Cover Story - June 2010
Tex Med. 2010;106(6):22-29.
By Ken Ortolon
Some people may love it; others definitely hate it. And still more are just trying to figure out what's in it.
Regardless of how you feel about the health system reform bill President Barack Obama signed in March, it is now the law of the land and is likely to be the biggest change in the health care landscape in America since the enactment of Medicare in 1965.
Few people - including many in Congress who voted for or against it - truly know exactly what is in the bill or what its consequences, intended or unintended, might be. But stakeholders in the health care industry now are scrambling to determine how to deal with it.
Health care policy analyst Greg Scandlen calls it the "worst thing that has ever been enacted by the United States Congress in our 250-year history." And, U.S. Rep. Michael Burgess, MD (R-Texas), says the bill "should never have become law." Both predict dire consequences for the cost and quality of health care.
Meanwhile, Texas small business owners say they are "terrified" of the impact the law could have on their cost of doing business. And health plans predict the cost of health coverage is likely to go up for just about everybody.
Others, however, say the law is a good start, even while acknowledging there probably will be many problems that will need to be fixed.
"It's not a good bill, but the only worse thing that could have happened was that this bill didn't pass," said Austin lawyer David Hilgers, JD, health law chair for the American Bar Association. "We had to have a major infrastructure change. We could not continue to go on the path that we were going."
Because various elements of the law don't even take effect until 2014, it will be years before anyone truly knows how health system reform will impact the cost, quality, or accessibility of health care for the American public. But Fort Worth allergist Susan Rudd Bailey, MD, president of the Texas Medical Association, calls the law the "new normal" and says physicians must work now to make the best of the new environment in health care delivery for themselves and their patients.
"I don't think we really know yet" what the impact of the new law will be, Dr. Bailey said. "As time goes on, it's going to be a new world for everybody.
"In the meantime," she added, "we must work with the Texas Legislature to shape health system reform for our state. In many areas, Texas can decide what reform will mean for Texans."
Nineteenth-century German Chancellor Otto von Bismarck purportedly remarked that to retain respect for laws and sausages one should never watch either being made. That certainly was the case with health system reform.
Political observers say the debate was one of the most "fractious" in recent history, and not just along partisan lines.
From the beginning, Republicans were essentially shut out of the process, or took themselves out of it, depending on your point of view. Representative Burgess, for one, says that early in the debate he reached out to the Obama administration with an offer to help craft meaningful reform but was rebuffed.
But one political observer who was close to the debate says Republicans set themselves up for an "all-or-nothing" Democratic reform product when they decided to "Alamo the fight" in August 2009.
Eventually, every House and Senate Republican opposed the final bill, leaving it to the Democrats to push the measure through.
But observers say Democratic infighting nearly derailed the reform law. Mr. Hilgers was personally involved in many of the negotiations surrounding provisions of the law dealing with physician ownership of hospitals. He says the tenor of the debate changed several times over the months since President Obama gathered health care stakeholders together at the White House back in 2009 to begin health system reform discussions.
Mr. Hilgers says at that point it appeared the president already had deals in place with pharmaceutical companies, health plans, hospitals, and some physician groups.
But the wheels started coming off the cart when House Democrats loaded the bill with all sorts of pet provisions, ranging from lactation privacy rooms to a public health insurance option.
"I think you can argue that the Democrats had been out of power for 10 to 12 years and there was a huge pent-up demand for all these things they wanted to put in there," Mr. Hilgers said. "They got all head up about the public option and started splitting themselves up. And so they lost sight of where they were going. So all fall it was basically the Republicans on the side sniping and the Democrats not being able to get their act together."
Mr. Hilgers says the fractious nature of the debate among Democrats largely was the product of President Obama's failure to take charge.
"For whatever reason, Obama didn't really take control. He didn't step in at that point," he said.
Despite differences among Democrats over the public option, antiabortion language, and other issues, House Speaker Nancy Pelosi finally did muster enough votes to pass it in November and send it to the Senate.
Once the measure got to the Senate, however, things took another strange twist. Representative Burgess says the Senate debate eventually came down to backroom deals struck in December to bring reluctant senators on board.
