The Affordable Care Act

Affordable Care Act

The Affordable Health Care Act

The hospital industry is comprised of many different sectors including, but not limited to, non-profit and for-profit hospitals, safety net hospitals and teaching hospitals among others. Because the sectors are so varied, it is surmised that the Affordable Care Act, which was enacted in March of 2010, will have different effects for each different sector and individual hospital. There are certain hospitals that have always given either low-cost or no-cost health care to uninsured patients and it is posited that these hospitals will gain the most in relation to the uncompensated care that they have given patients. It is believed that there are substantial provisions within the Affordable Care Act that will have a beneficial effect on recovering unsustainable losses incurred through uncompensated care by a hospital that already provides ample charitable services. To understand some of these provisions within the Affordable Care Act, it is important to review the U.S. health care system's history to understand how the new Act will impact hospitals. It is also necessary to discuss some of the negative impacts of the Act and how these beneficial aspects can outweigh the negative.

Introduction.

The idea of a national health insurance first came about in 1915 when the American Association for Labor Legislation tried to introduce a medical insurance bill to some state legislatures, according to Ramachandran (2010). These attempts, of course, did not work; however, what did work was the fact that the idea about a national insurance came to light and thus a controversy. There were several national groups that supported government supported health care -- including groups like the AFL-CIO, the American Nurses Association, the National Association of Social Workers, the Socialist Party USA, the American Medical Association, and the Life Insurance Association of People (2010).

When President Franklin D. Roosevelt signed the Social Security Act in 1935, medical benefits were not a part of the bill. Roosevelt had considered putting in some kind of national health care clause, but he did not think that Americans were ready for it. President Harry Truman also liked the idea of a national health care and tried to put it into his Fair Deal program. This too was not successful, although Truman was able to put some attention on the need for increased medical care for the elderly (Ramachandran 2010). Eisenhower also supported this argument and created the Ways and Means Committee to bring attention to the cause, but there was never any legislative action that resulted from it. It should be noted that there were a couple of bills that have paved the way for Obama's Affordable Care Act. One of those was the Kerr-Mills Act of 1960 which gave states the authority to decide which patients needed financial assistance and which did not (2010). At the states' decree, the federal government would provide individual assistance. Most of the states, however, did not take part in this Act. There was one other preliminary bill, the King-Anderson Bill, which was created in 1962, that stated some hospitals and nursing home costs for patients 65 and older would be covered. This bill was defeated in committee, although the vote was quite narrow (12-11); this signaled a sort of change in attitudes. This was the what enabled President Johnson to include in his "Great Society" program Medicare and Medicaid programs as part of the Social Security Act of 1965, giving 19 million Americans health care coverage (2010).

The effects of the Medicare and Medicaid on the United States economy is very clear today as overall health care comprises 1/6th of the U.S. economy (Ramachandran 2010) -- that's about $600 billion annually. Obama's Affordable Care Act will cost approximately $940 billion over the next decade. This is a major cost to provide medical care to nearly all U.S. citizens.

Where are we as a nation without healthcare? Why is the Affordable Care Act something so long in the making? During the 2008 elections, an imminent collapse of the American health care system was at hand. There were three "symptoms" (Brown 2008) being discussed: first, without any kind of affordable universal coverage, the system leaves an estimated 47 million Americans without health insurance (2008); second, health care costs are exorbitant ("the United States spends about 16% of its annual & #8230;GDP, or $6,400 per capita, on health care, whereas France…covers virtually its entire population reasonably well at 11% of GDP and half the per capita spending" (2008)); third, the U.S. health care system cannot logically be called a "system;" it is, according to Brown (2008), "an incoherent pastiche that has long repulsed reforms sought by private and public stakeholders" (2008).

