Key Questions Remain for Reform Bill’s Rollout

With President Obama signing into law sweeping health reform legislation (HR 3590), Democrats’ 14-month push on the issue seems to be coming to a close. However, questions over how to implement the bill’s provisions — and the impact the reforms will have on California — are just beginning.

Overall, California stands to gain from the legislation as written, with significant eligibility expansions, new Medi-Cal funds and increased reimbursements to rural providers. Yet, state policy experts and provider associations have voiced concern over a potential influx of newly insured patients, still-low federal reimbursements and a period where costs may rise before the legislation’s provisions take effect.

While there are many questions about how the legislation will affect California, here are four key issues to watch as officials work to implement reform.

1) How will the new high-risk pool be structured?

The legislation directs $5 billion in new federal funds to create high-risk insurance pools within the next 90 days. The national program would offer subsidized premiums to those who have been uninsured for at least six months and have pre-existing medical conditions.

Thirty-five states already have high-risk pools, but limited funds have forced most programs to restrict participation. California’s high-risk pool, the Major Risk Medical Insurance Program, capped enrollment at 7,100 last year, about 12% lower than 2008, and hundreds of state residents are on the waiting list.

2) How will insurers be prevented from rescissions?

The legislation immediately prohibits health insurers from rescinding enrollees’ policies, excepting cases of fraud or abuse. Insurance company executives had defended their use of rescission in congressional testimony last summer.

Consumer advocates have applauded the new ban but say that there are still too-few protections against rescissions. California Assembly Member Hector De La Torre (D-South Gate) is sponsoring a bill (AB 2470) that would require health plans to obtain independent approval of proposed rescissions before canceling coverage for ill patients.

3) How will reduced federal payments to Medicare Advantage plans affect beneficiaries?

Beginning in 2011, federal subsidies for Medicare Advantage plans would be cut by at least $118 billion over a decade. These cuts would disproportionately affect Californians, given the high number of MA enrollees in the state. About 34% of California’s Medicare beneficiaries have opted for MA plans, compared with an average of 22% of Medicare beneficiaries nationally.

In light of the pending cuts, private payers that offer MA plans may reduce benefits, boost premiums or leave the MA program altogether, forcing millions of beneficiaries into traditional Medicare.

4) What will happen to still-uninsured residents?

California stands to benefit from new coverage provisions more than most states because of its significant uninsured population.

Under reform legislation, about five million of California’s eight million uninsured residents are expected to become insured. Roughly two million to three million would obtain private coverage, while another two million low-income Californians would be newly eligible for Medi-Cal and other public programs, Mark Smith, president and CEO of the California HealthCare Foundation, said in a press release. CHCF is the publisher of California Healthline.

However, many of the state’s 2.6 million undocumented immigrants would remain uninsured, given a provision that bars undocumented immigrants from buying into new state-based exchanges. The lack of universal coverage is a key reason why San Francisco official say they will maintain the Healthy San Francisco program, which currently covers 51,000 of San Francisco’s 60,000 uninsured residents and is not dependent on immigration status.

Shaping the Story

  • The Obama administration on March 22 provided congressional Democrats with talking points that convey how the two health reform bills passed in the House on Sunday will benefit U.S. residents, Politico‘s “Live Pulse” reports. The talking points state that the legislation will lower health care costs, expand coverage and provide some immediate benefits (Frates, “Live Pulse,” Politico, 3/22).
  • The White House Office of Management and Budget, rather than the Congressional Budget Office, likely will determine the fiscal impact of the Senate reform bill to abide with the “pay-as-you-go” law passed in February, CQ Today reports. Under the law, if CBO is to provide final scoring, the legislation must specifically say that. Neither the Senate reform bill nor the so-called “corrections” bill (HR 4872) have such language  (Clarke, CQ Today, 3/22).

Deal-Making

  • While debating the final reform package, lawmakers considered — and later abandoned — a plan that would have redirected about $3 billion in Medicare funds from California to states that traditionally report lower Medicare costs, HealthLeaders Media reports. The proposal was an effort to sway lawmakers who represent those states to sign onto the reform legislation. Instead, the final legislation calls for a study on regional differences in Medicare costs (Clark, HealthLeaders Media, 3/22).

Hospital Fallout

  • Not-for-profit hospitals will struggle with reimbursement and efficiency pressures under health reform legislation, according to Moody’s Investors Service, which speculates that the overhaul will trigger spending cuts, mergers and changes to revenue streams. Generally, for-profit hospital systems are “better equipped” than not-for-profit hospitals to meet challenges set forth under reform, Moody’s notes, as these facilities benefit from greater scale and diversity and face fewer labor and pension issues (Aubin, Reuters, 3/22).

Insurer Fallout

  • Compared with other health sectors, insurers will see the most immediate and direct effects of health reform legislation because every part of the industry would be subject to new regulations, billions of dollars in fees and lessened reimbursements, the Washington Post reports (MacGillis, Washington Post, 3/23). Although large insurers could see a surge in revenue because of the insurance mandate in health reform legislation, neither they nor Wall Street analysts expect unbridled profits given the escalating cost of medical care and provisions in reform legislation that could reduce earnings, the Los Angeles Times reports (Helfand, Los Angeles Times, 3/22).
  • Cigna CEO David Cordani said health reform legislation will increase the price of health insurance rather than lower it because of several provisions, including one imposing $70 billion in new taxes on insurers — which will be passed onto plan members — the Hartford Courant reports. Plans to expand Medicaid also could affect the privately insured, as providers compensate for lower Medicaid payments (Sturdevant, Hartford Courant, 3/23).

Related Topics

Road to Reform The Health Law