The Affordable Care Act of 2010: What it Means to You
Beginning the week of Sept. 23rd, or 6 months after the enactment of our nation's health care overhaul, some of its key provisions begin to take effect. Almost all of the changes taking place during the next few years are consumer friendly, but these changes, by themselves, are unlikely to reduce consumers' health care costs.
First, let's look at the big picture. A. Sisko and colleagues from the Office of the Actuary, Centers for Medicare and Medicaid Services, published their projections for health care spending under the new law. They predict further growth in health care spending beyond their previous, pre-overhaul estimates of 0.2% annually. Meanwhile, they also predict the number of uninsured people to be reduced by 32.5 million by 2019--increasing the insured shared of America's population to 92.7%. Furthermore, the Affordable Care Act extends the life of the Medicare Trust Fund, which was projected to reach insolvency by 2017, by at least 12 years. As Medicare's Trustee's phrase it in their Annual Report: "The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act..." This means that Medicare is not now in the imminent danger of collapse that it was just several months ago, and the ranks of the uninsured should begin to lessen considerably within the next several years.
First, let's look at the big picture. A. Sisko and colleagues from the Office of the Actuary, Centers for Medicare and Medicaid Services, published their projections for health care spending under the new law. They predict further growth in health care spending beyond their previous, pre-overhaul estimates of 0.2% annually. Meanwhile, they also predict the number of uninsured people to be reduced by 32.5 million by 2019--increasing the insured shared of America's population to 92.7%. Furthermore, the Affordable Care Act extends the life of the Medicare Trust Fund, which was projected to reach insolvency by 2017, by at least 12 years. As Medicare's Trustee's phrase it in their Annual Report: "The outlook for Medicare has improved substantially because of program changes made in the Patient Protection and Affordable Care Act..." This means that Medicare is not now in the imminent danger of collapse that it was just several months ago, and the ranks of the uninsured should begin to lessen considerably within the next several years.
What does the law mean if I already have insurance through work, purchase my own insurance, or am covered by Medicare
If you are covered by commercial insurance, purchased either through your employed or as an individual, for any health plan years beginning on or after 9/23/10, insurance companies are prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays. Furthermore, the new law makes it illegal for insurance companies to rescind insurance coverage for policyholders who are stricken with expensive, severe illnesses, such as cancer. It also prohibits denying coverage to children based on pre-existing conditions and extends this same protection to adults in 2014. As of Sept. 23, you will also now have the right to keep your young adult children on your health insurance policy until they turn 26 years old unless they are offered their own insurance at work. It makes no difference if the young adult is married or financially independent; you can keep your child on your policy until age 26.
Beginning on Sept. 23, employer plans can't impose annual coverage limits of less than $750,000 for "essential" benefits, such as drugs, emergency services, hospitalization, and maternity. This limit increases every year and is eliminated in 2014. These limits apply to those who purchase their insurance in the individual market as well. New policies written after Sept. 23 (as opposed to existing "grandfathered" ones) must provide preventive services such as breast cancer screening, cholesterol tests, mammograms, and colonoscopies without requiring a co-payment or deductible. Recommended immunizations must also be provided at no cost, and patients will be able to see obstetricians and pediatricians without the need for prior authorization.
If you are a senior citizen on Medicare, the new law will help with prescription drugs. 4 million seniors are expected to reach the gap in Medicare prescription drug coverage known as the "donut hole". This year, each of these seniors will receive a check for $250 to help with these costs; as of late August, approximately 1 million seniors had received this check with more being mailed every month. Starting in 2011, Medicare beneficiaries will receive a 50% discount on brand name drugs and a 7% discount on generics while they are in the coverage gap. The new law closes the gap entirely by 2020.
In addition, beginning next year, Medicare will pay for an annual wellness visit to your doctor and will pay for many preventive health care services, including cervical cancer screenings or diabetes screening without your having to pay a co-pay or deductible. To help pay for the overhaul, payments to Medicare Advantage plans are being cut in 2011. Today, Medicare pays Medicare Advantage insurance companies over $1000 more per senior on average than is spent per person in traditional Medicare. This results in higher costs for all Medicare beneficiaries, including the 77% who are not in Medicare Advantage programs. No basic Medicare benefits will be lost, but Medicare Advantage Insurers could decide to limit extra offerings such as eyeglasses or gym memberships.
Beginning on Sept. 23, employer plans can't impose annual coverage limits of less than $750,000 for "essential" benefits, such as drugs, emergency services, hospitalization, and maternity. This limit increases every year and is eliminated in 2014. These limits apply to those who purchase their insurance in the individual market as well. New policies written after Sept. 23 (as opposed to existing "grandfathered" ones) must provide preventive services such as breast cancer screening, cholesterol tests, mammograms, and colonoscopies without requiring a co-payment or deductible. Recommended immunizations must also be provided at no cost, and patients will be able to see obstetricians and pediatricians without the need for prior authorization.
If you are a senior citizen on Medicare, the new law will help with prescription drugs. 4 million seniors are expected to reach the gap in Medicare prescription drug coverage known as the "donut hole". This year, each of these seniors will receive a check for $250 to help with these costs; as of late August, approximately 1 million seniors had received this check with more being mailed every month. Starting in 2011, Medicare beneficiaries will receive a 50% discount on brand name drugs and a 7% discount on generics while they are in the coverage gap. The new law closes the gap entirely by 2020.
