In his latest blog post, Henry Rosevear, MD, summarizes the Affordable Care Act and explains how it has already affected his practice.
I usually start this blog by saying that residency is tough, and I still agree with that statement. But after spending the last few weeks reading about the Affordable Care Act (or Obamacare), I can honestly say that residency is straightforward compared to this law.
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First, a brief disclaimer: I write this blog so that other young urologists can learn from my mistakes and hopefully in the process have more time for their practices, families, hobbies, and other important things. This blog is not political, and I am neither endorsing nor criticizing the new health care law. Rather, my goal is to summarize it and explain how it has already affected my practice.
If anyone wants to read the law in its entirety, here is a link to all 906 pages: http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. (Some friendly advice: You’ll need more than one cup of coffee [or beer] to get through it.)
To start, it’s important to explain who in America would not get insurance under the law. And yes, while the goal was to provide "universal coverage," it is estimated by the Congressional Budget Office that even under ideal situations, over 23 million people in America would go uncovered.
Who are they? First, anyone here illegally is not covered. Of note, if an illegal immigrant walks into an ER, they are required to be treated under the Emergency Medical Treatment and Active Labor Act (EMTALA) passed in 1986. Second, anyone who doesn't bother to enroll won't be covered. While this may seem obvious, this includes two groups of people: those who are eligible for Medicare/Medicaid but not enrolled and those who choose to pay the annual penalty rather than get coverage. Third, people who live in states who chose not to expand Medicaid and don't qualify for Medicaid under their state's current law and who also don't qualify for subsidized coverage under their state's (or the federal government’s) exchanges won't be covered. Why is there a gap? That has to do with how the law was intended to cover everyone and how the Supreme Court interpreted it, but I’ll get to that later.
Next: The individual mandate and changes to insurance
Remembering what we learned from the previous blog on the pre-Obamacare health insurance system, there were four ways people received coverage before this law: Medicare for the elderly, Medicaid for the poor, employee sponsored, or self purchased. Under the new law, "everyone" is required to have coverage. This is the individual mandate that is mentioned so frequently in the media. As an aside, the idea for an individual mandate was originally proposed by the Heritage Foundation back in 1989 to get around the free rider problem created by EMTALA, since the cost of caring for people who don't have coverage and who receive treatment they can't afford in the ER are then passed on to everyone else. How does the mandate work? Starting in 2014, anyone who does not have coverage must pay a penalty. In 2014, the penalty is $95 per adult and half that for a child or 1% of your total household income (whichever is greater, up to the national average annual premium for a "bronze" plan, which I’ll discuss soon). This increases to 2% in 2015 and 2.5% in 2016 and then goes up with inflation.
The reason everyone was required to have insurance is that the law also put numerous new onerous (to insurance companies) rules on insurers that limit what they can do. Here’s how I see this: A company wouldn't sell you fire insurance on your house if it was on fire (even if was only smoldering a little), but in some sense that is what we are asking insurance companies to do when they sell health insurance to someone who is sick. To help the insurance companies recoup those costs, the government increased the number of healthy people in the market by requiring everyone to be covered. Here are some of the ways the new law prevents health insurance companies from varying rates based on degree of risk (ie, comorbidities):
Next: Expansion of coverage
Now that we understand both why there was an individual mandate and how the government was going to enforce it, we can address how the law was designed to expand coverage. First, Medicare would stay in place for the elderly.
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Second, Medicaid was to be expanded so that instead of just covering its mandatory eligibility groups (certain groups and all people up to 100% of the poverty line; complete list at
), it would also include everyone up to 133% of the federal poverty line. Of note, in 2012, the Supreme Court in the case of National Federation of Independent Business v. Sebelius decided that the federal government could not force states to expand their Medicaid coverage and, as a result, approximately half of the states chose not to expand coverage. This decision creates one of the gaps in coverage I mentioned previously.
Third, employers with more than 50 employees were required to provide "adequate" coverage for their full-time employee (defined as someone who works more than 30 hours a week). This creates two hypothetical side effects. First, there is arguably a disincentive to hire the 50th employee and an incentive to limit the number of full-time employees by hiring more part-time people. The actual effect of this is unknown. Similar to the individual mandate, this employer mandate is backed with a financial penalty. The penalty is the smaller of $2,000 per employee after the first 30 employees or $3,000 per employee receiving subsidized coverage in the exchange. This mandate has been delayed a few times and is currently over a year away.
The fourth way the law was to cover everyone was by creating health care exchanges to allow otherwise uncovered people to purchase "adequate" insurance that would be subsidized on a sliding scale from 133% to 400% of the poverty line. That means subsidies are available for people with incomes up to about $46,000 for a single and $94,000 for a family of four. Exceptions are those who are eligible for Medicare or Medicaid or those who are eligible for an employer-sponsored plan.
Next: Health care exchanges and 'adequate' coverage
What is an exchange and what is "adequate" coverage? While these may seem like simple questions, the answers and their implications are incredibly important. Let’s start with the exchanges. Think of an exchange as an Amazon.com for health insurance. While in theory this sounds like a simple idea, anyone who wasn't trekking in Patagonia a few months back remembers how well it started off. The exchanges were designed to achieve two goals: figure out how much of a subsidy a person was eligible for based on his or her income and which plans were available in a consumer's area.
Remember, the exchanges are a way for private health insurance companies to sell directly to consumers. This creates another potential problem because in some geographic areas, the availability of plans is minimal as the number of companies competing in that area is minimal. By allowing private health insurance providers to compete for these new customers, it was theorized that this would promote competition among health insurers and drive down costs, but again, this is an unknown.
