A Nod to Healthcare Reform

health-care-reformThe recent landmark 5-4 decision by the Supreme Court to uphold the provisions of the Patient Protection and Affordable Care Act (PPACA) has caused a flurry of response from various media outlets.  It’s been interesting to follow the myriad of opinions – the good, the bad, and the ugly. Many were shocked to see the individual mandate, a law that will extend healthcare coverage to more than 30 million uninsured, be ruled constitutional, claiming that it meddled too aggressively in state affairs and the lives of private citizens. One thing became certain though much to the dismay of 26 states who opposed the law, beginning in 2014 most Americans will now be required to obtain health insurance or pay a penalty. Employers must also offer full-time employees and their dependents affordable coverage with a minimum value or be subject to the same fate.

So what does this mean for the Medicare program? Although the individual mandate seemed to steal the show as the headliner that affects most Americans, the decision also upheld additional provisions that aim to improve the Medicare program. In an aim to maintain the financial sustainability of the Medicare program, the improvements will seek to eliminate the Part D prescription drug “Donut Hole” coverage gap by 2020 as well continue to offer the 50% brand-drug discount and 14% generic-drug discount for enrollees who fall into the “Donut Hole” in 2012. The provisions also place importance on adding and maintaining preventative care services as well as eliminating cost-sharing for said services.

In that same consumer-friendly vein, people enrolled in private Medicare Advantage plans will have expanded protection against being charged more than traditional Medicare plans for various expensive services. To help fund these improvements, Americans earning $200,000 or more will see an increase in their Medicare withholding tax.

There was one provision of the law however, that was struck down. Had the provision been upheld, states would have been required to participate in a significant expansion of the Medicaid program that provides health insurance for the poor. As the decision stands, states can opt out of Medicaid expansion without forgoing existing federal funding for their existing Medicaid program. Should they choose to participate however, Medicaid coverage would be extended to all people living within 133% of the poverty line.

Although the Federal Government would be picking up most of the tab, each state would be required to contribute its fair share as well. How much would states be required to kick in? New York Times blogger Annie Lowrey put together this cost-comparison chart outlining what it would end up costing each state. We’re left to wonder if already-cash-strapped states like our home Rhode Island are ready for $70 million expense. Only time will tell!

Sadly, the biggest issue in the debate on US healthcare costs is not the individual mandate, but individual actions. In striking down the Government’s initial argument promoting the individual mandate, Chief Justice Roberts rightly identifies (pp 22) what we suspect is the underlying culprit – poor individual health habits…

“Indeed, the Government’s logic would justify a mandatory purchase to solve almost any problem. See Seven-Sky, 661 F. 3d, at 14–15 (noting the Government’s inability to “identify any mandate to purchase a product or service in interstate commerce that would be unconstitutional” under its theory of the commerce power). To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. See, e.g., Dept. of Agriculture and Dept. of Health and Human Services, Dietary Guidelines for Americans 1 (2010). The failure of that group to have a healthy diet increases health care costs, to a greater extent than the failure of the uninsured to purchase insurance. See, e.g., Finkelstein, Trogdon, Cohen, & Dietz, Annual Medical Spending Attributable to Obesity: Payer- and Service-Specific Estimates, 28 Health Affairsw822 (2009) (detailing the “undeniable link between rising rates of obesity and rising medical spending,” and estimating that “the annual medical burden of obesity has risen to almost 10 percent of all medical spending and could amount to $147 billion per year in 2008”). Those increased costs are borne in part by other Americans who must pay more, just as the uninsured shift costs to the insured.”