In addition, beginning next year, Medicare will pay for an annual wellness visit to your doctor and will pay for many preventive health care services, including cervical cancer screenings or diabetes screening without your having to pay a co-pay or deductible. To help pay for the overhaul, payments to Medicare Advantage plans are being cut in 2011. Today, Medicare pays Medicare Advantage insurance companies over $1000 more per senior on average than is spent per person in traditional Medicare. This results in higher costs for all Medicare beneficiaries, including the 77% who are not in Medicare Advantage programs. No basic Medicare benefits will be lost, but Medicare Advantage Insurers could decide to limit extra offerings such as eyeglasses or gym memberships.
Are there systemic reforms that could improve the system in general?
There are many reforms that have the potential, down the road, to improve the system, improve quality, and reduce cost. Unfortunately, most of the consumer based reforms discussed above will lead to higher costs to consumers, at least in the short term. While preventive medicine does lower health care costs by increasing patients' health over many years, the initial tests do cost money, and insurers will try to pass those costs on to consumers in the form of higher premiums. Similarly, insurers will pass along costs associated with insuring older children or writing policies that lack lifetime dollar limits. According to a new report from the Kaiser Family Foundation and the Health Research & Educational Trust, workers nationwide are paying 14 percent, or $482, more for family health insurance coverage in 2010 than in 2009. Employers now aren’t increasing their share of the increasing costs. Instead, they’re shifting more costs onto employees. Furthermore, a recent study by the National Business Group on Health found almost two-thirds of large employers planned to ask employees to contribute more toward their premiums while almost half planned to increase employee deductibles. At least part of these increased costs to consumers is due to the consumer protections written into the new law.
However, there are promising avenues for quality improvement and cost savings. To strengthen the availability of primary care, there are scholarships and loan repayments available for primary care doctors and nurses who work in underserved areas. The Independent Payment Advisory Board is a non-political body charged with developing proposals to reduce costs and improve quality of care for Medicare patients. It would work much the same way as the non-partisan military Base Closure and Realignment Commission did in the last decade. It lessens the ability of lobbyists and special interest groups to set Medicare policy and, thus, allows policy to be developed free of political interference. Unfortunately, special interests who are threatened by this model and the members of Congress who have enriched themselves by the health care industry's past massive campaign contributions are working hard to limit the effectiveness of this Board.
Insurance companies are generally required to spend 85% of premium dollars on health care services and health care quality improvements (80% for plans sold to small employers or individuals). If insurance companies fail to meet these goals, they must provide rebates to their consumers. This, of course, sounds quite good and certainly has the potential to lower consumers' costs, but the devil is in the detail, and there is quite a fight now raging to decide what exactly will qualify as part of the 85%. Furthermore, many insurers and large companies, like McDonalds, that self-insure, will threaten to walk away from the marketplace entirely if forced to follow these guidelines, and no one can predict exactly how these regulations will ultimately affect the insurance marketplace.
Medicare is offering financial incentives to hospitals to improve quality of care, and hospital performance will be publicly reported, starting with measures related to heart attacks, heart failure, pneumonia, surgical care, and infection, and this should improve quality, and this program could be rapidly expanded.
In summary, many consumer friendly changes are incorporated into the Affordable Care Act of 2010 along with changes to Medicare that bring it back from the brink and keep it solvent for many more years. The act also has the potential to yield some systemic changes that both improve quality and reduce cost, but there will be opposition from special interests and the lawmakers beholden to these special interests, and it is far from clear that any meaningful changes will ultimately be made.
However, there are promising avenues for quality improvement and cost savings. To strengthen the availability of primary care, there are scholarships and loan repayments available for primary care doctors and nurses who work in underserved areas. The Independent Payment Advisory Board is a non-political body charged with developing proposals to reduce costs and improve quality of care for Medicare patients. It would work much the same way as the non-partisan military Base Closure and Realignment Commission did in the last decade. It lessens the ability of lobbyists and special interest groups to set Medicare policy and, thus, allows policy to be developed free of political interference. Unfortunately, special interests who are threatened by this model and the members of Congress who have enriched themselves by the health care industry's past massive campaign contributions are working hard to limit the effectiveness of this Board.
Insurance companies are generally required to spend 85% of premium dollars on health care services and health care quality improvements (80% for plans sold to small employers or individuals). If insurance companies fail to meet these goals, they must provide rebates to their consumers. This, of course, sounds quite good and certainly has the potential to lower consumers' costs, but the devil is in the detail, and there is quite a fight now raging to decide what exactly will qualify as part of the 85%. Furthermore, many insurers and large companies, like McDonalds, that self-insure, will threaten to walk away from the marketplace entirely if forced to follow these guidelines, and no one can predict exactly how these regulations will ultimately affect the insurance marketplace.
Medicare is offering financial incentives to hospitals to improve quality of care, and hospital performance will be publicly reported, starting with measures related to heart attacks, heart failure, pneumonia, surgical care, and infection, and this should improve quality, and this program could be rapidly expanded.
In summary, many consumer friendly changes are incorporated into the Affordable Care Act of 2010 along with changes to Medicare that bring it back from the brink and keep it solvent for many more years. The act also has the potential to yield some systemic changes that both improve quality and reduce cost, but there will be opposition from special interests and the lawmakers beholden to these special interests, and it is far from clear that any meaningful changes will ultimately be made.
