Updated 3/19/201o to include the House Reconciliation Bill & CBO estimate.
The Democrats say it is going to pass – maybe this week. For those of you who haven’t had a chance to read all 2,009 pages (depending on which version you count) of the Senate’s Patient Protection and Affordable Care Act (AKA: HR 3590) and or even the 74 page summary – and, the 153 page House Reconciliation Act of 2010 (AKA: HR 4872), I thought you might like to know what’s in it for you. And when.
There are some really important things in the combined bill including, according to the CBO, covering an estimated 95% of our citizens – 32 million more than have insurance right now. It corrects many wrongs too long overlooked. It is a good start. Better than nothing, but miles short of wonderful. It isn’t a pretty read. It is filled with technical issues. Way too much of it is really about Medicare, Medicaid, tax policy and deals struck with vested interests (private and public interests) to get the bill passed. Way too little of it is about making health care affordable and keeping it that way for people in the middle who trying to stay there.
It is an improvement on the status quo. It will lay important groundwork for modernizing our system and making it more fair. It will reduce the deficit (while CBO estimates it will cost $940B over 10 years, it would yield a net reduction of our deficit of $138B and reduce it $1.2T over 20 years). It will save lives. And it will take years, as is typical, for it to be interpreted by our bureaucracy into policy and then by lawyers and accountants into loopholes. It is not – not even close to a government takeover – if anything, it is just the opposite – giving private industry yet another shot to heal itself.
What it may do best will also cause the most political damage to the courageous men and women who worked and vote for it: most of the bill is phased in over four years to minimize cost, allow for industry to prepare, and should it be necessary, to provide time for our politicians to fix obvious problems – but it will probably be too late to save those who will have to fall on the sword during the next election cycle for our future.
The clear winners include: seniors (prescription donut hole and no cost preventative care – note: more is expected to come from reconciliation); those over 55 being forced to accept early retirement; those disabled who need care and their families; the working poor and uninsured; all those under 26, students and especially children (OK, and their parents); small business (insurance choices and tax credits); the health insurance industry and providers (30+ million new paying customers – note: physicians and hospitals did not do as well as insurance and pharma, but I suspect, most will be relieved/happy for their patients); software developers, tech support, data managers, etc.; state governments (healthier citizens, few unfunded mandates and a dramatic reshaping of indigent care – note: reconciliation is expected to provide more help to the states on mandated Medicare changes); deficit hawks (saves taxpayer money and sets framework for future changes); and millions of patient advocates, volunteers, social workers, community health clinics and civic organizations who tirelessly help those less fortunate.
The losers: those making over $250,000 a year (.09% wage tax and 3.8% investment income tax, plus some minor changes in deductions) and especially senior health insurance executives or those with exotic medical and compensation plans; lawyers (fewer bankruptcies); and copier companies, copy paper producers and related products. Mostly the losers are those who can’t wait until 2014 – and probably the Democrats.
Was Going To Happen This Year No Matter What
- Private health care insurance companies will immediately raise rates as high as possible – they would have whether the bill passed or not. Witness: Anthem of California’s rate hike of up to 39%. Get ready, if being ready helps. It will be ugly. There is almost nothing stopping them now or ever. They are bulletproof. A win-win-win. Without competition the market just can’t correct it, and what competition there will be, is years away.
- Tens of thousands of employers will react to these rate hikes by either raising employee health care costs or quit providing coverage – they would have whether the bill passed or not. Good luck.
- Millions of individuals will drop their coverage because they can’t afford it (the Robert Wood Johnson research puts the number expected to join the uninsured in the next 10 years at 18.2 million, bringing the total to 67.6 million without insurance) and play the American version of Russian Roulette betting they will survive long enough for the bill to phase in subsidies and benefits. Most would have dropped their coverage anyway. They will blame it on the economy, the private insurance companies and Washington. They should.
