Rarely has there been a social program as politically charged as the Patient Protection and Affordable Care Act (PPACA) of 2010. Every American seems to have a highly formed opinion regarding its cost, necessity and desired effectiveness. With over 2,700 pages of regulations, there is something for everyone to admire or dislike.
The magnitude of the impact of the PPACA, also known as ObamaCare, is nothing less than stunning. Never before has our government passed legislation this radical—a law that will reshape and dramatically affect over one-fifth of our total economy. According to some estimates, more than $1 trillion in new tax dollars will be collected and redistributed through government programs over the next 10 years. And in 2014, every American will be required to purchase health insurance—something never before seen in this country’s history.
Most remarkable is the divisiveness this law has generated. Republican presidential candidates are staking their election hopes on promises of rescission of the law. A majority of the states have joined lawsuits to challenge its constitutionality, and now, the Supreme Court will culminate the debate with the highest of dramatics this summer. Vice President Biden has been proven very right since he was caught on mic at the signing ceremony in 2010 with the revelation, “This is a big #*&%ing deal!”
This month marks the two-year anniversary of the passage of PPACA. The focus of the law was two-fold: to control healthcare costs and provide access to the healthcare system for all Americans. While only a small portion of the entire bill has been enacted, there has been significant impact upon Americans and the healthcare system.
So, the question begs itself: What has worked? And how well?
The Costs
Generally, costs are a mixed bag, so to speak. The government was thrilled to report recently that the Medicare growth rate is at a historical low. This past fall, the S&P Indices for the Healthcare Economic Composite showed that Medicare rates only increased at an annual rate of 1.97 percent over the 12 months ending in September 2011. Also, in December, Medicare announced that seniors saved over $1.5 billion in prescription costs—over $500 per person—due to a provision in PPACA that mandated a 50-percent discount for seniors on prescriptions that lie within the “doughnut hole.” Given that savings, Medicare is keeping Part D (prescription coverage) premiums flat for 2012, counter to estimates that they would raise them somewhat drastically.
Costs on the commercial or private side of healthcare delivery are another story. The Kaiser Family Foundation reported that costs are actually increasing. In 2011, the cost of coverage for an American family for private insurance was $15,073 per year—an increase of over nine percent from the 2010 rates. The S&P Indices for the latest numbers in October show the same, with an annual growth rate of just over eight percent for private insurance premiums. While these figures may not approach the dramatic numbers of the late 1990s and early ‘00s, a 10-percent increase on a $15,000 rate is a significant real-dollar increase to the employer.
The issue of whether or not PPACA has driven these increases is being hotly debated, with one side arguing that mandates such as free preventive care, no pre-existing limitations and unlimited lifetime maximums are causing these higher increases. The other side of the argument is that insurance companies are gearing up for the minimum loss-ratio provision coming into effect in 2012 which mandates private insurance carriers spend upwards of 85 percent of collected revenue on claim payments.
A report released this January raised many eyebrows and lent some validity to the contention that insurance companies are maximizing profits. In the six quarters since the passage of PPACA, profit margins of insurance companies have jumped to 8.24 percent based on gross revenue against 6.88 percent in the six quarters prior to the law’s passage. However, it’s fair to point out that the six quarters prior to passage of PPACA were the darkest days of the Great Recession.
More Insured? Better Benefits?
The provision that allows adult children to stay on their parents’ policy until the age of 26 regardless of their school or marital status has also had a tremendous impact in reducing the number of uninsured. The Department of Health and Human Services announced in December that over 2.5 million young Americans have stayed on or rejoined their parents’ plan since the passage of PPACA. The percentage of individuals aged 19 to 26 with health coverage increased from 66.7 percent in September 2010 to 71.9 percent in June of 2011, and experts expect that number to continue to rise.
The real stress upon the system is still in the future but is approaching quickly in 2014. At that time, Medicaid eligibility will be expanded to 133 percent of the federal poverty level, adding upwards of 16 million Americans to the pool. The individual mandate sweep will potentially gather 10 to 13 million more Medicaid members who are already eligible but not enrolled. Initially, the government will pay for the increases to the doles but will shift that burden to the states by 2020. The biggest concern is the weight this provision will place upon the emergency care system, as most Medicaid patients do not have a primary care physician, instead relying on emergency rooms for basic care.
