This policy brief takes a look at the Affordable Care Act (Health Reform) in the United States and specifically looks at a comparison for the state of Mississippi.
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Changes to Public Health Insurance
The expansion of both public and private health insurance coverage is expected to insure approximately 32 million more Americans in the next ten years. By 2019, as many as 16 million more people may be insured through Medicaid and the Children’s Health Insurance Program (CHIP) as a result of the new health reform law.* The expected changes in private and public coverage are depicted below.
Changes to public health insurance will also affect Medicare, Indian Health Services, and the U.S. Department of Veterans Affairs. The new legislation attempts to address certain aspects of each public program, including access, enrollment, benefits, prescription drug coverage, quality and efficiency of services offered, options for long-term care resources and supports, and funding to hospitals caring for a disproportionate share of the uninsured. The law includes temporary and long-term provisions with some elements enacted immediately and then phased out, and others enacted on a delayed timeline.
*Estimated by the Congressional Budget Office, March 20, 2010.
**This shows the non-elderly and is a preliminary estimate, subject to revision. Last revised September 2010.
The major changes to public health insurance coverage outlined in the law can be viewed in three categories: expanded and coordinated eligibility, expanded services offered, and changes to payment mechanisms.
Eligibility
- Beginning in 2014, extends Medicaid coverage beyond qualified children, their caretakers, pregnant women, the disabled, and certain other groups to cover all individuals under the age of 65 who are at or below 133% of the federal poverty level.
- Continues the Children’s Health Insurance Program and allows states to expand eligibility.
- Improves coordination for individuals eligible for both Medicaid and Medicare.
*Estimated by the Congressional Budget Office, March 20, 2010.
**This shows the non-elderly and is a preliminary estimate, subject to revision. Last revised September 2010.
Services Offered
- Offers new and expanded services and funding options for special populations including American Indians and Alaska Natives, maternal and child populations, and long-term and elder care:
- Makes it easier for states to extend Medicaid coverage to family planning services.
- Covers tobacco cessation for pregnant women through Medicaid.
- Covers evidence-based prevention programs through Medicare.
- Creates a national, voluntary long-term care insurance program. Premiums will be deducted from every worker’s paycheck unless they choose to opt-out.
- Extends Medicaid coverage of prescription drugs through benchmark benefits, rebates, and requirements to cover specific drugs.
- Offers a temporary provision of a $250 rebate for those who reach the Medicare Part D “donut hole.”
Payment Mechanisms
- Beginning in 2014 and 2016, respectively, enhances federal payments to states for Medicaid and CHIP for expansion populations.
- Temporarily increases Medicaid payments for primary care services.
- Requires Medicare Part D enrollees above a certain income to pay higher premiums.
Changes to Private Health Insurance
Changes in the private health insurance market impact insurers, employers, individuals and families. A key provision in the law is that health insurance companies will be able to contract with a government agency or non-profit organization to participate in a health insurance exchange. The exchange will allow small businesses and individuals to select from a range of insurance plans. All plans in the exchange must offer coverage for essential benefits, which include: emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, preventive and wellness services and chronic disease management, and pediatric services (including pediatric oral and vision care). Other changes include new rules in the insurance market that aim to increase participation in health plans by expanding eligibility, offering protections against loss of eligibility, improving the quality of services, and expanding choices for insurance coverage.
Insurers
- Requires states to create health insurance exchanges by 2014. There will be two types of exchanges, individual and Small Business Health Options Program (SHOP), although states may combine exchanges or propose a state-specific alternative. The individual exchange will be open to individuals who do not have qualifying coverage through an employer or a public program. SHOP will be open to individuals and employers with fewer than 100 employees.
- Bans lifetime coverage limits, meaning there is no limit on what an insurer must pay for the life of the insurance policy. Coverage cannot be rescinded except in cases of fraud, and beginning in 2010 children cannot be excluded due to pre-existing conditions. By 2014, coverage cannot be denied for adults with preexisting conditions.
- In 2010, institutes a temporary, national high-risk pool for those previously unable to obtain insurance due to poor health.
- In 2016, permits insurers to sell products across state lines through established health care choice compacts.
Employers
- Provides tax credits to small businesses. Effective 2010, this provision will apply to employers of 25 employees or fewer with average wages of less than $50,000 who offer coverage that meets minimum requirements.
- Establishes a temporary re-insurance program so that employers providing health insurance coverage to retirees, ages 55-64, may receive financial assistance to offset early retiree claims between $15,000 and $90,000.
- In 2014, assesses a fine to businesses with more than 50 workers if they do not offer coverage and have at least one employee receiving a tax credit through an exchange.
Individuals and Families
- By 2014, requires all individuals to obtain health insurance or pay a penalty, although some exceptions will apply. The penalty, in the form of a tax, will first be assessed as 1% of household income, moving to 2.5% in 2016 and beyond. There will be upper income limits and those who can show financial hardship or have religious reasons may be exempt.
- In 2010, allows unmarried children up to age 26, regardless of full-time student status, to stay on a parent’s plan unless offered a choice of plans by their own employer.
- Effective 2014, offers tax credits on a sliding scale for families below 400% of the federal poverty level (FPL) to offset premiums and help with out-of-pocket costs for insurance purchased in the exchanges. (In 2010, 400% FPL for a family of four is about $88,000/year.)
Improving Health Care Quality
The new health reform law includes several provisions intended to improve the quality of care in the U.S. health care delivery system. One strategy to improve quality includes incorporating best practices and systematically collecting and analyzing health care data. A second strategy involves streamlining and coordinating care, as well as encouraging interdisciplinary treatments. One example of the integration of a health system is accountable care organizations (ACOs), which will encourage physician groups to join together to gain efficiencies, improve quality of care, and reduce spending. A third strategy involves a series of quality-driven incentives and penalties for providers. Additional quality-related elements of the new legislation include funding to study and implement evidence-based practices related to the financing and delivery of Medicare and other forms of health care finance.