The question still remains, why now? The answer may be due to the fact that the American Medical Association and the pharmaceutical industry supported the Act to a certain extent. There isn't anything in the new Act that fundamentally threatens their livelihood. If there was, it is doubtful that the bill would have passed today -- nearly 70 years after Roosevelt's first glimmering idea of a national health care system. President Obama seemed to have learned something from Clinton's past mistakes of trying to deal with the problems of coverage and cost at the same time. Containing costs is just too threatening to too many health care interests. So the first part of the task has got to be to get the uninsured covered. The second part will have to be in addressing costs to keep the new system of healthcare up and running. If we are to take out the issues of cost then we can understa

President Obama signed the highly anticipated -- and highly controversial -- Affordable Care Act into law on March 23, 2010 with the goal of putting American consumers back in the driver's seat when it comes to controlling their health coverage and care. This was a landmark in U.S. social legislation and something that most Americans felt was long overdue. President Obama said, "…the bill I'm signing will set in motion reforms that generations of Americans have fought for and marched for and hungered to see," enshrining, "the core principle that everybody should have some basic security when it comes to their health care" (Jacobs & Skocpol 2010).

One of the major factors that needs to be contemplated when evaluating the impact of national health care is what will become of the safety-net programs that service around 100 million Americans? Redlener and Roy (2009) state that the whole concept behind safety-net programs is to guarantee that all citizens' -- regardless of their social or economic situations -- access to fundamental services falls below a certain point. Today's health care safety-net is a multifaceted collection of entitlements, specialty services (e.g., care for people with HIV / AIDS), hospital-based programs, and emergency care services that is designed to facilitate access to important health care for the people who are medically underserved, uninsured, or underinsured. The U.S.'s biggest safety-net programs are, of course, Medicare and Medicaid (often referred to as "entitlement" programs) (2009) and they are legally protected form having eligibility thresholds lowered below federally established standards (2009). The State Children's Health Insurance Program (SCHIP), created in 1997, is the newest addition to the safety net; its incorporation into the system means that numerous children in the U.S. have a regular source of health care, which includes preventative services (2009). Laws that require hospitals that receive federal funds provide care for anyone seeking emergency treatment (regardless of citizenship or ability to pay) are also a part of the safety net (2009). Disproportionate Share Hospital programs are also a part of the safety net and they are facilities that will receive some kind of compensation (at least partial) when they provide a disproportionate share of otherwise uncompensated care to the poor and underinsured (2009).

Still, even with multiple safety-net options, including community health centers, public hospitals, and clinic, at least 22,000 people died in the United States in 2006 because they lacked health insurance and had limited access to medical care. And the number of deaths related to lack of coverage has been increasing by about 1000 every year (Redlener & Grant 2009).

There are two major elements that will affect the structure, function, and mission of the safety net in the future -- that is beyond the rise and fall of the democrats and republicans. The first element is, undoubtedly, the recession. In a survey that was conducted in 2009 by the American Hospital Association, 9 out of 10 hospitals reported service reductions because of the current economic conditions, and nearly half of them had to cut staff. One-fifth of those had to reduce community services such as mental health care, patient education, and community clinics, and 8 out of 10 had cut back on facility and technological upgrades, including upgrades in the area of electronic health records. The combination of increased demand and greatly diminished resources has placed enormous stress on the safety net. The second element that must be considered and one that will have a great impact on the safety net is health care reform. The Affordable Care Act means that health coverage will be required for almost every American and will be partially subsidized. However, it will not change the employer-centric, private-insurer-based system of financing and coverage. Demand for care will increase significantly and rapidly, but the underlying issues that created the need for a safety net in the first place will not be solved in the near future.

Feldstein (2005) argues that if national health insurance is enacted and designed as an efficient in-king subsidy, then it is questionable as to whether in-kind subsidies should be continued. The major in-kind subsidies on the demand side are Medicare, Medicaid, and the tax deductibility of medial expenses in excess of 7.5% of adjusted gross income. According to the new Act, there will not be any abolition of any of these, but there will be reductions to all of them.

