The Patient Protection & Affordable Care Act of 2010 (ACA)

Presented by:

George Faulkner

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Why We Needed Reform Coverage (Access)

- 50 million uninsured (2010) - 14,000 Americans lose health insurance coverage everyday - 29 million under-insured (2010) - 45 states allow denial for pre-existing conditions

Quality - 100,000 hospital infection deaths- 100,000 medical error deaths- WHO ranked US #37 among other industrial nations for outcomes

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Why We Needed Reform Cost

− Approaching $3 trillion in 2012− The cost for average American family: $16,771− Half of all bankruptcies related to medical expenses− 20-30% ($600 billion) on administration (not actual medical

care)− 1/3 or more of our costs are wasted− Medicare: 3% administration. − Medicare Advantage plans: get 14% more from the gov’t − Projected Medicare bankruptcy by 2017 (delayed to 2029)− Projected health care coverage cost 2020 is $25,000+

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What the ACA Is and Isn’t Some wanted:

− “Improved Medicare” for all (single payer, like in Canada)− a public plan option− just individual policies purchased “across state lines”− malpractice reform at the national level instead of state level− no changes at all

The ACA keeps the current mixed system but adds:− regulations to control costs, guarantee access to good coverage,

and improve medical care delivery− subsidies for individuals, small employers, and states

The bill is not perfect – changes will be made over time

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Key Improvements for Individuals

  Currently Uninsured In Medicaid

Have an Individual

Policy

Covered by Large

EmployerIn

MedicareWork for

Small Employer

% of Non-Military Pop. 16% 14% 4% 52% 14%

Major Changes

Temporary state-run high risk pools

Subsidies for up to 400% of poverty level

Subsidies for small businesses to provide coverage

Common national Medicaid eligibility up to 125% of poverty level

Preventive care

Access to more primary care physicians and others

Subsidies for up to 400% of poverty level

State health exchanges to provide plan options, regulate insurance companies, and administer billing

Must provide wellness programs

Guaranteed access to other coverage when leave job

Subsidies for early retiree coverage

Phase-out of prescription drug “donut hole” over 10 years

Drug discounts

Free preventive care

Credits (subsidies) to help pay for coverage

State health exchanges to administer coverage

ACA SummaryFall 2010 2011 2012 2013 2014

Medicare $250 “donut hole” check

Free preventive care, 50% drug discount

Delivery system reform pilots

Start phase-out of Med. Adv. subsidies

Donut Hole Phase-out started

Additional payroll tax if income >$250K

Expanded prevention coverage

IPAB) to identify Medicare waste. Recommendations cannot ration care, raise taxes, or change Medicare benefits.

Uninsured Funds for community health clinics

High risk pools

Higher Medicaid pay to primary care doctors

Medicaid expansion to all w. income <133% poverty level

Employers Small employer tax credits

Must show value of covg.

Penalty for large employers with no coverage.

Other Individuals

Adult dependent covg. to age 26

Bans on child pre-X condition limits, lifetime dollar max., and rescissions

Free preventive care

Savings through review and regulation of insurance co. medical loss ratios

Simplified billing and claim filing

State, regional or federal health exchanges for indivs. & small ers.

Subsidies if income <400% of poverty

Covg. mandate Ban on pre-X

limitsHealth Care Providers

Electronic health records funding

Malpractice reform and quality reporting pilot programs

Insurance co. & provider admin. simplification

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For Individuals Without Other Sources of Coverage and Small EmployersState health insurance exchanges (2014)

-- A new regulated marketplace for health insurance− An “Orbitz” for health insurance plan comparison and

annual enrollment− Regulated and run by states. But states can go in together

on multi-state exchanges or fall back on a federal exchange

− Open to individuals without health insurance and to small businesses

− All plans offered must cover certain “essential benefits”− Competition on price and quality of plans

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For Individuals Without Other Sources of Coverage and Small Employers (2014)

Subsidies for Most Individuals Using Exchanges− Eligibility up to 400% of Federal Poverty Level

($43,320 for individuals; $88,200 for family of four)− Premiums can be no more than a certain percentage

of income (roughly 2-10%, based on a sliding scale) − Subsidies to reduce out-of-pocket spending on

deductibles, co-pays, etc.

