Obamacare/ACA: Implications for Providers
This is the second post of a four-part series on the status and implications of the continuing roll-forward/roll-out of the Affordable Care Act (aka Obamacare). In this post, the context is the implications for providers, given the evolving state of the ACA and some of the current uncertainty of its future.
Important to note: Affirmatively, the ACA has fundamentally changed the health care landscape for providers, regardless of its ultimate fate. Unraveling the Act in its entirety is virtually impossible. The ACA as drafted and passed, is a singular layer of law that provides the framework for an incredibly deep-set of regulatory/administrative law provisions. Illustratively, the ACA is like an onion; broad layers on the outside leading to more intricate, narrow layers on the inside. It is essentially, an enabling piece of legislation rather than a single or for that matter, bifurcated or trifurcated law focused on enabling, funding and enforcement. The ACA is written to cause other agencies and entities to exist, to promulgate rules and to cause Congress to fund via a prescriptive mechanism, the evolution of what the ACA was passed to create. Complex, I know – hence the thousand plus page bill.
Because the ACA ties providers, insurers, employers and individuals ultimately together, the implication for providers is a function of the elements of the law directed at providers (really quite minimal) and all other elements that pertain directly to insurers, employers, individuals and to another extent, government itself. The latter is where the ACA creates another level of entitlement within the government, primarily through Medicaid expansion and the insurance exchanges. In short, logically separating the pieces, providers vs. all other groups impacted, clears the picture for providers.
Because the ACA doesn’t structurally change healthcare or for that matter, the major regulatory or payment components, provider implications at the core, are truly minimal. Arguably, without the ACA, providers would still see a similar level of regulatory activity and reimbursement changes. These issues are truly separate from the ACA as remember, the ACA doesn’t touch Medicare, Medicaid (other than to expand it) or reform or modify, any other federal conditions of participation. It didn’t even address the physician payment formula (known as the SGR). Regardless of the political rhetoric, the ACA only served to create a methodology for spending reductions to offset its associated implementation costs, greater output to states for Medicaid spending, and a series of provider taxes (DME) as a method for internal funding transfers.
What providers experience today in terms of increased fraud vigilance, RACs, rate rebasing, pay for performance (quality measures), changes in HIPAA, Medicare reimbursement cuts, etc. are events non-organic to the ACA. True, the ACA codified some additional elements such as Accountable Care Organizations and bundled payment demonstrations, etc. but not in any great detail. The reality is that the ACA didn’t need to exist for these events to occur as the administrative levels within government (Department of Health, CMS, etc.) can create, and has, this level of regulation and activity via agency fiat or other legislative (normative) functions within Congress (budget appropriations, etc.). These issues and events are all or were all, in motion prior to ACA passage. Providers would have seen them with or without and perhaps, in quicker time increments as the ACA has muddied the picture rather than made it clearer.
The driving element for providers isn’t the ACA but the changing structural nature of our society, our economy and the federal mechanism for funding and paying for, entitlements. The ACA doesn’t change these issues or even address them indirectly. Providers face cuts, regulatory oversight, other regulatory initiatives to make healthcare more “efficient” and outcome driven because of the federal funding issues, growth in entitlements and budget allocation for entitlement spending. In federal parlance, the cost of and growth of entitlements are too large and too “ineffective” to continue (the last point arguable of course). Too much money is spent for too little care or ineffectively so and too many people are ending-up in the entitlement pool for government to remain solvent or achieve equilibrium. Taking away the ACA, the issues remain. Keeping the ACA, the issues remain. The ACA didn’t address them nor changed the entitlement window or programmatic elements driving the fiscal course one iota (other again, than to expand certain elements such as Medicaid).
The real implications for providers arise when insurers and consumers fully integrate into the picture. Today, this is the government’s dilemma. In the desire of the drafters to create more insureds, improve access, and redistribute the health care pie, the ACA became the poster for “unintended consequences”. For example, look at the shift in union/labor support for the ACA. Because the ACA includes a “tax” on benefit rich insurance plans (Cadillac plans) and sets a definitional limit on employee eligibility for firms to provide mandate coverage at 30 hours per work week, the law is directly oppositional to union positions (full-time employment at 40 hours and “privately’ negotiated benefit plans). The ACA does not exempt collective bargaining plans from tax imposition if the same plans meet the “Cadillac” definition. Similarly, businesses that wish to avoid the ACA’s employer mandate on insurance benefit plan structure, can do so by reducing their employee work week to under 30 hours.