Taking a closer look at all the different aspects of the effects of national health care reform, it is important to contemplate the impact that the economy has already had on health care -- particularly for hospitals for the purposes of this study. The American Hospital Association (2009) survey found the following statistics, which represent the impact of the economy on hospitals in the United States:

1. Emergency room visits by uninsured patients -- 45% of hospitals reported a moderate increase in the number of emergency room visits by uninsured patients; 13% reported a significant increase.

2. Uncompensated care -- 43% of hospitals reported a moderate increase in uncompensated care as a proportion of total gross revenue; 27% reported a significant increase.

3. Elective procedures -- 41% of hospitals reported a moderate decrease in elective procedures; 18% reported a significant decrease.

4. Inpatient admissions -- 38% of hospitals reported a moderate decrease in inpatient admissions; 17% reported a significant decrease.

5. Community need -- 42% of hospitals reported a moderate increase in community need for subsidized services; 11% reported a significant increase.

6. Charitable contributions -- 31% of hospitals reported a moderate decrease in charitable contributions; 9% reported a significant decrease.

7. Total operating margin -- 26% of hospitals reported a moderate decrease in total operating margin; 39% reported a significant decrease.

8. Days cash on hand -- 32% of hospitals reported a moderate decrease in days cash on hand; 27% significant decrease.

9. Days accounts receivable -- 29% of hospitals reported a moderate increase in days A/R; 7% reported a significant increase.

10. As a result of these economic conditions, hospitals responded in the following ways: Administrative expenses -- 80% of hospitals reported cutting administrative expenses as a result of economic concerns. Staff reductions -- 48% of hospitals reduced staff. Service cuts -- 22% of hospitals reduced services. Mergers -- 9% of hospitals reported considering a merger.

While modern health care has become more effective than ever in saving and improving the lives of individuals in America, it has become more expensive than ever for individuals, businesses, and governments. What is more, insurance companies have long abandoned its clients without medical insurance at times in their lives when the have needed it the most, resulting in patients putting off the care they need, compromising the state of their health and driving up the cost of care when they do finally get it. Insurance companies tend to put the insurance company bureaucrats between a patient and his or her doctor. Private health insurance companies in this country have grown into mega industry hegemonies coordinating coverage in negotiations with big employers on one side, and hospitals and doctors on the other side (Jacobs & Skocpol 2010). Insurance companies have very strong incentives to protect their profit margins by "dumping people who get costly illnesses, such as cancer" (2010).

…public and private health insurers engage in a complex and continuous process of negotiations with multiple health care providers to establish reimbursement rates for services. This increases administrative expenses among payers and providers and leads to wide variation in prices (Volsky 2010).

Health care reformers, often called "advocates of universal coverage" (Jacobs & Skocpol 2010) have run into major political opposition and have failed every time at trying to guarantee coverage for all U.S. citizens. "The best reformers could do, in major steps toward this goal, came decades ago, in the mid-1960s, when Medicare was enacted to help cover physician and hospital costs for the elderly and Medicaid was enacted to pay for care for some of the very poor" (2010).

The Affordable Care Act puts the insurance company back in its place, pointing out their scandalous practices while also giving individuals the stability that they need to make choices about their health that makes the best sense to them as individuals. As Joe Biden noted on that day in March 2010 after introducing Barack Obama, "this is a big f…ing deal." The Affordable Care Act of 2010 has taken place as a landmark in U.S. social legislation, comparable to Social Security legislation enacted in 1935, Civil Rights legislation enacted in 1964, and Medicare (Jacobs & Skocpol 2010). New York Times columnist David Leonhardt called the Affordable Care Act "the federal government's biggest attack on economic equality" since the late 1970s (2010). The Congressional Budget Office projects that cost-control provisions will gradually reduce the nation's overall healthcare bill and shrink the federal budget deficit (2010).

The health care "system" in America has been continually under attack. While millions of Americans are uninsured, there is also the problem of hospitals being run more like "profit centers" (Berenson & Zuckerman 2010) than places of care. Rather, there is "a strong business case for keeping beds full and employing service-line strategies for generating volume, contributing to what some have called a 'medical arms race'" (2010).