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Medicaid Expansion (2014)

Will cover many working poor who fall just above federal poverty line

Eligibility expanded to 133% over the poverty level Childless adults covered Financed 100% by federal money for first two years,

then ~90% federal match for all states Higher payments to primary care doctors in order to

expand access (to match Medicare rates by 2013)

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Universal Participation(Shared Responsibility) Mandatory enrollment, starting in 2014 Annual tax if choose not to enroll

2014 - $95 or 1% taxable income

2015 - $325 or 2% taxable income

2016 - $695 or 2.5% taxable income

Applies to U.S. citizens and legal immigrants− Exemptions for religious objection, American Indians, those

without coverage <3 months, undocumented immigrants, if lowest cost plan is >8% of income, or income is below tax filing threshold

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Universal Participation (Shared Responsibility) Why the individual mandate?

− Without it - difficult to incentivize young, healthy people to buy insurance and help mitigate risk for all

− Reduces “free-rider” problem: when people can sign up to use the benefit and then drop out again – raising costs for others

− Can’t make insurance companies eliminate pre-existing conditions limits and other underwriting practices without it (premiums would soar)

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Employer Responsibility (2014)

No employer mandate but… Employers with more than 50 full-time workers that do

not offer coverage and have at least one worker who receives the premium assistance tax credit will pay a fee of $2,000 per full-time employee/year.

Small Business with <25 employees who purchase health insurance for their workers get a tax break starting in 2010

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Insurance Regulation

Requires all new plans starting in 2013 to cover pre-existing conditions (starts in 2010 for children)

At least 85% of premiums must pay for actual medical care – in small group and individual markets (starts in 2012, though regulation development in 2010)

Prohibits lifetime dollar limits benefits paid (2010) Prohibits dropping patients from coverage (“rescission”)

except in case of fraud (2010) Sets minimum benefit standards in the exchange (2014) Limits premium variation by age, gender, etc. (2012)

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More Prevention and Wellness (2011-12)

Eliminates co-pays and deductibles for preventive services in Medicare and in all new insurance plans

Grants to employers for establishing wellness programs Premium discounts for employees who participate in

wellness programs Requires chain restaurants to publish calorie and

recommended daily allowance information for food products they sell

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Medicare Changes

Medicare Advantage Changes− Phases out overpayments to insurance companies: due to 2003

Act, Medicare pays on average 14% more, with little evidence of improved quality of care.

Imagine the headline if the 2003 bill were enacted now: “Medicare system, already in deficit, will now pay insurance companies 14% more than those in regular Medicare.”

− New York Times: Contrary to fears, “…since the health care law was passed, ‘Medicare Advantage premiums have fallen by 10 percent, and enrollment has risen by 28 percent.’ ”

− Requires these plans to spend at least 85% of dollars on medical care or activities that improve the quality of care, rather than on administrative costs, profits, executive pay, etc.

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Cost Containment and QualityImprovements Independent Payment Advisory Board (IPAB) to make cost

saving recommendations to Medicare − Physician payments exempt from these recommendations

until 2020 Creates a Center for Innovation to test payment/delivery

system reforms Pilot programs for “medical homes,” bundled payments, and

accountable care organizations (ACOs) Reduces hospital payments for preventable readmissions and

infections Requires reporting of quality indicators by physicians

Begins 2011

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Cost Containment and QualityImprovements Medical malpractice reform

− $50 million in grants to states to encourage alternatives to litigation

− More grants for those that focus on patient safety and reduction of medical errors

− Examples of innovative ideas: Medical review boards Prompt apology and compensation policies Protection for physicians adhering to evidence-based

practices

Begins 2014

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Cost Containment and QualityImprovements

Comparative Effectiveness Research Establishes a non-profit Patient-Centered Outcomes

Research Institute. Will provide physicians with clinical effectiveness data

that industry-sponsored research often does not undertake. Example: directly comparing different drugs that do the same thing, or researching cheap drugs that are not profitable for industry to sell.

The findings will not lead to mandates (that will be left to specialty societies, as it is now).

