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Health Reform: An Overview
- 1. Health Reform: An Overview Jennifer Tolbert Associate Director Kaiser Commission on Medicaid and the Uninsured for KaiserEDU.org September 2010 Return to KaiserEDU Tutorials Figure 1
- 3. Promoting Health Coverage Medicaid Coverage (up to 133% FPL) Employer-Sponsored Coverage Exchanges (subsidies 133-400% FPL) Individual Mandate Health Insurance Market Reforms Universal Coverage Figure 3 Return to KaiserEDU Tutorials
- 6. Estimated Health Insurance Coverage in 2019 SOURCE: Congressional Budget Office, March 20, 2010 Total Nonelderly Population = 282 Million Figure 6 Return to KaiserEDU Tutorials
- 15. Financing Health Reform, 2010-2019 Total Cost = $938 Billion Savings to Federal Deficit = $124 Billion Source: Congressional Budget Office, 2010 Federal savings New revenues Figure 15 Return to KaiserEDU Tutorials
- 16. Health Reform Implementation Timeline Figure 16 Return to KaiserEDU Tutorials
Editor's Notes
- Hello, I’m Jennifer Tolbert, an Associate Director with the Commission on Medicaid and the Uninsured at the Kaiser Family Foundation. Today, I will provide an overview of the Patient Protection and Affordable Care Act, which I will refer to simply as the health reform law. This comprehensive law was enacted on March 23, 2010 and will bring about significant changes to our health care system. This overview will focus on several key areas of the law: health insurance coverage, delivery system improvements and cost containment efforts.
- Before we get into specific provisions of the law, it is helpful to understand what the law sought to achieve. Most people can agree on the underlying problems with our system. Many people (50 million in 2009) lack health insurance and even those with coverage face increasing premiums and plans that may not cover the services they need. Fragmentation in the health care system leads to duplication and inefficient care and means that people do not always receive the best care. Health care costs continue to skyrocket, outpacing increases in inflation as well as workers wages. And, while we don’t all agree on the solutions, the overarching goals for health reform were to address these fundamental problems. The goals spanned four key areas: expanding coverage to the millions of Americans who lack it today; improving the affordability and quality of the coverage for those who are currently insured; improving access to and the overall quality of care that individuals receive; and constraining the growth in health care costs. The law includes numerous provisions designed to address each of these goals. This tutorial will focus on some of the more significant provisions in each area.
- The health reform law seeks to expand health coverage by building on the existing public-private system for providing health insurance and filling in the gaps in the current system. It expands eligibility for the Medicaid program, the current safety net health insurance program for the poor. It creates new exchanges, or marketplaces, where people can purchase coverage and, depending on their income, receive premium subsidies to help them afford the coverage. It includes new penalties for employers that don’t offer coverage to their employees and provides tax credits to small employers that do to bolster the availability of employer-sponsored coverage. Supporting these enhanced coverage mechanisms are a new requirement that individuals, with some exceptions, have health insurance (referred to as the individual mandate) and new rules for insurers requiring them to provide coverage to everyone regardless of health status and limiting the variations in premiums they charge people. Together, these strategies are designed to increase significantly the number of people with health insurance.
- To begin to fill the gaps in coverage, the health reform law makes some small changes to our system this year. To provide immediate coverage to individuals with medical conditions, the law creates the Pre-existing Condition Insurance Plan. Essentially a high risk pool available in each state, individuals are eligible if they have a pre-existing medical condition and have been uninsured for at least six months. To make the coverage in this plan more affordable, the premiums will be set as if the enrolled population was not sick. In some cases, however, the premiums will still be unaffordable for people who need the coverage. This program is federally funded and will be available until the new health insurance exchanges are up and running in 2014. Targeting the young adult population, which has the highest risk of any age group of being uninsured, the law allows adult children to remain on their parents’ insurance policy until age 26. Adult children do not have to live with their parents or be claimed as a dependent on their parents’ taxes to be eligible. Nor do they have to be students. They may also be married, though their spouses and children are not eligible.
