For the time being, the ACA does not include any direct laws that would change Medicare, except for the IPAB and payment reform.

Medicare will come out somewhat unscathed

Medicare was originally designed to serve as ‘major medical’ insurance for unexpected large expenses, but today it also includes preventive care, screening, annual exams and most routine care. Despite income level, Medicare applies to all individuals over the age of 65 years old. For the time being, the ACA does not include any direct laws that would change Medicare, except for the IPAB and payment reform.

The ACA is expecting about a 40% savings, by reducing payments to providers, under Medicare. In years past, many physicians have pulled out of the program, as a result.  The major concern of these cuts to Medicare payments is that there will not be enough physicians enrolled to see Medicare patients, if physicians drop out of the plan.

The Independent Payment Advisory Board (IPAB) consists of approximately 15 appointees, who control the costs of Medicare spending. This panel determines when and where cuts need to be made, if spending grows faster than the average consumer prices and medical prices, based on the Consumer Price Index.

Many oppose the IPAB because of their power to select or limit what is paid for by Medicare; they interpret this power as a way of rationing care or creating “death squads”.

Healthcare Leadership Council President, Mary R. Grealy said, the objective of healthcare reform “shouldn’t be to arbitrarily cut Medicare spending but rather to achieve better care and improve health outcomes. IPAB is not a mechanism geared to do that.”

Controversy has sprung up about whether states will adopt new Medicaid guidelines, or go their own route.

Federal government offers states incentive for compliance with Medicaid expansion

A war has been brewing in state legislatures across the country over Medicaid expansion. Controversy has sprung up about whether states will adopt new Medicaid guidelines, or go their own route. Of the 40 million individuals who will be newly eligible to receive health insurance starting in 2014, half will be qualified for Medicaid assistance. The ACA is designed to expand coverage to all individuals; along with tax subsidies and tax credits, the government will create this new coverage by making significant changes to Medicaid rules.

Medicaid applies to individuals younger than 65 years old and who have low income. The federal poverty line (FPL) establishes the benchmarks that states use. Some states set Medicaid eligibility at 50% of the FPL, while others set it at 100%.

Medicaid enrollment is being expanded in two ways:

  1. In addition to children and single moms, participation is granted to parents, pregnant women and adults without dependent children

  2. Coverage is offered for individuals whose income is up to 133% of the FPL, before it was only 100%

A Supreme Court ruling in 2012 determined that the federal government could not force states to change the limit from 100% of the FPL to 133%. This is where the war initially broke out.

Government’s bargain for states

The federal government has promised to cover every state’s cost of Medicaid expansion for the first three years, in hopes that they will comply. This is why states are reluctant to expand because once the three years have ended they are going to be amidst a budget crisis.

A large number of physicians do not participate in Medicaid programs; therefore, the ACA is offering a temporary increase in payment rates. By doing so, the hope is to expand the physician pool so these new enrollees will have access to primary care providers, rather than over utilizing emergency rooms.

For states that refuse to expand eligibility, they are trying to figure out how to deal with those individuals who are caught between 100% and 133% of the FPL. Oddly, these individuals are making less money than those who qualify for assistance through the exchanges (which begins at 138% of the FPL), and yet will have no definite assistance.

It is possible that we will see a movement of people to states where they can receive health insurance coverage; this may differentiate states in terms of their overall economic environment.

As of late June, 26 states have decided to participate in Medicaid expansion, 13 were not participating and the rest were undecided.

Private healthcare insurance companies, like Cigna, Aetna, and Well Point, have had to make substantial changes to their coverage eligibility standards due to the ACA’s new federal laws.

Private Healthcare Insurance Companies Face New Changes Under The ACA

Private healthcare insurance companies, like Cigna, Aetna, and Well Point, have had to make substantial changes to their coverage eligibility standards due to the ACA’s new federal laws. Their products will be the most likely source of insurance for individuals who make more than 400% of the federal poverty limit and are less than 65 years old. The insurance companies will be required to abide by these new standards, as of January 2014. These changes are so significant that many have said the ACA is insurance reform, not health care reform. I might be beating a dead horse here, but as I have mentioned before, one of the main goals of the ACA is to drive down the cost of healthcare. Healthcare insurance market reform aims to assist this goal, from the business perspective, by creating more insurance competition (i.e. exchanges, co-ops, a larger customer pool, like the individual mandate) and reorganizing the way insurance companies handle their profits.