"The Senate bill literally was just a grab bag of health care ideas," he said. "'What do I need to put in the bill to get your vote?' was the whole approach to crafting the Senate bill. When they got to 60 they stopped, they had the votes, they passed the bill, and they got out of town before the snowstorm hit and they were home for Christmas."
Representative Burgess says Senate leaders never intended that bill to be the final product, but any chance of crafting a real compromise between the House and Senate bills was quashed by another quirk of fate.
The stunning victory by the little-known Massachusetts Republican Scott Brown in the special election to fill the late Sen. Edward M. Kennedy's vacant seat put final passage of any health reform bill in jeopardy. Senator Brown had proclaimed himself the "41st vote" against health reform, which meant Senate Majority Leader Harry Reid likely could not get the 60 votes needed to end a Republican filibuster and pass any compromise bill worked out by a House-Senate conference committee.
"When Scott Brown won the senatorial election in Massachusetts, the conventional wisdom was there was no way the Senate could come up with 60 votes," said Darren Whitehurst, TMA vice president for advocacy. "So there was no way to go to conference because you couldn't get a reconcilable bill through both chambers."
The only option left available, Mr. Whitehurst says, was to use a process called reconciliation, which is normally reserved for legislation involving spending issues. The reconciliation rules allow senators to avoid potential filibusters and pass spending measures with a simple majority of 51 senators.
To make that work, House Speaker Pelosi had to convince House Democrats to pass the Senate bill with no amendments, then pass a second bill fixing many of the provisions House members didn't like that could be sent back to the Senate for passage through reconciliation.
That was a tall order. Liberal Democrats in the House were unhappy that the Senate bill did not include a public insurance option. Meanwhile, pro-life Democrats in the House also were upset that the Senate had removed language in the House bill restricting government funding for abortion. And it was clear Senate leaders could not get the votes to pass the tougher House antiabortion language.
Meanwhile, the president's deals with insurance companies, the pharmaceutical industry, and others began to unravel.
Health plan representatives say their willingness to accept some of the bill's insurance reforms - particularly provisions requiring them to take all comers, including those with preexisting conditions - was predicated on the inclusion of individual mandates to buy coverage and tough penalties for those who didn't. Jared Wolf, executive director of the Texas Association of Health Plans (TAHP), says the penalties in the Senate bill were "watered down to be almost nonexistent."
By that point, it didn't matter that health care stakeholders were peeling off the bill, political observers say.
"The Democrats eventually just said we've got to pass something or else we're really in a ditch in November," Mr. Hilgers said. "And then Obama and Pelosi just really got tough with everybody and got it done."
He and others say the president and speaker essentially "stiff armed" reluctant members of the so-called moderate-conservative Blue Dog Democrats to get them on board. Meanwhile, liberal House Democrats who didn't think the Senate bill went far enough got the full White House press. U.S. Rep. Dennis Kucinich (D-Ohio), for example, switched his vote from "no" to "yes" after a ride on Air Force One with the president for a rally in his home district.
The final votes fell into place when President Obama promised pro-life U.S. Rep. Bart Stupak (D-Mich.) that he would sign an executive order clarifying that no federal funds were to be used for abortions under the bill. Observers say Representative Stupak brought a handful of other pro-life Democrats with him, which actually allowed Speaker Pelosi to release a few Blue Dogs facing tough reelection bids to vote against the bill.
With the measure now law, stakeholders began poring through its 2,700 pages, plus the 1,300-page reconciliation bill, to see just what Congress had done to or for health care.
While TMA officials say there is much not to like about the bill, there are a few pieces to like, particularly in terms of health insurance reforms. Among those are provisions prohibiting health plans from denying coverage due to preexisting conditions, requiring plans to take all comers, allowing adult children up to 26 years of age to stay on their parents' health plan, eliminating lifetime maximum benefits, and more.
TMA officials also say provisions expanding eligibility for Medicaid to adults earning up to 133 percent of the federal poverty level could greatly expand coverage.
"I'm excited that there's no more preexisting conditions," said Athens family physicians Douglas Curran, MD, who chaired a special TMA task force that developed a set of guiding principles that TMA used to grade health system reform legislation. "And I'm excited that more people are going to have access to care. I'm hoping that it evolves over the next few years that we're going to see more people have health insurance who haven't had it before."
