In March 2010, President Barack Obama signed the federal health reform into law. The federal health reform consists of the Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act also referred to as PPACA. The bill’s key features include the Patient Bill of Rights, expanded insurance coverage, regulated insurance practices, Medicaid and Medicare modifications, and mandates transparency from medical providers but also institutes incentive programs (3). How will these changes positively or negatively affect hospitals, physicians, adults between the ages of 18-64, children, the Medicaid and Medicare programs, the state governments, small businesses, and insurance companies statewide?
Below is a table that compares the Health Coverage of the United States to one particular state, the state of Oregon. Compared to the national coverage, there is very little difference seen with the health insurance coverage in Oregon. However, with the changes that are going to be made, both the national and state percentages will change. I chose to look at the changes in health care that will affect the state of Oregon because that is where I am originally from. Much of my family and friends still reside there, and I hope to move back there one day soon.
HEALTH INSURANCE COVERAGE: 2011-2012 (2)
Sources: Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the Census Bureau’s March 2012 and 2013 Current Population Survey (CPS: Annual Social and Economic Supplements).
Medicaid: Includes those covered by Medicaid, the Children’s Health Insurance Program (CHIP), and those who have both Medicaid and another type of coverage, such as dual eligibles who are also covered by Medicare.
Medicare: Includes those covered by Medicare only as well as those covered by Medicare and a private/other source of coverage.
Employer: Includes those covered by employer-sponsored coverage either through their own job or as a dependent in the same household.
Other Public: Includes those covered under the military or Veterans Administration.
Other Private: Includes those covered by non-group insurance or other types of private insurance, such as employer-sponsored coverage for dependents living outside the household.
Uninsured: Includes those without health insurance and those who have coverage under the Indian Health Service only.
NSD: Not Sufficient Data.
Oregon was one of the first states to pass legislation establishing a health insurance exchange as required under the ACA. Oregon has also passed other legislation to prepare for health insurance reforms in the ACA. Oregon is well positioned to implement the Medicaid expansion, due to its long track record in expanding program eligibility. Oregon’s successes so far in implementing the ACA can be attributed to already having passed many elements of the law as part of its own health reform efforts, and making the ACA compatible with Oregon values (1).
Health reform will impact all states in various ways. In the State of Oregon, Health reform will be impacted by the numbers. The new federal funding of an estimated $5 billion coming to Oregon over the next decade should make it easier for the state to pay for health care lawmakers have promised uninsured children and adults. 500,000, 83 percent of the state’s 600,000 uninsured or men, women, and children, who could gain health coverage through a combination of subsidized private insurance and expanded Medicaid coverage. Also, insurance companies will no longer be able to deny coverage to anyone with pre-existing conditions. Undocumented immigrants will continue to be excluded from the Oregon Health Plan and will not be eligible for subsidized private insurance (4).
The Patient Protection and Affordable Care Act (ACA) will implement many significant changes affecting hospital providers. Even though the bill mandates every United States citizen or legal alien to obtain health insurance, there will remain a large uninsured population mostly the undocumented or illegal alien. The rise in insured citizens will help hospitals reduce the amount of unreimbursed care but the increase in insured citizens may also increase hospital admissions causing an increase in waiting times and overcrowded space. Tax-exempt hospitals must conduct a Community Health Needs Assessment every three years to demonstrate that their services meet the patients’ needs within the community they serve. Failure to comply with any requirement of the CHNA can result in a penalty of up to $50,000. In addition, hospital must develop a policy to address financial assistance criteria; such as eligibility criteria for financial assistance, basis for calculating charges to patients and procedures in place in the event of nonpayment (1).
Because uncompensated care trends have been rising and hospitals recognize the need to get people covered with some type of insurance, Oregon hospitals overall are supportive of the state’s health reform efforts. However, there are many challenges ahead. More people will have insurance, but many of the preventive and efficiency efforts included in the ACA, as well as the state’s vision for CCOs, will affect hospital revenues. In addition, as in many other states, Medicaid historically has not been a great payer in Oregon. So even though under reform more people will be covered, many will have Medicaid, which is worrisome to hospitals because of the program’s low payment rates (1).
Another issue of concern has to do with hospital provider taxes on which Oregon heavily relies to finance its Medicaid program. Oregon’s acute care hospitals, described by some as the major player in the state’s health care market, are overwhelmingly nonprofit institutions; only two of the 58 hospitals in the state are for-profit. The direct benefit of the tax to hospitals potentially could be compromised if CCOs are successful in shifting care to more preventive and primary care, and away from hospitals. Such a shift could possibly jeopardize hospitals’ willingness to continue paying the tax (1).