With regards to how they handle their profits, 85% of the money that insurance companies receive has to be applied towards healthcare expenses; they can no longer make a 50% profit off of individual’s premiums and keep it. Now, if insurance companies net more than 15%, they have to do something that benefits their enrollees, not themselves.

Insurance reform can raise the cost of insurance premiums dramatically because insurance companies can no longer be selective in who they cover. They must abide by the following requirements when providing new plans to enrollees:

  • No one can be denied insurance – preexisting health conditions are no longer a determining factor

  • All conditions are covered – individuals are eligible regardless of status-related factors (i.e. health status, medical condition, medical history, disability, etc.)

  • Rates are the same across the board EXCEPT…

    • self-only or family enrollment premiums will be different

    • rating area – there is a provision that specified regions can charge different prices (i.e. suburbia), however everyone in one area will be charged the same regardless of disease

    • state specifications

    • age

    • tobacco use

    • There is no cap – as long as the healthcare services are considered essential health benefits

    • Preventive services are covered 100% by insurance companies

The fines for not purchasing healthcare insurance by January 2014 are not astronomical…yet. Healthy individuals tend to not purchase healthcare insurance because they feel as though it is a waste of money. I think young, healthy individuals will take the risk in not purchasing healthcare insurance in 2014, which the ACA is requiring, since the cost of healthcare insurance far outweighs the fines of not having it.

In order for insurance reforms to not increase premiums dramatically, it is critical that all individuals purchase insurance (i.e. the mandate), otherwise the ACA’s hope of decreasing costs, from an insurance perspective, will disappear.

Conversations around these two healthcare mandates have been making headlines week after week – let’s recap.

To Delay Or Not To Delay: A Look At Healthcare Mandates [Part 2]

Yesterday I introduced the details of the two widely debated healthcare mandates – employer-coverage mandate and individual mandate. Conversations around these two mandates have been making headlines week after week – let’s recap.

Delaying mandates

The White House made a decision to delay the employer-coverage mandate by one year on July 3, 2013. Republican leaders are begging for an explanation as to why one mandate was delayed and not the other.

The New York Times reported that GOP leaders agreed with the employer-coverage mandate delay because it was, in fact, burdening, already overwhelmed employers. However, GOP leaders further said, “…American families need the same relief.”

The Office of Management and Budget reported that delaying the individual mandate would be “unnecessary,” thus causing insurance premiums to rise, the number of uninsured Americans to continue rising and it would undermine key portion of the ACA.

The American Academy of Family Physicians (AAFP), American Medical Association (AMA) and several other major physician groups support the individual mandate. They collectively agree delaying the individual mandate would be a mistake because it will prevent healthcare costs from rising for everyone. The President of the AAFP, Dr. Jeffrey Cain believes the individual mandate, “…is the foundation of improving access to care and vital to ensuring everyone has healthcare coverage.”

GOP leaders introduced two bills to the House of Representatives, in which they pass on Wednesday, July 17th. The first bill codified the employer mandate delay, while the second bill postponed the requirement that individuals purchase health insurance.

It may seem that Republicans are making headway on having the individual mandate delayed as well. Despite the fact that their efforts were successful in the House, CNN reports that they don’t see the bill passing through the Democratic-controlled Senate, but they feel all the publicity they are receiving about delaying the individual mandate will create public backlash and that’s what they hope for, in the least.

Now that employers are not required to provide health insurance coverage, there is no real way to determine who does and does not have insurance. The White House is powerless to decipher this information. If a person stays healthy and stays out of the doctor’s office, they will go unnoticed. That’s the crux of the two mandates.

The White House has been facing quite a bit of criticism for delaying the employer-coverage mandate.

To Delay Or Not To Delay: A Look At Healthcare Mandates [Part 1]

The White House has been facing quite a bit of criticism for delaying the employer-coverage mandate. A war has been raging between the two political parties; some even find themselves on the opposite side of the argument.

