elimination of pre-existing conditions barrier to
insurance; employer penalties, incentives, credits and
subsidies; several insurance industry reforms; state
exchanges; and various others.
B. HEALTH CARE QUALITY AND PAYMENT
INCENTIVES
1.
Center for Innovation; programs focused on quality
and delivery reforms; pilot and demonstration
projects; focus on primary care, coordination, and
outcomes; VBP for many providers; and various
others.
10
II. ACA Short Explanation (cont.)
C. COST CONTAINMENT AND FINANCING OF
HEALTH CARE REFORM
1.
Increased taxes, restrictions in Medicare payment, or
thresholds; reduction in payments to certain
providers, reduction of DSH, enhanced compliance
enforcement; and more.
D. ACCESS
1.
Requires most U.S. citizens and legal residents to
have health insurance.
2.
Creates state-based Health Benefit Exchanges
through which individuals can purchase coverage
with premium and cost-sharing credits available to
individuals/families with income between 100 –
400% of the federal poverty level.
11
II. ACA Short Explanation (cont.)
D. ACCESS (cont.)
3.
Creates separate Exchanges through which businesses
can purchase coverage (“Small Business Health
Insurance Options Program, or “SHOP Exchanges”;
states can combine Exchanges.
4.
Requires “applicable large employers” to pay penalties
for employees who receive tax credits for health
insurance through an Exchange.
5.
Imposes new regulations on health plans in the
Exchanges and in the individual and small group
markets.
6.
Allows for expansion of Medicaid to 138% of the federal
poverty level.
12
III. Strengths and Weaknesses of the ACA
A. STRENGTHS
1.
Improves affordability of health insurance.
2.
Expands Medicare.
3.
Subsidizes low and moderate- income people,
particularly important in high-unemployment times
when markets are less effective.
4.
Assists small business in providing insurance
coverage.
5.
Improved access.
6.
Some shared financial responsibility for citizens and
employers.
7.
Health Insurance Options.
13
III. ACA Strengths and Weaknesses (cont.)
A. STRENGTHS (cont.)
8. Elimination of pre-existing coverage barrier to health
insurance.
9.
Improved coverage for children.
10. Improved coverage for preventive care and screening.
11. Expanded funding for health care careers.
12. Children up to 26 can retain coverage under their
parents coverage.
B. WEAKNESSES
1.
Mandatory coverage of pre-existing conditions will
increase insurance premiums (especially if the risk
pool has less than 40% of its insured in the 18-34 year
old range).
14
III. ACA Strengths and Weaknesses (cont.)
B. WEAKNESSES (cont.)
2.
Some argue that the ACA could reduce full-time
equivalent work force from 2 to 2.5 million between
2017 to 2024. This would mostly affect low-wage
workers.
3.
Does not adequately address shortage of physicians
and other health care workers, which may be
exacerbated by the ACA. The Bureau of Health
Professions estimated in 2008 there would be a
physician shortage of 49,000 by 2020. In 2010,
(after ACA passage) the Association of American
Medical Colleges predicted that by 2025 there would
be a shortfall of 130,600 physicians nationally.
15
III. ACA Strengths and Weaknesses (cont.)
B. WEAKNESSES (cont.)
4.
Some continuing gaps of coverage, particularly for
those Americans of modest incomes may not be able
to afford their employers’ family policies, but be
unable to qualify for government subsides to buy
their own.
5.
Children may not have same health insurance plan as
parents.
6.
Greatly reduces payment to some health care
providers (hospitals, for example, will have
reductions in Medicare payments of $55 billion over a
ten-year period. They will also have reduced DSH
payments).
16
III. ACA Strengths and Weaknesses (cont.)
B. WEAKNESSES (cont.)
It remains to be seen whether increased insurance or
Medicaid coverage for some individuals will offset
these reductions. It seems unlikely since original
projections were that under the ACA as many as 25 to
30 million individuals might be newly covered. To
date, something in excess of 7 million have new
coverage nationally. In excess of 65,000 have enrolled
in Indiana.
17
IV. Judicial Modification of the ACA
A. NATIONAL FEDERATION OF INDEPENDENT
BUSINESS V. SEBELIUS, 132 S.Ct. 2566
1.
By a 5-4 margin, in a decision authored by Chief Justice
John Roberts, the Supreme Court ruled that the ACA is
constitutional. The individual mandate requiring
individuals to buy health insurance is ACA’s most
controversial component. The Court held that, while the
Federal Government does not have the power to order
people to buy health insurance, it does have the power to
tax, and the individual mandate represents a tax on people
who choose not to buy health insurance. The other key
component of the ACA expanded Medicaid to cover all
non-elderly people with incomes below 133% of the poverty
line.
18
IV. Judicial Modification of the ACA (cont.)
A. NATIONAL FEDERATION OF INDEPENDENT
BUSINESS V. SEBELIUS, 132 S.Ct. 2566 (cont.)
2.