The United States has some of the world's best doctors and healthcare facilities, yet American medicine, in general, has failed to provide high-quality care to Americans, There are too many unplanned readmissions, medication mistakes, and hospital-acquired infections (U.S. Dept. Of Health & Human Services 2009). There are several barriers that come into play as well when doctors and other healthcare workers are trying to give quality care to patients. The combination of the American Recovery and Reinvestment Act and the Affordable Care Act will help address any information gaps that get in the way of physicians caring sufficiently for patients. For example, the American Recovery and Reinvestment Act provides about $25 billion in incentives for physicians and hospitals to use electronic health records (2009).

Administrative overhead and lack of primary care providers are also perceived to be barriers to the delivery of high-quality care. The Affordable Care Act is a major step forward in each of these areas. One of the nightmares of the health care system is paperwork. This results in the need for millions of workers just filling out forms for insurance companies. Under the administrative simplification provisions of the Affordable Care Act, physicians will be able to reliably find out electronically whether a particular test is covered, how much the insurance company is paying, and how much patients have to pay. These simple changes are expected to save the government $20 billion over the next decade and save hospitals, physicians, and insurers far more in both in cost and frustration (U.S. Dept of Health & Human Services 2009).

The Affordable Care Act will require that essentially all Americans, beginning in 2014, buy basic health insurance coverage (just like all drivers on the road need car insurance). This "individual mandate" (Jacobs & Skocpol 2010) is designed to ensure that individuals do not wait until they or a family member becomes ill to seek care, getting the healthy people into the system from the get-go. The law also includes eventual taxes on very expensive private insurance plans (the intention is to make them less prevalent), along with incentives for more efficient payments to physicians and hospitals, intended to move the country toward paying for results in health care, rather than for sheer numbers of tests and procedures (2010).

The hospital industry is made up of numerous and varied sectors including such as non-profit and for-profit hospitals. With such wide variation in hospital industry sectors, it is only plausible that the Affordable Care Act will have unique results the varying sectors and individual hospitals, in general. Certain hospitals have, historically, offered more care to patients who are uninsured. "These hospitals are likely to gain the most in terms of revenue increases for the mostly uncompensated care they have been providing these patients" (Berenson & Zuckerman 2010). There are substantial provisions within the Affordable Care Act that will have a beneficial effect on recovering unsustainable losses incurred through uncompensated care by a hospital that already provides ample charitable services.

President Obama as well as some of the chief leaders in the Senate and House praised the long-term deficit-reduction features of the new legislation. Their claim is that expanded coverage and cost control go hand-in-hand: The emergency-room care the uninsured rely on is often much more expensive than the preventative care available to the insured (Jacobs & Skocpol 2010). What is more, by preventing insurance companies from profiting by "dumping" or avoiding ill people, the Act's proponents argue, the legislation will encourage insurance companies to seek their profits by encouraging greater health care efficiency (2010).

The plan is to have rules of the U.S. health care and insurance system work more like the National Football League -- where anything goes, and the Yankees and a couple of other teams that can afford to pay the most millions usually win, while the poor teams just get worse and lose more often, and the middle-of-the-pack spenders usually fall short of the top (Jacobs & Skocpol 2010).

The Affordable Care Act offers doctors the financial support for making positive and informed decisions when it comes to treating patients. Today, the fee-for-service system encourages ordering tests and performing interventions. It doesn't support and, in fact, it may even deject coordinated care that prevents complications and secondary prevention (U.S. Dept. Of Health and Human Services 2009). Both research and experience shows that by moving away from fee-for-service payment, rewarding hospitals and doctors for working with rather than competing, comparing the effectiveness of treatments, providing patients with the information they need to share in decision-making, and giving gravely ill patients the chance to choose palliative or hospice care, will reduce the over-treatment that puts patients at risk -- and it will give them more affordable and safer patient-focused care. The Affordable Care Act changes this fee-for-service system by encouraging and establishing patient-centered medical homes and accountable care organizations that should allow doctors to focus on coordinating care and preventing avoidable hospitalizations (2009). On that same note, the pilot projects on bundled payments reward doctors for offering care that keeps chronically ill patients in good health and out of the hospital (2009).

