Changing the U.S. Health Care System

Key Issues in Health Services Policy and Management

Gerald F. Kominski

• Publisher: Jossey-Bass
• Year: 2013
• ISBN:
  9781118416402
• Edition: 4
• Topic: Medicina
• Subtopic: Sanità, amministrazione e assistenza pubblica

The Fourth Edition of Changing the U.S. Health Care System addresses the key topics in health care policy and management, presenting evidence-based views of current issues. Each chapter is written by an expert in the field who integrates evidence to explain the current condition and presents support for needed change. The book examines all the levers in the setting and implementation of health policy, and includes extensive coverage of impact of the Affordable Care Act, particularly on Medicare, Medicaid, and large and small group insurance markets. Also new to this edition is expanded coverage of nursing, disease management, mental health, women's health, children's health, and care for the homeless.

Part One

Access to Health Care

Chapter One

The Patient Protection and Affordable Care Act of 2010

Gerald F. Kominski

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Learning Objectives

• Understand the political circumstances leading to the enactment of the Patient Protection and Affordable Care Act (ACA) in 2010
• Learn the major components of the ACA and the timetable for their implementation
• Examine the expected impacts of the ACA on major stakeholders in the U.S. health care system

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The Patient Protection and Affordable Care Act of 2010 is the most significant piece of U.S. health legislation since the enactment of Medicare and Medicaid in 1965. The law is now more commonly known simply as the Affordable Care Act (ACA) and will be referred to throughout this book as the ACA. It has also been referred to pejoratively by opponents as Obamacare, at least until the 2012 presidential campaign, when President Obama embraced that label to describe the most significant legislative achievement of his first term. At the time of its enactment, the ACA was expected to extend health insurance coverage to thirty-two million uninsured U.S. citizens and permanent residents by 2016 (Congressional Budget Office [CBO], 2011), thus reducing the portion of uninsured legal residents from 17 percent to 5 percent.

How did this major piece of legislation get enacted after several failed attempts to expand health insurance to all Americans during the forty-five years between the enactment of Medicare and Medicaid in 1965 and the enactment of the ACA in 2010? And will the ACA finally achieve the goal of providing (nearly) universal access to health insurance in the United States while promoting higher quality care at an affordable and sustainable rate of growth in health care expenditures into the future? These are fundamental questions that will be explored throughout this book.

Since the first edition of this book was published in 1996, just a few short years after the failed effort of President Clinton to enact universal health insurance, the book's major purpose has been to discuss the fundamental challenges facing the U.S. health care system and to provide readers with both conceptual frameworks and the most current empirical evidence necessary to formulate effective strategies for innovation. At the time of this writing, the United States stands poised to undertake a fundamental reform of health care financing in almost five decades. It goes without saying that the ACA will have profound effects on health care financing and delivery in the United States for decades to come. My coauthors and I believe this book will continue to be a valuable tool for understanding not only the expected impacts of the ACA over the next decade, but for understanding the impacts of the other significant trends in health care that have been occurring independently of the ACA.

The likely consequences of the ACA will be addressed in varying degrees of depth in every chapter of this volume. Therefore, to set the stage for the rest of this book, the remainder of this chapter describes the major components of the law and discusses its likely impacts on major stakeholders in the health care system. But before dealing with the content of the law and its impacts, it is worth briefly reviewing how this law came to be after so many years of failed efforts to expand health insurance coverage to virtually all Americans.

Events Leading to the Enactment of the ACA

The evolution of the unique mix of private and public health insurance in the United States is discussed in more detail in Chapters Six, Seven, and Twenty-One of this volume and is summarized in two recent articles by Oberlander (2010; 2012). Briefly, the origins of the Affordable Care Act can be traced most directly to three significant events that occurred since the enactment of Medicare:

• The growth of managed care in the 1970s and the formulation of a proposal for national health care reform based on “managed competition” among insurers
• The failure of the Clinton Administration's proposal for health reform based on managed competition among managed care plans in 1993 and 1994
• The enactment of significant health reform in Massachusetts in 2006 based on managed competition, including subsidies for low- and middle-income individuals and families to purchase private insurance in regulated market places

Managed competition was first proposed by Professor Alain Enthoven of the Stanford Business School in the late 1970s (Enthoven, 1978). It was designed to build on the strengths of private insurance markets, but to correct their weaknesses through regulated competition. Enthoven's model of managed competition was based on the Federal Employees Health Benefits Program (FEHBP), which provides health insurance benefits to more than three million federal employees nationally through a regulated marketplace that offers employees multiple plan choices. In the political context of the 1970s, managed competition was viewed as a private-market alternative to liberal proposals for a single-payer health care system through, for example, the expansion of Medicare to all ages.

Enthoven proposed to standardize insurance policies to promote price comparison among similar products, so consumers could make “apples-to-apples” comparisons. He also proposed to address inefficiencies in the demand (the buyers') side of the market by pooling small companies and individual (nongroup) purchasers into larger groups known as health insurance purchasing cooperatives (HIPCs) and by providing vouchers (subsidies) for low-income individuals to purchase private insurance. HIPCs were a central feature of President Clinton's national health reform proposal and were the template for both the Massachusetts Insurance Connector established in 2006 and the American Health Benefit and Small Business Health Options Program (SHOP) exchanges included in the ACA.

