will be required to submit a comprehensive research report on an aspect of
Healthcare. If you choose to do an analysis of the Healthcare Reform Act
(PPACA). DO NOT TRY TO COVER THE ENTIRE ACT. It should cover one or more of the
1. Some key components of the reform act and their consequences. (Limit your topic).
2. Missing elements in the reform act and their consequences.
3. Future areas of reform which must be addressed.
4. Problems with the enactment of the ACA.
A thoughtful, well written, graduate level paper of 14-15 pages is what’s expected. Tightly reasoned analysis and good grammar and sentence structure are important. Double spaced in size 12 font.
Please include source citations, including those from the web.
NOTE: Research Paper is not briefing paper, Do not need to summary or abstract, footnotes, quotes, Not an opinion paper, any aspect of Healthcare. Biggest mistake is not narrow enough focus, make an outline. Research is most time consuming, full bibliography.
Title: The American Healthcare System
The Patient Protection and Affordable Care Act (PPACA), sometimes also referred to as the Affordable Care Act, was enacted on March 23, 2010. The objective of this act was to address some of the challenges facing the US healthcare system. In this regard, three core challenges may be singled out. The first one is the fragmentation of services, whereby service providers have traditionally failed to operate in a coordinated fashion. The second challenge is the tendency by healthcare providers to focus on treating diseases while failing to contribute to the improvement of the patients’ overall health. The third challenge is the existence of financial incentives that do not focus on quality of care, but rather on quantity of healthcare services provided.
Although many people are happy that the Affordable Care Act will address these issues, they are also concerned that it may raise healthcare costs at both federal and state levels. The aim of this paper is to determine whether the Affordable Care Act will increase healthcare costs in the United States. The thesis of this paper is that one of missing elements in the Affordable Care Act that must be addressed is an increase in healthcare costs arising from the introduction of near-universal healthcare coverage. Although this act creates provisions that outline how the costs of coverage will be shared by individuals, their employers, and government, it does not provide for the inevitable, dramatic increase in healthcare costs at both federal and state levels. Towards this end, various provisions of the Affordable Care Act and their consequences will be examined. The paper will also highlight missing cost-related elements and their consequences, future areas of reform that must be addressed, and problems with the enactment of the ACA.
The Patient Protection and Affordable Care Act is a landmark law whose aim is to provide near-universal healthcare coverage to the American people. Full implementation of the act will occur on January 1, 2014. At this time, provisions on the responsibility of the individual and the employer will take effect. At the same time, health insurance exchanges at the state level will become operational. Moreover, Medicaid expansion will take effect. More importantly, individual groups as well as small-employer groups will start receiving healthcare subsidies. This means that crucial immediate steps will need to be taken in the near future to ensure that the implementation of the act occurs without hitches. One of the core objectives of the adoption of these steps is to ensure that healthcare services are provided in a coordinated manner.
The Affordable Care Act presents America with an opportunity to overhaul the entire healthcare system. It requires multiple laws to be enacted with a view to enhance the way healthcare services are offered. Together, these laws will constitute a legal framework for the country’s healthcare system. The basic legal protections provided for by the act have always been absent. One of them is a guarantee of access to insurance coverage throughout the lifetime of the individual. A core component of this coverage is that it should be affordable. It is expected that once the Act is fully implemented, there will be a 50 percent reduction in the number of uninsured Americans (Foster, 2010). It is also expected that 94 percent of Americans will gain access to health insurance coverage (Foster, 2010). Unfortunately, the law will also leave some 24 million Americans without healthcare insurance coverage (Foster, 2010).
The act seeks to address the issue of fragmentation in the healthcare system by introducing the idea of near-universal coverage. The responsibility for this coverage is to be shared by individuals, their employers, and government. The act envisages that this will lead to affordability, quality, and fairness in the health insurance coverage. The need to pursue these goals arose because of the realization that the healthcare sector was engaging in wasteful spending without necessarily achieving the goal of quality healthcare. At the same time, access to healthcare remained a mirage to a large section of the country’s population. By strengthening access to primary healthcare while at the same time introducing long-term changes to preventive healthcare, the act hopes to address the problem of segmented provision of healthcare services. The act also creates opportunities for the same goal to be achieved through strategic investments in community health and clinical preventive care.