Employer-coverage mandate

As of January 1, 2015, large businesses, defined as 50 full-time-equivalent (FTE) employees or more, are required to provide health insurance coverage for their employees; otherwise pay a fine.

Businesses with fewer than 50 FTE employees are not required to provide insurance coverage. This mandate directly discourages small businesses from growing into a 50+ FTE employee company because the fear of having to provide affordable health insurance coverage.

It is no question that businesses want to grow and employ more individuals; however, this mandate is threatening business owners with a high price for noncompliance that is causing some to stay small. This is particularly alarming for business owners because for the first time ever “full-time” is being redefined. Now, a full-time employee is someone who works 30 hours per week, averaged over the course of a month.

Individual mandate

As of January 1, 2014, individuals are required to maintain minimum health insurance coverage; otherwise pay a fine. Some individuals may be exempt, while others may qualify for financial assistance to help pay for their health insurance.

The penalties for noncompliance are as follows:

  • In 2014, the fines will be $95 per adult, $47.50 per child, up to $285 per family or 1% of family income, whichever is greater

  • In 2015, the fines significantly increase to $325 per adult, $162.50 per child, up to $975 per family or 2% of family income, whichever is greater

  • In 2016 and beyond, the fines are projected to be $695 per adult, $347.50 per child, up to $2,085 per family or 2.5% of family income, whichever is greater

The Henry J. Kaiser Family Foundation provides a helpful flowchart that explains how the individual mandate works.

Tomorrow I will talk about the most recent arguments surrounding the delay of the employer-coverage mandate and the proposed delay of the individual mandate.

Mandates, subsidies, tax credits, fines, exchanges, marketplace, co-ops, private insurance reform… What do all of these terms mean?

What Is The Health Insurance Marketplace Or Exchange?

Mandates, subsidies, tax credits, fines, exchanges, marketplace, co-ops, private insurance reform… What do all of these terms mean?

In an effort to better understand the changes the ACA will be bringing, we must separate the legislation into three distinct categories, or “silos”. These silos are not dependent upon one another, but can definitely have an impact on how the others operate.

  1. Patient reform (I explained in an earlier blog post that there is none of this.)

  2. Insurance reform

  3. Payment reform (In earlier blogs I talked about fee-for-service, bundled payments, and ACOs.)

Insurance reform is a very large portion of the ACA. Many have said this legislation is not about healthcare reform, but insurance reform; there is validity in this statement.

As a result of the ACA, more people than ever, in the history of healthcare, will be eligible for free or low-cost health insurance; shopping for the right coverage will be made easy through the Health Insurance Marketplace. Coming this October, individuals and small businesses will be able to shop for health insurance that fits their budget through these Exchanges or Marketplace.

Enroll America, a privately organized not-for-profit organization aimed at maximizing the number of uninsured individuals in healthcare, has conducted research showing that 78% of the currently uninsured, do not understand the new healthcare laws and are completely unaware of their options. Those individuals say that they would like to learn more in a “just-the-facts sort of way.”

About the Marketplace

The state-based Marketplace will provide detailed information, break down costs and allow users to search and compare private health plans. There will be no hidden costs when choosing coverage and it will be easy to compare prices, benefits and quality of care, side-by-side. Moreover, insurance companies will not deny coverage for anyone due to chronic or pre-existing conditions.


The Health Insurance Marketplace is for just about everyone – the uninsured, small businesses needing insurance and the insured wanting to know their options. You must meet three requirements in order to use the Marketplace:

  1. You must live in the U.S.

  2. You must be a U.S. citizen or national (or lawfully present)

  3. You can’t be currently incarcerated

Tax credits

Tax credits are available as soon as enrollment begins. What’s different about the tax credit, through the Marketplace, is that there will be an obvious decrease in monthly costs.

Individuals have the option to choose how much of their tax credit money they want applied towards their monthly premium. However, the amount they are eligible to receive depends on the size of their family and expected yearly income.

Small businesses may qualify for the Small Business Healthcare Tax Credit. This tax credit will help bring down the costs of providing insurance for employees.


