Reading the Tea Leaves - The Affordable Care Act

With the Supreme Court’s June 2012 decision declaring that the major pillars of the Affordable Care Act (ACA) are constitutional, America would appear to be on iron rails to government-mandated health insurance and massive healthcare reform by 2014. Like all government programs, the ACA fixes some problems and creates many others. The basic intent of the legislation is to provide some form of health insurance for a substantial percentage of the 50 million Americans who are currently uninsured by demanding that everyone pay something toward their own coverage. However, in the process of reforming the health insurance industry, Congress has crafted legislation that impacts every aspect of health care in this country – from child care to nursing homes, from hospital stays to hospital reimbursement, from drug costs to new drug approvals, and from physician training to physician compensation models. In short, the entire healthcare industry is scheduled for a complete makeover by 2017.

As if this were not enough, on January 1, 2012, physicians are facing a 27 percent reduction in pay for their work with Medicare patients due to a totally unrelated, legally mandated price-control mechanism called the Sustainable Growth Rate (SGR) formula. With all this change on the horizon, it is not surprising that many physicians who see Medicare patients are contemplating early retirement. Obviously, if physicians decide to retire from the Medicare system in large numbers, this will exacerbate the current shortages of both primary care physicians and certain specialists. With these issues in mind, this article attempts to outline how the implementation of the ACA will impact consumers. The ACA document is thousands of pages long with hundreds of provisions that phase in from 2010 through 2017. It is far beyond the scope of this commentary to cover each of these provisions. I will attempt to provide insight into how our new healthcare system will look from a patient’s point of view.

The good news is that many people who have never had health insurance will have subsidized coverage by 2014. It is unclear, however, exactly how much the uninsured rolls in this country will decrease, given that recent projections by the Congressional Budget Office and others suggest the health reform law will not cover as many Americans as it was first believed. A major unknown in this equation depends on whether state governments opt to accept the massive Medicaid expansion that the federal government is proposing. Bringing health insurance to millions of previously uncovered people will create new customers for insurers and decrease the indigent care burden for emergency departments, hospitals and physicians. Under the new law, the federal government will subsidize 100 percent of the cost of covering newly eligible individuals under Medicaid for the first three years through 2016. The federal coverage for the Medicaid expansion declines slightly in subsequent years, until it reaches 90 percent of the cost in 2020, where it will remain thereafter.

To pay for this expansion, states are incentivized to expand their Medicaid contributions, Medicare money will be reallocated, and the employer tax credit for offering health insurance will be restructured. Specifically, employers will be penalized for offering “Cadillac health plans” to favored employees and “high-dollar coverage” will be downsized. In essence, Medicare money is being reallocated and high-dollar health insurance coverage for private workers is being reduced to subsidize coverage for the uninsured and unemployed. In addition, employers will have the option of paying a penalty and opting out of health insurance responsibilities to their employees, in which case employees will be funneled into stateadministered insurance panels.

Coverage for preventive services like mammograms, sigmoidoscopy [sig-moi-dos-kuh-pee] and bone density scanning are mandated by the ACA, but the actual reimbursement for providing some of these services is being steadily decreased. For example, the reimbursement for bone density scanning for Medicare patients has been reduced in the doctor’s office to such a degree that many physicians can no longer afford to provide the service to the elderly patients who need it most. Thus, mandating a service does not guarantee that patients will get the service, if doctors can’t afford to provide it.

In a separate piece of legislation, Congress has encouraged the use of electronic medical records (EMRs) in the Medicare and Medicaid programs with a $47-billiondollar subsidy to provide incentive payments for the adoption of electronic health records (EHRs), with the intention of computerizing every American medical office by 2014. Physicians who don’t adopt EHRs by that time will be penalized by Medicare and Medicaid payment reductions beginning in 2015. While this campaign should enhance the portability of medical information and create new millionaires in the medical informatics field, it also means that instead of looking at patients, in the near future doctors will spend a lot of patient care time typing and staring at computer screens.