Why this is the crux of the ACA implication for providers is simple. Pushing aside current Medicare and Medicaid demand, the remaining demand is “all other”. This ” all other” category is dominated by privately insured individuals. The ACA exists to morph this category via mandates on employer plans, mandates on private insurance offerings, and mandates (via taxes or penalties) on individuals to purchase/access insurance. Assuming, as is presently the case, that nothing more changes in the ACA as written, providers are certain to face the following;
- Companies that formerly offered insurance benefits to their employees, dropping their plans and opting to pay the ACA penalty. This will shift more individuals into the expensive private market place purchasing, if they can, higher cost insurance with lower benefit levels.
- Companies will reduce their work-week hour requirement below to the 30 hour threshold and thus, limit their insurance benefit plan requirements under the ACA. Again, employees formerly insured will now enter the private marketplace, the exchange or Medicaid.
- Medicaid will expand and the numbers of participants will swell. The payments from Medicaid will not increase proportionately and thus, while providers may experience less bad debt (although not total elimination), the trade-off is patients with an inadequate payment source. I know few provider types, perhaps other than hospitals via default, who willingly want to see more patients with Medicaid as their primary payer.
- Exchange plans, when available, will not come cheap (although subsidies exist for income qualified participants) and in some states, may involve only one plan offering. We don’t know much about the Federal exchange participants yet. What we do know is that the elements within the ACA that mandated benefits for private insurance plans, upped the dependent coverage age for adult children, removed pre-existing condition limits and lifetime benefit limits, raises the cost of insurance to levels where affordability is questionable. The trade for affordability is coverage levels (higher copayments, deductibles, etc.).
When these issues arise, and they are or have to a certain extent already, providers see different consumer behavior. Lacking insurance or facing reduced benefit levels, individuals will alter their consumption behavior; including the consumption of health care services. Simply having access to insurance isn’t going to mean for the most directly impacted middle-class/working class, that one can afford it. While the ACA expands benefits and access via Medicaid and subsidies to the “working poor” (125% or under the Federal poverty limit), it doesn’t protect the cost for anyone else. Further, its provisions shift financial burdens and incentives among private, non-union benefit plans so much so that many employers will significantly alter their insurance offerings, negatively impacting their employee insureds. Negative impacts of this type mean individuals behave differently, purchase differently, and access care differently so as to minimize personal financial exposure. Providers will see demand slack.
The expansion of Medicaid presents a completely different picture for providers. Picture a group that has previously had minimal to no access to care. This group is awarded a rich benefit plan typical of any government entitlement program. Having likely delayed or refrained from using or accessing care other than in a circumstance of urgency, they now have immediate benefits and immediate (perceived) access. The analogy best suited is a person wins the lottery; sudden wealth and a former lifestyle of delayed or no consumptive gratification. The likely demand from this new group of Medicaid recipients, once they become aware of their purchasing power via the government, is for care. The question is, what care and how infirmed and debilitated is this group? Will providers accept this group? Can they afford to accept this group?
In answer to the above, we’ll see. What I know is that as of today, given the present payment mechanisms and levels under Medicaid, few providers will willingly open their doors. This is particularly true for physicians – the portal to all other care. Hospitals who have somewhat embraced the Medicaid expansion in general, are today just realizing the somewhat perverse implication that may arise if physicians abdicate Medicaid further – a growing flux in emergency care visits, already a problem for Medicaid and the under/non-insured market. The ACA doesn’t address this complication and in all cases, makes it worse by expanding a program that is viewed by providers as a poor payer.
What providers can expect in terms of ACA implications is a fundamental shift in consumer behavior toward health care. Its not the governmental implication of what the ACA does directly to providers; it is what the ACA does to insurers, employers and consumers. As the impacts for insurers are employers are shifts in the cost of benefits paradigm (negatively), both will react to reduce exposure and to insulate against financial erosion. This means providers need to understand that insurance plans will offer less coverage at higher prices, the same coverage with higher cost-share, and employers will reduce employee coverage either directly or indirectly via higher premium levels/cost share. These elements when applied in an economic element, shift behavior away from consumption, reducing demand for non-essential health care services or toward cheaper alternatives. Medicaid expands but within the same framework, pouring newly benefit rich consumers into the marketplace. The problem is that these new consumers, full of pent-up demand, only bring payment at fractional levels of costs. Plenty of consumption possibilities but at a loss to most if not all providers.
Moving one step forward, socially and economically the picture for providers can be truly unsettling. The picture for society perhaps even more concerning. More people, less covered plus more people better covered but via a poor payer (Medicaid) equals less care, not more. For the Medicaid folks, what good does it do to have a great benefit plan but access to limited providers? For the insured group, what good does it do to have insurance but at a price and cost-share point that constrains access or places the insured at-risk for accessing the system(s) from a financial perspective? Providers will see the end result of this social/economic shift and the end result is less core demand and patient flow, demand for services with a less than adequate payment, the risk of more bad debt from those insureds with higher cost-share levels, and a greater reliance on urgent/emergent access for those whose only access is via this portal.
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