In just a few short months individuals and small businesses will be able to enroll in the Health Insurance Marketplace online, or by calling a toll-free number. There will be experts available to answer questions and suggest plans. The coverage provided through the Marketplace will go into effect January 2014.

The U.S. Department of Health and Human Services offers a free service for you to receive email and/or text message updates concerning your state’s Marketplace. Visit to sign up.

Americans are faced with the high prices of healthcare on a daily basis, but could it be related to the lifestyles choices they are making?

Pursuing Wellness Before Sickness Pervades

Americans are faced with the high prices of healthcare on a daily basis, but could it be related to the lifestyles choices they are making?

The health of our culture has been slowly deteriorating over the last several decades. Yesterday, I heard that obesity is now considered the number one risk factor of an American’s health; it used to be smoking.

  • 12% of American adults were obese in 1990. More than 1/3 (35.7%) were obese in 2010

  • Childhood obesity has increased by 60% since 1990. 3 million preschool-aged children (5 and under) were obese in 2010

  • 67% of American adults drink alcohol, as compared to 56% in 1990

  • The number of American adults who smoke cigarettes has declined about 5% since 1990. Today, 19% of all adults in the U.S. smoke cigarettes

These statistics stand as a representation for the health of our culture today. Healthcare reform is centered on addressing these numbers and adopting ways to improve them. This is part of the Triple Aim.

The American Medical Academy is currently working on reclassifying obesity as a disease, rather than a condition. A disease is an interruption of the normal structure of any body part, organ or system that is characterized by specific symptoms and signs that may or may not be explainable. A condition is a state of health or being.

In medicine, it is generally believed that obesity is a condition in which people can change, if motivated. Providers are always trying to help their patients recognize areas of their lifestyle that need to change; improving one’s diet and exercising regularly can go a long way. With the dramatic increase in obesity, this kind of effort is crucial.

Ken Sigman, owner of Health and Benefit Systems describes this debate well; “…obesity correlates to higher risks of diabetes, heart disease, stroke and other metabolic syndromes. And those conditions lead to higher medical and pharmacy costs, more absenteeism, and higher workers’ compensation and short-term disability costs.”

In the era of high healthcare costs, providers are in a unique position to help reduce these costs significantly. We have the responsibility of motivating our patients more.

We must earn the trust of our patients by meeting their health care needs. This trust will overflow into their lifestyle choices.

It is within the context of a provider-patient relationship that we can gain a better understanding of our patient’s lifestyle. Then, we will have the best chance of engaging our patient’s desire to improve their lifestyle. Successful patient engagement will have to be apart of the ACA, if the Triple Aim is to be accomplished.

From a medical perspective, managing a population’s health is being responsible for a patient, regardless of if they come into the office.

Healthy Relationship, Healthy Culture

One of the three main goals of the Triple Aim is to improve the health of populations. From a medical perspective, managing a population’s health is being responsible for a patient, regardless of if they come into the office.

How can healthcare providers improve the health of our culture? This is a question that has been lingering for quite some time now, but soon will have to be seriously pursued.

The Beryl Institute defines patient experience as, “the sum of all interactions, shaped by an organization’s culture, that influence patient perceptions across the continuum of care.”

Patient motivation

The chronic diseases that we are faced with, in America, boil down to lifestyle issues. Hypertension, diabetes and cholesterol, to name a few, are dependent upon diet, exercise and weight. Genetics may play a part in an individual’s struggle, however the major determining factor of chronic disease is one’s lifestyle.

So, how can we motivate a patient to take better care of themselves? As a healthcare provider, I understand what a patient needs to do—change eating habits, manage weight, quit smoking, etc., but how do I go about expressing these changes in a way that facilitates a positive patient experience?

Patient satisfaction

Patient satisfaction has become a large part of hospital’s and provider’s evaluations because it will impact their pay. Unfortunately, many hospitals and providers view this as a popularity contest, thus ignoring whether they are serving their patients well, while meeting medical needs.

At one point in time, all of us have allowed the staleness of an exam room to overtake us. You tell a patient that in order to experience improved health results, they must lose weight or quit smoking. This doesn’t always generate a happy patient; sometimes it results in an angry patient.