- Much more significant coverage expansions occur in 2014. In 2014, the law expands the Medicaid program to cover nearly all individuals with income up to 133% of the federal poverty level, which is $14,400 for an individual or $29,300 for a family in 2010. This expansion will create a uniform eligibility threshold for Medicaid across the states. Currently, states set eligibility levels for Medicaid and in most states, adults without dependent children regardless of their income are not eligible. Also in 2014, the law creates new state-based health insurance exchanges or marketplaces, where individuals and small employers can purchase coverage. These exchanges will allow individuals to compare plans and select the one that best meets their needs. To ensure that coverage in the exchanges is affordable to most consumers, beginning in 2014, premium subsidies will be available to those with incomes up to 400% of the federal poverty level or $43,300 for an individual and $88,200 for a family of four in 2010.
- The Congressional Budget Office, which provides estimates of the cost and impact of all major legislation, has estimated that the coverage provisions in the health reform law will expand coverage to 32 million people by 2019. Sixteen million more people will be enrolled in Medicaid and the Children’s Health Insurance Program and 16 million people will be newly covered through the Exchanges. As a result, the uninsured rate in 2019 is estimated to be 8% as compared to 19% if health reform had not been implemented.
- In addition to expanding coverage, the law seeks to improve the adequacy and the affordability of the coverage that people have. New insurance market rules will prohibit insurers from denying coverage or charging people more because they are sick. In addition, insurers will not be permitted to rescind coverage, except in cases of fraud, nor will they be able to place lifetime or annual limits on the coverage. Other changes will require plans to provide coverage for certain preventive services, such as mammograms, colonoscopies, and diabetes screenings, with no cost-sharing for the individual. Many plans will be required to offer a minimum set of benefits and to limit what people have to pay out-of-pocket for their care.
- The law includes new requirements and incentives for employers to offer health coverage to their workers. Beginning in 2014, employers with 50 or more employees that don’t offer affordable coverage will be subject to penalties of $2,000 per full-time worker per year, excluding the first 30 workers. Recognizing the particular difficulty small employers face in providing health insurance, the law exempts employers with fewer than 50 employees from the penalties, and provides the smallest employers that offer coverage tax credits to offset some of the costs of that coverage.
- One of the more controversial aspects of health reform is the requirement that individuals have health insurance. Beginning in 2014, most people will be required to have health insurance that meets minimum coverage standards. This mandates was included in the law to ensure that the requirement that insurers provide coverage to everyone could work. Without a mandate for coverage, some people might choose not to purchase insurance until they got sick. Doing that would drive up premiums for everyone else, making coverage unaffordable for many. This new requirement will be enforced through the tax system and individuals will face monetary penalties if they don’t have coverage. Certain individuals will be exempt, including those who don’t have access to affordable coverage, those with incomes below a certain threshold, American Indians, immigrants who are not legal residents, and people in jail.
- Despite efforts to expand coverage, some uninsured will remain. The Congressional Budget Office estimates that 23 million people will be uninsured in 2019. The remaining uninsured include immigrants who are not legal residents and therefore not eligible for Medicaid or for federal premium subsidies in the exchanges, people who are eligible for Medicaid but are unenrolled, those who are exempt from the individual mandates in most cases because they do not have access to affordable insurance and those who choose to pay the penalty instead of purchasing health coverage. It is expected that many of the remaining uninsured will be low-income so that the need for a strong network of safety net providers to care for these uninsured will continue.
- In addition to the provisions focusing on health coverage, the law makes important changes to the health care delivery system. These delivery system changes are aimed at improving access to care and overall quality and to reign in rising health care costs. They cover a number of areas including promoting primary care and prevention, improving the supply of providers, particularly primary care providers, creating new models for delivering health care that promote quality and efficiency, using health information technology to streamline the delivery of care, and creating incentives for quality care through provider payments.
- The health reform law places a strong emphasis on primary and preventive care. To improve access to primary care, the law increases Medicare and Medicaid payments for primary care providers. Through loan repayment programs, scholarships and other mechanisms, the law also creates incentives for new doctors and nurses to practice in primary care. The law also seeks to increase access to preventive services by requiring Medicare and new private health plans to provide coverage for certain preventive services, including mammograms, colonoscopies, and diabetes screenings, at no cost to the consumer. It provides incentives in the form of enhanced federal payments for states to offer the same coverage through their Medicaid programs. To improve the health of the population, the law creates the Prevention and Public Health Fund to support initiatives to prevent obesity and diseases such as HIV, promote tobacco cessation, and strengthen the public heath infrastructure.
