Overview – the expansion of the safety net
Since their inception, Medicare, Medicaid and Social Security provided the vital safety net that protected the poor and the middle classes in America. The Affordable Care Act (ACA) was thus intended to bridge the gaps in the protections that these programs provided. Come January 1, 2014, the ACA will impact over 100 million Americans with savings and peace of mind.
More specifically, The ACA was meant to drastically reduce the number of uninsured Americans, to improve and render more comprehensive the coverage of insured Americans, and to address the crisis of rapidly increasing national healthcare costs.
The full name of this landmark legislation is the Patient Protection and Affordable Care Act, mostly referred to simply as the Affordable Care Act. It was passed by Congress and then signed into law by President Obama on March 23, 2010. Pursuant to subsequent legal challenges, the Supreme Court rendered a final decision on June 28, 2012, to uphold the health care law. The law was promptly proclaimed as the most significant healthcare legislation enacted since the passage of Medicare and Medicaid forty-five years earlier. It puts in place major health insurance reforms that will keep rolling out over the entire decade, starting in 2010.
The Prescription Drug benefit (Medicare Part D)
For the majority of older adults, one of the most significant out-of-pocket outlays has in the past been on prescription drugs. This is understandable as it is not uncommon for an older person to be taking more than half a dozen medications at any one time.
Medicare Part D took hold in 2006, at President George W. Bush’s instigation. It was structured around the “donut hole” which consisted of a coverage gap that followed an initial coverage period during which the enrollee paid only 25% of drug costs all the way until the total costs paid (by both the enrollee as well as the insurer) in 2010 amounted to $2,830. When that figure was reached, the enrollee would go into the donut hole where they would pay almost 100% of their drug costs. If and when drug costs paid would reach the sum of $6,440 in any one-year period, it would trigger the catastrophic phase of the coverage in which Medicare would pick up 95% of drug costs.
It is easy to understand why the donut hole form of accounting has no equal or parallel anywhere else in the world. It is the birth child of a political system that got convoluted right at conception, and the gap in coverage was doubtless an accommodation granted at the eleventh hour to some congressional voting block that must have had considerable leverage.
The elimination of the donut hole -gradually over a 10-year period starting in 2010- thus became one of the benchmark programs of the ACA. And to salute the new changes, every one of the 6.3 million Part D enrollees who had reached the coverage gap in 2010 received a refund check of $250. By early 2013, it was estimated that enrollees in Medicare’s Part D had saved over $6 billion on out-of-pocket prescription drug outlays. People who had been splitting pills and going without their prescribed needs were once again able to afford to buy some of their needed medications.
The exact year-by-year distribution of the benefits -by type of drug- is portrayed in the following charts¹:
Protections against insurer abusive practices
A new Patient’s Bill of Rights was enacted in 2010 that provided the elderly, as well as the rest of the population, with various protections from abusive insurance company practices. These can be summed up as follows:
• Starting in 2010, insurers could no longer deny coverage to children under the age of 19 based on pre-existing conditions
• By 2014, they could no longer deny coverage to anyone because of pre-existing conditions
• One of the significant prohibitions enacted by the ACA thus is that insurers are no longer allowed to cherry-pick their enrollees. Up to that time, younger, non-smokers, enrollees with no prior existing conditions were given priority at the expense of everyone else.
• Formal or informal assessments can consequently no longer be used to determine premiums or to deny coverage.
• By 2010, insurers could no longer rescind coverage once a patient was covered
• By 2010, children could remain covered on their parents’ plans up to the age of 26
• By 2010, annual dollar-based caps were limited to new plans only
• By 2014, these caps would be completely eliminated
• By 2014, anyone –individual, family, or small business- could seek the best coverage that suited them on the competitive and open “marketplace” (more on that in a subsequent section)
• The ACA gave consumers new powers to appeal insurance company decisions that deny doctor ordered treatments covered by insurance
There were many other general provisions that were initiated in 2010 and consolidated over the next four years. These were predominantly in the domain of cost cutting measures, quality control and preventive care.