The main goals of the Healthcare Reform are to improve quality of care and increase patient access to care while controlling healthcare costs and reducing fraud waste and abuse. Legislature has outlined incentives to motivate physicians to extend care to rural areas and improve the quality of care by offering 10% Medicare bonus payments to physicians working in those areas. The bill also attempts to discourage fraud by reducing penalties for self-reporting due to possible Stark violations. The Center for Medicare and Medicaid Services established the Physician Compare network to assist patients in choosing Medicare providers and provides information through the Physician Quality Reporting System. Even though there are incentives to participate in the Physician Compare network, the physician participation will become almost mandatory by penalizing physicians who wish not to participate within the network; failure to participate will result in a 1.5 reduction in Medicare payments (3).
Another issue is the capacity for primary care. Given the large numbers of individuals who will gain coverage under the ACA, there is a concern for all states whether there are sufficient numbers of primary care providers. In Oregon, it has been acknowledged that there is a shortage, particularly in rural areas. If CCOs are successful, some believe sufficient primary care capacity will exist. In addition, Oregon’s health reform legislation, HB 2009, called for the state to develop care attributes, measures, standards and incentives for care delivered by Patient-Centered Primary Care Homes (PCPCHs), which is Oregon’s medical or health home model of care (1) .
To encourage stability of primary care across the state several steps have been initiated. An outreach effort to certify medical practices is underway, enhanced payment for Health Homes for Medicaid as provided for in the ACA is being pursued, and Oregon is working with insurers for state employees and school districts to encourage similar primary care incentive payments tied to the same standards as those of PCPCH. Oregon also passed measures to help boost the state’s primary care capacity in rural areas, where capacity is more of a concern. These include a loan forgiveness program for medical students who agree to practice primary care in rural areas of the state and a bill which tasks the OHA to develop a strategic plan for recruiting primary care physicians to the state, particularly rural areas (1).
Young adults within a certain income range or unemployed now qualify for Medicaid. If the employer does not provide healthcare coverage, the individual may receive healthcare coverage through the Health Insurance Marketplace. Individual coverage mandates require individuals to obtain acceptable health care coverage or pay penalties. Penalties vary from $95 per person and increase each year. The new Healthcare Reform attempts to extend healthcare to those individuals with pre-existing conditions that health insurers denied or limited healthcare coverage on in the past. In addition to health care education, patients will receive preventive health services at no cost. The services include screening; such as mammograms or colonoscopies, measles vaccinations and flu shots, counseling for smoking cessation, weight loss or alcohol (3).
In Oregon, adults under the federal poverty level were eligible for coverage under the Oregon Health Plan. However, due to the lack of state funding, it limited the enrollment to a fraction of those who were eligible. Now all states must extend Medicaid coverage to all adults earning less than about $14,400 a year (133 percent of the federal poverty level). Federal funds will cover all the costs of newly eligible individuals through 2016, and a large portion thereafter. With the addition of federal subsidies for buying private insurance, it is estimated that approximately 500,000 Oregon state residents could gain health coverage in Oregon, which is about 83 percent of those currently going without (4).
Overall, the Healthcare Reform will have a positive impact on children of all ages and backgrounds in the United States. The Healthcare Reform will prohibit health insurers from excluding from coverage children with pre-existing conditions. This will result in an increase to access to care for those children who suffer from devastating illness; such as cancer or chronic illnesses; such as diabetes. The bill not only extends coverage to dependent children up to the age of 26 under their parents’ insurance plan but also extends Medicaid coverage to foster children up to the age of 26. Under this law, health care insurers cover immunizations and preventive health services free of cost for infants to adolescents under the new insurance plans. In addition, $25 billion have been allocated for the Childhood Obesity Demonstration Project, established through Children’s Health Insurance Program (CHIP) in order to reduce childhood obesity. The Healthcare Reform will increase Medicaid enrollment and overall spending due to coverage expansion. According to the Congressional Budget Office (CBO), by 2019 there will be an additional 16 million individuals covered by Medicaid and CHIP. Effective 2014, states will be required to expand Medicaid coverage to the non-elderly population up to the 133% Federal Poverty Level (FPL) (3).
Pam Mariea-Nason, health policy director for CareOregon, a nonprofit health plan serving Medicaid enrollees, is concerned that there could be a downside as it’s not yet quite clear if some children will end up in a worse situation if federal reforms engage them to move from Medicaid into subsidized private insurance, which brings with it higher costs to families and lesser benefits and legal protections to the child. “It’s still a possibility,” Pam indicated as she explained that the reconciliation version of the legislation preserves each state’s current eligibility rules for children (4).
Changes under federal reforms: With an estimated $5 billion in new federal funding over the next decade, Oregon should have less trouble paying for its Medicaid expansion. On the downside, it’s not yet clear whether some children might end up worse off if federal reforms force them to move from Medicaid into subsidized private insurance with higher costs to families and lesser benefits and legal protections. “It’s still a possibility,” said Pam Mariea-Nason, health policy director for CareOregon, a nonprofit health plan serving Medicaid enrollees, who pointed out that the reconciliation version of the legislation preserves each state’s current eligibility rules for children (4).
