Landmark health care legislation enacted by Congress and signed into law by President Barack Obama continues to undergo scrutiny as it nears the first anniversary of its passage.
The medical community, insurance industry and individuals covered by health insurance are scrambling to decipher the impact of the legislation even as portions of the law take effect this year. Additional provisions are scheduled to be phased in over the next three years.
“There will be significant focus on the exchange and how Colorado is planning on doing that,” says Neil Waldron, chief marketing officer for Rocky Mountain Health Plans based in Grand Junction. RMHP is the largest health care benefits provider in Mesa County.
Health care exchanges are billed as places where consumers can shop for various kinds of coverage at various costs. Waldron says the federal government will be a factor in prodding states to adopt legislation covering such exchanges. Government oversight is intended partly as a means to control costs.
“If you exceed certain expense limits, you’d have to offer a rebate,” Waldron says. For example, a large insurance company would be required to ensure that 85 percent of the revenue it collects in premiums would be paid out in health claims. If the percentage paid in claims dropped below 85 percent, the company would have to rebate money in the form of cash refunds or lower premiums. For small group providers, the threshold could be 80 percent paid out in claims.
With profits expected to drop under the new formula, many insurance companies have reduced the commissions they pay their insurance agents. To add to frustration for insurance companies, final details have yet to be authorized by the government.
“There’s uncertainty about how much flexibility states are going to have,” Waldron says.
Insurance companies in the Grand Valley sounded the alarm soon after the federal legislation took effect. Many private companies say the new system will result in higher costs and slower delivery of health care even as Congress portrayed the legislation as a means to improve quality and help control costs.
Jim Sjerven, an agent for Valley Financial Services in Grand Junction, says insurance plans that are rich in benefits will cost more than they otherwise would.
“Every time you put something on an insurance company, it’s going to raise rates,” Sjerven said during a seminar sponsored by his company last September.
Others warn that if profit margins continue to decline for insurance companies, only large corporations will remain in the game. The result could be reduced competition and the closure of small insurance companies.
“There’s debate as to how big an impact the exchanges will have on small business,” Waldron says.
By the end of September, the first provisions of the national legislation had kicked in. They included insurance coverage for dependent children up to age 26, coverage of pre-existing medical conditions for all children and full coverage for certain preventive treatments.
Since the national Patient Protection and Affordable Care Act (PPACA) was signed into law by President Obama last March, details of the measure have been examined by lawmakers who admitted they didn’t read the entire bill prior to voting. And various special interest groups have lined up to endorse provisions, call for repeal of the bill or demand some reform while retaining the bulk of the overall legislation.
The president has pledged to work on changing one provision which adds more paperwork for businesses throughout the year. The provision requires a business to issue a 1099 tax form to any organization receiving more than $600 from the business during a calendar year. In other words, if a business purchases $601 worth of copy paper from a print shop, the business must issue the print shop a 1099.
The provision took effect in January, requiring businesses to report all such transactions for 2011 and beyond. The president acknowledged during his State of the Union message the provision is probably counterproductive.
The provision, Section 9066 of PPACA, also requires coin and bullion dealers to report any sales greater than $600.
That has sellers and collectors concerned, because $600 doesn’t buy much gold these days. The going rate is more than $1,400 an ounce, so much paperwork would be added for people who buy or sell gold.
“It’s going to affect business for me negatively,” Teresa Mays, owner of the Hedge Company in Grand Junction, said during an interview in January. Mays buys and sells coins, and said her average purchase is higher than $600. Like other small business owners, she dislikes the idea of filing more paperwork, yet probably can’t justify hiring a person to do it for her.
Tracking gold and silver ownership is not new. Current law requires owners to report the metals as taxable materials. The change mandated by Section 9066 is another way to ensure the government knows who possesses gold and silver, say people leery of the new law.
Other provisions which took effect this year include: elimination of pre-tax reimbursements from health accounts for non-prescribed, over-the-counter medicine; a 20 percent tax for nonqualified withdrawals from health savings accounts; and small employer grants for wellness programs.
Additional provisions kick in through through 2014, when all Americans will be required to carry health insurance. Large employers will be required to offer health insurance for employees or face a penalty for each employee who’s not insured. People who prove insurance is not affordable for them can opt for public coverage through Medicare or Medicaid.
The extra burden on governments already facing budget shortfalls has lawmakers, local municipalities and the private sector concerned about the effects of health care changes over the next three years.
There’s also focus on tort reform —or the lack of it— in health care legislation. “It’s always talked about and nothing’s come out,” Waldron says.
For decades, physicians’ organizations have protested the U.S. legal system can award a patient tens of millions of dollars for winning a lawsuit against a doctor. From a practical standpoint, doctors say, insurance companies have to raise rates for malpractice insurance and doctors have to buy the policies to help ensure their businesses can withstand an expensive defeat in court. Doctors, in turn, pass the costs on to patients, who often pass them on to insurance companies.
Another serious cost issue is the rise in medical costs paid for by tax dollars. While most industrialized countries spend about 10 percent of their gross domestic product on health care, the United States spends about 18 percent, says Dr. David West, vice president of medical affairs at Hospice and Palliative Care of Western Colorado in Grand Junction. West previously managed the family residency program at St. Mary’s Hospital in Grand Junction and currently works as a hospitalist at St. Mary’s.