- States, faced with insurmountable budget shortfalls, will cut reimbursement rates to doctors and hospitals, which will cause thousands of providers to drop Medicaid resulting in hundreds of thousands of people going without any health care (your neighbors will be among them), many of whom will die.
- The midterm elections will be held before almost anything tangibly good in the bill changes anything. There may be hell to pay.
- The next presidential election will be held before almost anything tangibly good in the bill changes anything, but after the taxes, fees and requirements go into effect. There may be hell to pay.
Immediate (within 90 days)
- Those uninsured who have pre-existing conditions, will have access to a national high risk insurance pool (using private providers or via state high risk pools) with financial assistance (limits out-of-pocket costs for coverage through the pool to $5,950 for individuals and $11,900 for families annually – up to $5B in total subsidies). This is temporary and will be transitioned to exchanges in 2014.
- Will bar preexisiting conditions on children’s coverage.
- Will create a new reinsurance program to make coverage more affordable for early retirees (55+) – basically, a subsidy for employee-based plans to continue coverage by paying up to 80% of the cost until Medicare.
- Gradually closes the Medicare prescription drug gap (Part D “Donut Hole”) until it is eliminated in 2020. Effected seniors will receive a $250 rebate in 2010.
- Increases the adoption tax credit by $1,000 (begins in 2009) and extends them through 2011 (one of those unrelated to health care bones tossed to the anti-women’s right to choose lobby, before the Senate caved totally).
- Small business (up to 35%) and small nonprofit tax credit (up to 25%) on employer’s contribution to health insurance for employees.
- A two-year tax credit (2009 & 2010 – capped at $1B) to encourage investment in therapies that prevent, diagnose and treat acute and chronic diseases. This was an attempt to win support of doctors, hospitals and equipment manufacturers.
- Tax relief for health professionals with state loan repayments – doesn’t affect you and me, but will give tax help to some physicians in underserved areas.
- Provides funds to build new and expand existing community health centers, and expands funding for scholarships and loan repayments for primary care practitioners working in underserved areas – some of this is new money, most is refunding existing programs.
- Expands low-interest student loan programs and scholarships for health students and professionals.
- Excludes the value Indian tribal health benefits from gross income.
- Requires creation of a web site that will identify affordable coverage by state, tax credits, and other information of interest to small business.
- Requires another crackdown and more screening on fraud and waste.
- Creates another council to promote health policies.
- Provides money to Health & Human Services (HHS) to figure out and quantitatively measure just how wonderful this program is. Or isn’t.
- Extends payment protections for rural providers who don’t do enough business to make it on their own, but help a lot of people who couldn’t get help otherwise.
- Creates a private, non-profit institute to identify “national priorities” and compare the effectiveness of health treatments, which is an attempt to create political cover when facing lobbyists who don’t want their pet projects cut.
- Finally allows states the option of covering parents and childless adults up to 133% of the poverty level (in some states, not typically Southern, it is felt that the poverty level is too low and their least fortunate citizens a more humane program).
- Establishes standards and community assessments for new nonprofit hospitals which should give some political cover for local government when facing neighborhood activists in cahoots with real estate developers, bond companies, etc.
- Gives Blue Cross a special tax deduction as long as this non-profit don’t profit by more than 15%, which was designed to get a couple of votes in the Senate. (Note: this will likely be removed in the reconciliation bill.)
- Imposes a 10% tax on indoor tanning services because their lobby was not as effective as the cosmetic surgery lobby.
- Codifies and clarifies economic substance doctrine and penalities (again, not health care, allowable, important).
- Appropriates $500M a year (2010-2014) for the Community College and Career Training Grant program; creates mandatory funding of Pell Grants, funds College Access Challenge Grants and funding for Historically Black Colleges & Universities; and reforms student loans, limits interest rates and reduces income-based repayment amounts (again, not health care, allowable, important).
