Health exchange launch isn't the last you'll hear of Obamacare

Tuesday might have been a climax in ongoing health reform efforts, but it's not the last we'll hear of the Affordable Care Act.
Tuesday might have been a climax in ongoing health reform efforts, but it's not the last we'll hear of the Affordable Care Act. Here, Lillian Ardon, right, an application counselor with Harris Health System in Houston, helps Vanessa Danielle Cotton sign up for the new health exchanges this week. David J. Phillip

Tuesday’s balky kickoff of the new health insurance exchanges may have been the climax for health reform, but it was hardly the start and it’s not even close to being the end. 

Millions will still lack access to coverage in states that have declined to expand their Medicaid programs. Changes meant to make the disorganized, free-for-all U.S. health care system a little more logical have barely begun to take place. And efforts to lower costs — Americans pay more for health care than anyone else in the world — will take decades to bear fruit.

The 2010 Affordable Care Act aims mostly to get health insurance to the 15 percent of Americans who don’t already have it. It’s about 40 million people, and experts predict that only about 7 million will sign up this year on the new exchanges operated by states and the federal government.

Another 17 million could get covered by an expansion of Medicaid, the joint federal-state health insurance plan for people with low incomes, and the Children’s Health Insurance Program (CHIP). Only 20 states have decided to make Medicaid more available, according to the Advisory Board Company . Fifteen are considering it or at least haven’t ruled it out; 15 states have said they absolutely will not expand, even though the federal government has offered to pay the full cost for the first few years.

“That will continue to be hashed out over the next year as states struggle to expand,” says Caroline Pearson, vice president for health reform at consultancy firm Avalere Health. 

One unanswered question: What will happen to the millions of people who won't get Medicaid in the states that are not expanding and who also do not qualify for federal subsidies to buy health insurance on the exchanges?

The Congressional Budget Office projects that 26 million people will buy health insurance on the exchanges by 2022 and that 12 million people will become newly eligible for Medicaid in the states that choose to expand their offerings by 2022.

So those are people newly insured. The hope is they’ll get preventive medical care, instead of waiting until they are really sick and using emergency room and other last-minute services that cost far more than if they'd received routine care.

The Affordable Care Act, known widely as Obamacare, also seeks to stop what the administration calls the “worst abuses” of the insurance industry. Any company offering products on the exchanges will have to pay for preventive care such as cancer screenings, vaccines and maternity care. They can’t cap coverage once a person runs up a lot of bills and that have to take customers even if they have pre-existing conditions such as diabetes or asthma.

But it also extends these rules to any company offering insurance on the individual market starting in 2014. The hope is to gradually transform the industry.

Another major goal is to improve the coordination of health care. Most experts agree the U.S. health care system is not a system at all, but a disorganized mess in which doctors get paid only for doing tests, procedures or prescribing drugs and not necessarily for giving patients advice that will keep them well. 

One way the law is trying to change this is through Accountable Care Organizations (ACOs), which are supposed to be something like the Health Maintenance Organizations (HMOs) of the 1980s, only a lot better.

Those are just starting, too, says Pearson. “At a general level there are a lot of demonstration programs in Medicare and also Medicaid that try to incentivize quality over quantity of care and really pay providers for keeping people healthy,” says Pearson.

There are about 250 of these ACOs taking part in Medicare nationally, and probably several hundred privately operated ones, Pearson says. They haven’t been a great success yet, she says. “Early data shows that while a lot of them produced good quality improvements, they didn’t save money,” she said.

But they have saved a little bit, counters Ceci Connolly, managing director of PwC's (PriceWaterhouseCoopers) Health Research Institute. She says some did save, including two Boston-based hospital systems. Partners saved $7 million last year in its ACO experiment, she says, and Beth-Israel Deaconess saved $15 million.

These savings came in areas that the ACA seeks to expand across U.S. healthcare, including paying hospitals less if their patients come back sick again too soon after being discharged and reducing infections in the hospital. "The minute you bring down readmissions, that's a significant savings," Connolly said.

The ACA also encourages a new model for paying hospitals, doctors and clinics. It’s called bundled payments and means, for instance, reimbursing with a single rate for treating a diabetes patient instead of forcing providers to break down the care into a series of billable items such as a blood test here or a prescription there.

While eventually the government hopes these policies will lower costs, health care costs are still growing every year, although at slower rates than in past years.

Last month, actuaries at the Centers for Medicare and Medicaid Services said health costs were growing at a slower pace but said it was almost entirely due to the poor economy.

PwC says it’s also partly because of changes made by health insurance companies that cover the most Americans — that is, through contracts with employers. They are charging higher deductibles and co-pays in the hope of discouraging health spending — and it’s working.

“The sluggish recovery has created a ‘new normal’ in healthcare spending patterns,” PwC says in a recent report.

“Individual consumers, bearing more financial responsibility for their medical bills, are questioning and sometimes delaying procedures, imaging, and elective services.”

And companies are taking matters into their own hands, a trend that can be expected to continue.

“Major employers such as Walmart, Boeing, and Lowe’s now contract directly with big-name health systems for costly, complicated procedures such as heart surgery and spinal fusion,” PwC says. 

Expect to see more of these trends when a new tax on "Cadillac" health insurance plans kicks in starting in 2018, Connolly says. "We are already hearing from employers that they are focused on the Cadillac tax in 2018," she said.