Begins 2010-11

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Administrative Simplification for Insurance Claims

National rules to standardize and streamline health insurance claims processing.

For doctors’ offices: easier to track claims, faster payments by insurance companies, and lower overhead costs.

For patients: appeal procedure for denied claims will now go to an external reviewer instead of another division of the insurance company.

Begins 2010

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How Does Expanding Insurance Coverage Affect Physicians? Less uncompensated care

− The AMA estimated that physicians provided $24 billion in charity care in 2008

Sustaining the Medicaid program with federal dollars and better reimbursement levels

Less use of emergency rooms for routine care More ability to do preventive care For those who are self-employed or own a small

business:− New regulated health exchanges to select coverage, provide

administration, and offer potential for subsidies and tax breaks

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How Does Expanding Insurance Coverage Affect Physicians?

Medicare and Medicaid Payment reform− 10% bonus payment to all primary care physicians − 10% bonus payments for general surgeons in rural areas− 5% bonus for mental health providers− Increase in Medicaid payment rates for primary care

physicians to equal Medicare rates (2013-2014)− Increased reimbursement in rural and low-cost areas− Bonus payments for voluntary participation in Medicare’s

Physician Quality Reporting Initiative (PQRI).

Begins 2011

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How Does Expanding Insurance Coverage Affect Physicians?

Physician Workforce Investment − Residency programs will be required to redistribute 65% of

unfilled slots to primary care or general surgery− Expanded scholarships and loan repayment through the

National Health Service Corps− Tax relief for those health care workers paying state-issued

student loans for working in primary care or high need areas

− Additional low-interest student loans, scholarships, loan repayment programs for primary care and general surgery

− Increases funding for Community Health Centers

Begins 2010-11

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How We Pay For This

Excise tax on high cost insurance plans, starting in 2018 Increased Medicare payroll tax for high income earners,

starting in 2013:− Additional 0.9% Medicare payroll tax on wages >$250,000− 3.8% tax on unearned income (interest, dividends)

Reduced payments to Medicare Advantage plans Savings in Medicaid and Medicare prescription drug

costs Reduces Disproportionate Share Hospital (DSH)

payments because newly insured will be able to pay Fees on certain device manufacturers, insurers, tanning

salons, etc.

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Do the Taxes, Etc. Affect You?

Do you make more than $250,000?− Medicare payroll tax (additional 0.9%)− Get substantial income from dividends and interest

Is your insurance premium above $27,000?− Starting in 2018, just the portion above $27K taxed as

income.

Do you go to indoor tanning salons?

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What the Nonpartisan Congressional Budget Office Says

Reduces federal deficit by $143 billion in the first 10 years and by another $1.2 trillion in the next 10 years. Repealing it does the opposite, only worse (CBO)!

Will have little initial impact on health plan premiums for the majority of Americans who get their insurance from their employers

Costs will go down for those who buy through exchanges and qualify for subsidies

Elmendorf, D. (2010, March 18) Preliminary Cost Estimate for Pending Health Care Legislation. Retrieved April 5, 2010 from Congressional Budget Office Website: http://cboblog.cbo.gov/?p=508

$(500)$(400)$(300)$(200)$(100) $- $100 $200 $300 $400 $500 $600

Expansion of Medicaid and CHIP

Subsidies and Exchange Operations

Small Employer Tax Credits

Penalty Payments From Uninsured Persons and Employers

Excise Tax on Ins. Cos. for High Cost Plans

Other Revenues

Ending of subsidies for Medicare Advantage Plans

Savings on Medicare and MA Plans

Taxes on Med. Devices, Higher Incomes, Etc.

ACA First Ten Year Net Savings: $143 Billion

Second 10-Year Savings: $1.5 Trillion

Other Savings from Health System Changes

Ten-Year Medicare Savings = $533.1 Billion

Source: Kaiser Family Foundation analysis of Congressional Budget Office (CBO) cost estimates as provided on March 20, 2010.Notes: *Savings include interactions with Medicare Advantage and TRICARE; spending includes implementation of Medicare changes, Part D interactions with Medicare Advantage provisions, Part B interactions with Part D provisions, and Medicaid interactions with Medicare Part D provisions.

