The Patient Protection and Affordable Care Act (ACA) represents the most comprehensive government expansion and legal restructuring of the United States healthcare system since the passage of Medicare and Medicaid in 1965.
Enacted in March 2010 and upheld by the Supreme Court in 2012, most of the ACA's important and controversial provisions, including the individual mandate and elimination of pre-existing condition restrictions, will become effective nationally on January 1, 2014.
Prior S2KM blog posts addressing ACA issues from a settlement planning perspective:
- Health Care Reform - highlighting the Spring 2011 edition of the NAELA Journal which features a comprehensive ACA review.
- Health Care Law Upheld - summarizing the Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius.
- Affordable Care Act - 1 - reviewing Joshua Congdon-Hohman and Victor A. Matheson's article about the ACA's impact on future medical damages in personal injury cases.
- Affordable Care Act - 2 - reviewing separate law review articles by Rebecca Levenson and Ann Levin about the ACA's impact on the collateral source rule.
- ASNP 2013 Annual Meeting - referencing Scott Solkoff's presentation about the ACA's impact on special needs planning.
- Future of Elder and Special Needs Law - summarizing the Spring 2013 issue of the NAELA Journal which includes a Medicare article by Alfred J. Chiplin Jr. and Bethany J. Lilly detailing various cost-saving components of the ACA.
This S2KM blog post looks more closely at the ACA analysis in Chiplin and Lilly's Spring 2013 NAELA Journal article titled "Medicare’s Future: Letting the Affordable Care Act Work, While Learning From the Past."
Chiplin and Lilly begin their article with an extensive review of the historical debate concerning public health insurance in the United States. This historical debate not only defines the current structure of the Medicare program but also, according to Chiplin and Lilly, "the on-going debate ... about the necessary elements of a comprehensive program, including health care financing and accessing the quality of necessary services."
After summarizing key components of the current Medicare system, Chiplin and Lilly address current concerns about Medicare solvency. Their conclusions:
- Solvency - "[T]he current state of the Medicare Trust Funds is not as dire as both major political parties and news media outlets indicate." Medicare, according to the authors, "... has enough money to pay all of its bills through 2024 and to pay 87 percent of its costs for many years thereafter."
- Financial challenges- Medicare nonetheless faces two specific financial challenges:
- The insolvency of the Federal Hospital Insurance (HI) Trust Fund in 2024; and
- Rising health care costs.
Unlike the Supplemental Medical Insurance (SMI) Trust Fund, which the authors maintain is not in danger of insolvency because it is funded by specific percentages every year, the HI Trust Fund expenses have exceeded income and are expected to continue to do so. The authors' solution: Congress must either raise the payroll tax or reduce Medicare payments for medical costs.
Chiplin and Lilly provide statistical evidence to highlight the negative impact of rising health care costs on Medicare and Medicare beneficiaries as well as the United States economy. For example:
- In 2011, the Federal Budget equaled 24 percent of Gross Domestic Product (GDP) and experienced a deficit of more than $1 trillion. Medicare accounted for 13.5 percent of the entire budget.
- Medicare enrollment has increased from 34 million (1990) to 39 million (2000) to 47 million (2010).
- Due to our aging population, the Congressional Budget Office (CBO) estimates Medicare enrollment will increase to 64 million by 2020 and 81 million by 2030.
- As a percentage of GDP, Medicare spending has increased from 1.7 percent in 2002 to 3.7 percent in 2012 with projected increases to 4.2 percent in 2022, and 6 percent in 2037.
- The CBO estimates that 40 percent of Medicare’s future growth will result from “excess cost growth” compared with 60 percent attributable to increases in the number of Medicare beneficiaries.
- A 2012 report from the Institute of Medicine (IOM) attributes increased Medicare costs to several factors including: high re-hospitalization rates, lack of coordination among physicians and failure to pay for quality.
- Because Medicare cost increases are expected to outpace average Social Security benefits, elderly Medicare beneficiaries will likely pay a higher percentage of their income for health care.
- However, because private insurance pays more than Medicare for the same benefits, the costs of health care generally would likely increase much more if Medicare benefits were eliminated.
Following their historical and statistical summaries, Chiplin and Lilly address the central issue in their article: "how will the ACA reduce health care costs?"
The ACA's cost-containment programs, according to Chiplin and Lilly, are based upon the theory that costs can be reduced by demanding a higher quality of care and greater efficiency from providers and allowing providers to share in the savings. ACA programs the authors highlight include:
- Patient-Centered Medical Home (PCMH). The purpose of this program, currently being tested in CMS-designed demonstration models, is to “redesign the health care delivery system to provide targeted, accessible, continuous and coordinated, family-centered care to high-need populations.” To qualify, a participate must be enrolled in Medicare Parts A and Part B and have at least one eligible chronic disease as defined by CMS.
- Medicare Shared Savings Program (MSSP). The purpose of this program is "to promote accountability for a defined patient population, coordinate items and services under traditional Medicare Parts A and B, and encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery." Under the MSSP, groups of providers and suppliers that meet criteria defined by the Department of Health and Human Services (HHS) can work together to manage and coordinate care for Medicare fee-for-service beneficiaries through Accountable Care Organizations (ACOs). ACOs will be eligible to share cost savings if they meet HHS-defined quality performance standards.
- The Independent Payment Advisory Board (IPAB). The IPAB is a 15-member board of health care experts appointed by the President whose mission is to develop recommendations to "reduce the per capita rate of growth in Medicare spending.” The IPAB cannot make recommendations "to ration health care, raise revenues, raise Medicare beneficiary premiums, increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria.” The IPAB reports will be submitted to MedPAC, HHS, the President and Congress. The report will explain each recommendation and include both a legislative proposal and a CMS actuarial opinion. HHS will adopt IPAB recommendations unless Congress votes to prevent implementation.
- Quality Review Mechanisms-
The ACA features several quality measurement initiatives that restrict
payments for services and procedures that do not meet care standards:
- Incentive payments for hospitals.
- Limiting payment for hospital-acquired conditions.
- National strategy to improve health care quality.
- Interagency working group on healthcare quality.
- Quality measurement development.
- Health information technology.
- Data collection to reduce health care disparities.
- The Center for Medicare and Medicaid Innovation.
- Preventive services.
Chiplin and Lilly view ACA as "a vast experiment in paying for high-quality health care while preserving the Medicare program and expanding access to health care for other population segments." Implementation will be a tough, but doable challenge so long as we "let the tools of the ACA work". Among the implementation challenges: the "fiscal cliff", insurance exchanges, and integrating services for "dual-eligibles".
Overtime, the authors believe the ACA's spending and cost-containment provisions should at least slow the health care spending curve. As this New York Times article points out, there is mounting evidence to support Chiplin and Lilly's belief that a sustainable slowdown in health care costs is possible.
For a liberal political perspective on the ACA-related health care debate in the context of the budget deficit debate, see this May 29, 2013 blog post by Jonathan Chait titled "Yuval Levin Dissembles Madly".