The Affordable Care Act contains numerous provisions that facilitate the establishment of cost-sharing subsidies. In essence, the provisions lay down the groundwork for the introduction of new guidelines on how the healthcare industry ought to operate. They provide for the establishment of an integrated platform through which healthcare purchasing can take place. By making health insurance coverage a legal expectation for American citizens, the act creates an environment of predictability.
These reforms are bound to have a number of consequences for the health sector. First, the existing mechanisms of health insurance will be strengthened. It is also expected that a new affordable market for health insurance will be created. This market is expected to benefit families and individuals who are not covered by any “essential coverage” such as Medicaid or Medicare. By expanding the existing coverage, the rationale is to restructure Medicaid in such a way as to facilitate coverage to all American citizens.
One of the consequences of this expanded coverage is that the need to register for health insurance coverage will become an individual mandate. This means that most US legal residents and citizens will be required to be covered by health insurance. Failure to enroll for such coverage will attract a penalty. This provision alone goes a long way in streamlining issues of accessibility to healthcare. In the past, healthcare insurance coverage was not an individual mandate, meaning that in most cases, only those who could afford it pursued this objective.
The establishment of entities known as American Health Benefit Exchanges is also expected to increase the accessibility and affordability of coverage. Through these entities, individuals who operate in small businesses or have not access to employer coverage will have an opportunity to purchase coverage. The establishment of new requirements is also expected to ensure that more Americans than ever before will have access to affordable coverage. Moreover, at no time will these citizens live in the fear of losing their coverage. This applies equally to those who belong to the newly created High-Risk Insurance Pool. In the past, these people were being left out of the country’s insurance system because they were either hard to insure or simply uninsurable.
Nevertheless, it must be noted that legally guaranteed coverage comes with coverage obligation. US taxpayers will ultimately shoulder the burden of ensuring that this legally guaranteed coverage becomes a reality. The idea is to establish a risk pool, thereby making the idea of universal coverage feasible. The need to extend the mandate to all citizens arose because without it, a huge percentage of healthy individuals would fail to seek coverage, yet their presence is critical to the establishment of a risk pool. In the traditional structure of the healthcare system, different insurers were providing coverage in a fragmented manner, such that it was not possible for such a risk pool to be formed.
In the previous dispensation characterized by the absence of the mandate, discriminatory pricing was rampant in the private healthcare insurance industry. It was impossible to eliminate these tactics because private insurance companies depended on them as a source of protection against adverse selection. This essentially means that the goal of universal coverage would be impossible without establishing the mandate. Similarly, the creation of the mandate was an essential requirement in the process of ensuring that the insurance foundation was stabilized.
One of the biggest concerns regarding the implementation of the Affordable Care Act is costs. The act did not provide clear guidelines on exactly how the federal and state governments would meet high costs arising from the enactment of the new law. This leaves Congress with a difficult task of figuring out how to address healthcare costs in the future. One of the ways in which Congress may seek to meet these costs is by maximizing the level of funding provided by the federal government. Another option that may need to be considered is that of leveraging on the purchasing power of states. Alternatively, efforts may need to be put in place to ensure that the cost of healthcare for high-cost citizens is reduced.
The intention of the act is clearly to redefine the financial relationship between citizens and the healthcare system (Kocher, 2011). Although the act makes this intention clear, it does not provide an equally clear framework for funding its proposals. The objective of enacting it was to deal with the health insurance crisis that has continued to affect many individuals, communities, and the national economy at large. Without clear provisions on funding, the act may present unique challenges during the implementation process.
The issue of how Americans relate with the country’s health insurance system and the provisions made by this act in this regard has turned out to be controversial. In fact, it was the subject of a protracted legal battle over the constitutionality of the law. Proponents of the law argue that the PPACA is about regulating how America approaches the task of purchasing care. The argument made in this regard is that since everyone uses care, the only issue that should arise is how to pay for this care. In contrast, opponents of the law argue that individuals are passive non-economic actors and should therefore not be forced to buy a product (healthcare insurance) that they do not want.
