Expect a tumultuous 2012 for health care, as more elements of the federal overhaul kick in, the Supreme Court considers the constitutionality of parts of the law and state budget cuts continue.

The federal Affordable Care Act will continue to roll out programs as it heads toward full implementation in 2014. The signature health care legislation of the Obama administration, the law is aimed at cutting the rising cost of care, improving quality, and expanding medical coverage to 90 percent of the population.

Many elements already enacted have been popular — banning insurers and Medicare from requiring copays on preventive care, allowing parents to keep children on policies until age 26, and addressing the Medicare prescription “doughnut hole.”

But Republicans have opposed the Affordable Care Act since Congress passed it in 2010. A GOP sweep in the 2012 election could lead to a wholesale dismantling.

Nathan Kaufman, a San Diego-based health industry consultant, predicted that 2012 will see structural changes in health care as rising costs collide with new regulations aimed at controlling them.

“This will be the beginning phase of a chaotic adjustment that needs to occur in health care, just as we saw in housing,” he said. “Where patients need to worry is in access to care.”

Large state budget cuts this fiscal year already limited how often Medi-Cal recipients can see a doctor for some services, and the governor’s proposed budget for the fiscal year beginning in July calls for cutting $842 million more from Medi-Cal. More doctors may quit seeing Medi-Cal patients, as well as new Medicare patients, as uncertainty over payment rates continues, Kaufman said.

And hospitals, which shift some of the cost of treating Medi-Cal and Medicare patients onto patients with private insurance, may have to rethink that practice although the proposed state budget includes Medi-Cal cuts specifically to hospitals. New state and federal regulations over premiums may make cost-shifting tougher, he said.

“With unprecedented cuts on the government side and more regulation of insurance companies, the health care bubble is starting to burst,” he said. “It’s going to be ugly, and most of us think it will take 10 years to settle down.”

In the short term, here are some changes expected for 2012:

Hospital Value-Based Purchasing

Part of the Affordable Care Act, value-based purchasing is due to start in October 2012. Medicare will pay hospitals more if they perform well on specific quality measures. The program will base 30 percent of the hospital’s performance on patient satisfaction surveys.

An estimated $850 million will be spent the first year, with annual increases expected. Hospitals will still receive standard Medicare payments, but the amount will be cut by 1 percent to fund this incentive program.

The Center for Medicare Services “has really linked quality and payments together for the first time with this program,” said Debbie Rogers, an analyst at the California Hospital Association. “Going forward, CMS will add more measures. We’re embarking on a long journey together. This is just the first step.”

Accountable Care Organizations

ACOs are part of the Affordable Care Act and start in January. An ACO is a voluntary network of physicians, hospitals and other providers that coordinate care for Medicare patients. The goal is to cut costs while increasing quality by avoiding duplicate procedures, tracking medications better, linking hospital and outpatient care, etc. ACOs meeting cost-saving benchmarks get a share of the savings.

When many hospitals and physicians rejected the proposal last summer, federal officials responded with a smaller, more flexible Pioneer ACO Program. Recently, 32 health systems have been chosen for the experiment, including Sharp HealthCare in San Diego. After two years, ACOs will no longer be paid per service but will get a monthly per-patient fee.

“Today, too many hospitals actually lose resources when they help prevent unnecessary readmissions,” said U.S. Health and Human Services Secretary Kathleen Sebelius during a recent news conference. “Suddenly, keeping your patients healthy and out of the hospital becomes a sustainable business model.”

U.S. Supreme Court

To rule on the constitutionality of at least some of the Affordable Care Act, the Supreme Court has scheduled more than five hours of oral arguments in March, with a ruling expected by the end of June.

The court will hear three appeals and consider: First, the constitutionality of the requirement that people have health insurance starting in 2014 or pay a penalty; second, if the mandate is unconstitutional, whether other parts of the law must be nullified; third, whether a ruling must wait until the first penalties are issued in 2015.

“If the Supreme Court rules against (an insurance mandate), I think opinion is divided on whether the whole thing will fall apart,” said Steven Wallace, associate director of the UCLA Center for Health Policy Research. “Without that, the core of the Affordable Care Act … starts to unravel. You would still see increased coverage, but it would be a third to a half the amount you would have with the mandate.”

Health insurance exchanges

The exchanges, mandated in the Affordable Care Act, are related to the individual insurance mandate. While the exchanges don’t launch until 2014, lots of behind-the-scenes work is starting.

States must set up exchanges so small businesses and individuals can pool their buying power to purchase health insurance at a lower rate. Low- and moderate-income people will get federal subsidies to help cover the cost. California’s new Health Insurance Exchange has an executive director and a $40 million federal grant for ongoing startup efforts.

The California Medical Association is concerned that this state’s exchange may offer a limited number of insurance plans, while new regulations governing premiums could lower payments to providers, said Dr. James Hay, CMA’s president.

2011 Affordable Care Act changes• Helped seniors in the Medicare Part D prescription drug “doughnut hole” — the gap between basic and catastrophic coverage when seniors must pay full price for a prescription. Drug companies were required to provide a 50 percent discount on brand-name drugs filled in the coverage gap. Part D premiums also were adjusted for income for the first time.

• Increased premiums for Medicare Part B (outpatient care, physical therapy, home health care and other services) for many higher-income seniors.
• Required free preventive care for Medicare recipients, capped annual out-of-pocket expenses for Medicare Advantage plans.
• Flexible Spending Accounts could no longer pay for over-the-counter drugs.
• Banned Medi-Cal payments for services related to hospital-acquired infections.

Health insurance

Starting in January, a new state law allows California to implement a section of the Affordable Care Act requiring insurers to spend 80-85 percent of premium costs on patient care. A new state law also requires insurers to give 60 days’ notice of rate increases and justify their need. Rate increases of more than 10 percent are subject to automatic regulatory review.

In June, insurance companies must report information about 2011 premiums for individual, small group, and large group policies, said Janice Rocco, a spokeswoman for the state Department of Insurance.

“It will not be surprising if at least a few of the insurers have at least one market segment for which they don’t meet the requirement and therefore must provide rebates by August 2012,” she said.