But others have reached a much more negative conclusion about the bill's potential impact.
Mr. Scandlen, founder and director of Consumers for Health Care Choices, says the new law is an "unmitigated disaster" in terms of making any real improvements in the health care system.
"Everything that is wrong with health care will be made worse with this legislation, and nothing will be improved," he said. He says the current system is problematic because it is bureaucratic, unaccountable, inconvenient for patients, of questionable quality, and too expensive.
"On every one of those points this law will make it worse. It will be more bureaucratic, it will be less accountable, and it will be more inconvenient to patients," he said. "If quality is currently questionable, in the future quality will be clearly bad, and costs will be even higher."
Representative Burgess also is skeptical whether this law will help or hurt patients.
"If your only objective was to get a bill signed, then I guess this becomes a victory," he said. "If your objective was to, first, not hurt anything for people who were actually okay in the current system and, second, provide some health care for people who weren't okay in the current system, I think you failed on all counts.
"But it's anybody's guess as to what really happens now, how many people are going to lose the insurance they have today, who will then become uninsured, and how many people who are ultimately going to be picked up with what were supposed to be safety nets but now will become the mainstream form of health coverage in this country," Representative Burgess added. "And I'm talking about expanded Medicaid and the subsidized lower tier of insurance in the state exchanges."
Mr. Wolfe of TAHP says consumers certainly can expect to see increases in their health insurance premiums because the law mandates higher levels of coverage in many instances, such as coverage of preventive services with no deductibles or copays.
"You're pulling off annual or lifetime maxes, no cost sharing for preventives services; certainly you're going to see increased utilization," Mr. Wolfe said. "I think there are a lot of things that are going to serve to increase cost before you start talking about just the adverse selection that we think is going to occur there."
That "adverse selection," as he put it, will be younger, healthier people opting to pay a penalty of only a few hundred dollars rather than ponying up thousands for health coverage. Plus, some critics say there are no penalties for not paying the penalties, so some people may simply avoid any expense at all.
"The compression of rates, the limitations on rating, the guaranteed issue, no pre-ex - the only way that you can make those work is if you have everybody in the pool," Mr. Wolfe said. "We feel pretty confident at this point that's not going to happen the way the law is structured."
Where's the Incentive?
On top of that, business owners predict the new law actually will make it less likely that employers will offer health insurance coverage for their workers.
Laura Stromberg, communications director for the Texas chapter of the National Federation of Independent Business, says there is plenty of anecdotal evidence that small business owners will drop their coverage or cut jobs to avoid mandates in the law. In fact, a survey of Texas business leaders released in April by Burson-Marsteller and Penn Schoen Berland found that 42 percent say reform will make them less likely to offer health coverage.
"Rather than providing incentives for small business owners to provide health insurance, they're taxing and fining and finding any way they can to charge the small business owner more," said Ms. Stromberg, whose organization represents small employers. "We don't see this bill helping the average small business owner provide insurance."
For example, the law requires businesses that employ more than 50 workers to provide health coverage or face a $2,000 per employee annual fine. If they offer coverage and a worker opts out, that employer faces a $3,000 annual fine for each worker not on the plan.
That, Ms. Stromberg says, is likely to prompt businesses that currently employ between 50 and 60 workers to lay off employees. And those who employ between 40 and 45 people likely won't be expanding their workforce any time soon.
She says she has heard of one employer who plans to lay off his entire workforce, then rehire them at salaries $2,000 lower than their previous salaries so he can afford to pay the fines for not providing coverage.
Mr. Scandlen also says the law's reliance on Medicaid to cover more than half of the estimated 32 million Americans who would get coverage could actually reduce the number of newly insured people.
"We already know that people who are eligible for Medicaid often don't bother enrolling," he said. "So one-third of the currently uninsured are already eligible for Medicaid, so expanding eligibility doesn't mean that anyone's going to enroll."
Plus, he says many people see no advantage in being on Medicaid because they can't find a primary care doctor to see them because physician payments in the program are so low.
"So they'll do what they've always done, which is run on down to the ER when they're feeling poorly because they know their doctor is there," he said.