After the recession of 1990 through 1991, millions of Americans lost their employment-based insurance, and the number of uninsured rapidly jumped from 35 million to 40 million between 1991 and 1993 nationally (DeNavas-Walt, Proctor, & Smith, 2011). President Clinton was elected in 1992 in part because he campaigned on a platform that proposed major health care reform with universal access. Although the Clinton plan, known as the Health Security Act, was based on many of the principles of managed competition, it went further to include federal controls on premiums, national budgets, and perhaps most controversial of all to many Americans, a requirement that employers enroll their employees in managed care plans. This last element was very controversial because millions of those with employment-based insurance would be required to give up their insurance to join health maintenance organizations (HMOs), the most common form of managed care in the early 1990s.

After the failure of the Clinton plan to even move forward for a vote in Congress in 1994, major health reform seemed out of the question for the foreseeable future, and the first edition of this book contained language to that effect. Nevertheless, two significant expansions of health insurance occurred over the decade following the Clinton plan. One was the creation of the State Children's Health Insurance Program (SCHIP) in 1997, to be discussed further in Chapters Six and Eighteen. The other was the enactment in 2003 of Medicare Part D, the pharmaceutical drug benefit, which is discussed further in Chapter Twenty-One.

What caught many health policy analysts by surprise at the national level was the enactment of significant health reform in Massachusetts in 2006 based on an innovative combination of Medicaid expansion, subsidies for purchase of private insurance in a regulated market known as the Insurance Connector, and employer and individual mandates. Of course, this approach did not simply appear overnight; as explained by McDonough, Rosman, Phelps, and Shannon (2006), the road to reform in Massachusetts started in 2001 and represented the “third wave” of reform efforts that began under Governor Dukakis in 1988, just prior to his unsuccessful run for the presidency. One of the major forces driving the 2006 reform, however, was the threatened loss of almost $400 million dollars in funds under the state's Medicaid waiver with the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs these programs, unless the state provided expanded coverage for the uninsured (Holahan & Blumberg, 2006). These diverse, concurrent pressures within Massachusetts in the early 2000s led to a unique compromise approach to reform, forged by Republican Governor Mitt Romney and Democratic legislative leaders, combining both conservative and liberal elements to achieve the goal of nearly universal access for all legal residents of the state. But the core of the Massachusetts reform reflected key elements of managed competition.

The successful enactment of significant health reform in Massachusetts in 2006—and the fact that it represented a genuine compromise between conservative and liberal proposals—immediately elevated the Massachusetts model as a template for feasible reform for the rest of the nation. Governor Schwarzenegger in early 2007 proposed legislation to implement a Massachusetts-style reform for California, perhaps hoping to replicate the bipartisan support for health reform. Although California's effort was ultimately unsuccessful, the attempt to enact such a reform in the nation's largest state virtually ensured that health reform would be a central issue in the 2008 presidential election.

The role of health reform in the 2008 election, the difficult path to eventual enactment of the ACA in March 2010, and the Supreme Court's decision to uphold the constitutionality of the individual mandate provision in June 2012 are discussed in more detail in Chapter Six. But, for the remainder of this chapter, it is important to remember that the major elements of the ACA were based directly on the following components of the 2006 Massachusetts reform: (1) expansion of Medicaid for those with the lowest income, (2) subsidies for low- to middle-income individuals and families to buy private health insurance in regulated markets, (3) and mandates for employers to offer insurance and for individuals who are legal residents to acquire insurance.

Major Provisions of the ACA

This section provides an overview of the major elements of the ACA. The final version of the law is over nine hundred pages in print and includes ten significant sections, or titles. Thousands of additional pages of federal regulations have been issued since the law's enactment on March 23, 2010, as part of the administrative rule-making process by which federal laws are implemented. This section cannot provide a comprehensive review of the entire law, so it focuses primarily on the small-group and individual (nongroup) market reforms and expansion of Medicaid contained in Titles I and II, respectively, of the law. More complete summaries of all the provisions of the law are available at www.healthcare.gov, which also includes the complete text version of the law, and at kff.org/health-reform.

Medicaid Expansion

Since the enactment of Medicaid in 1965, low-income individuals qualify for this program based on what is known as categorical eligibility. In effect, this means that eligibility is based on both low-income status and having a qualifying medical condition or need. As a result, simply being poor has never been a sufficient condition to qualify individuals for Medicaid. The ACA fundamentally changes Medicaid eligibility by establishing a uniform, national eligibility standard based solely on income. Starting in 2014, Medicaid eligibility will be available to everyone with income up to and including 138 percent of the federal poverty level (FPL), which varies according to family size. For example, in 2013, 138 percent of the FPL is equal to $15,856 for an unmarried individual and $32,500 for a family of four. Because federal rules permit an offset of 5 percent of income in determining eligibility, the 133 percent FPL limit for Medicaid eligibility identified in the law is effectively 138 percent in practice (Angeles, 2011).

The ACA changes the federal matching assistance percentages (FMAPs) available to states for newly eligible Medicaid populations. As of 2013, states receive FMAPs that range from 50 to 77 percent for their existing Medicaid programs. Under the ACA, states will receive a 100 percent FMAP to cover their newly eligible Medicaid beneficiaries from 2014 through 2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent from 2020 onward. As a result, after 2014, states will receive a “regular” FMAP for individuals who would have qualified for their Medicaid programs as of 2013 and a separate, more ge...