At the state level, healthcare costs may increase as well. It will be extremely difficult for states to coordinate the newly introduced health benefit exchange by aligning them with other healthcare programs that will already be operational at the state level. In the end, state costs may increase, eventually adding up to billions of dollars every year. Moreover, for some hospitals, normal funding procedures will be affected. These hospitals will be compelled to change their Medicaid eligibility processes to ensure that they are in conformity to the new federal requirements. Similarly, far-reaching changes will be required as far as the coverage of children and high-risk pools is concerned. The same case applies to those who will be forced by circumstances to remain uninsured.
The expansion of health insurance coverage will naturally lead to a substantial increase in the costs of future Medicaid programs at the state level. These costs may eventually rise to billions of dollars. Most of the reform provisions that will have a sweeping impact on Medicaid will take effect in January 1, 2014. The costs will increase primarily because of eligibility expansions, changes in how states determine eligibility for programs, as well as payments for services (Harrington, 2010). It is fortunate that for some of these cost-related requirements, federal authorities are willing to provide enhanced funding with a view to facilitate implementation at the state level.
The changes necessitated by the bill will exert considerable fiscal pressure on states for many years primarily because the amount of the reduced amount of enhanced federal funding. It is worrying that the precise cost at the state level is not precise. One of the reasons for this lack of precision is the failure by federal authorities to issue regulations that are highly likely to influence the way provisions of the act are implemented. The act does not provide clear guidelines on what action should be taken whenever this happens.
Additionally, the act gives the state some leeway in the procedures for the implementation of federal mandates. Nevertheless, this leeway comes with a pitfall whereby the risk of a rise in costs is increased considerably. These pitfalls continue to exist even when one takes into account the possible positive or negative fiscal impacts of PPACA that are unrelated to healthcare programs. An example of these fiscal impacts is the changes that might impact on the costs incurred by state employees. Another example is the possible increase in tax revenues arising from state insurance premiums.
For the first time, both state and federal authorities will have to deal with a new phenomenon of a rise in Medicaid spending occasioned by the entry of new eligible citizens into the system. Between 2013 and 2022, federal and state government will have to set aside an additional $781 billion for this population (Hofer, 2011). Although more people will be covered by the country’s healthcare insurance system, the risk of rising costs of care will be high. Medicaid costs may rise if some states fail to pay their part in the implementation of the act. In such states, citizens may fail to reap the benefits of universal healthcare insurance coverage. This is a major concern particularly when it is viewed in the light of the Supreme Court ruling of June 2012. This ruling established limits on the enforcement authority of the federal government.
The PPACA paves way for the creation of a multibillion health insurance tax that will greatly contribute to a rise in healthcare costs. It is estimated that the healthcare insurance tax, which is an integral component of the healthcare reform law, is expected to have raised $87 billion or more by the year 2020 (Hofer, 2011). The uniqueness of this bill arises from the fact that as a fixed-dollar amount, its assessment has been done against the operations of the health insurance industry. In 2014 alone, insurers are expected to have paid some $8 billion, with the amount hitting the $14.3-billion mark by 2018. From this point, the tax will be adjusted to conform to premium growth in the insurance industry.
Theoretically, health insurance tax will be levied on health insurance firms. In practice, however, it is just like a typical excise tax that the insurance companies will pass on to consumers and employers. In confirming this fact, the Congressional Budget Office observes that the tax would have to be passed on to the end consumers through higher premiums for health insurance coverage. Critics warn that once the tax emerges, the widely proclaimed benefits of the PPACA will suddenly cease to exist, thereby causing more harm to the US economy.
Many concerns continue to be raised regarding the impact of health insurance tax, with critics anticipating that the tax lead to an increase in the premiums to be paid by individuals and families. The Joint Committee on Taxation, during a discussion of the new law, pointed out that a significant portion of the tax would have to be borne by individuals and families primarily through a 2 percent increase in cost of premiums by 2016. The committee also estimated that by 2023, the tax would have caused the amount of premiums paid by consumers to increase by more than 3 percent (Goodson, 2010).
With the enactment of the Affordable Care Act, it is also expected that Medicare organizations will pay taxes amounting to $34 billion between 2014 and 2024 (Goodson, 2010). The net effect of these taxes is an increase in premiums for beneficiaries. Alternatively, they could lead to a reduction in benefits in terms of care. Similarly, the area of Medicaid managed care is expected to be affected by the taxes in the same way. Today, the Medicaid budget has already proven to be challenges both at federal and state levels. With the introduction of new taxes, this pressure can only increase.