In an effort to simplify the process of choosing health insurance plans, they were divided into groups named after metals. The lower-end plans (bronze) tended to have significantly lower monthly fees but as a tradeoff, have higher deductibles and narrower coverage. For example, the average bronze plan deductible for a single person was listed in a recent article at approximately $5,000, up from $1,000 to $2,000 for the average employer-provided health insurance plan, according to an article from HealthPocket, an independent research firm. Of note, starting in 2018, consumers with health insurance that costs more than a predetermined amount will pay a 40% tax on the excess. This is the “Cadillac” insurance plan tax and will likely hit platinum plans and some employee-funded plans.
The second issue raised by the exchanges is the concept of "adequate" coverage. The law defines the lower limit of what a policy must cover (eg, free preventive health visits), which on top of the other requirements mentioned earlier created a situation where some people who had insurance before the law was implemented found their policies canceled as they no longer were deemed “adequate”. This is how the White House found itself in trouble over the line, “If you like your health care plan, you can keep your health care plan.”
Interestingly, another quote from the White House also fell short as an indirect effect of how the insurance companies complied with the exchanges. In the run-up to the law being implemented, the White House stated, “If you like your doctor, you can keep your doctor.” (http://www.whitehouse.gov/assets/documents/Health_Insurance_Reform_PDF_1.pdf). Unfortunately, patients are finding that narrow panels on some of the lower-tier plans are requiring them to change physicians.
This is also one of the first ways the law directly affected my practice. My Colorado practice was approached by one of the major insurance companies in our area who “invited” us to be on a narrow panel of physicians in a new health insurance plan it was introducing. Not surprisingly, for the right to be on this panel, the company demanded a significant cut in our reimbursement. This is not limited to my geographic area. A report by McKinsey & Co. stated that narrow networks are up to three times more common now than immediately before the law’s implementation. Limiting doctors will likely be one of the major ways insurance companies keep costs down since they are now greatly limited in their historical ability to vary health insurance costs with risks.
Next: How this law has affected me
How has this law already affected me? As noted, my practice was pressured to join a narrow insurance network at a reduced rate. While downward pressure on physician reimbursement by health insurance companies is nothing new, it will worsen under the new law.
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Two other issues we are seeing that we think are related to the new law are decreased volume and increased deductibles. Patients with high deductibles seem to be putting off care while they can. Other patients seem unaware of their deductibles and are shocked with the implications. Just last week, I had a heavy smoker with gross hematuria delay his evaluation because he could not afford his deductible. If this is a nationwide trend, it will certainly not lower health care costs in the long run.
Another problem we are seeing has to do with a grace period the law allows all consumers who purchase plans on the exchanges. By law, all consumers have a 3-month grace period but insurers are only required to pay for the first month if at the end of the grace period the patient drops coverage. What this means is that if on Jan. 1 a patient buys insurance and pays the premium, he is not required to pay his February bill until April 1. If he doesn’t pay by April 1, the insurance company is only required to reimburse health care providers for services rendered in January. This begs the question, if we see patients in February, how do we know if they are going to pay their bill by April? Do we have to start charging large upfront down payments to ensure that we are paid? Further, this will increase accounts receivable as insurance companies delay paying us while they wait to see if the consumer pays his premium.
We are also encountering patients who signed up for new plans and received their health insurance cards, but haven’t actually paid their premiums, which means that at the end of the month, if they don't pay their bills, the insurance company will cancel their coverage and not pay us for anything done the previous month. Yet another problem we are encountering is a direct result of how the law increased heath insurance coverage; it dramatically increased Medicaid eligibility. This creates the situation where the number of patients with Medicaid increases but, given that Medicaid patients are money losers, for many urologists, the number of us willing to see these patients may decrease.
The last way the law has already directly affected my practice involves one way the law aimed to decrease overall costs. The law created acountable care organizations in which hospitals and doctors team up to provide coordinated care for patients under one umbrella. This creates a financial incentive for hospitals to buy out private practice physicians (especially primary care doctors), a trend we are certainly seeing in my neighborhood. Consolidation also is being driven by the decrease in Medicare reimbursement rates for groups not using electronic medical records and the huge costs to small groups to maintain and run these systems.
Next: Will it work? I don't know.
Will it work? I don’t know. In an article about the effect of Medicaid enrollment on emergency department use, Taubman et al reported on the results when Oregon expanded its Medicaid roles by randomly drawing 25,000 names of uninsured low-income adults from a waiting list (Science 2014; 343:263-8). Comparing the patients who were now covered by Medicaid with those who did not receive coverage, the article found that Medicaid enrollees were 40% more likely to use an ER than the uninsured even though they now had access to primary care doctors. This is a trend that the ER doctors here in town have also seen since the new health care law was implemented. Interestingly, this is not particularly worrisome to them, as they cite another paper that predicts that while usage will go up, emergency room reimbursement will also increase as the number of uninsured (no-pay) patients will go down (Ann Emerg Med 2014; 63:412-7). For the average urologist, though, this trend is concerning, assuming that treating Medicaid patients remains a cost sink.
In summary, the Affordable Care Act seeks to increase health insurance coverage by expanding Medicaid, keeping Medicare, mandating insurance for employers in large companies, and providing subsidized coverage for people not otherwise eligible making up to 400% of the poverty line. The scope of its changes is creating both intended and unintended consequences for the practicing urologist that are certain to have a long-standing impact on how health care is delivered in this country.
Next: More from Dr. Rosevear
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