Nuts and Bolts of Obamacare
Masood N. Khan M.D., F.A.C.P.
Health reform legislation, called Affordable Care Act and nicknamed Obamacare, could be rightly called President Obama’s biggest achievement. Presently, health care insurance programs are based on private health insurance companies and government programs of Medicare and Medicaid. Medicare, put into law by President Lyndon Johnson in 1965, now provides coverage for 38 million elderly and disabled Americans. It is the stanchion of all government subsidized social programs of America. Medicaid on the contrary is a sister program for families and individuals with low means of survival because of low income and limited resources. Indeed it is a government health insurance program for anybody regardless of age, unable to pay for health care. It is jointly funded by state and federal government.
The need for these reforms was very pressing. The US is suffering with two grave and major health care problems.
- Too many people of this advanced country are without health insurance and therefore vulnerable to be deprived of timely healthcare, much less quality healthcare.
- The cost of health care has been increasing by leaps and bounds, twice the rate of inflation, every year. In the current situation health care consumes 16% of GDP. After thorough research and investigation, the reason for increasing cost is attributed to waste in the service industry of healthcare where spending is more to produce quantity than quality of care. By estimation, 30% of more than 2 trillion dollars Americans spend on healthcare, goes towards treatments that have unproven necessity in terms of improving morbidity, mortality or preventing of disease.
These two problems are deleteriously interconnected. The high cost of care is not only unaffordable for people but also burdensome for the government to subsidize care. Besides, persons without insurance procrastinate care until late stages of the disease forcing them to seek expensive emergency room services and procedure- based treatment modalities.
THE CONCEPT & APPROACH:
Keeping in view the above state of affairs, Obamacare has come up with the following reforms to address the two crisis-like healthcare problems mentioned above.
A. The reforms aim at providing additional 32 million Americans with health care insurance to start with. The dream is to guarantee health care to every citizen as the reforms incrementally extend healthcare coverage to more and more people.
B. Within 10 years from its implementation which started in 2014, the government has set aside 350 billion on subsidies to create new health insurance marketplaces which will compete with each other to offer coverage at the lowest prices possible helping small businesses and individuals of low and middle-income groups afford health insurance and thus enroll an additional 24 million Americans into insurance programs.
C. In an effort to lower the cost of health care the reforms will operate in two directions.
- Highly expensive insurance benefits are nicknamed “Cadillac Plans” and are provided by private insurance companies which require almost zero co-payment (that is out-of-pocket spending for the patient), deprive patients of any incentive to cost effective care thereby causing overuse of the health care system that pushes the cost up. These plans will be taxed by the government to be imposed upon the insurance companies as well as their clients. The purpose is to encourage the employers and the individuals to go for cheaper insurance plans that save money overall. At the same time the tax will generate money that can be utilized to subsidize cheaper insurance marketplace.
- The reforms will experiment with innovative payment plans mandated to the cost-effective insurance companies whereby hospitals and doctors will be rewarded for good treatment outcomes of disease preventing wasteful management of chronic diseases and frequent readmissions into the hospital for the same disease. Another innovative way is to pay hospitals, doctors and other providers a set fee for a single episode of care; for example, heart bypass surgery, and let everyone involved divide it among themselves.
D. The reforms will promote expansion of Primary Care Physicians and increase their payments as in the majority of cases they can reasonably manage illnesses without having to avail specialist care and costly procedures. This is to contain disease management as much as possible within primary care levels. In addition, the government will en- courage and help establish, in the community and at schools, nurse-managed clinics at a basic level which could operate at a very low cost compared to doctors’ offices or hospital based clinics.
Those who wrote the new laws are adamant that the reforms will reduce the cost of health care by 500 billion dollars over the next 10 years from the total existing cost of 6.1 trillion. This reduction will be achieved through elimination of waste in the system and from small but widespread reduction in reimbursements to the hospitals and doctors.
- The reforms will increase the number of Americans covered by health insurance with demands to make health care services available to them without any increase in the existing cost of care.
- This situation will increase demand for primary care physicians. However, the medical graduates are not well convinced to take up primary care because of the nature and scope of practice and low salaries. By 2020, when almost all uninsured Americans will have been provided coverage, it is predicted that this country will face a shortage of about 40,000 primary care physicians.
- The role of primary care physicians will also have to expand with new clinical responsibilities and skills. This would mean their training programs will have to be redesigned so that they become leaders in health care, providing high quality of incidental as well as preventive care. They will not only be given increased reimbursement but also rewarded for good outcomes.
- In spite of reforms, it is realized that lowering the health care cost is extremely difficult as the whole industry will have to be transformed to pay the quality-controlled outcomes and not the volume. Political compromises will limit this transformation besides non-compliance on the part of patients, which is a common problem which has always been difficult to control. As long as an individual considers health care as ‘only when I am sick’ matter, the emergency room visits will swell and costs will increase.
- In order to create low cost health insurance plans, government will have to chip in with subsidies. This can only be supplied through taxation.
- Government will have to expand its administrative structure to regulate, implement and monitor results causing further financial burden. The law enjoins the setting up of an independent board to monitor clinical outcomes and recommend cost-controlling methods without compromising quality of care.
- All insurance plans will form and fund a “high-risk pool” to provide coverage to anybody who is uninsured because of pre-existing conditions.
- Children can remain on parents’ plans until they are 26.
- Insurance companies will be prevented from removing coverage when a person gets sick, denying coverage to kids with pre-existing conditions and imposing lifetime coverage caps.
- Small businesses will receive tax credits for buying cost-effective insurance for employees.
- Medicare will spend more money on Part D which provides prescription-drug coverage to senior citizens. Currently the coverage is provided until the cost of the drugs reaches the mark of2830 dollars. For charges beyond this mark, the patient will have to bear until 6440 dollars are paid out of pocket. The coverage then will resume. This is called “Doughnut Hole” which the reforms aim to eliminate by 2020. In the meantime, the seniors who are trapped in doughnut holes will receive a 50% discount on brand name drugs.
- Medicare payroll taxes will increase as all unearned money of an individual making more than 200,000 and families making more than 250,000 annually will be taxed.
- Most Americans are required to get the coverage or pay a penalty.
- Any family that earns less than 88000 a year, (22000 x 4) which is below the federal poverty line, will receive subsidies provided by insurance plans to facilitate their ability to purchase.
- All insurance companies are prohibited from refusing policies to individuals and businesses. They will have no freedom to set premiums on the basis of the health status of the individual.
- Businesses with 50 or more employees are required by law to provide coverage to their employees or pay the penalty.
- After 2018, any employer who will provide high-cost policies whose premiums exceed 27,500 per family and 10,200 per individual will be subject to a 40% tax.
- In order to create a new low cost insurance network, the government’s Medicare plans will approve and team up with special low-cost plans offered by private insurance companies called HMO plans. These are called healthcare exchanges. So anybody who qualifies for Medicare will have the option to enroll in any of these plans operating at a lower cost. These companies are able to offer plans at lower cost because of all the cost controlling measures these plans will adopt and the assistance from government subsidies. The copayment for patients under these plans will be at a fixed and lower rate than if they remained solely with Medicare at an 80:20 ratio of coverage vs. copayment.
Shortly after signing the bill of Affordable Care Act, President Obama said “For those of us who fought so hard for these reforms and believe in them so deeply, I have to remind you our job is not finished”. So besides the political and practical challenges in its implementation, these reforms will of course unfold into major hurdles as well as social rewards. A long tortuous road is ahead, yet the process has begun.