Special Member Update on US Health Care Reform - March 2010

March 28, 2010

Dear colleagues,

Many of you followed the debate over health care reform in the United States closely. This special Members’ Update provides a brief overview of the newly enacted laws in the U.S. and places them in context for a Canadian audience.

What does the legislation provide?

The Patient Protection and Affordable Care Act and the companion Health Care and Education Reconciliation Act (the “fix-it” bill) are complex pieces of legislation. Unlike the Canada Health Act which is fourteen pages long (in two languages), these U.S. laws are each over 2,000 pages long. The legislation makes hundreds of changes, and the full impact will be unclear for a decade or more.

But the key provisions of the legislation are relatively straightforward. First, the new laws will decrease the number of uninsured people by expanding Medicaid and by imposing employer and individual “mandates”. Second, the legislation imposes new regulations on private health insurers.

How will the legislation reduce the number of uninsured people?

The legislation expands Medicaid by approximately 16 million enrolees to include those with incomes up to 133% of poverty levels. Medicaid is the state administered and jointly state-federal funded program for the poor. Medicaid reimbursement rates, however, remain low. This limits access to care because physicians and other health care providers find it difficult to participate in Medicaid.

The legislation also increases funding for community health centers, which deliver prevention and primary care to millions of low-income or poor residents and minorities in inner cities and isolated rural areas.

The legislation also imposes both employer and individual “mandates” by taxing employers with more than fifty employees that do not offer health insurance and fining individuals who do not buy health insurance, with exemptions in cases of hardship or religious objection.

How will the legislation regulate private health insurers?

The legislation puts into place regulations that require insurers to extend benefits to dependent children up to the age of 26 years, thereby helping to ensure that young adults have health insurance.

Adults with pre-existing conditions will be able to join a temporary high-risk pool that will be replaced in 2014 by an insurance exchange.

Insurers will be prohibited from dropping enrolees when they become sick, and by 2018 they must cover preventive care and checkups without co-payments.

Insurers will be required to maintain a medical loss ratio (i.e. proportion of premiums spent on health care, rather than on administration, profit, salaries, as a proportion of total revenues) between 80-85% depending on the size of group insured. Currently, up to 30% of revenue goes to expenses other than health care for enrolees.

What does the legislation not provide?

As with any piece of legislation, but particularly in the polarized U.S. environment, there is no guarantee that these laws will remain in place for the long-term. On March 23, 2010, before the ink had dried on President Obama’s signature, thirteen states filed lawsuits challenging the constitutionality of the legislation. Although most legal scholars believe these challenges will fail, it is possible that the legislation will be repealed in a future Congress with Republican majorities and a Republican President. Unlike the Canada Health Act, which was passed unanimously by our Parliament, the key U.S. bill passed in the House of Representatives by the narrow margin of 219-212, with not a single Republican voting in favour.

More significantly, even with the law in full force and effect, it will likely also leave approximately 23 million people uninsured a decade from now. Millions more will be under pressure to “play or pay”. They will either have to buy health insurance, or pay the fine for not doing so. With commercial insurance policies costing up to 9.5% of their income, yet covering only 70% of health care costs, the choice between fines or expensive yet incomplete insurance will be a tough one for many families.

With health care still linked to employment, many people will be locked into plans offered by employers, with limited choice of provider, escalating costs, and eroding benefits.

Though pre-existing condition exclusions are prohibited, loopholes remain and may result in a high-stakes chess game of “find-the loophole / plug-the-loophole”. Risk rating will continue in the form of higher premiums based on gender and age, allowing insurers to charge women and older adults more, at least until 2017.

Finally, Americans will still be required to pay for a significant fraction of their healthcare costs through deductibles and co-payments. The evidence shows that these “user fees” result in the avoidance of medically necessary care.

Is this legislation an improvement?

 

Most observers from Europe and Canada feel that there is cause for celebration in the passage of any effort to improve access to health care in the U.S. for the 47 million people who are uninsured, and the millions more who are underinsured. This perspective, shared by many progressive members of the U.S. Congress, says that although the legislation does not provide a Canadian-style “single-payer” Medicare system for Americans, it is still a substantial improvement over the current situation.

On the other hand, the response from some progressive groups has been guarded (seewww.pnhp.org for the perspective of one of our partner groups, Physicians for a National Health Plan). It may not yet be time to pop the champagne.

This law, though it offers some relief to some people, further entrenches what many see as the root of the problem, namely the profit-driven private insurance industry. Instead of reaping the fiscal benefits inherent in the low administrative costs of a Canadian-style system, thereby “bending the cost curve”, this law perpetuates the enormous administrative costs inherent in a profit-driven insurance system. At its core, this law offers mostly insurance reform, rather than comprehensive health care reform.

What is the potential impact on Canadian health care?

 

One health systems scholar, Colleen Flood, predicted that reform in the U.S. may lead to a demand south of the border for Canadian trained health professionals:

For the US to make universal health insurance work it will have to rein in costs. Short of rationing care itself it will need to control the prices of care and focus more on preventative and primary health care and less on specialty and acute care. We can expect the US will want to attract more of our primary care providers to work there. We will have to face the fact that as the US strives to rationality in their system that they will look to attract our family physicians, nurses, pharmacists and other primary care providers to work within their borders - exacerbating existing problems we have in access to primary health care.

 

As well, she noted that while the U.S. system still remains unduly dependent on private financing and for-profit insurers, we still have some way to go in Canada in maximizing comprehensiveness, efficiency, and quality in our publicly financed system. Perhaps the experience of watching healthcare reform take place in the U.S. can inspire us to advocate for reforms to improve our own system.

Conclusions

 

This legislation does one really important thing: it affirms the role of the federal government in enacting legislation to promote and protect the health of its citizens. What remains to be seen is whether the laws in the U.S. will be enforced. Over the last decade, the Canadian government has done a poor job of enforcing the Canada Health Act, leaving many Canadians concerned about the security of our own system. How aggressively the U.S. government enforces the Patient Protection and Affordable Care Act remains to be seen.

The painful process of enacting this legislation, and the influence of the insurance industry on what was eventually passed, has affirmed for Canadian Doctors for Medicare how difficult it would be to remove profit-driven insurers should they infiltrate our own Medicare system.

Reliance on “the market” to rein in costs, or to deliver affordable, accessible health care to all has never succeeded anywhere in the world. As noted by Dr. William Hsiao, the Harvard University economist and architect of successful health reform in several countries, “You can have universal coverage and good quality health care while still managing to control costs. But you have to have a single-payer system to do it.”

As Canadian Doctors for Medicare continues to advocate for improvements here at home, we also hope that the Patient Protection and Affordable Care Act is the starting point rather than the finish line for health care reform in the United States. An American health care system that is truly equitable, universal, comprehensive, and sustainable would be in all of our best interests.

With my regards,

 

(signed)

 

Irfan Dhalla, MD, MSc, FRCPC

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