The impact that the health care reform will have on the state government is yet to be seen. This will depend on the state’s demographics. The bill mandates federal programs to expand benefits with limited funding or supplemented with federal funding that may be depleted in the future. The federal government will reimburse the states for new enrollees from 2014-2016. After 2016, the reimbursed amount will decrease from 95% steadily to 90% in 2020. The reimbursement amounts may continue to decrease as the population of new enrollments increases. In addition, states are required to raise the provider reimbursement levels to those of Medicare. Even though the federal government will initially supply the difference in provider payout, states will see an increase in health care costs due to the requirement for insurers to cover high-risk consumers. This doesn’t even include the modification for CHIP or the insurance exchangers; which will increase costs. Some of the programs may create jobs for the state but this may also increase state taxes to cover for the expenses created (3).
While Oregon generally has a successful past of implementing its health care reform, the state faces challenges. The state must now be able to take key pieces of its reforms from concepts to details, and those details must be approved by the state legislature. Health reform in Oregon has for the most part been bipartisan, but it is not clear how the legislature will receive specifics. Overlying the politics is Oregon’s fiscal situation, which, like that of most states, is described as being between ‘terrible’ and ‘awful’ and raises the concern that if the state’s economy declines further, it may take away from the state’s drive and attention on health care reform. Despite these issues, it appears that Oregon is well situated to fully implement the ACA, as well as its own health care reforms (4).
The Healthcare Reform will have an impact on small businesses. The new rights and protections offered by Obama Care will help smaller businesses provide their employees with better quality coverage by giving them increased buying power and cost-assistance via the Small Business Health Options Program (SHOP), which is accessible through each State’s health insurance marketplace. Small businesses with fewer than 50 full-time equivalent employees can shop for group health plans now. By 2016, those with 100 full-timers or less can use the SHOP (3).
Below is a summary of what Obama Care means for small businesses. It creates the SHOP where small businesses can shop for group health plans. Small businesses with fewer than 25 full-time equivalent employees who have average annual wages below $50,000 can get tax to help pay for employee premiums. By 2015, small businesses with more than 100 full-time equivalent employees with average annual wages above $250,000 must provide health coverage to full time employees, and starting in 2016, employers with 50-99 full-time equivalent employees will have to insure their full-time workforce as well. Starting in 2015, if any business that is mandated to insure its full-time workers, but does not, will have to make a $2,000 shared responsibility payment on their year-end federal income taxes. The fee is $3,000 if the employee gets health insurance subsidies through the marketplace (3).
Obama Care will mostly have positive effects on small businesses. It appears that the smaller the business, the better the tax breaks. Small employers can see up to a 50% reduction in their share of the cost of employee premiums, and the amount they do pay is tax deductible. 96% of all firms in the United States compared to 50% in the State of Oregon (4) have fewer than 50 employees and will not be penalized for choosing not to provide health coverage to their employees. However, with the coverage extension to children up to 26 years old, this could become a financial burden for small businesses to enroll dependents. Some other negative effects include the possibility of employees’ hours being cut, costs passed onto the consumers, and a reduction in hiring and more out-of-pocket costs for larger businesses (3).
The positive and negative effects of the Health care Reform on insurance companies will be complex and only time will tell how the changes will impact on the long run. In 2010, the Department of Health and Human Services (HHS) reviewed health care insurers’ rates. HHS continues to use this data to either include or exclude the provider from the Health Insurance Exchanges. Exclusion may perceive the insurer to have a history of unjustified or excessive increase in premium rates. The bill mandates individual responsibility for insurance coverage; therefore more insured patients will enter the insurance market. Many of those will have illnesses that were not previously covered, and this bill removes pre-existing conditions as a tool to deny health care coverage to these people. It also prohibits insurance companies from dropping people from coverage when they get sick and has eliminated the lifetime and annual dollar limits. The penalties for young adults without health insurance are minimal, approximately $95 annually. Thus young adults may opt out to save money. Meanwhile, they could develop illnesses that will be covered under the new bill once insured (3).
State-run insurance exchanges are now supposed to create a more affordable market for people to buy health insurance. Individuals earning less than about $43,000, or less than $88,000 for a family of four, would be eligible for subsidies. Insurers will no longer be able to charge more based on health status. Insurers also will be required to spend 80 to 85 percent of premiums collected from enrollees on medical care. The U.S. Department of Health and Human Services will establish a process for reviewing premium increases, but Sean Kolmer with the state Office of Oregon Health Policy and Research said the details are unknown. It remains to be seen how affordable insurance will be (4). Although the health care reform will bring a lot of positive changes to the under-insured, uninsured, and those with limited income or resources, someone must pay for these services, and such federal subsidization programs may open up a new door to financial burdens on the states.
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