PPACA: Impact on Physicians, Hospitals, and Long-Term Care

Introduction

The Patient Protection and Affordable Care Act (PPACA) is a federal U.S. statute dealing with health care. The Act was passed by Congress and signed into law by President Barack Obama on March 23, 2010. It constitutes the principal health care reform legislative action of the 111th United States Congress. Public Law 111-148 was the first installment of this body of legislation, signed into law on March 23, 2010, and was subsequently amended by Public Law 111-152, signed by the President on March 30, 2010.

This complicated new body of legislation leaves many questions unanswered regarding its impact upon physicians and specialists. However, there is one commonality among the various portions of the law: due to new insurance provisions and financial compliance procedures, Health Information Technology (HIT) issues take center stage, requiring an overhaul of technological infrastructure in an effort to bring about cost savings by achieving the paperless office.

Whether it concerns the business decisions of a family practice physician in private practice or of a specialist healthcare provider, everyone will be affected. However, providers of long-term care (such as nursing home administrators) and hospital administrators will likely be affected the most, given the HIT requirements, Medicaid and Medicare compliance issues, and reduced reimbursement formulas that also trouble family physicians and general internists.

PPACA Overview

PPACA was intended to reform the health care system by fundamentally transforming health insurance in the United States through shared responsibility for paying healthcare costs. It seeks to reform many aspects of both private health care and public health insurance programs, including increasing insurance coverage for preexisting conditions and expanding access to insurance for more than 30 million people. The bill also mandates an increase in total national medical expenditure on healthcare, while its designers intended to achieve these reforms without raising health insurance premiums. In essence, all Americans would be part of the system and required to have coverage, with individual and family tax credits ensuring that insurance remains affordable for all.

From the beginning, PPACA has been surrounded by constitutional controversy. A majority of states, along with numerous private organizations and individuals, filed separate actions in U.S. federal court challenging the constitutionality of the Act. As recently as September 2011, federal appellate courts remained closely divided on the constitutional issues raised at the district court level: three federal judges upheld PPACA's constitutionality while three others declared the Act partially unconstitutional. Several other challenges were dismissed on technical grounds, and the Supreme Court was expected to review the matter by the end of 2011.

The PPACA contains many provisions that take effect over several years beginning in 2010, and policies issued before the law was enacted are grandfathered from certain federal regulations. The total new tax revenue from the Act is expected to amount to $409.2 billion over the first ten years, with the federal government expecting to realize $78 billion before the end of fiscal year 2014.

Much has been made of the economic impact of the Act. To gauge its scale, it is useful to consider the size of the health care market. The industry has been estimated to encompass roughly one-seventh of the U.S. economy. As one of the largest industries in 2008, healthcare provided 14.3 million jobs for wage and salary workers. Ten of the 20 fastest-growing occupations are healthcare-related, and the field was projected to generate 3.2 million new wage and salary jobs between fiscal years 2008 and 2018 — more than any other industry — largely in response to the rapid growth in the elderly population. Regardless of one's position on the PPACA, its economic impact on this enormous sector of the U.S. economy is certain to be substantial.

PPACA Stages and Provisions

The Act is set to come into effect in stages. It is divided into 10 titles and contains provisions that became effective immediately, 90 days after enactment, and six months after enactment, as well as provisions that became effective in 2014. The amendments in the Health Care and Education Reconciliation Act of 2010 are integrated into this timeline.

Some immediate reforms were implemented within six months, including the creation of a temporary high-risk pool with subsidized premiums for certain people with preexisting conditions, and the ending of health insurance rescission abuse. The Act bans coverage exclusions for preexisting health conditions in children, requires public disclosure of overhead and benefit spending by health insurance companies, and provides coverage of certain preventive health services without cost-sharing. Lifetime limits on benefits and restrictions on annual benefit limits are eliminated.

Insurers are required to offer dependent coverage allowing children to remain on their parents' insurance policy up to age 26. The Act mandates uniform explanation-of-coverage documents for all enrollees, eliminates coverage exclusions based on preexisting conditions or health-status ratings for adults, and establishes standards for medical loss ratios to ensure that premiums pay for necessary benefits.

PPACA also requires guaranteed issue and guaranteed renewability of insurance coverage, allows individual states to form compacts to facilitate interstate insurance sales, and aims to increase transparency by mandating that health insurers provide a complete summary of coverage terms to all applicants and enrollees. Enrollees may select their primary care provider or pediatrician, access emergency room services without prior authorization or increased cost-sharing, and have direct access to obstetrical and gynecological care.

By 2014, PPACA creates state-based and state-administered health insurance exchanges — marketplaces for individual and small-group insurance markets. States may be granted waivers to opt out of this requirement if they can provide coverage at least as comprehensive as that required under PPACA. Only qualified health benefit plans meeting specific criteria will be sold in the exchanges, though insurers may also sell policies outside of them. Large employers were to be phased into these exchanges in fiscal year 2017. Health plans must implement a process for appealing coverage determinations and claims.

PPACA allows qualified health plans to provide coverage through a qualified direct primary care medical home meeting federal requirements established by the Secretary of Health and Human Services. Health plans must publicly disclose information on claims payment policies, including enrollments, denials, rating practices, out-of-network cost-sharing, and enrollee rights.