Six Months After Enactment (and Beginning with Your Insurance Plan Year)
- Prohibits rescissions (practice of rescinding coverage when a person gets sick as a way to avoid covering costs) – we all should count down the days and hope we aren’t on the rescind list.
- Eliminates lifetime and restricts “unreasonable” annual limits.
- Requires first dollar coverage (generally, no deductible) for preventative care.
- Allows dependent coverage until age 26.
- Requires creation of an “effective” appeals process for coverage determination and claims and awards grants to states in order to establish consumer assistance programs in response to complaints (boy, that’s going to work in Georgia).
2011 (lower your expectations)
- Provides a free, annual wellness visit and no-cost sharing preventive services for Medicare beneficiaries.
- Begins a 50% discount on brand name drugs for seniors in the Medicare prescription drug gap (Part D “Donut Hole”).
- Creates incentives for states to cover evidence-based preventative services without cost-sharing for Medicare beneficiaries.
- Requires Medicare coverage of tobacco cessation services for pregnant women (I’m guessing that this isn’t limited to pregnant women over 65).
- All health plans must file annual reports showing share of premiums going for care and, should their accountants really screw up, they must provide consumer rebates for excessive medical loss ratios.
- Provides a 10% Medicare bonus payment to primary care physicians and general surgeons (which they would have done anyway so that they don’t have to actually raise reimbursement rates – permanently raising would make it look as if Medicare was in trouble).
- Establishes a “Center for Medicare & Medicaid Innovation,” which will attempt to create methods to reduce costs while enhancing care and which sounds like such a great idea, but makes every cynic snicker.
- Provide several important policy changes related to education slots to increase doctors, nurses and care providers, but they are so tediously complicated I suggest you Bing or Google for the details).
- Ditto on tax code changes related to standard language, small business cafeteria plans and other technical issues which would only pain you to know at this point, unless you are planning to raid your HSA, which you’d better do before the end of 2010. Oh yeah, your W-2’s will now show the value of your health benefit.
- Begins the transition away from Medicare Advantage – that famously popular program where we, the taxpayers, give insurance companies 15% more to privately manage Medicare which they used to expand benefits by charging recipients even more. Wonderfully conceived experiment.
- Imposes a non-deductible $2.3B fee (split based on market share) on big pharma in return for “supporting” this bill and our government agreeing not to negotiate prices or re-import drugs for Medicare or Medicaid which would, of course, bring prices way down for individuals who will have to wait four years to see benefit.
October 1, 2011
- Allows states to offer home and community based services rather than institutional care to disabled individuals through Medicaid.
2012 (lower your expectations even more)
- Implement payment reforms to gain efficiencies and improve quality.
- Incentivize quality hospital outcomes and penalize hospitals with the highest readmission rates.
2013 (chances are, this won’t be your year either)
- Begin paying Medicare physicians based on value instead of volume to promote quality of care.
- Requires that Medicaid payment rates for primary care services be no less than 100% of the Medicare rates.
- Mandatory adoption of electronic filing and information exchange (expect everyone to miss that deadline) and establish a pilot program of payment bundling and provider cooperation/coordination designed to save money, and, of course, improve care.
- Increase the itemize deduction threshold for medical expenses from 7.5% to 10% of adjusted gross income for eligibility.
- Add a .09% hospital insurance wage tax and a 3.8% investment tax on people making more than $200,000 individuals/$250,000 family.
- Limits the deductibility of executive (all officers, employees, board members and contract workers) compensation of insurance companies to $500,000 each per year.
- Sets $2,500 cap on over-the-counter medications for flexible spending accounts (FSAs).
- Creates excise tax on medical device manufacturers of 2.9% (exempts Class I medical devices, eyeglasses, contact lenses, hearing aids, and any device of a type that is generally purchased by the public at retail for individual use) to raise $2B ($3B in 2012 and beyond).
2014 (finally and outrageous to believe that some of these weren’t done in year one)
- Insurance companies are prohibited from discriminating based on health status, preexisting conditions, and gender. They still will be able to discriminate based on age, geography, family size and tobacco use, but they are limited to discriminating on rates of no more than three times their lowest rate.