“An ounce of prevention…”
There are many preventive care provisions for children and for people of both genders under the age of 65. The provisions listed hereunder² are those that affect mostly individuals 65 years of age and older. It is also important to note that all these provisions are offered free of charge, without invoking co-pay or deductibles. With the ACA, the American healthcare system finally woke up to the realization that preventive care is the biggest cost-cutting tool for healthcar
• Immunization vaccines: Hepatitis A & B, Influenza, Measles, Mumps, Rubella, Pneumococcal, Tetanus, Diphtheria, Varicella
• Mammograms and colonoscopies: annual exams and counseling
• Tobacco Use screening: Cessation interventions for tobacco users
• Alcohol Misuse: Screening and counseling
• Obesity: Screening and counseling
• Diet Counseling: for adults at higher risk for chronic disease
• Diabetes (Type 2): Screening, particularly for individuals with high blood pressure
• Abdominal Aortic Aneurysm: Screening for men of specified ages who have been prior or current smokers
• Alcohol Abuse: Screening and counseling
• Aspirin Use: To prevent cardiovascular disease for older individuals
• Blood Pressure and Cholesterol: Screening and counseling for seniors
• Colorectal Cancer: Screening for seniors
• Depression: Screening and counseling
New-style competitiveness in the healthcare system
One of the main overarching achievements of the ACA was the creation of a “marketplace” for healthcare insurance policies, aka a health insurance “exchange”. The other achievement was in radically expanding Medicaid, bringing into the fold millions of previously uninsured Americans.
The marketplace was intended to provide consumers and small business (enterprises with 50 employees or less) with more choices, better protections, and less expensive premiums when buying insurance policies. The marketplace (also available online) is meant to oblige insurers to provide transparency and a competitive environment in which consumers have the widest choice with no hidden clauses. In addition, the ACA has brought about an unprecedented level of scrutiny and accountability to insurer rate increases by requiring that insurers justify a rate increase before it goes into effect. It thus caused an avoidance of arbitrary or unnecessary cost increases. Insurers are made to share information with enrollees as to changes in their price structures and options.
Medicaid Expansion: The expansion of Medicaid under the ACA constitutes the nation’s departure –finally- from having a big segment of its population without healthcare coverage. With the ACA, coverage was expanded to include all individuals with incomes below 138% of the Federal poverty line of 2014. It is thought that by 2016, Medicaid will have added 17 million people to its coverage.
For seniors, the ACA was a win-win proposition no matter how it was assessed. People who are happy with their existing healthcare coverage need not make any changes. They will still be able to see the doctor of their choice, or see a specialist without a referral. And as was mentioned earlier, seniors are already seeing savings from their Part D coverage, with the donut hole becoming a relic of the past by 2020.
What to expect –and when
Under the new 80/20 rule, insurers are required to spend at least 80% of their received premiums on actual health payouts and programs, rather than on their own administrative costs, executive salaries and profits. The ACA requires insurers to then refund back to their enrollees any surpluses accrued over the 20% they are entitled to retain. To date, insurers that did not meet the 80/20 rule have sent back $1.1 billion in refunds that benefited about 13 million Americans, at an average of $151 per family.
Seniors have lived for a long time in fear about rumors of Medicare going bankrupt and news of how much fraud there is in the system. They are thus happy to learn that the ACA contains an investment item of $350 million earmarked exclusively to fight Medicare fraud. In addition, the Medicare Board of Trustees announced in 2010 that the fund's outlook had substantially improved due to new cost-cutting measures brought about by the ACA (mostly in the areas of reducing waste, abuse and billing errors). The trustees gave Medicare a clean bill of health and pronounced it “solvent” up to the year 2029.
There will be enrollment periods every year, but the current enrollment for people who are unhappy with their current policies, or those who are seeking health insurance for the first time, is from October 1, 2013, through March 31st, 2014. Shoppers will find online a new environment reigning over the hitherto impervious, take-it-or-leave-it approach of health insurance companies. The new environment will be friendlier, more informative, and one that gives you genuine apple-for-apple comparisons.
¹ Charts courtesy of the American Society on Aging (ASA), author: Richard L. Kaplan
² Source: Healthcare.gov