Dr. Bailey also fears already overburdened hospital emergency rooms will feel the brunt of the new patient load.
"I think it's going to mean that they're still going to end up in the emergency rooms, although now at least some of them will have some coverage. That might help the hospital's bottom line but it's not necessarily in the patient's best interest and doesn't make it any easier for doctors to see Medicaid patients."
Dr. Curran says the Medicaid expansion could be devastating to practices such as his that have a high percentage of Medicaid patients if payments don't increase. In Texas, in particular, Medicaid payments to physicians have been historically low.
"We've got to at least be able to pay our bills and stay afloat in order to take care of people," he said. "The reality is if you see an enormous Medicaid practice, you can't pay your bills."
Dr. Bailey says the failure of Congress to fix the Medicare physician payment system as part of the reform law also is a huge concern. Congress in April passed another stop-gap measure to prevent a 21-percent cut in Medicare fees, but the issue is still hanging over physicians' heads.
"The verdict is still out as to whether or not doing that separately will make the Sustainable Growth Rate formula easier or more difficult to fix," Dr. Bailey said. "Unfortunately, I think we're seeing right now that it's going to be more difficult because the momentum for health system reform has essentially stopped."
Winners and Losers
As with any piece of legislation, there always are winners and losers in the debate. But experts can't seem to agree on who among health care stakeholders came out on top this time. Obviously, those Americans who currently are uninsured and who eventually get coverage because of this law can be counted among the winners, but who else?
Mr. Hilgers says the big winners are hospitals.
"I think the hospitals are going to essentially be the ones that this bill relies on to develop a health care system that they believe will work," he said. "They're going to be essentially unregulated, excepted by Medicare and Medicaid, but on the commercial side they're pretty unfettered."
Mr. Hilgers says insurance companies also may do "relatively well" in the short term but in the long term they will have to find "other mechanisms to generate revenue." Among those may be as the administrators of bundled payment, global payment, and other cost control schemes contained in the law, he says.
Doctors, Mr. Hilgers adds, are the real losers.
"Doctors are in real trouble. Doctors are going to have to figure out how they can exert any leverage in this system because the money is going to the hospitals, and the hospitals are going to be paying the doctors. Unless the doctors can get themselves inserted in some way to generate leverage in those systems, they are going to basically be part of those systems and, essentially, the laborers in those systems."
Mr. Scandlen has a drastically different take on the winners and losers. He says hospitals, health plans, pharmaceutical companies, and physicians all will be losers, and he points to Massachusetts for proof.
The law passed there several years ago to provide universal health care coverage has not helped the hospitals' financial standing, he says.
"Hospitals in Massachusetts supported that legislation. They thought universal health care would mean they would have no more uncompensated care," Mr. Scandlen said. "That proved not to be true. And not only did uncompensated care not go away, but because so many more people were on Medicaid they were not covering their costs."
The Brave New World
While some of the insurance reforms kick in immediately, many of the other provisions, such as creation of health insurance exchanges, a tax on so-called "Cadillac" health plans, and others will be phased in over the next two, four, even eight years. Drs. Bailey and Curran say that will give physicians time to take stock of the law and make the best of it for their patients and their practices.
"I think we've got to embrace what's really good about it and work on the things we don't like to see if we can't get them fixed," Dr. Curran said. "I think the biggest danger is that it's made people angry and they've quit listening and quit trying to figure out how we deal with this."
While congressional Republicans have talked of repealing the bill if they take control of Congress this November, Dr. Curran says that's not likely to happen, even though many political observers predict big gains for Republicans in both the House and Senate this year.
"I don't think that's going to be doable," he said. "I really think that what we got we got. We just need to be looking at it and figuring out what we can really take advantage of that helps our patients and helps our doctors. And then, what doesn't, what's hurtful, we need to start trying to change."
Dr. Bailey says TMA is well positioned to help its members "figure out what the new normal is and then equip our members with the tools to keep their practices viable and to maintain autonomy. We always have to keep our eye on that."
Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at Ken Ortolon.
Understanding the Health System Reform Timeline
Confused about what's in health system reform and when it will take effect? You're not alone.
