Like anywhere in the U.S., the effect of health care reform will be mixed — extending insurance coverage to many while lightening the wallets of others.
First, the good news: Many uninsured Tennesseans can get coverage.
According to a congressional analysis of Tennessee’s 5th District (which includes most of Davidson County and parts of Cheatham and Wilson counties), roughly 54,000 uninsured Middle Tennesseans will now have access to health insurance through new rules that prohibit coverage denials for illness or pre-existing conditions, through subsidies to help them purchase insurance, and through an expansion of Medicaid eligibility.
Statewide, that analysis predicts 460,500 uninsured Tennesseans will have access to coverage. TennCare estimates it will add 250,000 Medicaid enrollees between 2014 and 2019.
These individuals should now be able to access preventive and routine care, avoiding or mitigating health problems that may escalate before they seek emergency care.
“They work for small businesses, or lost their insurance, or their policy was canceled, or they had a pre-existing condition and they couldn’t get coverage — and they end up here,” said Rob Stillwell, chief financial officer of the Metro Hospital Authority. ”
As for the 3.9 million insured Tennesseans, they will be able to keep their coverage.
Of course, there is also bad news. Though the Congressional Budget Office says the $940 billion reform package will cut the federal deficit, some will see health care cost increases.
Americans earning more than $200,000 a year and couples making more than $250,000 will see their Medicare payroll taxes increase starting in 2013. In Davidson County, roughly 4.3 percent of all households, or 10,800, had income above $200,000 in 2008, according to census data.
Taxes and excise fees imposed on the insurance, pharmaceutical, medical device and other industries may show up on individuals’ health care bills in the form of higher charges from doctors and hospitals, said Paul Keckley, executive director of the Deloitte Center for Health Solutions.
“That’s part of what people may miss,” Keckley said. “If you increase the cost in the delivery system, those costs are going to be passed on directly and indirectly.”
Individuals will also notice higher premium costs. In the long run, younger people will pay more to help subsidize insurance for older, sicker individuals, Keckley said, though a new regulating body is supposed to make sure premiums don’t rise too drastically.
In the short term, as people with pre-existing conditions join insurance pools before mandates for healthier individuals to buy coverage take effect, premiums may rise to offset those costs.
In addition, adding hundreds of thousands of enrollees to financially strapped TennCare, at a cost of $200 million per year between 2014 and 2019, raises concern over coverage limits.
“I’m worried we’ll once again end up talking about limiting services or limiting payments, or both,” Stillwell said. “It’s already just bare medical necessity coverage.”
Nashville’s $50 billion health care industry, with 300-plus companies, stands to benefit from reform.
The dominant local industry segment — hospital management companies — is among the expected winners. Though their Medicare payment rates will be reduced, any negative financial effect should be more than offset by a reduction in bad debt and an increase in use that come with more Americans having health insurance.
In Tennessee alone, hospitals and health care providers should see uncompensated care reduced by $3.8 billion annually.
That’s good news for HCA, Community Health Systems, LifePoint Hospitals, Vanguard Health Systems, Iasis Healthcare, Ardent Health Services and a brace of other local players. Stock prices of the publicly traded companies in the bunch soared last Monday after the U.S. House of Representatives passed the Senate bill, and at least one analyst speculated HCA could ride the rising tide toward an initial public offering.
“Reform, and the higher valuations … will likely bring an IPO of HCA pretty shortly after the health reform bills are signed,” said Sheryl Skolnick of CRT Capital Group.
As far as local losers, Medicare Advantage plan providers like HealthSpring appear to be the only ones in the crosshairs, according to Jefferies & Co. analyst Arthur Henderson.
“But frankly, when the dust settles on reconciliation, their stock has adequately incorporated the Medicare Advantage cuts, and they will probably do quite well from here on out,” Henderson said of HealthSpring.
Other commercial insurers are likely net losers, given new industry taxes, an increase in customers with greater health risks and constraints on their ability to raise rates, said Jon Lehman, associate dean for health care management at Vanderbilt University. Pharmaceutical companies, device makers and some other traditionally “non-Nashville” segments also face a somewhat negative effect.
But for the most part, Lehman thinks most companies will do all right.
“It’s still a huge market, and the underlying demographics are strong to drive growth,” he said. “So I don’t think that anyone is going to the poor house on this.”
According to most estimates, some 32 million uninsured people will have coverage upon full implementation of the new law. That leaves only about 5 percent of Americans uninsured.
Things you need to know about health care reform
No pre-existing conditions
Beginning this year, insurers will no longer be able to deny children coverage based on pre-existing conditions. The measure will apply to adults in 2014. During the interim, a high-risk pool will be established to cover adults with pre-existing conditions, beginning in three months. As well, an insurance company will no longer be able to cut people when they get sick, a process called “rescission.”
State-run insurance exchanges would be created for citizens not covered by employers, or those who are under-covered or whose insurance costs exceed a certain percentage of their income. The exchanges would also be open to those who live at 133 percent of the federal poverty level but less than 400 percent; to that set would also be available federal health care subsidies.
Reducing the deficit
Over the next decade, the law is expected to reduce the federal deficit by $143 billion, according to the latest estimate by the Congressional Budget Office. Over the following 10 years, the deficit would fall by $1.3 trillion.
Taxing the rich
Beginning in 2013, families making over $250,000 a year will contribute a small percentage more in Medicare taxes, as well as a new 3.8 percent tax on investments and capital gains. As well, the most expensive insurance policies — so-called “Cadillac plans” — will be subject to a new 40 percent tax on the excess.
By increasing taxes on the wealthiest portion of Americans, the federal government will be able to expand Medicaid coverage to more of those who live in poverty. Families making up to 133 percent of the federal poverty level — just under $30,000 annually for a family of four — would be eligible for coverage.
Filling the ‘donut hole’
Medicare’s prescription drug program is flawed in that once a patient passes the initial coverage limit for medications, he must pay out-of-pocket for all medications until the cost reaches the much higher catastrophic limit. The new law closes that gap over time. Starting immediately, those affected by the gap would receive a $250 rebate.
Small business credits
Businesses with fewer than 50 employees will be exempt from the requirement to provide health care or face a tax penalty. As well, those businesses will receive credits covering as much as half of the health care premiums they pay for employees. Businesses larger than 50 employees would be required to provide health insurance for employees or face a tax penalty. This takes effect in 2014.
Youth coverage extends
Young people will be able to stay on their parents’ plans until age 26.
Sources: The White House, the Congressional Budget Office, the Patient Protection and Affordable Care Act, The New York Times