Best Information
- Supports the use of practices that improve the quality, safety, and efficiency of health care delivery.
- Creates a uniform strategy to collect and analyze data from existing health care information systems that relate to health care quality and use. Performance and quality data must be available to the public through standardized Internet websites.
Coordinated and Interdisciplinary Care
- Improves quality and reduces cost of chronic disease treatment through funding for medication management and by encouraging medical professionals to collaborate.
- Funds community-based health care teams to support primary care practices, including obstetrics
and gynecology practices. - Establishes a primary care extension program to provide support and educate primary care providers about preventive medicine, health promotion, chronic disease management, mental and behavioral health services, and evidence-based therapies and techniques.
- Awards grants to states to establish extension program hubs to coordinate state health care functions with quality improvement organizations and area health education centers.
Provider Payment Incentives and Penalties
- Assesses a Medicare rate penalty for hospitals with high rates of hospital-acquired conditions and could influence Medicaid rates as well.
- Establishes a hospital value-based purchasing program where incentive payments are made to hospitals that meet specified performance standards.
- Offers incentives and penalties designed to encourage physicians to participate in a quality reporting system.
Improving Health
Efforts to improve health and well-being will be coordinated by a national council, supported by research and innovation, and implemented through insurance coverage requirements and state and community programs. Wellness and prevention services and research will be expanded to focus on physical activity, nutrition, emotional wellness, smoking cessation and other chronic disease priorities. Public and private insurers will be required to provide preventive and wellness services in their qualified health plans, and employers will be permitted to incentivize employee participation in wellness programs. State and local agencies will be given opportunities to apply for federal funds to implement programs to create healthier communities.
Integrative National Health Strategy
- In 2010, creates a National Prevention, Health Promotion & Public Health Council comprised of leadership across federal departments and agencies.
- Develops by 2011 a national blueprint for improving federal prevention, health promotion, public health, and health care practices.
Research and Public Health Innovation
- Supports data collection on race, ethnicity, sex, primary language, disability, rural and frontier geographic status as a way to identify and monitor health disparities.
- Promotes research that examines best practices and cost effective strategies for organizing, financing and delivering preventive health services.
- Funds oral health promotion and research to include school based dental-sealant programs, initiatives to improve oral health surveillance and data collection, and effectiveness research of dental disease management programs.
Medicaid and Medicare Preventative Services
- By 2011, provides Medicare beneficiaries wellness services and access to personalized prevention plans.
- Implements and evaluates state initiatives that incentivize risk and behavior modification among Medicaid beneficiaries.
Healthier Communities
- Awards Community Transformation Grants, beginning in 2010, to states, local government, and community-based organizations to use, evaluate, and communicate evidence-based practices.
- Provides pilot grants to communities in 2010 for screenings, interventions, and clinical referrals for 55-64 year olds and those 65 and older.
- In 2011, gives grants to small employers to establish workplace wellness programs.
- Requires nutritional content to be displayed in vending machines and chain restaurants with 20 or more locations. Menus must also mention the suggested daily caloric intake.
Cost and Funding (U.S.)
The Congressional Budget Office (CBO) estimates that the total new cost to the federal government for this reform will be about $940 billion over the next decade. The largest portion of those costs will fund the expansion of Medicaid coverage ($434 billion) and fund the subsidies in the health insurance exchanges ($465 billion). The CBO also estimates that the new federal spending will be offset by a combination of taxes and savings from changes to the Medicare program. Some of the new taxes include:
- Increased Medicare taxes on high-income earners (individuals earning more than $200,000 or families earning more than $250,000 annual income).
- Payments from businesses and individuals who do not offer or take up coverage.
- New taxes on medical devices manufacturers, pharmaceutical companies, and health insurance companies.
Estimated Health Reform Dollar Flow Into Mississippi
Under health reform, Medicaid eligibility will change beginning in 2014. All individuals with family incomes below 133% of the Federal Poverty Level (FPL) will be eligible for Medicaid. The Federal government will pay 100% of the costs of covering newly eligible Medicaid recipients in 2014 through 2016. The percentage paid by the Federal government will drop to 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 where it will remain. In 2014 it is estimated that Mississippi will have about 270,000 new Medicaid recipients as a result with Medicaid expenditures of $1.6 billion annually++. Over the period from 2014 to 2019 state expenditures for the newly eligible Medicaid recipients will be about $11.4 billion with the Federal government paying 97% of those costs.
Beginning in 2014 Mississippians with incomes between 133% and 400% of FPL may be eligible for subsidies for the purchase of coverage within a health insurance exchange. It is estimated that about 275,000 individuals will purchase coverage through the exchange in 2014. About 229,000 will be eligible for subsidies worth $912 million in 2014. The subsidies will be paid by the federal government.
++Two years of Census’ Current Population Survey are used to estimate coverage under after implementation of health reform. The base year was 2008. Census projections were used to model population growth. While economic conditions have and will continue to fluctuate over time, it was assumed that similar conditions will exist in 2014-2020 as existed in 2007-2008. A medical cost inflation rate of 6% annually was used to estimate future costs of both private coverage and Medicaid. Eligibility for public programs and private subsidies was estimated and research on Medicaid participation rates, employer health insurance offer rates, and the elasticity of demand for insurance (price sensitivity) for individuals were employed to project coverage under the health reform law.
Significant Federal Financial Implications
