Uncertainty about ACA Fades

At the beginning of 2012, the future of the Patient Protection and Affordable Care Act (ACA) seemed uncertain. More than a dozen states had sued to have the healthcare reform law overturned and Republican presidential candidates vowed to repeal the law.

With the Supreme Court ruling in June to uphold the ACA’s constitutionality and President Barack Obama’s re-election in November, this signature piece of legislation is intact, and the healthcare industry is preparing for changes.

By January 1, 2014, health insurance exchanges will be available in each state, either run by the state or the federal government or a partnership between the parties. On that same date, states will have decided whether to expand their Medicaid enrollment. If states do not allow individuals <65 years of age whose income is <133% of the federal poverty level to be eligible for Medicaid, some of those people will receive subsidies to purchase insurance on the exchanges. Next year also brings the beginning of the individual mandate that requires most people in the United States to buy health insurance or else be taxed for refusing to do so.

There are fewer major changes taking effect in 2013, although the U.S. Department of Health & Human Services (HHS) has touted improvements in preventive health coverage, expansion of bundled payments, increased Medicaid payments to primary care physicians, and additional funding for the Children’s Health Insurance Program (CHIP). In addition, there will be higher Medicare payroll taxes for wealthy individuals and other taxes to help offset the costs of insuring 30 million more people next year.

Preventive Health Coverage Expansion

State Medicaid programs in 2013 have received new funding from the federal government to offer preventive services. By adding those patients, HHS predicts that 78 million people will have gained more coverage for preventive services by this year.

The coverage for preventive services began in September 2010 and requires that plans allow for screening in many patients for health conditions such as blood pressure, cholesterol, depression, type 2 diabetes, HIV, and obesity.

Bundled Payments Expansion

Health officials concerned about rising costs have, for years, proposed the concept of bundled payments, in which providers receive a lump sum for treating a condition instead of getting paid for each step of the process.

The Centers for Medicare & Medicaid Services (CMS) have started a program called the Bundled Payments for Care Improvement initiative. CMS and providers have worked together to create 4 models for payment reform, but questions remain about how to define an episode of care and how to share the payment among a group of doctors working on the same patient. CMS hopes the new system will lead to better care coordination, lower costs, and fewer re-admissions.

Increased Medicaid Payments for Primary Care

By next year, millions of people will gain eligibility for Medicaid coverage. To encourage primary care providers to cover these patients, states are mandated by the healthcare reform law to increase payment rates for Medicaid to at least 100% of Medicare rates in 2013 and 2014.

HHS and other government agencies are concerned about the projected shortage of primary care physicians. To address these concerns, the ACA includes provisions to help encourage medical students to consider primary care. For example, President Obama’s administration in June 2010 announced it would provide $250 million in funding to help expand primary care. Still, the Association of American Medical Colleges projects a shortage of 90,000 physicians by 2020, including 45,000 in primary care.

Children’s Health Insurance Program (CHIP)

Effective October 1, states will receive 2 additional years of funding for CHIP, which was started in 1997. This program provides insurance for children whose families do not qualify for Medicaid, but cannot afford private coverage. Pregnant women may also be eligible for the program.

Although the coverage varies by state, all states are required to cover routine check-ups, immunizations, dental and vision care, inpatient and outpatient hospital care, and laboratory and X-ray services.

Amended Taxes/Regulations

The Wall Street Journal noted that in 2013, individuals earning >$200,000 and couples earning >$250,000 will pay an additional 0.9% of their wages for Medicare on income exceeding those limits. Until this year, all employees paid a 1.45% tax of their earnings towards Medicare, and employers matched the 1.45%. Those rates will remain the same for lower income workers, although the higher earners must pay a higher rate. Medical device makers will also face a 2.3% tax this year on certain devices.

In addition, beginning this year, employees are limited to contributing $25,000 toward their flexible spending accounts. Before then, there had been no limit on the pre-tax accounts. BKD, an accounting firm, also indicated that nonprescribed over-the-counter medications are not eligible for reimbursement through the flexible spending accounts.

Businesses, employees, and others are taking note of the changes. In January, PwC’s Health Research Institute released a report titled Top Health Industry Issues of 2013: Picking Up the Pace on Health Reform that polled 1,000 consumers. Most were related to the ACA and preparing for the influx of approximately 30 million newly insured people next year.

“For the health sector, 2013 offers enormous opportunities,” the authors of the Health Research Institute report wrote. “Providers, insurers, and life sciences companies have 1 year to target and capture a large new market of paying customers…Success in 2014 will come to those who use 2013 wisely.”