While some provisions of the health reform law, such as elimination of exclusions for preexisting conditions, take effect this year, many others must wait for up to 10 years.
The Texas Department of Insurance has developed the following timeline for some of the major provisions of health system reform:
People With Health Insurance
- Insurers may not arbitrarily cancel your coverage when you get sick, except in cases of fraud (effective Sept. 23, 2010).
- Insurers may not impose lifetime coverage limits and, until 2014, may only set restricted annual limits for essential health benefits (effective Sept. 23, 2010).
- Insurers must cover preventive services with no copayments or deductibles (effective Sept. 23, 2010).
- Children who don't get health care coverage from their employers may stay on their parents' plans until age 26 (effective Sept. 23, 2010).
- Insurers may not deny coverage to a dependent child younger than 19 because of preexisting conditions. The same will be true for adults and dependent children aged 19 and older beginning in 2014 (effective Sept. 23, 2010).
- Eligible beneficiaries with Part D coverage who enter the "donut hole" in 2010 can receive a one-time $250 rebate to pay for prescription drugs they purchased while in the donut hole. The rebate will be less for individuals earning more than $85,000 per year and for couples earning more than $170,000. The donut hole is the period of time during which some Medicare prescription drug plans won't contribute anything toward prescription costs (began Jan. 1, 2010).
- Individuals without coverage for at least six months and who have a preexisting condition may obtain coverage through a high-risk health insurance pool to be run by the state or a nonprofit organization. The risk pools are temporary until exchanges become effective in 2014 (effective July 2010).
- Businesses with 25 or fewer full-time employees that pay for at least 50 percent of premiums and pay average annual wages below $50,000 may be eligible for a tax credit of up to 35 percent (25 percent for nonprofits) of their premiums. The credits increase in 2014 (began Jan. 1, 2010).
- For small group and individual plans, insurers must spend at least 80 percent of revenue from premiums on medical services and programs directly related to improving health care quality. The amount increases to 85 percent for large group plans. Insurers that fail to meet the minimum payment requirements must provide refunds to enrollees.
- Seniors with Part D coverage in the donut hole will begin receiving a 50-percent discount on brand-name drugs.
- Copayments and deductibles for preventive services will be eliminated.
Wealthier Individuals and Families
- For individuals earning more than $200,000 per year and couples earning more than $250,000 per year, Medicare payroll taxes will increase.
- Health care coverage will be required for U.S. citizens and legal residents. The tax penalty will be $95 or 1 percent of taxable income in 2014; $325 or 2 percent of taxable income in 2015; $695 or 2.5 percent of taxable income in 2016; and adjusted according to income every year after. There are exceptions for religious objectors, those who can't afford coverage, individuals below the tax-filing threshold, and various others.
- States will create insurance marketplaces, known as "exchanges," for people and small businesses to buy coverage. U.S. citizens and legal residents who are not incarcerated would qualify to buy coverage in an exchange. States can expand their exchanges to provide coverage for large employers in 2017.
- Premium subsidies will be available for individuals and families with incomes between 133 percent ($14,404 for individuals and $29,326 for a family of four) and 400 percent ($43,320 for individual or $88,200 for a family) of the federal poverty level.
- States will be required to expand Medicaid to individuals younger than 65 (children, pregnant women, parents, and adults without dependent children) who earn up to 133 percent of the federal poverty level. There is an option for states to expand Medicaid in 2011.
People With Health Insurance
- Insurers may not deny coverage because of preexisting conditions.
- Insurers must accept everyone who applies for coverage when they apply during a defined enrollment period.
- Insurers can base premiums only on age, tobacco use, geographic area, and whether coverage is for an individual or a family.
- Insurers may not deny coverage because of a person's health status, medical condition, claims experience, medication history, genetic information, or disability.
- Large employers who don't offer employee health care coverage will pay $2,000 for each full-time worker who receives a tax credit for health insurance through a state exchange.
- Tax credits for small employers increase to 50 percent (35 percent for nonprofits) of the health care premiums the business pays.
- Businesses with more than 200 employees must automatically enroll employees in a health insurance plan. Employees may opt out.
Medicare Beneficiaries With Part D Coverage
- The donut hole is eliminated.
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