Politico recently summed up the president’s recent sales pitch for Obamacare this way: “Make the big sell by talking small.” And indeed, in a mid-July address, the president tried to assure Americans that all was going according plan, Politico reported, by painting “an optimistic picture of how Obamacare is putting money back into the pockets of consumers who will soon see new competition drive down insurance rates.” While the president has been focusing on some early small victories—like the rebates some people are getting due to a provision in the law—at its core the Affordable Care Act is about insurance.
When it passed, it was about giving some 30 million of the 50 million people uninsured at the time, in 2010, a chance to get insurance—for some, to buy it with help from subsidies from the federal government, and for some others, getting it through Medicaid, via an extension of the existing federal/state program for the poor. A secondary goal was to get rid of some of the worst practices in the so-called individual market, which prevented sick people from obtaining coverage and well people from affording it. There was also talk that the law would slow down the rise in the cost of US medical care, though it arguably did not contain teeth strong enough to make that happen. Forces that could actually raise healthcare costs—like consolidation in the insurance and hospital markets—would have continued with or without Obamacare. It is within this context that the Affordable Care Act to date must be scored. In Part 1 we examined what parts of the original law have been implemented, what parts are on hold, and what parts are gone. In this, Part 2, we assess the law as it stands so far—its hits and its misses, as well as the parts that get mixed reviews.
Coverage for young adults.
According to the 2012 Biennial Health Insurance Survey, from 2010 to 2012 about 3.4 million young adults up to age 26 gained coverage under their parents’ insurance policies, thanks to Obamacare. While some states and some employers already permitted young adult coverage, this popular provision has helped many young people who are starting their working lives.
No lifetime limits on insurance coverage.
Anyone who has experienced a catastrophic illness or accident and found that their insurance stopped paying the bills because the costs exceeded the policy limits knows how important this provision can be. While most people never reach those limits, they could mean financial ruin to those who did. Now, insurance companies can no longer impose lifetime dollar limits on coverage, a provision the White House says http://www.whitehouse.gov/healthreform/myths-and-facts has already affected 105 million Americans with individual or group coverage. Annual limits, too, will be entirely phased out by 2014. Insurers, however, are still allowed to limit the number of physician visits or treatments. Whether a policy comes with such limits will be a factor of the premium and the cost sharing a policyholder will pay. But the overall dollar limits for healthcare benefits—a factor when serious illness or accidents occur—will be a thing of the past.
Prescription drug savings for seniors.
Early on, the government sent a $250 rebate check to Medicare beneficiaries who had high drug expenses—those who in 2010 had reached the so-called “donut hole,” where the Medicare prescription drug law, passed in 2003, provides no benefits. The Affordable Care Act closed the donut hole gap, thanks to a deal the administration made with the drug companies. The companies helped fund some coverage for brand name drugs needed by consumers whose expenses were high enough to reach the coverage gap. That, of course, gave them entrée to new customers for those drugs. In 2011, the White House says, seniors saved, on average, $604 per person.
Preventive care benefits.
The law requires most health plans to cover core preventive services recommended by the US Preventive Services Task Force—with no cost sharing on the part of the patient. These include such services as immunizations and blood pressure screenings. Other services are aimed at women, such as well-woman visits and gestational diabetes screening, are also covered without cost sharing.
Obamacare also called on Medicare to pay for one wellness exam each year for beneficiaries. (The exam is not a full-fledged physical; it’s basically a visit to assess someone’s health risks. Patients fill out a short health risk assessment, and the doctor may measure blood pressure and body mass or discuss strategies for improvement). The exam is free for seniors if their doctors have agreed to accept Medicare’s payment in full (most do). Doctors may do other tests and provide other services like vaccinations. Some may be covered under Medicare’s preventive benefits, but others may not be. The wellness exam has been underused. In 2012 only about 12 percent—about 3.1 million seniors and disabled people—enrolled in traditional Medicare (not Medicare Advantage plans) got their wellness visit.
Obamacare intended these as a stopgap measure for sick people who needed insurance but have been shut out of the individual market because they had preexisting conditions, until the part of the law forbidding that takes effect. While several states had offered high-risk pools for years with little success, the health reform law pumped some $5 billion into such pools to encourage sick people to join. Advocates feared that wouldn’t be enough. Medicare’s chief actuary predicted in the spring of 2010 that 375,000 people would sign up by the end of that year. Instead enrollment has been disappointing. Sky-high premiums and deductibles have deterred a lot of would-be customers. Only 220,000 people are currently in them, and states are phasing them out in anticipation of the new exchanges.
Small business tax credit.
The idea here was to encourage small businesses to offer insurance to their workers by refunding a percentage of a firm’s health insurance expenses between 2010 and 2013. This has not been a spectacular success. The Government Accountability Office found that the credit was too small to persuade business owners to spend the time and money calculating the credit to cover their workers. It was estimated that between 1.4 and 4 million companies would be eligible for the credit. In mid 2012 the Government Accountability Office reported only 170,300 firms had claimed a credit in 2010. The White House said that in 2011, the number had jumped to about 360,00O, still way short of the estimates.
