ABC's of Health Care Reform and You

Cost

The cost of the Affordable Care Act is estimated at $940 billion when fully implemented in 2019. It is financed through a variety of taxes, Medicare/Medicaid payment cuts, and new fees. The pharmaceutical industry, the insurance industry, the hospital industry, and the medical device industry will all fund the law. Further, businesses and individuals will pay penalties for insurance non-compliance. More funding will come by way of the recovery of proceeds from fraud and abuse efforts under the Medicare and Medicaid programs.

In addition, new ways in which care will be delivered and reimbursed will result in savings. This is where the coordination of care, across all provider settings, comes into play. You may have heard terms like Accountable Care Organizations and Medical Homes. These are settings in which all types of health care providers work together to provide and monitor a patient's care. Electronic medical records will help providers better communicate with one another and keep track of a patient's medications, test results, and other crucial personal health information. The result will be less duplication of tests, fewer medication errors – all contributing to savings for the health care system and its patients. Other changes in how hospitals and health care providers get paid for caring for Medicare patients include penalties for preventable hospital readmissions and payment based on performance, known as value-based purchasing. This means doctors and hospitals have to meet pre-determined quality care criteria in order to receive payment. Other Medicare payment reforms being tested include bundled payments – one provider receives payment and disburses payment to other providers involved for an entire episode of care beginning three days before an admission, during the admission, and 30 days after the admission.

With more people carrying insurance and the availability of insurance exchanges that will sell insurance to individuals and small businessess, the competitive forces of a free market should control costs and make insurance more affordable for everyone.

Further, as of September 2010, hospitals are required to make available annually a list of their standard charges for services. This helps consumers budget appropriately and make informed choices.

Uninsured/Young Adults/Adults Under 65

Everyone is required to maintain minimum essential health coverage beginning in 2014 or pay a penalty. The penalties are phased in starting in 2014 when they are set at $95 per individual or 1% of taxable income. This increases to $325 or 2% of income in 2015 and then $695 or 2.5% of income in 2016. Penalties for families are capped at three times the individual penalty.
Exemptions are available if coverage is deemed unaffordable – defined as a required premium cost in excess of 8% of household income.
For low-income individuals not eligible for Medicaid, refundable tax credits are provided to subsidize premium costs on a sliding scale. This applies to those whose incomes fall between 138% and 400% of the federal poverty level.
A March 2012 final federal rule establishes throughout the nation a federal minimum Medicaid income eligibility level of 138% of the federal poverty level, beginning 2014. New York had already expanded coverage for childless adults to 133% of the federal poverty level. The federal government will help states pay for this expansion. (Updated added 3/23/12)
The amount of salary contributions that can be made to health flexible spending accounts (FSA) is capped at $2,500, beginning in 2013. This will help fund the law, because the amount of tax-deferred income will lessen, thus increasing taxes the government can collect.
A tax on high-cost health plans will be imposed beginning 2018. This will help fund the cost of the law.
Beginning in 2013 and through 2019, medical device manufacturers will pay additional taxes for each device sold. Some common items are exempt.

Seniors/Disabled

In 2010, some Medicare beneficiaries who hit the donut hole for prescription drug coverage received a $250 rebate. A gradual phase-out of the gap is achieved between 2011 and 2019.
Beginning in 2011, brand name drugs for Medicare beneficiaries became cheaper through a combination of manufactuer discounts and federal subsidies.
A tax on brand-name pharmaceuticals began in 2011. This will help fund the cost of the law.
High-income earners pay a higher Part A hospital insurance tax.

Chronic Disease Sufferers

Better coordinated care will greatly help chronic disease sufferers manage their conditions. This in turn will result in better outcomes for the patient and cost savings throughout the health care delivery system.
The government will fund test programs aimed at improving the health of those at-risk for chronic disease. These programs would provide wellness and prevention plans and would be carried out at selected community health centers.

Children

The law calls for a test project (worth $25 million 2010-2014) aimed at reducing childhood obesity in the United States.

Businesses

Tax credits for small businesses that purchase employee health insurance became available in 2010.
Credits apply to employers with 25 or fewer employees, who purchase coverage for their employees and have average annual wages of less than $50,000. The employer must make a premium contribution of at least 50% to be eligible.
For employers with fewer than 10 employees, a tax credit of 35% of their premium costs will be available for years 2010 – 2013. For 2014 and 2015, tax credits up to 50% are available, with employers of 10 or fewer employees and average salaries of less than $25,000 eligible for the full credit.
Large employers (200 or more employees) will be required to auto-enroll all full-time employees in coverage.
Employers of more than 50 full-time employees that do not offer coverage will pay a penalty of $2,000 for each full-time employee if the employer has at least one employee getting help paying for their premium. The assessment is not applied to the first 30 employees.