- As one of the overarching goals for health reform, the law contains numerous provisions to improve health care quality. While it’s not possible to describe all of the quality improvement provisions, here are a few of the more significant ones. First, the law requires the development of a national quality strategy to coordinate federal activities to improve the nation’s health. It promotes more coordinated health care through the creation of medical homes and other arrangements that hold providers accountable for the care they provide. Paying providers based on the quality of care they provide and making information on provider quality available to consumers is a central tenet of the law. The law also invests in research to identify and disseminate findings on the most effective treatments. Finally, enhanced data collection will enable a renewed focus on reducing health care disparities.
- Another key area addressed by the Health Reform Law is containment of health reform costs. Some of the provisions in the health reform law targeting health care costs focus on health care prices, primarily the premiums insurers charge, while other provisions address provider payment methodologies and the ways in which the health care system is organized that may be contributing to overutilization and inefficient delivery of care. With respect to prices, the law requires states to review premium rate requests by insurers to identify excessive or unreasonable premium increases. Insurers will also be required starting in 2011 to spend a certain portion of premium dollars on patient care, as opposed to administrative costs or profits. The offering of standardized plans through the Exchange will make it easier for people to comparison shop, which should spur competition and possibly lower premiums. In other areas, the law calls for reforming payment policies in Medicare, including reducing payments to Medicare managed care plans, known as Medicare Advantage plans, and slowing annual payment increases for other providers, as well as reducing payments to providers for avoidable complications, such as hospital-acquired infections and readmissions. It will test new delivery system models that will be designed to provide higher quality care more efficiently.
- According to the CBO, the health reform law will cost 938 billion dollars over 10 years from 2010 to 2019. The cost stem largely from expanding Medicaid and providing premium subsidies for individuals in the exchanges. It is paid for in a combination of savings to existing federal programs, mainly the Medicare program and new revenues. Some of the more significant savings provisions include reductions to payments to Medicare management care plans and smaller annual increases in payments to other providers. The law also creates a new independent payment advisory board that is charged with limiting overall growth in Medicare spending. As more people gain insurance coverage, Medicare and Medicaid will reduce payments to hospitals for the uncompensated care they provide. The new revenues are generated primarily through taxes. The law imposes new fees on health insurers, drug makers, and a lot of medical devices and indoor tanning services. Higher income earners, individuals with income greater than $200,000, and couples making more than $250,000 will face an increase in the Medicare tax on earnings and a new Medicare tax on unearned income. Beginning in 2018, high cost health plans will become subject to a new tax.
- As difficult as the debate over the health reform legislation was, many people agree that passing a bill was easy compared to the very challenging task of implementing the law. Health reform will be implemented over the next several years. A number of health insurance improvements, including allowing young adults to remain on their parents’ health insurance policies, eliminating lifetime limits and restricting annual limits on coverage, and prohibiting denials of coverage to children with pre-existing medical conditions go into effect this year. Still, the major coverage expansions and significant reforms to the health insurance markets that will guaranteed access to coverage for everyone won’t be implemented until 2014. The many delivery system changes will occur between now and 2014.
- The challenge of transforming our health care system, which represents 1/6 of our economy is daunting. It will require guidance from the federal government to explain how the law will be implemented as well as to provide oversight to ensure that implementation is proceeding as expected. Key stakeholders, including states, health plans, employers, and providers must commit to making the necessary changes. Resources to build infrastructure and to expand provider capacity will be needed. And, all of this will be done in the face of stiff political opposition. Despite the challenges, if we can get it right, health reform provides an opportunity to really transform our health care system so that it works better for all of us.
- I’m glad you’ve taken the time to learn more about the new health reform law and I hope you’ve found this tutorial useful. If you would like more information on provisions of the law and its implementation, I would suggest these additional resources. Thank you.