Monday, September 17, 2012

Health Reform, The Election, and Beyond


Health Reform in 2012 –
Crunch Time, Part Two

By Adam Dougherty, MPH, MS III

This is the second piece in a two-part series on a
decisive year in health care policy.

IN THE WAKE OF THE RECENT Supreme Court
ruling of the Affordable Care Act (ACA) and in
anticipation of the November elections, the
drama of 2012 has only just begun. The future
of our new American health care system remains
an uncertain one, but the potential paths
forward have indeed grown clearer.

Supreme Court Debrief
As the dust begins to settle after the Supreme
Court’s ruling, it is worth recapping what
actually happened and what it means. Starting
in 2014, every qualifying American citizen will
be obligated to have health insurance coverage.
While my correct prediction wasn’t entirely
accurate as far as which justices would vote in
favor,1 I'll point out that I was in the extreme
minority among peers and colleagues in even
coming close! That being said, I will admit I did
not sleep much the night before the ruling, and I
may have PTSD from the moment of sheer
terror when CNN initially botched the call.
In the ruling's supporting opinion, Chief
Justice John Roberts explains that the mandate
does not fall under the jurisdiction of the
Commerce Clause. Rather, he interprets it as
legal through the taxation authority granted to
Congress. In its simplest interpretation, yes, the
mandate is a tax. More accurately, though, it is a
monetary penalty on those individuals who
choose not to purchase health insurance.

Contrary to some doomsday shock jocks,
this is not “the biggest tax increase on the
middle-class in our history,” as the vast majority
of rational Americans would opt for some form
of health insurance anyway. More so, there will
be exemptions from the mandate for individuals
with religious objections or for those who can't
afford insurance even with the exchange
subsidies (e.g. up to three months coverage for
those between jobs).

For the handful of individuals who take
freedom to the extreme by voluntarily foregoing
health coverage, they will see an annual penalty
on their tax returns that will theoretically
subsidize the health care that they eventually
might need. It is also worth noting that the law
explicitly prohibits the IRS from “aggressive
efforts to collect the penalty” (i.e. threatening
jail-time), and will most likely occur through
withholding of tax returns.

The Medicaid aspect of the Supreme Court
ruling was also significant, as the court felt that
obligatory expansion of eligibility to 133 percent
of the federal poverty level ($15,000 for an
individual, $30,000 for a family of four in 2012)
was beyond Congress' authority. This provision
has huge financial implications for states,
counties, businesses, health providers, and
patients as it is almost wholly federally funded.
Despite the Feds picking up the bill, several
conservative governors have jumped on the
opportunity to refuse this piece of Obamacare.
Unfortunately, these are the states which have
some of the highest uninsured rates and would
precisely be the ones to benefit most once
enacted in 2014. While many of the quick
responses from the likes of Rick Perry and
Bobby Jindal might merely be political
pandering, the chorus of local opposition will
undoubtedly rise from county hospitals, health
insurers, state medical societies, and patient
advocacy groups.

Similar knee-jerk reactions took place in the
1960s with the original creation of the Medicaid
program, which all states eventually ended up
implementing despite it being completely
voluntary. I predict that most states will fall into
line to tap into the 2014 revenue stream.

To those who worry that this “investment”
in Medicaid expansion will bury us in debt, the
nonpartisan Congressional Budget Office (CBO)
says otherwise. They now estimate that the ACA
will cost $84 billion less over 11 years than what
was originally forecasted. By expanding the pool
of insured persons and reducing expensive
rescue care, they estimate an overall reduction in
the national deficit by $109 billion over this
time frame.2 Of note, California is expected to
fully implement the expansion, bringing
coverage to over three million previously
uninsured Californians.

The ACA has now survived all three
branches of government, and the Supreme
Court seal of approval will allow the state-based
health insurance exchanges to move full speed
ahead. Many state legislatures will still opt out of
creating their own exchanges, but the law allows
for a national exchange to fill these gaps. In the
meantime, the law continues to quietly roll out
new consumer benefits, with the most recent
being the Medical Loss Ratio standard for health
insurers.

Under this standard, health plans are
required to spend at least 80 cents of every
dollar on actual health care services instead of
on marketing, profits, and overhead. And if they
don't? Then their customers get a rebate check
for the amount they underspend on actual care –
which was the case this year for 12.8 million
Americans to the tune of $1.1 billion averaging
$151 dollars for each family.3

Skimming off fewer health care dollars for
profit or executive compensation probably
appeals to most health care consumers. Of note,
Medicare, despite all its critics, has significantly
lower overhead costs than private insurances.4

November and Beyond
Looking to the November elections, it is not
unrealistic to call 2012 a referendum on health
reform. Public opinion of the law is still largely
divided, half in favor and half opposed.5 In a
one-term presidency scenario (and an
accompanying Republican sweep of the House
and Senate), we would see extensive reversals of
the last two years. While the “Repeal on Day
One” slogan is effective at the podium, laws
cannot be overturned in one swift Executive
Order.

Given the near impossibility of obtaining 60
seats in the Senate (the filibuster-proof level
needed to pass anything anymore), Republicans
would use the Reconciliation Process to
overturn/augment many budget-related items,
including the mandate penalties, Medicaid
expansion funds, and terminating the insurance
exchange subsidies and the Public Health and
Prevention Fund.

If the President prevails (in either a split
legislature or Republican legislature), the vast
majority of ACA provisions would remain, no
matter how many presidential vetoes are
exercised. Hence, 30 million individuals would
still gain insurance coverage, and the Medicaid
program would be fundamentally preserved.
In either scenario, a continued focus on the
deficit will remain, as the post-election lame
duck session requires dealing with the failed
Super Committee and its looming $1.2 trillion
in “sequestration” cuts, which would spell
substantial reductions to Medicare, Medicaid,
and other health programs. Regardless of the
election outcome, harder questions remain with
the biggest drivers of the long-term deficit
including the projected spending in Medicare
and the flawed SGR formula.

Medicare eligibility age extension, assetbased
cost sharing, expanded value-based
purchasing, and the Independent Payment
Advisory Board (IPAB) are a few of the more
controversial but necessary strategies being
considered. Bold steps may be taken in the
ensuing 113th and 114th Congresses to address
long-term health spending as the nation
recovers from the Great Recession, and the
medical profession will continue to have a
central role to play in shaping these decisions.
Now more than ever, it is essential for
current and future physicians to be engaged in
the conversations and deliberations that will
shape our evolving American health care. How
health reform translates from words on paper to
what happens in our exam rooms is a process
still unfolding.

1 Dougherty, A., “Health Reform in 2012 – Crunch Time,
Pt. 1”, SSV Medicine, May/June 2012.
2 Estimates for the Insurance Coverage Provisions of the
Affordable Care Act Updated for the Recent Supreme
Court Decision, Congressional Budget Office, July 24,
2012.
3 Health Care Law saves consumers over $1 billion, US
Department of Health and Human Services, June 21,
2012.
4 Steffie Woolhandler, Terry Campbell, and David U.
Himmelstein, “Costs of Health Care Administration in
the United States and Canada,” The New England
Journal of Medicine, August 21, 2003, 768–75.
5 Kaiser Health Tracking Poll: Early Reaction to
Supreme Court Decision on the ACA, Kaiser Family
Foundation, June 2012.