Is our job to make patients happier or healthier? Relationships with our patients are everything. Asking a patient to make a significant lifestyle change can be unpleasant for them and quite frankly, is fruitless outside of a relationship. When we lose sight of the fact they need a personal connection, we greatly reduce our chances of the patient being motivated or better engaged in their treatment plan.

Physicians tend to blow off this concept of patient satisfaction, but there is a place where you relate to the patient and convey through a “personal connection” how their lifestyle is negatively impacting their health. The patient’s engagement is most influenced by this “personal connection”.

Jason A. Wolf, Ph.D., President of The Beryl Institute, described a recent healthcare experience when his son was born, “It was the interactions, it was the culture—the people who cared for us each day—that ultimately drove our perceptions and made our experience so great.”

We have to take ownership in our patient’s level of engagement and stop blaming patients when they don’t do what we ask and experience the health repercussions of bad lifestyle choices.

If we are going to help improve the culture of healthcare, we have to be more intentional about how we interact with patients. Successful patient satisfaction really will translate into a patient’s engagement in their treatment plan.

Accountable Care Organization (ACO)

Survival Of The Fittest: ACO-Style

There are three core principles that ACO must strongly pursue in order to survive.

They must be a provider-led organization with a strong base in primary care.

Providers should have a strong leadership position and be collectively accountable to the Triple Aim for their patient population.

Dr. Richard Parker, Chief Medical Officer for the Boston-based ACO explains that a primary care physician leader is needed to communicate with colleagues about care management and utilization of services. Primary care recognizes how to manage a patient’s health on a fixed budget.

Primary care physicians are faced with balancing the budget, as well as delivering quality care every patient visit. This has been part of our responsibility for the past several decades.

When a patient needs to see a specialist, the primary care provider can refer them to the appropriate specialist, who will then communicate back what diagnoses and care plans they determined for the patient. With this kind of communication and coordination, the patient will more than likely receive the most cost effective and quality care needed. This will also, bring more appropriate care, to patients, than they are presently experiencing.

Payments should be linked to quality improvements – called” fee for value”.

The problem is not that people have diseases, like diabetes, it’s the number of poorly controlled diseases that creates staggering costs. If we bring diseases under control, then other procedures and conditions, like amputations, kidney failure, blindness, etc. will decrease dramatically. The key is to treat diseases adequately to drive down costs.

I once heard the former Medical Director of IBM tell of an employee, at IBM, who cost them a million dollars in one year because of uncontrolled diabetes, requiring 17 specialists! The problem is that this situation is not unusual.

ACOs are paid for service and value. A significant revenue stream will be based on how much money they save Medicare. This new payment mechanism is called “Medicare Shared Savings Plan”. If Medicare pays less than expected for a patient population, they will share some of these significant savings with the ACOs who created the savings.

Additionally, ACOs can earn bonuses if spending on patients slows enough to exceed a target. This “slow-down” effect is a result of patients becoming healthier and receiving better care. Improved quality will inevitably lead to lower costs. This quality is the value Medicare is looking for from “fee for value,” not just service.

Bolster data collection to determine the quality being provided and stimulate better quality.

Through this data, it must be proven that patients are not being restricted from any care. The ACA has built this whole argument that we are going to save the culture of healthcare billions of dollars, not because we are going to restrict care, but because we are going to align finances with quality to motivate us to improve care.

This kind of data is critical for an ACO’s financial success. One patient’s disease level, cost of care, and quality of health care produced will determine how much money a system is paid for that particular patient for that year. A provider is no longer paid for each time a patient walks through their door.

I believe that data collection could easily cost hundred of billions of dollars. Payment for providers depends upon the measurement of disease for each individual, how frequently they came into the office, how many healthcare services were used, how much money was spent and saved, how well the patient is doing etc. This amount of data is staggering and it has to be communicated from an individual provider’s office, through a handful of people and eventually to the ones who are paying the bills.