Analyses based on results from an Urban Institute microsimulation model show that the approximate 30 to 32 million newly insured Americans would generate around $40 billion in new revenues for all hospitals by the year 2019 (Berenson & Zuckerman 2010). Though analyses show that newly insured Americans could possibly produce in the arena of $40 billion in new revenues for all hospitals, the coverage expansion were paid for, in part, by hospitals agreeing to accept slower growth in Medicare payment rates and to forgo certain special payments that have been made under Medicare and Medicaid to offset the costs of uncompensated care (2010). The Congressional Budget Office's (CBO) projections of the amount of these forgone revenues suggests that -- as an entire group -- hospitals won't have to give up much more -- if any -- revenues than they will profit from newly insured patients.

The overall goal of the Affordable Care Act is to raise the quality of care while giving both Americans and health care providers -- such as hospitals -- more control over health care. It essentially puts patients' relationships with physicians ahead of insurance company profits and paperwork, and gives health care providers incentives to better handle and coordinate care. The Affordable Care Act will ensure that millions of Americans have access to affordable insurance -- offering them the quality care than hospitals shall deliver (Health Care.gov 2010).

Problem/Issue/Improvement Project.

Those who defend the status quo in U.S. health care often use the argument that the United States has some of the most technologically advanced health care in the world, the best hospitals and the finest experts in various fields across the healthcare board. Defenders of the status quo say that all Americans have access to this wonderful advanced technology if they show up at any hospital emergency room. However, this advanced technology can raise costs if it is used wastefully -- "as it often is in the United States when well-insured patients are at issue and doctors or hospitals have an incentive to provide costly tests or treatments" (Jacobs & Skocpol 2010). If your revenues depend on doing a lot of costly MRIs or running other expensive tests, why not do it for well-insured patients (particularly if you want to avoid being accused of malpractice) (2010)? But the emergency room argument is not adequate despite the "best" arguments for it. As Republican senatorial candidate Sue Lowden of Arizona put it in a May 2010 interview trying to make a case for the status quo: certainly if you manage to stagger in, some hospital will patch up "a bullet hole in…[the] chest" (2010). The fact of the matter is that many private hospitals are having to close their emergency rooms because of the mounting costs of uninsured patients using emergency rooms for various types of help. Many public hospitals are struggling as well. They are forced by law to take all emergency room patients, but at a time of cutbacks in taxpayer subsidies, public emergency rooms are facing major financial dilemmas.

If emergency rooms are clogged with uninsured people looking for many kinds of help, they cannot do their vital primary job for all of us -- after all, any one of us or a loved one could be turned away by an overcrowded emergency room, diverted to a different hospital when minutes could count to save life or limb (Jacobs & Skocpol 2010).

The current system is plagued by so many problems and the Affordable Care Act will help in a variety of ways. Emergency care as a substitute for affordable "normal" care is not appropriate in most cases and it is certainly not cost effective and it is most definitely not "free." Hospital bill collectors often have to prey on nonpaying patients for many years and if those bills cannot be paid by the patients then the debt shifts to everyone else. Hospitals are forced to charge paying patients higher rates for care; governments raise taxes to subsidize public and teaching hospitals, etc.

Simply pointing out all the problems of the status quo does not take away the fact that there is also criticism of the new health care legislation -- especially pertaining to hospitals. The Affordable Care Act has emphasized the lack of broad-based and decisive change in payment approaches under Medicare, especially when it comes to not changing the fundamental payment method based on diagnosis-related groups (Berenson & Zuckerman 2010). There are several "mandated pilots" (2010) of new payment models, that would, essentially, build on established payment methods and offer incentives at the margin for changing actions -- that is, for lessening rates of readmissions while still getting payment for the readmissions (2010). Even under the "shared savings" approach to testing accountable care organizations (ACOs), hospitals will still remain profit centers and, as mentioned, it will behoove them to keep patients under their care and employ "service-line strategies" for keeping an abundance of new patients coming in (2010).

