The Senate healthcare legislation passed last week aims to reshape the U.S. healthcare system and the way hospitals, insurers and physicians do business.
Senate healthcare reform bill to reshape industry
The more than 2,000-page Patient Protection and Affordable Care Act, approved early Christmas Eve in a historic 60-39 vote, would greatly restructure the $2.5 trillion per year healthcare sector in just over a decade's time.
At a cost of roughly $871 billion over the next decade, the Senate's package is expected to extend coverage to 31 million Americans who currently go without it. Even so, it will leave another 23 million non-elderly residents without insurance—about a third-of who would come from the ranks of unauthorized immigrants.
The Congressional Budget Office, which analyzes legislation for its fiscal and real-world impact, predicts that 94% of legal U.S. citizens would have coverage by 2019. Of that, 26 million people would be covered through newly created insurance “exchanges,” and another 15 million would fall into expanded Medicaid and children's health insurance programs.
The bill essentially requires all legal residents to buy insurance, offering hundreds of billions of dollars in federal subsidies to help offset the cost. It also expands Medicaid to individuals making less than 133% of the federal poverty level. Those who don't purchase insurance would face a penalty of $95 starting in 2014, but increasing to $750 in 2016. Families would have to pay half the amount for children up to a cap of $2,250 for the entire family, according to the CBO.
While there is no mandate for employers to offer coverage, firms with more than 50 workers who do not offer coverage would be subject to a penalty of $750 for each full-time worker if any of those workers get subsidized coverage through the exchange. Under the bill, the exchange would include private health plans and could include two national or multi-state plans operated under contract with an office that already oversees selected federal health plans.
For their part, insurance companies would have to accept all individuals regardless of pre-existing conditions beginning in 2014 and could not vary premiums to reflect differences in enrollees' health.
By and large, much of the cost of extended coverage would come from reductions in federal dollars to the Medicare and Medicaid programs. For starters, the bill reduces the annual updates to Medicare's payment rates for most fee-for-service sectors, except physicians, by about $186 billion over 10 years. Additionally, the bill will effectively gut the Medicare Advantage program, moving participating plans to a form of competitive bidding, resulting in about a $118 billion cut.
The bill creates a so-called Independent Payment Advisory Board, which would hold sway over Medicare payment formulas. Under the legislation, the board would make annual recommendations to the president, Congress and private entities on actions they can take to improve quality and constrain the rate of cost growth in the private sector. Its Medicare recommendations are non-binding in years where Medicare growth is below the targeted growth rate. The board will develop its first recommendations in 2013 for implementation two year later.
Even though the hospitals sector struck a deal with key lawmakers and the White House itself, they're nevertheless in line for payment reductions under a reformed healthcare system. For instance, hospitals will see a major reduction in the federal dollars they receive for treating patients who can't pay the full amount of their bills. The Senate's legislation cuts disproportionate share funds by $43 billion under the assumption that the bill will expand coverage to those who currently don't have it.
The legislation also creates a pilot hospital value-based purchasing program in 2013, where a percentage of reimbursement would be tied to performance. If successful, it could be expanded. Inpatient rehabilitation facilities and long-term care hospitals will also move toward such a system.
The bill is loaded with other pilot programs and system studies. Under one, hospitals in 2013 could volunteer to receive payments for an entire episode of care rather than under the piecemeal inpatient prospective payment system, or IPPS. The bundled payment system will also be expanded to other provider types as well. It also establishes a Center for Medicare and Medicaid Innovation, which will be charged with finding new ways to improve the delivery and payment of care.
Hospitals also face new penalties. In 2012, for instance, hospitals would see their reimbursement cut for certain types of readmissions.
For physicians, a late amendment to the bill removed a 0.5% increase in Medicare reimbursement for 2010 – a move lobbied for by the physician community who wants to see a longer fix. Lawmakers said they would start work on such a measure starting early in January. A separate bill passed earlier this month allows for a more substantial re-working of the Sustainable Growth Rate formula.
The bill also begins to look at other ways doctors can get paid. Pilot programs will be created to help move physicians towards providing more integrated care, as well as docking Medicare payments—starting in 2014—for those who do not report on certain quality measures.
A key objective of the bill is to bolster the ranks of the primary care workforce. The legislation includes a raft or new funding and measures aimed to encourage doctors to move into primary care . And in a measure to help increase transparency, the legislation requires HHS to develop a “Physician Compare” web site where Medicare beneficiaries can compare measures of physician quality and a patient's perception of care.
Another provision authorizes the release and use of standardized extracts of Medicare claims data.
Additionally, the legislation will move federally qualified health centers toward a prospective payment system.
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