The Act also requires health care plans to implement activities to reduce health disparities, including the use of language services, community outreach, and cultural competency training. It creates the Consumer Operated and Oriented Plan (CO-OP) program to foster the creation of nonprofit, member-run health insurance companies in all 50 states. CO-OP organizations may not be existing organizations; all activities must consist of issuing qualified health benefit plans in each state they are licensed in; governance is subject to a majority vote of CO-OP members; and profits must be used to lower premiums, improve benefits, or improve quality of care. PPACA provides initial grants to enable CO-OP organizations to meet state solvency requirements and precludes insurer or insurance industry involvement in CO-OPs.

The Act authorizes the Office of Personnel Management (OPM) to contract with private health insurers to offer at least two multi-state qualified health plans — including at least one nonprofit — to provide individual or small-group coverage through state-based exchanges. In the area of long-term care, PPACA creates a voluntary national long-term care insurance program (the CLASS program) to help purchase services and support people with functional limitations in maintaining personal and financial independence, financed through voluntary payroll deductions.

In the area of Medicaid and CHIP, PPACA expands Medicaid to all individuals under age 65 with incomes up to 133% of the federal poverty level. The federal government provides 100% funding to states for the costs of newly eligible individuals for fiscal years 2014–2016. The bill increases payments for primary care services provided by primary care physicians to 100% of Medicare payment rates for fiscal years 2013 and 2014. States maintaining the current structure of the CHIP program receive 100% of federal funding for increased payment rates, with a 23% increase in the match rate for fiscal years 2015 through 2019.

PPACA's individual mandate requires most individuals to maintain minimum acceptable coverage or pay a tax penalty beginning in fiscal year 2014, with exemptions for those who cannot afford coverage. The employer mandate requires employers with more than 50 full-time employees to provide health care coverage or pay a penalty, and allows qualified employees to receive free-choice vouchers for the purchase of qualified health plans through the exchanges.

The Act mandates premium subsidies in the form of refundable, advanceable, sliding-scale premium credits for individuals and families with modified gross incomes up to 400% of the federal poverty level. It also provides small employer tax credits for businesses with 25 or fewer full-time employees whose average annual wages do not exceed $50,000.

As PPACA has unfolded, incentives have decreased and penalties have increased. The Act expanded the Physician Quality Reporting Initiative (PQRI) and, most notably, transformed the incentive structure from positive to negative feedback. Bonus payments for quality reporting were reduced to 1% in 2011 and 0.5% in 2012 through 2014. Beginning in 2015, providers who do not meet reporting requirements face a 1.5% reduction in Medicare reimbursement, increasing to 2% in 2016 and beyond (Mathe, Hettrich & Nunley, 2011).

PPACA is not the only legislation affecting health care providers. The American Recovery and Reinvestment Act of 2009 included the Health Information Technology for Economic and Clinical Health (HITECH) Act, which provides incentive payments to healthcare providers who make "meaningful use" of certified electronic health record (EHR) technology, potentially amounting to as much as $18,000 (ibid).

PPACA also aims to increase the use of EHRs and other health information technologies — not only to reduce long-term healthcare costs, but also to make quality reporting easier. An incentive structure was established to encourage EHR adoption by healthcare providers, and PPACA explicitly requires that the Secretary of Health and Human Services integrate reporting mechanisms for the PQRI into meaningful use criteria. In 2011 and 2012, providers could earn up to a 1.5% bonus, decreasing to 1% through 2014. Beginning in 2015, a 1% reduction in payments applied to non-adopters, increasing to 2% in 2016 and 3% in 2017. The total reduction in payments under both PQRI and EHR provisions may not exceed 5% (ibid).

These measures are designed to encourage patients and healthcare providers to spend less and to seek providers who operate more efficiently. If the government's projections hold, the system should ultimately provide more equity for both providers and patients. A survey taken prior to the law's signing offers a baseline for gauging how healthcare professionals viewed the landscape at the time.

According to a Reuters/HCPlexus survey of 2,958 doctors, 65% felt that the quality of U.S. healthcare would get worse over the next five years, while only 18% thought it would improve. Physicians characterized the likely outcome as more work for already-stressed healthcare workers, less pay, and consequently worse care ("Mds Fear Healthcare," 2011).

Conclusion

To sum up, PPACA is a complicated new body of legislation that leaves many questions unanswered. However, there is one commonality among the various portions of the law: due to the new insurance provisions and financial compliance procedures, Health Information Technology (HIT) issues take center stage, requiring an overhaul of the technological infrastructure in an effort to achieve cost savings through the paperless office.

Whether it concerns the business decisions of a family practice physician in private practice or of a specialist healthcare provider, everyone will be affected. However, providers of long-term care (such as nursing home administrators) and hospital administrators will likely be affected the most, given the HIT requirements, Medicaid and Medicare compliance issues, and Quality of Care (QOC) formulas that are being imposed across the system.

Works Cited

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Mathe, R. C., Hettrich, C., & Nunley, R. (2011, January). Penalties coming under PPACA, PQRI. Retrieved from

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Public Law 111-148. (2010). Retrieved from U.S. Congress website: www.gpo.gov.

Public Law 111-152. (2010). Retrieved from U.S. Congress website: www.gpo.gov.

"MDs Fear Healthcare Reform: Thomson Reuters Survey." (2011, January 19). Reuters. Retrieved from

United States. Patient Protection and Affordable Care Act Detailed Summary. (2011). Washington, D.C.: U.S. Senate. Retrieved from http://www.dpc.senate.gov/healthreformbill/healthbill04.pdf.