Berenson and Zuckerman (2010) note that the basic agreement will reduce Medicare's annual market basket updates for a wide range of providers -- hospitals, home health, skilled nursing facilities, hospices, inpatient rehabilitation as well as other providers. (Hospitals can include these other types of providers under certain circumstances (2010)). Under existing Medicare laws, reimbursements to inpatient hospitals, skilled nursing facilities, hospice care, and other facilities are updated yearly and usually increase between 3 and 4% to match inflation and the increased costs of providing Medicare services.

Looking at all of these different providers, it is projected that Medicare has the potential to save $40.5 billion relative to the current payment baseline in 2010 as an outcome of limiting the annual updates (2010). The policy theory underlying these decreased rates was to taking savings based on an assumption of economy-wide productivity improvements.

Hospitals account for a little less than 50% of Medicare spending, excluding physician services and prescription drugs. This implies that hospitals will receive roughly $20 billion less in Medicare revenues in 2019 than they would under current rules, about half our projected increase in hospital revenues from the coverage expansion (Berenson & Zuckerman 2010).

Medicare will be stronger than ever because of the Affordable Care Act and will offer new benefits to patients. The Act essentially maintains the guaranteed benefits under Medicare and makes recommended preventive services available with no cost-sharing, and offers an annual wellness visit (Health Care.gov 2010). It closes the Medicare Part D prescription drug program 'donut hole' over time, starting with a $250 rebate to seniors who reach that limit in 2010. By lowering cost-sharing, the Act empowers providers because they will not have to worry as much about patients being unable to afford treatments that they need (2010).

Quality and utilization are going to be inextricably linked as the health care industry moves forward with the health care reform legislation. How all this legislation will go down is a matter of speculation right now, but hardly anyone denies that a new payment model for health care services, moving away from the current fee-for-service type payment model, is necessary for improved quality and the economic health of hospitals (Pharmacy Choice 2010).

With a sweeping overhaul of the nation's health care system, Congress is giving the health care industry as many as 32 million additional paying customers over the next few years (Abelson 2010). That means that millions more Americans will be buying private health insurance and will be better able to pay for their hospital stays, doctors' visits, prescription drugs and medical devices (2010). Some analysts said as the vote neared the final legislation and was coming together that it seemed much kinder to the industry that people initially feared. Hospitals (and drug makers), which both were in support of the final legislation, would be very clear beneficiaries, even if the outlook for insurers was less than certain (2010). Overall, it is believed that the legislation will be positive for most of the industry. The coverage of 32 million uninsured provides the greatest benefits to hospitals. Greater coverage of the uninsured should alleviate a large portion of bad debt expense (Business Week 2010). "Hospitals have little to fear. The number of newly insured is expected to decrease significantly the amount that hospitals now lose each year when they provide care to people with no means to pay" (Abelson 2010).

Analysis of Problem/Issue

There are several issues surrounding the new rules of the Affordable Care Act, but it is clear that hospitals will need to implement an automated, streamlined system that will help them comply with the Affordable Care Act's new requirements. Under the Affordable Care Act, hospitals will need to be able to consistently identify patients who qualify for financial assistance at point of service. Another issue, a method must be employed to easily and accurately determine the appropriate amount to charge for services provided to patients who qualify for financial assistance in an emergency room setting. Without an efficacious solution in place, these things will be practically impossible, and hospitals will risk very harsh penalties for noncompliance (Close-Up Media 2010).