Sources of Savings

• Provider payments, including DSH and home health - $219 billion

• Medicare Advantage – $136 billion

• Income-related premiums – $36 billion

• New Independent Payment Advisory Panel – $16 billion

• Delivery system reforms and hospital readmissions – $12 billion

Health Reform: Medicare Savings (Kaiser FF)

Medicare Advantage

Payment Reforms25%

Annual Provider Payment Updates

29%

Interactions* 14%

Other 5%

Part D Enrollment/ Consumer Protections 1%

Delivery System Pilots 1%

Reducing Hospital Readmissions 1%

Fraud, Waste, Abuse 1%

Part D Premiums 2%

Part B Premiums 5%Independent Payment Advisory Board 3%

Disproportionate Share Hospital (DSH) Payments 4%

Annual Provider Payment Updates 29%

Home Health Payments 7%

Medicare Advantage Payment Reforms 25%

Medicare Part A Trust Fund (Kaiser FF)

0%

50%

100%

150%

2004 2009 2014 2019 2024 2029

Pre-health reform: 2017 projected insolvency date

Assets as a share of annual spending:

Post-health reform: 2029 projected insolvency date

CBO Projection: Health reform legislation will extend the life of the Medicare Part A Trust Fund from 2017 to 2029

If Medicare Replaced… The “For-Profit” Health Coverage Penalty: 27% (Plus 5-10% Broker Commissions)?

73%

15%

3%0%8%

United Health Care (UNH) 2011 Operat-ing Statement

Claims & Loss ExpenseSelling, General, & AdminOther Oper. Exp.Interest Exp. & ChgsPretax Income

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Questions You May Have Why not just allow purchase of coverage from

any insurance company in any state?− Many major insurance companies (Aetna, United,

CIGNA, Anthem/Wellpoint) are already in most states− Any insurance company will be able to offer coverage as

long as they meet minimum standards on coverage, fair practices, clear policies, etc.

− Currently, only states regulate insurance companies, and some do a very minimal job. If we allow insurance companies to all file in the least regulated state, then “let the buyer beware!”

− It doesn’t really increase competition, since smaller insurance cos. won’t secure strong networks/discounts.

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Questions You May Have

Why have health exchanges, instead of just “voluntary” purchasing pools?

Voluntary pools are unstable:− The individuals or employers in the pool who have the

lowest claim costs always get offered a better deal from another insurance company and then drop out.

− As more drop out over time, costs rise even faster for those still in the pool.

− The pool eventually becomes unaffordable and empty− This idea has been tried off and on for decades.− The exchanges must administer subsidies and carrier

risk adjustments.31

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Questions You May Have

Why no national malpractice reform?− The law funds pilot projects at the state level, where

malpractice is now regulated. Congress would have to expand its authority to take away state control.

− This is an area where state experimentation makes sense. Right now we don’t have clear evidence of what works best.

− Malpractice reform is a lot more than just capping “pain and suffering” awards. It involves new practices to prevent errors, prompt apologies to patients, possibly no-fault rules, new review and claim settlement processes, etc.

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Questions You May Have

Is it “cutting” Medicare?− No Medicare benefits are being cut. − For-profit insurance companies should no longer get an extra

14% (on average) from the government for Medicare Advantage plans, compared to traditional Medicare benefits. That makes all others pay more.

− Medicare now pays doctors and hospitals different rates around the country and for different health procedures. It generally pays “fee for service,” which drives up costs. Medicare will gradually change these payment rules to slow

the annual cost increases, primarily for “overpaid” services . So if costs go up by 3% per year, instead of 5%, that’s not

“cutting” Medicare.

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Why “Regulation”?

Optional Goods and Services

Essential Goods and Services

Multiple Supplier Markets

Most consumer goods and services

Regulated Health Care Exchanges

One Supplier Markets

“First-to-market” temporary advantage

Regulated Utility

Totally free markets are unstable and devolve to monopolies or oligarchies.

Regulation is needed to:- Require full disclosure: pricing, contract provisions, ban

deceptive marketing practices- Allow easy comparison of products- Control or break up monopolies