- Annual limits are eliminated.
- Insurance companies will be prohibited from dropping coverage of those participating in a clinical trial or denying coverage for routine care.
- Health exchanges are established in each state (yes, state) to enable people to comparison shop, enroll and determine if tax credits for financial assistance will be available.
- A multi-state option (really national) will be available offered by private insurance companies and, at least one non-profit.
- Health care premium tax credits will be available for those above Medicaid eligibility and below 400% of the poverty line (currently $43,320 for individual; $88,200 for a family of four – Alaska and Hawaii are higher). These credits will be for premium and cost sharing expenses and is what will enable most of the uninsured to afford coverage. What does all of this mean? If your income is above the poverty line, but less than 133%, you’ll have to pay 2% of the cost and the tax credit will pay 98%. The scale slides up to 400% of the poverty line and indexed year to year, but basically your share would be: 133% up to 150% – 3.0%; 150% up to 200% – 4.0%; 200% up to 250% – 6.3%; 250% up to 300% – 8.05%; 300% up to 400% – 9.5%.
- Almost everyone is required to have health insurance or pay a penalty (2014: $95; 2015: $325; 2016: $695 or 2% (increasing to 2.5% in 2016) of income up to national average cap). Families will pay half the amount for children. The only exception is if affordable insurance is not available. Sounds onerous, but they are doing this because it wouldn’t be fair to the insurance companies for an individual to purposely not have insurance, get sick knowing they can get coverage by buying a policy only when they need it – plus, they made a deal with the insurance companies to do this in return for insurance companies agreeing to pay a fee to help offset the costs of the bills.
- No one receiving a tax credit to buy insurance would be allowed to use it for a policy with abortion coverage. States can ban abortion coverage in plans offered through the exchange. Exceptions would be made cases of rape, incest and danger to the life of the mother.
- Employers are not required to provide coverage. However, employers with 50+ employees (companies with fewer than 50 employees are except), who do not offer coverage, and have workers who are subsidized by the government, must pay a fee to subsidize those workers – $2,000 annually for each full-time employee (there is no penalty for the first 30 employees, plus, there are a few other caveats based on waiting periods, etc. Bing it). Part-time workers are included in the calculations (two part-time workers equals one full-time worker).
- The small business tax credit will continue.
- Workers who qualify for an affordability exemption to the requirement to have coverage, but not for tax credits, can take their employer contribution and join an exchange plan.
- Medicaid eligibility will increase to 133% of poverty. Childless adults will be included for the first time. For new enrollees, the federal government share will be 100% in 2014, 2015, and 2016; 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter (funding the state mandate).
- Medicare advantage will be eliminated by competitive bidding.
- Impose fees providers (health insurance companies): $2B ($8B in 2014; $11.3B in 2015 & 2016; $13.9B 2017 and $14.3B after that).
- There will be more reporting requirements for many providers to measure quality of care as a pathway toward value-based purchasing.
- Impose the Cadillac excise tax of 40% on employee plans costing more than $10,200 for individuals and $29,327 for families of four (indexed for high cost states, high risk professions and for the elderly).
- Medicare Part D (prescription drug plan) increases to a 75% discount on brand name drugs for seniors and completely eliminates the “Donut Hole.”
That’s it. Hard to believe, isn’t it? Seemingly, our entire government has spent a year developing that? Every news channel, newspaper and most blogs have spent a year reporting and debating that? Republicans could spin endlessly for a year that this, often in the same sentence, would turn us into Nazi Germany or Stalin’s Russia? Hundreds of millions spent lobbying against that? Democrats could trade all the hope and power that comes once in a generation, for this? Yes.
If it weren’t passed now, we’d just have to go through this again some day not soon enough.
Information, reference and documents used in this story include those from:
And others too numerous to mention. Thank you.