Improvement Data

The Affordable Health Care Act has some provisions that will help hospitals. For example, Section 3001 -- Rewarding High-Quality and Efficient Care -- establishes 'value-based purchasing,' which means that the government will make 'value-based incentive payments' to hospitals that offer care to Medicare patients that meets or exceeds certain performance standards and must relate to at least the following five conditions: heart attack, heart failure, pneumonia, surgery, and healthcare-associated infections (Greenwood 2010).

Essentially, the Act will give states and local communities new resources to address the country's mounting health challenges -- like the increase in chronic diseases and conditions that are related to obesity. This will strengthen provider efforts to help patients make healthy decisions like losing weight or quitting smoking (Health Care.gov 2010).

New models of patient-centered, coordinated care will also give health care providers and patients more control over how they get care. Investments in medical homes and other advanced care coordination and disease management models will help health care providers make sure that their patients receive faultless, efficient care. Providers who offer high-quality services will be rewarded based on standards that they help develop, based on solid medical evidence. Medicare will also pay bonuses to qualified primary care physicians and general surgeons, especially those who practice in underserved areas (Health Care.gov 2010).

Section 3022 -- Medicare Shared Savings Program -- is a provision which directs the Secretary of Health and Human Services to establish a program by January 1, 2012 through which accountable care organizations that save Medicare money would be entitled to a cut of the savings they achieve. Hospitals are eligible to participate in the program through a partnership or joint venture arrangement with physicians or as employers of physicians (Greenwood 2010).

Section 3023 -- National Pilot Program on Payment Bundling -- is a five-year long pilot program which the Secretary must establish by January 1, 2013 and states that the government will make one bundled payment 'for integrated care during an episode of care provided to an applicable beneficiary around a hospitalization in order to improve the coordination, quality, and efficiency of health care services' (Greenwood 2010). Episodes of care being three days prior to hospitalization and end 30 days after discharge. Hospitals can apply to participate in the program as part of 'an entity comprised of…a hospital, a physician group, a skilled nursing facility, and a home health agency' (2010).

The Affordable Care Act will reduce government subsidies to hospitals that treat a large number of uninsured patients. Because there will be fewer uninsured individuals, hospitals will no longer need such large subsidies.

The Affordable Care Act will finance new demonstration projects that reimburse providers in ways that focus on quality rather than quantity but won't directly lead to an all-payer system where hospitals would charge all payers (private and public) the same price for the same service (while allowing for age and risk modification to guarantee that hospitals would be sufficiently reimbursed for the most expensive patients (Volsky 2010). This strategy, according to Volsky (2010) was popular back in the 1970s and the 1980s when approximately 30 states used all-payer rate setting to contain health care speanding. Policy makers came up with rate boards that looked at "the differences in labor markets and how much a hospital pays in wages; the amount of charity care the hospital does; and whether it treats a large number of severely ill patients" (2010) and then it sets its rates accordingly.

By setting the prices at the actual cost of what delivering services cost, policymakers wanted or hoped to decrease the amount of wasteful spending and instigate efficiency -- "while freeing hospitals from the uncertainty of annual rate negotiations with insurers" (Volsky 2010). This seemed to work. One study found that between the years 1982 and 1986, "all-payer ratesetting reduced hospital expenditures by 16.3% in Massachusetts, 15.4% in Maryland, 6.3% in New York, and 1.9% in New Jersey, compared with the national average (2010).

Volsky (2010) notes that a review of the Maryland plan (published in a recent issue of Health Affairs) reported that, since 1976, state regulation of hospital rates has saved $40 billion. If there had been a similar system set in place over that same period of time for all of the states in America, the savings would have come to $1.8 trillion -- or more (2010). The Maryland system is seen as having created a market in which payments are "predictable, transparent, and fair, and in which profits have not suffered as a result" (2010). Providers are protected against having to negotiate rates with payers; and payers, in the meantime, are protected from the high markups attached to hospital services in other states; and, patient access to hospital care is protected (2010).

Proposed Solutions and Anticipated Outcomes.

