Healthcare Reform Explained

June 01, 2013

You most likely remember the partisan ruckus leading up to the March 2010 passage of the Affordable Care Act (ACA), often dubbed “Obamacare.” But now that the dust has settled on Capitol Hill, you’re probably wondering what it means for you.

You’re not alone. According to a recent survey, six in 10 Americans don’t understand how the ACA will affect them. This number shoots up to nearly seven in 10 among those whose lives stand to change the most—those in lower income brackets and the uninsured.

While the full effect of reform may take decades to unravel, our panel of experts has been closely tracking the ACA and what it means—now, next year and in the far-reaching future.

What Has Happened

To date, the ACA has accomplished more than sound bites of victory or vitriol, depending on where you tune the radio dial. While much activity has been centered on behind-the-scenes mobilization of the bureaucracy that will carry out provisions in the new law, some immediate changes have already kicked in.

For example, young adults up to age 26 can stay on their parents’ insurance policies, an expansion that has allowed 2 million young adults to gain coverage.

“That went into effect almost immediately when the bill was signed by President Obama into law in March 2010. Before, you had to be in college to stay on [your parents’ insurance]. The new law says it doesn’t matter what you’re doing—you’re covered,” says James Lott, who until recently was executive vice president of policy development and communications for the Hospital Association of Southern California.

Also of significance: Insurers are no longer allowed to deny coverage to children with preexisting health conditions. (Similar protections for adults will kick in next year.)

Furthermore, the Medicare coverage gap, or “doughnut hole,” for prescription drugs has begun closing incrementally and will close entirely by 2020 to make Medicare prescription drug coverage more affordable for seniors.

What’s Coming Soon

Most of the ACA’s provisions kick in beginning in January 2014. That means big changes are right around the corner.

Much debate has centered on the ACA’s “individual mandate,” which means that starting in January 2014, most Americans will be required to have health insurance or pay a penalty.

New state “marketplaces” are being created to make it easy to select the right insurance for you. In California, this marketplace is called Covered California (coveredca.com). Covered California will offer private health plans that cannot be canceled or denied for preexisting medical conditions.

Legal residents of California who lack access to employer-provided insurance can purchase health insurance through Covered California. Small employers with 50 or fewer full-time employees can, too.

Lott says the “marketplace” terminology is fitting. “It’s a supermarket of health plans that are available for the consumer. There will be comparison shopping, so to speak,” he says. Insurance plans will be ranked for easy comparison. And in California, there will be four basic levels of coverage: platinum, gold, silver and bronze. Open enrollment into the plans begins this October.

Dale Surowitz, regional chief operating officer for Providence Health & Services, Southern California, says this system will open up the market. “it will make a difference by helping those who currently cannot buy coverage,” he says.

Covered California will also help people find out whether they quality for tax credits or subsidies that reduce the cost of the mandatory insurance.

Lott estimates that 4 million uninsured Californians soon will be insured – either through Covered California or through a Medi-Cal assistance that, starting in 2014, will be expanded to include more people.

What’s in the Future

While the initial reform buzz will be centered on insuring millions of additional Americans, there will be several long-term paradigm shifts that will affect all Americans.

One change centers on placing more responsibility on healthcare providers to better manage patient health. “The healthcare law has incentives for providers to take care of the patient as a form of making profit versus providing services or procedures to make profit. The idea of managing a patient’s health status is the paradigm shift that is occurring,” Lott says. In other words, the government will pay more to providers who keep you well.

To do this, the government is also nudging providers toward creating “medical homes.”

“A medical home creates a team with the doctor as the quarterback and involved physicians’ assistants, nurse practitioners and social workers as part of that team,” says Bill gil, chief executive officer of the Facey Medical Foundation.

“Accountable-care organization,” a model for delivering service that offers doctors and hospitals incentives to provide quality care, is another buzzy reform term,” Surowitz says accountable-are organizations will force doctors and hospitals to work better together. “The goal is to have more coordinated care. That’s the direction the government wants everything going,” Surowitz says, adding that providence has been in front of this by investing $800 million in the creation of the Epic electronic health record system for patients. This will link Providence physicians, hospitals and ambulatory services, enabling them to deliver the right care at the right time.

How Will Uncle Sam Pull it Off Across the Board?

The government will send funds to providers that demonstrate better outcomes. “The hospitals that don’t do well aren’t going to get paid. No outcome, no income,” Surowitz says, noting that this represents a huge shift away from the fee-for-service structure of healthcare.

While the government may be able to incentivize providers, the real trick is changing patient behavior—especially for those who have relied upon the ER for healthcare. Gil predicts that the requirement to purchase insurance will nudge some patients in the right direction. “Once you give people more financial responsibility for the cost of care, they’re going to be asking questions. Patients are price-sensitive,” he says.

And that leads to the million-dollar question that most Americans are asking: Will my healthcare costs go up or down?

One theory is that state marketplaces could help lower premiums by pooling many people in one place—thereby fostering competition among insurers.

“Hopefully, over time, we will see a suppression in the increasing cost of care,” Gil says. “The reason I’m a little dubious about that being achievable is that we’re looking at 78 million baby boomers coming into Medicare in the next 10 years. The aging of the population is a proxy for chronic illness,” he says, noting that the huge cost of chronic illness could offset other efficiencies.

Gil predicts that greater numbers of insured patients will lead to less “uncompensated care” for hospitals, which drives up the cost of care for the insured. Simple math, however, still suggests that the government must do its part by adequately funding Medicaid programs, such as California’s Medi-Cal. “The reality is that the government pays less than the cost of care. That forces providers to adjust pricing for the other patients,” he says.

He acknowledges that costs have reached a tipping point.

“Paying more is not an acceptable solution. Doing more with less by being more efficient is where we all have to land. Any arguments outside of that are temporary arguments that aren’t sustainable.”