The increased benefits, which all non-grandfathered plans saw upon their first renewal after the passage of PPACA, have been received warmly by the American public. Increased preventive care, no lifetime limits, no pre-existing conditions for children under 19, and easily understood benefit summaries well exceed 70 percent approval. The Kaiser Family Foundation found that 84 percent of Americans felt very favorably about the benefit summaries provision. The irony is that the popularity of the law stands directly opposite those who oppose it. A recent AP poll indicates that only 15 percent of Americans believe the government should have the power to require citizens to purchase health insurance, and only 21 percent believe the law should remain as written.
Supreme Court Battle on the Horizon
This spring and summer, the debate over healthcare reform will come to a head as the U.S. Supreme Court will decide the fate of the PPACA in perhaps its most important ruling in decades. There are four issues on which the high court will pass judgment. First is the concept of the individual mandate. Can the U.S. government force every citizen to purchase health insurance coverage as it will do in 2014, or face a penalty for not doing so?
Both sides point to the commerce clause within the Constitution as the basis of this argument. It states that Congress “shall have power to regulate commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The opposition maintains that the government cannot regulate an “inactivity” because health insurance is something people may neither want nor need.
The Justice Department, on the other hand, takes the position that the health insurance market is something that everyone will eventually access regardless of desire to do so, and therefore everyone should be mandated to carry coverage. The most recent figures from 2008 indicate that more than $43 billion was spent on uninsured individuals accessing the healthcare system. The Supreme Court will hear two hours of arguments regarding this topic on March 27th.
The Sleeper Issue
On March 28th, the court will hear debate on two lesser issues. Ninety minutes will be spent arguing the severability of the individual mandate. If the court does indeed rule the mandate unconstitutional, must the entirety of the law collapse as well? Experts say either way, the law is in serious trouble, given that Congress must at the very least figure out how to replace the primary funding component of the act. In an election year and with a divided Congress, that looks to be a rather impossible task.
Another hour will be spent determining the constitutionality of the Medicaid provision that shifts some of the law’s burden onto the states and the risk of states losing their funding altogether if they refuse to comply.
However, there is one catch in the works that may delay the entire argument until the law actually takes effect in 2014. The Anti-Injunction Act of 1867, already referenced by two federal judges in this case, states that claimants may not seek relief on a tax until that tax has been collected by the government. Armchair quarterbacks speculate that if the court does cite this law, thus delaying a ruling on PPACA until 2016 (another election year), it would allow them to escape from ruling on a hyper-charged law in an election year. The court will hear 90 minutes of argument on March 26th on what experts are calling “the sleeper issue”.
This highly political issue should be answered, one way or the other, by July 4th, but not without incredible drama. Both sides of the aisle have been calling for Justices Clarence Thomas and Elena Kagan to recuse themselves from this case, asserting that Thomas’s wife’s work for PAC groups and Kagan’s close relationship with the Obama administration prior to her appointment are conflicts of interest. These calls led to an unprecedented statement from Chief Justice John Roberts defending his fellow jurors. "I have complete confidence in the capability of my colleagues to determine when recusal is warranted," he wrote. "They are jurists of exceptional integrity and experience whose character and fitness have been examined through a rigorous appointment and confirmation process."
There is also a grass-roots effort to get cameras admitted to the court in order to televise the debate for the American people. Well over 70 percent of Democrats and Republicans alike feel that the court should allow TV cameras. But don’t hold your breath—the Supreme Court has always held that cameras cause grandstanding and other highly problematic issues.
While there is always disagreement among the experts, it’s remarkable that virtually all agree that the final vote will be split 5-4 on the issue of the individual mandate. The question, of course, is which side will the prevailing five votes land? We know that the court is split fairly evenly with Justices Ginsberg, Breyer, Sotomayor and Kagan branded as liberal, and Justices Scalia, Thomas, Alito and Roberts labeled conservative. The swing vote is Justice Kennedy, and experts agree that no one can predict how he will vote on any particular issue. Regardless of the outcome, it promises to be an interesting summer.
Summary
Thus far, we have seen some minor successes within the law with regard to government cost, and none with regard to commercial insurance. It is readily agreed upon that the early provisions of the law have been welcomed by the American public, but they still strongly oppose the massive law. Even if it is ruled unconstitutional or thrown out by potentially victorious Republicans in November, we can expect those early changes to remain with us.
2012 promises to be a landmark year with regard to healthcare reform. Either the Supreme Court will overturn to the law, or let it stand for the voters to decide in the November elections. Either way, the approaching summer and fall promise to be highly entertaining for the political junkie in all of us. iBi
