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We have all heard a lot of debate and bits and pieces about the new Affordable Care Act. In December 2012, the Supreme Court upheld most of the Act. This article explains the new law, its goal, and its impact on various groups.
In a nutshell, the new law creates a nationwide health insurance system to help all Americans get coverage. The government will subsidize the new insurance coverage by expanding its Medicaid program to individuals who can’t afford insurance. It also provides subsidies to some businesses for insuring their workers. The goal is to extend insurance to more than 30 million people who are currently uninsured, thus sharply reducing the number of Americans without coverage.
What exactly is the new law intended to do and how will it work?
There are two basic parts to the Affordable Care Act:
1. It will create insurance exchanges for those buying individual policies and it will prohibit insurers from denying coverage on the basis of pre-existing conditions. These insurance exchanges are going to make it much easier to compare different insurance companies, allowing individuals to easily shop for and buy a an insurance plan.
2. At the same time, the federal government is going to provide subsidies to help lower- and middle-income Americans buy private coverage.
One concern is that the new plan is going to be very expensive for the government and for insurance companies. To help manage the costs, the plan creates a panel of experts to limit government reimbursement to only those treatments shown to be effective, and it creates incentives for providers to “bundle’’ services rather than charge by individual procedure.
A second concern is that many healthy individuals will not buy insurance even with the subsidy. If this happens, it will be very expensive for the insurance companies because only the very sick are going to get new insurance, which will cause the cost per person to go up. To fix this problem, the federal government is proposing a tax penalty on individuals who do not buy insurance. This new law is to take effect in 2015, and it essentially creates a tax on individuals who don’t buy insurance.
How does the law affect different groups?
Health Care providers: Providers and medical groups serving Medicaid insured patients are going to see an expansion in their Medicaid population since more people are now going to have insurance. This can be a good thing, but at the same time there are some significant provisions and limitations on reimbursements. First, the affordable care act provides incentives to bundle services, meaning less reimbursement for individual procedures. Providers will need to look for ways to decrease unnecessary health care expenses to prevent potential financial constraints. The first step is to ensure that patients get procedures and care when they need them so they don’t get sicker, and it also means decreasing potentially unnecessary procedures. In a nutshell, health care providers need to ensure that the right patients get the right level of care at the right time.
Some providers and specialists may also wish to reconsider the way patients and insurance companies are being charged for services, since overall patient care is going to be more important than individual procedures.
Insurance companies: There has been a general belief that insurance companies are going to benefit from this new law. Whether this is true or not is less clear. On the upside, insurance companies will see an increase on the number of individuals seeking insurance. On the downside, the insurance exchanges have the potential to drive insurance premiums down by increasing competition for individual insurance rates. In addition, there is a potential risk for insurance companies since we don’t have enough data about the health of the new individuals who will sign up for insurance. Insurance companies must ensure that the government reimbursement and the insurance premiums are sufficient to cover their costs. In summary, insurance companies are going to have more individuals to insure, along with greater competition and greater uncertainty.
Given the new landscape, insurance companies should reconsider the types of services that they offer in their plans. Insurance companies now have further incentives to encourage healthy habits and lower cost alternatives. We may see an expansion in lower cost services such as telehealth and telephone triage being provided by some insurance companies.
Individuals buying private insurance: The new law as it currently stands requires all individuals to buy insurance by imposing a tax penalty on those who don’t buy insurance. This new law is to take effect on 2015. The federal government believes this requirement is necessary so that everyone gets insurance, not just the ones that are very sick and need health care. The hope is that by requiring everyone to get insurance, the average cost of treating an individual will be reasonable enough to make insurance affordable.
However, if you are an individual without insurance, and you don’t want to buy insurance, you may not have to. About 26 states have challenged this mandate, and many conservatives are arguing that this mandate is unconstitutional under the commerce clause (meaning, if the government can force people to buy health insurance, than it could force people to buy other items, such as cell phones). This portion of the Affordable Care Act has been so controversial that it reached the Supreme Court. The debate is not over.
Individual States: Originally, there was a provision in the act penalizing states that refused to go along with the Affordable Care Act. In fact, in the fall of 2012, the New York Times reported that the Obama administration sent letters to states encouraging them to expand their Medicaid programs and telling them that they may lose federal money if they delayed. However, the Supreme Court decided that the federal government could not force the states to comply by cutting off all the federal money they receive for existing Medicaid programs.
While this is a win for states that do not want to be forced to go along with the Affordable Care Act, not going along may still prevent some states from taking advantage of additional funding from the government. Congress is still allowed to expand Medicaid by offering grants related to the new law, so states that do not go along will not be eligible to apply. This a difficult choice for the individual states. The new government grants may help pay for the costs of the expansion of the Medicaid program. At the same time, eventually the grants will end and the states may have the burden of paying for the additional healthcare coverage costs themselves.
Like the insurance companies, states planning to go along with the Affordable Care Act should carefully consider their programs for improving overall population health and look for ways to decrease the unnecessary use of healthcare dollars.
In summary, the new healthcare law is going to significantly expand the number of people who are going to be able to buy insurance. More than ever, health providers, healthcare insurance companies, and individual states are going to have to look very closely at their programs and how they care for individual patients. The burden of healthcare waste is going to be borne by the various groups involved in the healthcare system. There are significant incentives to expand programs that improve overall patient health and patient education in order to decrease unnecessary healthcare expenditures. To achieve this goal, we all need to work together to make sure that patients are coordinated so that they receive the right level of care at the right time.