The expected average increase in Medicaid managed care costs at the national level is about 1.5 percent. However, in some states, the increase is expected to be as high as 2.5 percent (Goodson, 2010). It should be borne in mind that funding for Medicaid managed care is jointly done by federal and state governments. This means that if the rates go up, more federal and state funding will be required. The matching formula process of the federal government is likely to force state governments to bear very huge costs arising from higher rates. This essentially means that states will have to look for additional revenue to meet the healthcare budget. Consequently, states might be compelled to resort to Medicaid fee-for-service. At that point, the APPACA will be said to have failed to deliver the promise of affordable, high-quality, near-universal healthcare for all Americans.
The act also puts Medicaid managed care agencies at a position of competitive disadvantage by exempting non-profit insurance firms from the tax. This is likely to prevent beneficiaries from accessing more plan choices. The level of competition is also likely to drop. Moreover, health insurance organizations are likely to be denied the much-needed incentives to introduce innovative care plans into the market. Moreover, since the new tax is only applicable to Medicaid plans, it gives states the incentive to reverse the gains they may have made through the implementation of innovative healthcare delivery reforms aimed at improving the quality of care provided to beneficiaries. Instead, such states are likely to return to the traditional Fee-For-Service model as a way of avoiding huge budget deficits.
Critics also warn that the health insurance tax outlined in the PPACA is likely to increase healthcare costs incurred by employers, thereby compelling them to look for alternative coverage options. Multiple tax experts are of the view that tax will lead to an increase in insurance premiums, thereby prompting many Americans to forego coverage. The likelihood of foregoing coverage is highest among young and healthy Americans. This would jeopardize the stability of the risk pool, which forms the foundation of the healthcare reform efforts. If the risk pool becomes unstable, this may exacerbate on the already-high healthcare costs at both federal and state levels.
Moreover, to avoid the tax, many employers may shift to self-insured plans that are not subject to this tax. This may greatly reduce the number of employers operating in an environment of fully ensured healthcare plans, leaving a few individuals and employers to carry the growing tax burden. The most possible outcome of this phenomenon is an unprecedented increase in healthcare costs, further destabilizing the risk pool in its entirety.
On the basis of these cost-related concerns, one may argue that today’s competitive marketplace faces the risk of distortion following the implementation of the health insurance tax provisions as outlined in the PPACA. It may be prudent for reforms to be made to ensure that the competitiveness of the marketplace is not altered. The tax causes a distortion in the marketplace because it is not deductible. Another reason is that it fails to provide equitability in terms of the framework within which insurance plans are executed. Moreover, it compels insurance companies to set aside an aggregate amount annually. Consequently, tax rates levied on health insurers will be among the highest in the country.
The issue of rising costs must be addressed for the Affordable Care Act to bring about meaningful change in the American healthcare system. In this regard, two options may need to be put into consideration by US lawmakers. The first one is the reduction of the taxes that may be imposed following the enactment and full implementation of this act. The second option is one whereby states create new funding opportunities for the delivery of certain healthcare services.
The taxes that the PPACA sets out to impose on American citizens can be reduced in many ways. One of these taxes is hospital insurance component of payroll tax, which will be increased from 2.9 percent to 3.8 percent (Hofer, 2011). This tax is applicable to couples earning an annual income of $250,000. It may be necessary to reform this section of the act in order to reduce the tax burden on ordinary Americans. The act also imposes annual fee on all health insurance providers. This fee is based on the market share of individual insurance companies. If this tax is not reduces, the health insurance providers will simply transfer the cost to American citizens, thereby increasing the cost of healthcare.
A 40 percent excise tax on all “Cadillac” health insurance policies is also stipulated in the PPACA (Hofer, 2011). This tax is applicable to plans that cost $27,500 for families and $10,200 for individuals (Hofer, 2011). This tax burden is too high for Americans citizens. If implemented, it is likely to worsen an already dire situation as far as healthcare costs are concerned. The same case applies to the 2.3 percent tax that the act levies on every importer and manufacturer of certain medical services. Moreover, the tax increases corporate taxes by imposing sanctions on business that engage in activities that are likely to lead to a reduction in tax liability. In all these examples, US policymakers may do more good than harm by reducing the stipulated tax. Such a move will make healthcare more affordable to a wider section of the population. It will also create a more enabling business environment for those who choose to invest in the healthcare sector.
