The Patient Protection and Affordable Care Act (PPACA), H.R. 4972 (Public Law 111-148 and 111-152), contains a broad, sweeping set of health care reforms that will move our country toward universal insurance coverage, change how Medicare and Medicaid pay for services, and infuse a new focus on wellness and care coordination into our previously reactive health care system. The most important and controversial aspect of the PPACA is the requirement that most U.S. citizens and residents have health insurance or pay a penalty in 2014. The key provisions passed as part of reform and their potential implications are discussed briefly below.
Expanded health insurance coverage
The PPACA includes several important changes in health insurance coverage, some starting this year. The most immediate changes include new state high-risk pools available nationally, which started in June 2010. These pools are available for those who have been uninsured for six months or more and have at least one pre-existing condition. The pools will provide welcome relief for thousands of uninsured with pre-existing conditions, including Georgia residents, who have often found it impossible to acquire insurance at any price. Other immediate changes to private insurance this year include a prohibition on rescissions (plans dropping coverage when you are sick), the elimination of lifetime benefit limits on what plans pay, and limits on annual benefit payouts (annual limits of what health plans pay are eliminated in 2014). In addition, dependent children up to age twenty-six will be included in family health plans (certain existing “grandfathered” plans must meet this obligation by 2014). Finally, clinical preventive services and immunizations will be provided by health plans with no cost sharing.
The most important insurance changes occur in 2014. The PPACA will require U.S. citizens and legal residents to have health insurance or pay a tax penalty (up to 2.5 percent of household income). Employers with more than fifty employees that do not offer coverage (those with fewer than fifty are exempt) will pay $2,000 per worker (excluding the first thirty workers from the assessment). Expanded coverage occurs through several channels. First, individuals under age sixty-five who earn up to 133 percent of the federal poverty line would become eligible for Medicaid. The federal government will provide 100 percent of the funding for newly eligible enrollees through 2016, 95 percent in 2017, and declining to 90 percent for 2020 and beyond. Individuals above 133 percent of the poverty line will be required to have insurance (or pay a tax) meeting federally defined essential coverage. This coverage includes government plans (Medicare, Medicaid, Children’s Health Insurance Program, Tricare, and the Veterans’ Administration), employer-sponsored insurance, plans in the individual market, and plans offered through new health insurance exchanges. Through these exchanges, health insurers must pay at minimum 60 percent of the total costs of health care.
Individuals and smaller businesses with up to a hundred employees will be able to purchase coverage through new insurance exchanges. The exchanges will include a variety of plans, from less generous ones (bronze plans) that would pay about 60 percent of total health care expenses to more generous plans (platinum) that cover 90 percent of total health care expenses. Plans must offer benefits to all regardless of health status, and policy renewal must be guaranteed as well. Refundable and advanceable premium credits will be offered to individuals with incomes between 133 and 400 percent of the poverty line. So for example, an uninsured family of four earning $60,000 purchasing a typical policy (cost about $14,245) would pay about $4,940 and receive a federal credit for the remainder. These credits are linked to the value of a silver plan (a plan that pays 70 percent of the total costs of care).
Prevention, wellness, payment,
and delivery system reforms
The PPACA includes important changes in our health care prevention and delivery system. These changes are important because 75 percent of total health care spending is linked to chronically ill patients. About 80 percent of these conditions—including diabetes, cancer, heart disease, high blood pressure, and dyslipidemia, among others—are potentially preventable. The PPACA establishes a prevention and public health fund (a $15 billion investment over the next decade) to pay for evidence-based interventions through community-based prevention programs, public health activities, and an educational and outreach campaign for preventive benefits. The PPACA improves coverage of clinical preventive services by eliminating cost-sharing in Medicare and Medicaid effective January 2011. Similar changes face many private health plans (starting this year).
The PPACA also places new emphasis on moving toward coordinated team-based health care. This is especially important given the overwhelming share of spending traced to chronically ill patients in general and Medicare patients in particular. In Medicare, over 90 percent of health care spending is associated with chronic illness. Half the program’s spending is linked to 50 percent of patients with five or more chronic conditions. In traditional Medicare, there is no care coordination, resulting in high rates of preventable hospital admission and readmission. By some estimates, 20 percent of hospital readmissions in the program within thirty days are potentially preventable.
To address these issues, the PPACA makes several moves toward a greater reliance on team-based care and medical homes. A new Innovation Center in the Department of Health and Human Services is tasked with identifying the best models and approaches, then scaling and replicating them nationally. One approach is the use of Community Health Teams, comprising nurses, nurse practitioners, and other primary care personnel, who will work with provider and physician offices, community health centers, and others to provide continuous, team-based care for chronically ill patients. This approach could be replicated and scaled nationally for all Medicare patients (and others) in a short period.
The PPACA also marks an important move away from fee-for-service payments to health care providers. To address the high rates of preventable readmissions, Medicare will adjust (reduce) payments to hospitals starting in 2012 for certain patients readmitted within thirty days (with heart failure, pneumonia, or pulmonary disease, for example). In addition, the PPACA calls for a new demonstration project in Medicaid and Medicare (ten key health care conditions) that would provide a single payment for a hospital admission and physician and other payments within a to-be-defined time window (say, thirty days). Both of these payment changes provide strong incentives for closer collaboration and integration of acute care hospitals and post-acute care providers.
Medicare policy changes
Finally, the PPACA includes several improvements in the Medicare program. The most notable is the reduced out-of-pocket spending by Medicare beneficiaries for prescription drugs. Today, the standard drug benefit requires beneficiaries to pay the first $310, then 25 percent of the next $2,520 in drug spending. Once total drug spending hits $2,830, beneficiaries are responsible for 100 percent of the costs for the next $3,610 in spending (the so-called “doughnut hole”). This year, beneficiaries hitting the doughnut hole received a $250 rebate. By 2020, Medicare beneficiaries will pay 25 percent of the costs of drugs in the doughnut hole rather than 100 percent.
In addition to eliminating cost sharing on preventive services, Medicare added a new personalized prevention and care plan that includes two new benefits. The first is a new health risk appraisal to accompany the “welcome to Medicare” physical exam. The risk assessment is designed to provide the foundation for the second addition, a personalized care plan. These new benefits are an important, if modest, start toward a new focus on preventing disease and mitigating the adverse health consequences associated with unmanaged chronic illnesses.
The PPACA includes several key changes in our health care insurance, wellness, and delivery system. The move toward compulsory insurance is well known and has been hotly debated. The PPACA includes, however, a broader range of changes less understood and potentially as important as the changes in insurance coverage. While the PPACA represents a major change in health care in our country, it certainly will not represent the last major change we make.