Besides this data collecting determining my financial outcomes, it also had a personal impact. When my office was still on paper charts, no one could easily look at my patients and determine how well of a job I was doing. Once we moved to Electronic Medical Record System (EMR), anyone who was appropriate could access my patient’s data and see which of my diabetic patients were being poorly controlled. That had more impact on me than I expected.

Being able to take valuable data and compare one doctor’s efforts to another was enough to get me working harder. We are all hard wired to do well and try not to come in at the bottom of a group. So once my results were transparent, I automatically worked harder to do a better job. This kind of accountability works for all of us.

Accountable Care Organization (ACO)

Businesses Flex Their Muscles To Develop A Model ACO

The effectiveness and profitability of ACOs have been making headlines the past several weeks.

The Centers for Medicare & Medicaid Services (CMS) reported Tuesday that 9 of the 32 Pioneer ACOs are leaving their program. The program was an experiment to try and change the way medical providers are paid for managing their patient’s chronic diseases.

CMS required their experimental ACOs to notify them of any participation changes by July 15th. Furthermore, the ACOs are only eligible to apply for the Medicare Shared Savings Program (MSSP) until July 31st.

“Dropping from the Pioneer program does not mean that providers are abandoning their investments or wavering on the concept of ACOs. Instead, many are moving from Pioneer to the less risky options in the Medicare Shared Savings Program,” says Blair Childs, Senior Vice President of Public Affairs, Premier Healthcare Alliance. Of the 9 that were reported for leaving the program, 7 have confirmed they will be applying to the MSSP.

All CMS-sponsored ACOs should be commended for their improvement in patient care and satisfaction. Of the 32 Pioneer ACOs involved, every single one of them reported respectable quality measures and were rewarded with incentive payments.

However, only 13 Pioneer ACOs saved their system enough money that could be shared among the providers. What may be scaring some of the lesser successful ACOs away from continued participation in the program is the financial risk when there’s a more flexible contract available, the MSSP.

Presbyterian Healthcare Services is one of the less successful ACOs that has announced they will no longer continue as a CMS-sponsored ACO, nor do they intend to transition to a MSSP.

This past January, Intel Corporation, the computer chip company, entered into an unusual agreement with Presbyterian Healthcare Services for a narrow-network accountable-care style arrangement for its employees. Under the ACO guidelines, Presbyterian will lose money through penalties, if they exceed their projections. They have accepted the risks of this patient population and are committed to keeping it as healthy as possible.

Hilary Clinton’s effort to control patients through HMOs was completely rejected because patient control was her main mechanism to controls costs. The culture felt there was no benefit to individuals to be controlled by the government, therefore the effort failed.

A narrow-network in this case means that Intel employees can only go to Presbyterian for their healthcare needs. If they venture outside of this network, they will be required to pay higher bills, either a portion or the whole thing, out of pocket.

This is one of the main differences between HMOs of the past and ACOs of the future. Patients are not limited to their specific network of care.

Intel now describes themselves as being a self-insured company because they no longer use a health insurance company as the middle man to pay their healthcare bills; they are paying for the cost of their employee’s healthcare directly out of their pockets.

Like many other companies have experienced, Intel found that no amount of pressure would cause their previous health insurance companies to bring down costs; therefore, they have gone to this radical new move.

An employer-driven ACO gives payers control over their employees, who have a vested interest in controlling the cost of healthcare because it means their company will do better. They aren’t just being told to control cost; they have a real reason to.

Walmart is another company who participates in an employer-driven ACO. What they have found is that costs for procedures fluctuate tremendously from one provider to the next. Walmart has hand-picked facilities all over the country that provide the highest quality of care for the most affordable prices.

We are beginning to experience transparency in the healthcare industry that has never existed in the past; it is bringing competition between services.

Out of this desire to inspire competition, in hopes of bringing down costs, employer-based ACOs, in a sense, are the perfect ACO situation because the employees, employer and healthcare system mutually benefit from producing quality care, while containing costs. Everyone wins in this situation; therefore, everyone is motivated to do their best at keeping costs as low as possible.

Intel has summed up this whole debacle perfectly; “…Intel couldn’t sell its computer chips if their quality and costs varied as much as healthcare quality varied.”

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