President Signs Health Care Reform Act; Now What?

This week, President Obama signed into law the most significant social legislation since the 1960s. The Patient Protection and Affordable Care Act (H.R. 3590) extends health insurance coverage to 32 million uninsured Americans ― at a cost of $940 billion over the next decade. The legislation ensures that by 2014, nearly all Americans will be required to be insured, and by 2016, the majority of the uninsured (30 million people) will be covered.

To do this, the legislation expands Medicaid to cover families making as much as $88K a year. It also creates state-supervised exchanges to expand coverage access to individuals and small businesses. Other goals of the legislation are to improve affordability and accountability, crack down on waste, fraud and abuse, and ensure fiscal sustainability.

What Didn’t Get Passed? There is no government-run insurance plan. People can buy coverage through the state exchanges, but these will be private, nonprofit plans.

How does this impact the major health care players? Some of the key tenets are described below:

• Extending Coverage for all Americans – On one hand, it is believed that the bill will benefit hospitals because more people will have insurance and hospitals will have to provide less charity care, which should result in fewer ‘write offs’ and a reduction in bad debt. However, expanded Medicaid enrollments could be a mixed blessing because Medicaid often pays hospitals less than the actual cost of care.


• Improving the Quality and Efficiency of Care – It provides incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections. The bill will also provide payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments. And it rewards innovative practices where doctors and nurse practitioners provide more primary care that is coordinated with every doctor or specialist involved with a patient’s care.


• Focusing on Prevention – This legislation will promote prevention, wellness, and the public health and provides an unprecedented funding commitment to these areas. It directs the creation of a national prevention and health promotion strategy that incorporates the most effective and achievable methods to improve the health status of Americans and reduce the incidence of preventable illness and disability in the United States. It increases prevention and wellness services for Medicare beneficiaries by waiving co-payments for most preventive services and by fully covering an annual wellness visit and personalized prevention plans for American seniors on Medicare.


• Expanding the Healthcare Workforce – The act will fund scholarships and loan repayment programs to increase the number of primary care physicians, nurses, physician assistants, mental health providers, and dentists in underserved areas of the country. With a comprehensive approach focusing on retention and enhanced educational opportunities, the Act combats the critical nursing shortage. And through new incentives and recruitment, the Act increases the supply of public health professionals so that the United States is prepared for health emergencies.


• Transparency and Program Integrity – Doctors with financial interests in imaging services, like MRI services, must inform the patients in writing that they can obtain the recommended imaging service from a person other than the referring physician, and provide a contact list. The Act also requires all drug companies, device, and medical supply manufacturers to fully disclose and report any gifts they make or financial arrangements they have with doctors, a physician practice or group. Providers enrolled in Medicare, Medicaid and CHIP programs will undergo increased scrutiny for new compliance requirements. The bill calls for increased governmental auditing and revenue oversight requiring providers to become more efficient and accountable for utilization, quality and cost of care.


• Funding the Program -- Funding for the landmark legislation will come from a variety of initiatives, including increased Medicare taxes for high-income individuals and an excise tax on insurers offering high-premium plans. In addition, hospitals agreed to help pay for the costs of the legislation and will contribute $155 billion over 10 years, primarily through lower Medicare payments. Health systems will also see reduced disproportionate share funding payments and cost-saving provisions resulting from program cuts for high-cost, less efficient hospitals in high cost markets. Moody’s Investors Service speculates that not-for-profit hospitals will struggle with reimbursement and efficiency pressures under health care reform legislation, triggering spending cuts, mergers and changes to revenue streams.

Most of the initiatives won’t take effect until 2014; however, the time for health systems to address both short and long term implications of the legislation is now.

Coming next: What to Expect from Industry-Leading Health Systems