An Independent Payment Advisory Board (IPAB) will be created in 2014, establishing and recommending policies to reduce Medicare spending in any year in which Medicare per capita spending growth rate exceeds a target growth rate. These recommendations would most likely be related to adjusting payment rates and would become law unless Congress passed an alternative proposal that achieved the same level of budgetary savings (Berenson & Zuckerman 2010). Consistent with the part the hospital industry has played in negotiating with policy makers, hospitals and certain other provider types that experienced significant reductions in their market basket updates in the legislation are exempt from the Board's jurisdiction through 2019. This would limit the potential impact of IPAB during its early years (2010).

In 2014, Medicare Disproportionate Share Hospital (DSH) payments will be decreased initially by 75% and subsequently adjusted based on the percent of the population uninsured and the amount of uncompensated care provided. Also starting in 2014, Medicaid DSH will be decreased starting with rather small amounts - $0.5-0.6 billion in aggregate from 2014 to 2016 and increasing to $5.6 billion in 2019 (Berenson & Zuckerman 2010). Effective in October of 2011, the U.S. Secretary of Health and Humans Services (the Secretary) is to establish a new Medicaid DSH allocation method to accomplish a number of policy objectives, consistent with financing the expanded coverage under the Act. This new method will supposedly take into account the percentage of the state's population that is uninsured, current levels of DSH spending, and the use of DSH funding in Medicaid waiver programs. Given that current DSH allocations are not explicitly related to the size of the state's uninsured populations, this could lead to a substantial reallocation in Medicaid DSH payments across states (2010).

Though Medicare's hospital payment system is still in place and does not significantly alter payment incentives, there were some changes. Two provisions of the law would give hospitals a greater incentive to promote high quality care and avoid unnecessary readmissions (Berenson & Zuckerman 2010). Particularly, beginning in 2013, Medicare payments will be decreased for hospitals with high rates of potentially preventable readmissions, for three conditions initially: heart failure, myocardial infarction, and pneumonia (2010) (as mentioned in Section 3001), the three conditions with risk-adjusted readmission measures currently endorsed by the National Quality Forum (2010). The hospital's actual readmission rate for these conditions will be compared to its expected readmission rate, and the hospital will be subject to a reduction in Medicare payment for its 'excess readmission.' The Secretary will make the information on each hospital's readmission rates available to the public after hospital review for accuracy. CBO estimates that this payment adjuster would save $7.1 billion over 10 years. In addition, the law would continue the policy of denying Medicare payment for treatments associated with hospital-acquired conditions and extend this policy from Medicare to Medicaid (2010).

This should encourage hospitals to create systems that would lower the incidence of hospital-acquired conditions and, thereby, improve quality of care. CBO estimates this would save $1.4 billion, but that none of this would come from Medicaid (Berenson & Zuckerman 2010).

Literature Review

In Jacobs and Skocpol's (2010) book, Health care reform and American politics: what everyone needs to know, the authors discuss the Affordable Care Act, describing in detail the landmark social legislation. The books explains that the Affordable Care Act extends health insurance to nearly all Americans, bringing the United States to equal ground along with other industrialized nations. The book explains how such a bold reform (one that will give millions of people of modest means benefits and protections from insurance company abuses -- and the bill will be paid by privileged corporations and the very rich) was passed. It explains what Affordable Care actually means, how it will be implemented and how it will affect not only individuals and families -- but health care providers -- such as doctors and hospitals -- as well.

In the New York Times article, "In health care overhaul, boons for hospitals and drug makers," Abelson (2010) discusses the sweeping overhaul of the nation's health care system and the 32 million people who will become paying customers of that system. These 32 million people would be buying private health insurance, making them more able to pay for their hospital stays, doctors' visits, and prescription drugs and medical devices (2010). While the hospital industry initially feared the legislation, analysts point out that the legislations will definitely be much kinder to the industry than what was initially expected. "Hospitals and drug makers…would be clear beneficiaries…even if the outlook for insurers was less certain" (2010).