Medicare Advantage plans.
The president came to office vowing to cut the government’s overpayments to Medicare Advantage plans, which are a private insurance alternative to receiving Medicare benefits, and which have been getting more money from Medicare for services than traditional government-run Medicare pays for the same benefits. And indeed the Affordable Care Act called for some $200 billion in cuts to these plans. For years the Medicare Payment Advisory Commission reported that the government was overpaying sellers of Medicare Advantage plans, and that those overpayments were shortening the life of the Medicare Hospital Trust Fund. But administration actions over the past few years have raised questions about how serious the president is about cutting overpayments.
First came a Medicare decision that restored money to Medicare Advantage plans. The rationale was to encourage better care. Plans that earned at least three stars on a five-star scale for improving care received a bonus. Three star or average plans could get a bonus payment of three percent of what the government normally paid them to provide benefits to seniors. Then this year, as CJR noted, Medicare Advantage plans were scheduled for a reimbursement cut of 2.3 percent as part of an annual review process. But a lobbying campaign by the industry aimed at the public and Beltway pols instead resulted in a 3.3 percent increase—worth billions to insurers.
One provision of the ACA calls for insurance companies to pay out at least 80 percent of the premiums collected in benefits to policyholders. The idea here was to limit what they could spend on administrative costs and retain as profits. The administration says on August 1 that about 8.5 million people will get rebates averaging $100 because their insurance carriers did not spend enough
on medical care. This year’s rebates total about $500 million, compared with $1.1 billion last year, and the administration says the so-called 80/20 rule has forced companies to be more efficient and lower their premiums.
Why the mixed review? While an extra hundred bucks or so is certainly welcome news for those who get it, long-range questions remain. Insurance experts say it’s not hard for the big companies to meet the new 80/20 rule. For small companies, which the administration is counting on to offer competition and lower prices of insurance throughout the system the 80/20 rule may be difficult to comply with. Time will tell.
Cracking down on fraud.
On its website, the government touts the “new tools and resources provided by the Affordable Care Act” that have enabled healthcare fraud and prevention efforts to recover $4.1 billion in 2011 and $10.7 billion over the last three years. The Center for Public Integrity tells a different tale, going forward. In a piece published earlier this month, the Center reported:
Citing massive budget and staff cuts, federal officials are set to scale back or drop a host of investigations into Medicare and Medicaid fraud and abuse even though cracking down on government waste and cutting health care costs have been top priorities for the Obama administration.
It turns out, the Center said, the Office of the Inspector General for the Department of Health and Human Services will lose some 400 employees—auditors, investigators, evaluators—who kept an eye out for Medicare and Medicaid fraud. The agency blamed “expiring funding streams,” and the sequester didn’t help.
Accountable Care Organizations.
Obamacare supporters eager to see lower medical costs as a result of the Affordable Care Act are pinning some of their hopes on accountable care organizations or ACOs—groups of healthcare providers who come together to provide coordinated care that eliminates duplication and theoretically poor care. Obamacare financially encourages them. A year and half ago, the government selected 32 ACOs as pioneers to test the theory that by giving patients better care, the costs would come down. A piece by Kaiser Health News in mid-July tells us that the results so far are mixed at best.
The so-called pioneers managed a gross savings of about $87 million, but only 13 saved enough money to share the savings with Medicare, which was the point of the exercise. Two plans actually owed Medicare money. Nine plans are leaving the three-year program before it ends; most are joining other arrangements that carry less risk. Medicare head Marilyn Tavenner said that “successful Pioneer ACOs have reduced costs for Medicare and improved quality of care for their patients.” But Chas Roades, chief research officer at the Advisory Board Company, a health technology and research consulting firm, said, “Going forward, I think we should temper our expectations about how much money we’re actually going to save through ACOs.”
The next stage of Obamacare is the one that we should watch most carefully, as exchanges set up by the law start selling insurance policies to the unininsured and granting subsidies help people pay for them—the heart of the Affordable Care Act. If people get better insurance for the buck, and decide they can afford the coverage rather than pay the tax penalty, and sign up in droves—that’s a huge hit. But it’s a complicated machine to start up and operate, and reporters need to watch closely. There are bound to be misses and mixed results. Whether they will undermine the success of the law is a big unknown. Neither the Democrats, the Republicans, or the press has a crystal ball.
Follow @USProjectCJR for more posts from Trudy Lieberman and the rest of the United States Project team, including our work on healthcare issues and public health at The Second Opinion. And for Trudy’s resource guide to covering the ins and outs of buying insurance on the state exchanges, see Open Wide, from CJR’s new July/August issue.
Open wide: the fine print
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