Stumbling Toward Implementation

Some would call it “Bait-and-Switch.”  Others would see it as a cruel joke.  Those who are inclined to be more tolerant and understanding defend it as an expected part of any major change in operating procedure.  No matter which way you view it, the Affordable Care Act is not what its proponents said it would be. 

When proponents praise the reform effort they frequently point to the insurance provision that plans must offer dependent coverage for adult children until they reach their 26th birthday.  But whether this mandate has actually increased coverage is a matter of contention.    A study published by the Robert Woods Johnson Foundation (April 2013) estimates that adult children (age 19-25) covered as dependents on their parents’ policies increased from 30.7% in 1999 to 36.5% in 2011.  That increase looks good until you factor in the decrease in those in the age group who are covered on their own from 21.8% to 16.5% over the same time period, a net 0.5% increase. 

Several provisions in the law have actually been repealed.  In early 2011 Congress eliminated the requirement that business firms issue 1099 income tax forms to any supplier that receives more than $600 for goods and services provided.  Normally, the 1099 is used to document compensation payments to free-lance contractors, such as temporary workers or consultants, who are not classified as an employee.  But in this case it was in the law to better track inter-firm payments and to improve tax compliance. 

More recently the CLASS Act, the long-term care insurance provision in the law, was eliminated.  Soon after passage HHS recognized that CLASS was not financially sound and postponed further efforts toward its implementation.  Finally, as part of the vote to avoid the 2013 fiscal cliff, Congress fully repealed CLASS. 

Led by Minnesota Senator Al Franken, Congress repealed the 2.3% revenue tax on medical devices, which translates into an average tax of 34% on industry profits.  According to the Manhattan Institute the tax would have generated over $30 billion in revenues and eliminated 146,000 jobs in the that industry.  Because the tax was on revenues and not profits, it would have cut the R&D budgets of many of the firms in the industry, 80% of which employ less than 50 employees.   In this case, economic reality triumphed over bad policy. 

Other aspects of the law have not fared well in their operation.  The Act provided a $5 billion subsidy to operate a high-risk pool for individuals with pre-existing conditions until the full law became operational in 2014.  Instead of the expected 350,000 participants, there were never more than 135,000 enrolled.  In early 2013 the program ran out of money and new enrollment was suspended. 

An important element of the plan to secure small business support was the Small Business Health Options Program (SHOP).  Intended to provide a marketplace where owners and employees of small businesses could select from a list of qualified health plans, SHOP will not be ready by the October 2013 target date, but instead implementation is delayed until 2015.  And even then there may only be one option available, instead of many as promised.    

IPAB, discussed repeatedly in this blog, is scheduled to produce its first report and recommendations for the Medicare program by January 2014.  Yet, not one of the 15 member board has been nominated by the President, or vetted in the Senate, much less appointed to the board.  Defenders will argue that this is really not a problem because the law allows the Secretary of HHS to take over the responsibilities of the board.  No wonder Modern Healthcare has listed Kathleen Sebelius as one of the top five most powerful people in health care in each of the last several years. 

Quite possibly, the biggest failure looming in our future is the federal government’s failure to set up the health insurance exchanges.  HHS has known since 2010 that a significant number of the states were not inclined to set up their own exchanges and that the task would be left to the federal government.  Yet, with less than 5 months left until the October deadline, there is still not a federal model.  The individual mandate requires that affordable plans be available for low income individuals and the exchanges must be functioning to deliver the subsidies to make that a reality. 

Failure to have operable exchanges would be a catastrophe.  Senator Max Baucus (D, Montana) recently showed his concern by labeling the implementation process a “train wreck.”  Baucus is not the only one to show concern.  Senator Jay Rockefeller (D, WV) described the implementation efforts as “beyond comprehension.”  And Henry Chao, chief technical officer responsible for implementation, showed his concerns when he admitted to being “nervous,” worried that process may end up “a third world experience”  for the millions of Americans who will be relying on the exchanges as the marketplace for their personal coverage. 

How should we respond to the looming collapse of the health care sector?  One suggestion is to simply sit back and let it happen.  Unfortunately, the American public often has to be hit square in the face with total disaster before demand action.  Recent polling shows that 40% of those surveyed didn’t even know that the Affordable Care Act was actually the law.  The poll results are perfectly understandable because nobody in the administration is publically promoting the law.  We’re less than 5 months away from the early sign up date for insurance coverage.  It’s getting late in the game and things don’t look good for the home team. 

The opinions expressed in this blog post are mine alone, and do not reflect the opinions of Baylor University.   Baylor is not responsible for the accuracy of any of the information provided in this post.