But doctor’s office changes will go far beyond the implementation of electronic medical records. The ACA promises to change the way that doctors get paid. Rather than paying for services and tests being performed, the new healthcare system will attempt to reward and penalize doctors based on how much and what kind of health care their patients consume. If your healthcare needs prove to be too costly to the system, your doctor and his Accountable Care Organization (ACO) may be financially penalized for your bad fortune. Obviously, this arrangement could drastically change the underpinnings of the doctor-patient relationship. Instead of being paid to deliver care, your doctor will be paid to keep you from requiring care. In order to cope with the financial demands of outcome-based reimbursement, physicians will be driven to partner with hospitals and insurers to control risks and costs. This is already happening. The fee-for-service private practitioner in solo practice is nearly extinct. Small practices do not have the actuarial and financial resources to survive in an outcome-reimbursed health care economy. Several bad outcomes in a small practice could bankrupt the practice and the physicians. Large groups of physicians and hospitals will need to consolidate in order to limit the sometimes unpredictable expenses associated with human illness.

In addition, because physicians are not needed for many aspects of primary care, physician extenders like nurse practitioners (ARNPs) and physician assistants (PAs) will deliver routine care to most patients with common diseases like diabetes, hypertension and high cholesterol where clear-cut guidelines for management already exist. Care will be menu driven and, on the positive side, visits will be prompt and less subject to emergency interruption. On the other hand, patient requests for laboratory tests that are not clearly beneficial will not be honored, because unnecessary testing results in unnecessary expense. If the testing you desire for your illness is not listed in the care guidelines for your disease, you won’t get it.

In a positive development, the ACA law is already working to diminish the out-of-pocket drug expenses that seniors face when they reach the donut hole in their Medicare pharmaceutical plan. However, to maximize systemic cost savings, practitioners will increasingly be asked to follow strict pharmaceutical guidelines, using less expensive generic drugs until they fail before moving to newer brand name products.

Many desirable insurance changes mandated by the ACA are already in place. A short list of these insurance reforms include:

(1) Elimination of lifetime and unreasonable annual limits on benefits (2) Prohibition insurance coverage termination when you become ill (3) Assistance if you are uninsurable because of a pre-existing illness (4) Required coverage of preventive services and immunizations (5) Extension of coverage for dependent children up to age 26 (6) Development of uniform coverage documents so consumers can make comparisons (7) Capping insurance company non-medical, administrative expenses (8) Creating an effective appeals process for claim denials (9) Creating a temporary re-insurance program to provide coverage for early retirees, and (10) Facilitating administrative simplification to lower healthcare costs

There are several clear-cut oversights in the ACA, most notably the failure to address the ongoing need for meaningful malpractice reform that has been needed for at least the past three decades. How the large delivery systems (ACOs) will deal with malpractice claims as they attempt to rein in costs is anybody’s guess. In addition, while the pharmaceutical industry was able to avoid major cost controls in the bill, it is unclear how the “new healthcare” will handle spiraling drug costs and drug shortages when there is no more money to allocate for these needs. Moreover, no solution was offered to physicians regarding the 27 percent pay reduction debacle scheduled to take place on January 1, 2013, under the SGR regulation mentioned earlier. Finally, the ACA established an unelected, Independent Payment Advisory Board (IPAB) to suggest changes in the structure of the healthcare system to maintain financial stability.

The bill gives this unelected board enormous power by entrusting it with significant – and possibly unmanageable – financial responsibility, including the determination of specific cost-cutting measures when insurance reform cost-savings predictions go awry. Patient advocacy groups and organized medicine are looking to repeal the IPAB portions of the ACA bill, but some mechanism will be needed to manage budget overruns if IPAB is eliminated. Patients must ask themselves if health care rationing like that seen in Canada is inevitable under the ACA.

In summary, the ACA will change the face of American medicine forever. Undoubtedly, some of the coming changes set in motion by the ACA are desirable, but many of the provisions threaten the economic survival of American health care professionals and health care service providers. Without healthcare providers and healthcare facilities, there will be no access to care, no matter how universal the insurance coverage. The survival of American healthcare will likely depend on the degree to which patients, practicing physicians and other health care professionals accept the changes being thrust upon them. If a substantial number of patients and health care providers elect to opt out of this system of outcome-based reimbursement and IPAB financial controls, the ACA Medicaid/Medicare program could, in a worst-case scenario, collapse under the weight of its own administrative cost. Another, less catastrophic scenario would be a two-tiered system like England’s, where the rich pay for Cadillac care and the poor and middle class settle for significantly restricted care. Only time will tell whether the Affordable Care Act of 2010 will lead to a reformed and revitalized system that successfully expands coverage to millions while preserving what is best about the culture of American health care.