Further, the government was empowered to penalize states
that choose not to participate in this expansion by taking
away their existing Medicaid funding. The Court found
this latter provision violated the Constitution. The effect of
this part of the ruling is that states can decide to expand
Medicaid or not on a voluntary basis.
The ruling in National Federation regarding Medicaid
expansion is likely to have a profound effect on the extent
of national coverage of uninsured individuals since much
of the coverage was going to be undertaken under
Medicaid under the ACA.
19
IV. Judicial Modification of the ACA (cont.)
A. NATIONAL FEDERATION OF INDEPENDENT
BUSINESS V. SEBELIUS, 132 S.Ct. 2566 (cont.)
It now seems likely that several states will ultimately
choose (many for financial reasons) not to implement the
Medicaid expansion envisioned by the ACA. For example,
currently 26 states and the District of Columbia have
chosen to expand Medicaid. 24 states (mostly in the south
and west) including Indiana have decided against Medicaid
expansion or are still negotiating with the Department of
Health and Human Services (“HHS”). Governor Pence has
announced that Indiana wants to expand coverage through
its existing Healthy Indiana Plan. HHS has not yet
approved that option.))
20
V. Implementation of the ACA
A. EXTENDED IMPLEMENTATION
1. Many ACA provisions went into effect upon passage
of the Act in 2010, or soon after. Others are being
phased in over time. Many major reforms including
Medicaid expansion, insurance exchanges, minimum
coverage provision, are to go into effect in 2014, but
others will not go into effect until later. (See Exhibit
A for summary of the timeline for ACA
implementation.)
21
V. Implementation of the ACA (cont.)
A. EXTENDED IMPLEMENTATION (cont.)
2.
While the timeline for implementation is set out in
the ACA, supplemented by rule-making by HHS, the
implementation of the ACA has subjected to many
delays and slow starts. (See Exhibit B which
summarizes anticipated implementation and delays,
changes, and repeals)
3. Given the complexity and breadth of the ACA, it likely
will face many additional fits and starts before
complete or substantial implementation in 2018.
22
EXHIBIT A , PAGE 1
23
EXHIBIT A ,
PAGE 2
24
EXHIBIT A , PAGE 3
25
EXHIBIT B
26
VI. The Future of ACA and Related Health
Care Opportunities.
A. THE VIABILITY OF THE ACA (cont.)
1.
Unlikely to be repealed, particularly after millions of
new enrollees now have health insurance coverage
and popular reforms like pre-existing conditions not
disqualifying people from obtaining insurance and
26-and-under individuals having health insurance
availability through their parents now existing.
2. Very likely to be amended and modified and possibly
even renamed, particularly if there is a Republican
Congress and Presidency in 2016.
27
VI. The Future of ACA (cont.)
A. THE VIABILITY OF THE ACA (cont.)
3.
The ACA, even with many false starts and very
uneven implementation to date, has within it
elements which incentivize or penalize and will have
the effect of modifying the health care system. It may
be left to successor laws and regulations to further
shape and mold the American health care system into
one that providers improved health care quality, at
more affordable costs, in a right-sized, appropriate
and accessible environment, served by the interdisciplinary team of health care professionals.
28
VI. The Future of ACA (cont.)
B. OPPORTUNITIES
1. ACA has provided the impetus for greatly expanded
health insurance coverage.
2. Increased emphasis on prevention and wellness have
immense short and long-term benefit.
3. The rebirth of the “medical home” is a positive in terms of
medical management and appropriate utilization.
4. It appears health care spending is now slowing for
reasons unrelated to the 2007- 2009 recession. Recent
research suggests that structural changes in the U.S.
health care system are responsible including initiatives
related to quality of care improvements which are
reducing hospital readmission rates and promoting
integrated care.
29
VI. The Future of ACA (cont.)
B. OPPORTUNITIES (cont.)
5.
The ACA, as a government program, with incentives
and penalties will do two important things: (A) it will
absolutely modify patient, provider, and insurers’
behavior (remember Medicare Prospective Payment in
1983.) (B) it will have a “spill-over” effect whereby
changes in Medicare and Medicaid will become
pervasive in the private health care sector as well.
6. Increased primary care emphasis will greatly improve
medical management and likely improve management
of chronic disease and illness.
30
VI. The Future of ACA (cont.)
B. OPPORTUNITIES (cont.)
7.
Reduced health care costs and spending result in
higher wages and standard of living for all.
Additionally, it dramatically reduces the nations longterm deficit. The CBO has recently revised its
projections of future Medicare and Medicaid spending
in 2020 by $147 billion since August of 2010.
31
Summary
In summary, we are embarking on significant and likely
lasting changes in how health care is delivered, paid for,
and accessed in the U.S. It will likely be a less costly,
higher quality service delivered and monitored in a more
convenient forums. It is a challenge I believe we are up to.
32
Questions?
John C. Render, Esq.
Hall, Render, Killian, Heath & Lyman, P.C.
One American Square, Suite 2000
Indianapolis, IN 46282
(317) 977-1436
[email protected]
33