“I would agree that we can’t have a state provide so much for Medicaid and the federal government for Medicare,” West adds.
One effect of rising state government expenditures on heath care has already been predicted by Tim Foster, president of Mesa State College in Grand Junction. The college, which has seen cuts in state funding over the past 10 years, could face elimination of state funds by 2014 as health care costs take larger bites out of the state budget — particularly through increased Medicaid funding. In fact, Foster predicts state funding for all higher education in Colorado could be eliminated in 2014.
Ironically, Mesa County’s medical professionals and clients are trying to adapt to changes even as the nation praises the Grand Valley for a health care system that’s noted for delivering quality care at reasonable costs.
The national legislation includes some components of the local plan, but there are a couple of provisions that are difficult to duplicate at the national level: doctors in Mesa County generally agree to earn less money than they otherwise could, the doctors belong to a Quality Health Network in which they monitor each other to help prevent unnecessary tests that can drive up costs and Rocky Mountain Health Plans compensates doctors in the Independent Practice Association at higher rates than they would otherwise receive when the doctors treat patients who are insured only by Medicare. The latter provision is an agreement in which the IPA agrees to contract solely with RMHP for coverage. The local model is being expanded to seven counties in Western Colorado over the next two years. The effort is partly funded by federal stimulus money.
Even given the extra incentives for RMHP reimbursements, doctor compensation is becoming a large issue for physicians. Congress continues to consider a 23 percent further reduction in Medicare reimbursements for doctors. And Colorado joined 19 other states in cutting funding for Medicaid in the 2010 fiscal year. Colorado reduced funding again in the current fiscal year, which expires in October.
The situation has some local medical practices rejecting any new patients covered solely by Medicare. Other practices privately say they’d have to consider turning away such patients, too, if the additional 23 percent reduction is implemented.
Such a reduction in revenue comes at a time when the Grand Valley seeks to attract new doctors even as newly licensed physicians face record amounts of student loan debts.
Medical doctors often graduate with more than $200,000 in loans. When they open for business, doctors face the additional prospect of rising malpractice insurance premiums as well as tests and treatments that seem to get better — and cost more — as the years progress. Many doctors are unwilling to work more than five days a week or be on call during late night hours. Such a scenario sometimes knocks them out of contention for primary care jobs. Consequently, a shortage of primary care doctors is apparent across the nation and the Grand Valley is no different.
Members of the Grand Valley Health Care Development Council focus on the local effort to recruit doctors. The council is headed by Sally Schaefer, retired chief executive officer of Hilltop Resources in Grand Junction. Among other activities, the council monitors the progress of a potential University of Colorado medical residency program at St. Mary’s Hospital. The program, designed partly to give graduate students a taste of the Grand Valley culture, appeared feasible three years ago. Since then, though, the Great Recession and state budget cuts have stalled the discussion.
Meantime, other local efforts are underway to entice new doctors to settle in Mesa County. St. Mary’s Hospital and Rocky Mountain Health Plans are offering loan forgiveness of up to $250,000, says Dr. Roger Shenkel, executive director of Primary Care Partners in Grand Junction.
Many local doctors plan to retire in the next decade even as a record number of those under 20 years old grow older and seek more health care themselves. Of course, many in the youngest generation could become doctors themselves. And the doctor shortage is not as severe as it was during the local natural gas boom in 2007-2008, Shenkel says.
While discussion over unintended consequences of health care legislation continues, proponents of health care reform believe much of the legislation is sound.
“I don’t think it will be repealed,” West says. “People ignore that this was supported by the insurance companies and (American Medical Association). If you repeal part of it, it will fall apart.”
Critics often point out the national legislation addresses the 30 million or
40 million people who currently lack health insurance, not the majority of Americans who wrestle with health care costs. And people without insurance are legally entitled to medical treatment if they walk into a hospital emergency room.
But West and others say emergency room treatment is too expensive and actually increases health care costs for all. “You can’t have people choosing not to have insurance and then go for treatment,” he says.
On the other hand, the number of people choosing to go without insurance rose in Colorado last year. Cancellation of insurance is often a result of a soft economy, with employees losing jobs and business owners cutting costs.
Says Waldron: “Forty percent of cancellations are due to employers dropping health insurance.”
One unusual development during the recent soft economic cycle is that employees with health coverage did not rush to doctors seeking minor treatments.
“Utilization was down last year and it’s a concern about costs,” Waldron says. “That’s different than in other recessions.”
He says one reason could be that employees last year were more likely to face co-pays than were their counterparts a couple of decades ago. Still, deferred minor treatment could result in more costly major treatments in the future.
One large item that won’t be deferred is continued implementation of the federal health care law, coinciding with federal concerns about funding Medicare and state worries over paying for Medicaid.
And, oh yes, Social Security funds are being stretched as the record-breaking baby boom generation heads for retirement. The methods of funding such programs can be as complex and challenging as understanding the multi-year provisions of the health care law.