The second option in efforts to reduce rising healthcare costs is one where states take advantage of new funding opportunities. For example, act requires the federal government to provide 90 percent of the funds required to run medical homes at the state level (Hofer, 2011). The act also creates a new funding opportunity through Optional Attendant Services Benefits. With effect from 2011, states can choose to set up an optional Medicaid benefits system in which community-based support and attendant services are provided.
The act also contain a section that gives eight states the opportunity to test the efficiency of their healthcare systems using bundled payments that will be targeted at Medicaid beneficially. Bundled payments can act as a replacement to fee-for-service payments, whereby reimbursement is received by the physician for every individual service provided. In bundled payment, a payment makes only one payment for all services he receives relating to a condition or treatment. The advantage of this plan is that the service may be provided by different healthcare providers in multiple settings. For example, a patient may visit a hospital and later on visit the physician’s office for follow-up care.
Efforts also need to be made to enhance opportunities that can be accessed through pediatric medical providers. The act should recognize pediatric medical providers as Accountable Care Organizations (ACOs). ACOs are healthcare organizations that operate with a set of closely related healthcare providers such as specialists, physicians, hospitals, and primary care providers. In such contexts, all healthcare providers take collective responsibility for aspects of both costs and quality within a specified population. This will lead enable healthcare providers to focus on the quality of care and not quantity.
The enactment of the ACA is bound to be problematic if sufficient measures are not undertaken to address the issue of cost implications. If all states choose to undertake Medicaid expansion as provided for in the ACA, total Medicaid spending at the national level would increase by about $1 trillion during the next one decade. The federal government would be expected to pay 93 percent of these costs. To do so, the federal government may be compelled to increase the tax burden on American citizens. Policymakers must look for ways of addressing this problem at the earlier possible opportunity.
Proponents of this act argue that Medicaid expansion cross states will lead to significant savings. However, this argument is problematic for two reasons. First, the costs and savings made will vary from one state to another. After all, it is upon individual states to decide on whether or not to embrace the idea of ACA Medicaid expansion. Secondly, the idea of savings depends largely on the success of the principle of creating a large risk pool at the federal level as provided for in other sections of the APPACA. It is estimated that half of the states might suffer from an increase in costs ranging between 5 and 11 percent between 2013 and 2013 (Rosenbaum, 2011).
The Patient Protection and Affordable Care Act (PPACA) is widely viewed as one of the most ambitious efforts to reform the American healthcare system. One of the main aims of this act is to provide near-universal healthcare coverage to the American people. When full implementation of this act occurs on January 1, 2014, Americans will start experiencing its cost implications. The conclusion arrived at in this paper is that the element of cost is missing from the Affordable Care Act and it must be addressed in order to deal with the anticipated increase in healthcare costs once near-universal healthcare coverage is introduced. Moreover, amendments to the act are required in order to enable Americans deal with the rising costs of healthcare that will be occasioned by the numerous taxes introduced by PPACA. At the same time, implementers at federal and state levels will have to look for new funding opportunities to offset rising healthcare costs.
Foster, R. (2010). Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Passed by the US Senate on December 24 2009. New York: Penguin Books.
Goodson, J. (2010). Patient Protection and Affordable Care Act: Promise and Peril for Primary Care. Annals of Internal Medicine, 152(11), 742-744.
Harrington, S. (2010). U.S. Health-care Reform: The Patient Protection and Affordable Care Act. Journal of Risk and Insurance, 77(3), 703–708.
Hofer, A. (2011). Expansion of Coverage under the Patient Protection and Affordable Care Act and Primary Care Utilization. Milbank Quarterly, 89(1), pp. 69–89.
Kocher, R. (2011). Hospital Readmissions and the Affordable Care Act Paying for Coordinated Quality Care. JAMA, 306(16), 1794-1795.
Rosenbaum, S. (2011). The Patient Protection and Affordable Care Act: Implications for Public Health Policy and Practice. Public Health Reports, 126(1), 130–135.
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