How the Affordable Care Act will affect Medicaid, Medicare,
hospitals, doctors, insurers and businesses:
In 2014, the Affordable Care Act expands Medicaid to cover most
people under 65 with incomes 133 percent below the federal
poverty level. That means individuals earning less than $14,856 a
year or $30,636 for a family of four.
Currently, Medicaid provides health benefits to 60 million
Americans, mostly women and their children, people with
disabilities, and some seniors. The expansion would cover 17
million new people across the country, and about 2 million
Californians by 2019, mostly adults. In San Diego County, about
190,000 more people would get coverage.
The federal government will pay 100 percent of the cost of the
expansion for the first three years (2014-16) and 90 percent
after that. Beneficiaries of the expansion include people who
will get Medicaid for the first time, of course, but also
community clinics and hospitals that have been treating those
people in the past for free or at a reduced rate.
At La Maestra Community Health Centers in San Diego, at least 55
percent of patients have no insurance, CEO Zara Marselian said.
“Although there will still be a percentage of our patients who
will not be insured, (the ruling) is still a step in the right
direction because some will qualify for programs like Medicaid or
the exchange,” Marselian said. “From a health center’s
(viewpoint), this is confirmation that we are moving forward in
health care reform and that health care belongs in the community
where the population resides.”
About 48.7 million people nationwide were Medicare beneficiaries
in 2011, including 4.8 million in California and 400,000 in San
The Affordable Care Act includes more than 160 provisions that
affect Medicare by cutting costs, increasing revenue, improving
some benefits, combating fraud, and researching new programs.
Some popular provisions already enacted include closing the
Medicare Part D prescription drug “donut hole,” or coverage gap
where seniors pay full price for medications, and free preventive
care, such as annual wellness checks, and cancer and diabetes
The law requires Medicare Advantage plans to stop charging higher
rates than original Medicare for services such as chemotherapy
and skilled nursing care. The cost for Medicare Part B outpatient
care already had been adjusted so that higher income seniors —
individuals with annual incomes of at least $85,000 and couples
with incomes of $170,000 or more — pay higher premiums. By 2019
the number of seniors paying higher rates will have tripled,
saving Medicare about $25 billion.
“I think the majority of people on Medicare should be elated by
the court’s decision,” said David Weil, manager of the San Diego
office of Health Insurance Counseling & Advocacy Program, a
statewide nonprofit Medicare advocacy and information
organization. “Since the court didn’t try to roll back any
improvements, people on Medicare can stop worrying about having
to pay back any reduced costs (already received through the law).
The expansion of preventive services is an especially positive
change for Medicare recipients.”
Since 2010, the Affordable Care Act has required insurance
companies to add several consumer benefits. Some have also been
made California law. They include allowing parents to keep
children on family policies until age 26, banning lifetime limits
to coverage, preventing insurers from denying children coverage
due to a pre-existing condition, banning insurers from dropping
people from policies for application errors, and requiring
insurers to spend 80 to 85 percent of premiums on health care
costs or rebate the difference to policyholders.
For insurance companies, the most significant piece of the law
requires that starting in 2014 they must provide coverage to
adults with pre-existing medical conditions at no additional
cost. This requirement goes hand-in-hand with the individual
insurance mandate, which increases the number of healthy people
with insurance to help subsidize the higher medical costs of
people with pre-existing conditions.
A temporary, federally funded program was launched in 2010, the
Pre-Existing Condition Insurance Plan, for people who have been
denied coverage because of their medical condition. More than
50,000 people nationwide, including 9,000 Californians, are
enrolled in the temporary program.
Patrick Johnston, president of the California Association of
Health Plans, said insurers will continue to get ready for full
implementation of the law.
“Much remains to be done to get more Californians covered,
especially the launching of the California Health Benefit
Insurance Exchange,” Johnston said. “Now that the link between
the individual mandate and insurance market reforms has been
upheld, we all need to address underlying cost drivers that are
increasing the cost of care.”
The Affordable Care Act affects hospitals in a number of ways to
improve quality and cut costs. The law establishes new reporting
requirements for nonprofit hospitals and more oversight programs.
Medicaid and Medicare will no longer pay costs related to
hospital-acquired infections. Medicare is testing programs using
per-patient or per-procedure payments to hospitals instead of
payments for each service given. A voluntary Accountable Care
Organization program encourages groups of hospitals, doctors and
other providers to coordinate care for Medicare patients with the
incentive of getting a share in any Medicare cost savings.
Hospitals will get less federal funding for serving a
disproportionate share of Medicare or charity care patients in
2014 when more people have insurance coverage.
“We anticipated the nature of the law taking effect, so things
will not be uniquely different,” said Michael Cover, CEO of
Palomar Health. “Now that we have clarity of the law, it allows
us to move forward with our quality initiatives, infrastructure
development and experiments with bundled payments. Potentially,
it means we will cover more individuals in the community because
those who would otherwise not have been able to get health care,
now can. It’s a good thing for hospitals.”
In an effort to address the growing shortage of doctors
nationwide, the Affordable Care Act offers education grants and
loans to encourage medical school students to go into primary
care and a loan forgiveness program for new doctors who agree to
work a certain number of years in rural and underserved areas.
Physicians receive incentive payments for participating in
quality improvement and reporting programs, which turn into
penalties for nonparticipation in future years.
Until 2016, primary care doctors with a large proportion of
Medicare patients get a 10 percent payment bonus, as do surgeons
in service shortage areas. The law also increases the pay to
primary care doctors who take Medicaid (Medi-Cal) patients in
2013 and 2014 — an average increase of about 34 percent. No
provisions have been made for extending that increase, however.
Physician groups have generally supported the Affordable Care Act
but say the law does not address Medicare and Medicaid payments
that they consider too low and a disincentive for doctors to care
for those patients.
“We supported elements of this law to begin with and opposed
elements of the law,” said Dr. Ted Mazer, communications director
for the San Diego County Medical Society. “We’ve waited two years
for this decision. Now we can move forward with what works and
fix what’s broken.”
Companies with fewer than 25 full-time workers may be eligible
for a tax credit if they provide health insurance to employees.
Starting in 2014, companies with more than 50 employees are
mandated to provide affordable insurance to workers or pay a
penalty. Companies with more than 50 workers that don’t offer
insurance or who offer unaffordable or inadequate insurance to
employees may face a tax penalty of $2,000 to $3,000 per
employee, minus the first 30 employees.
In San Diego, almost 95 percent of businesses have fewer than 50
employees and would be unaffected. But about 4,250 businesses in
the county have at least 50 workers and would need to provide
insurance or pay a penalty.
“The initial reaction from many businesses is that they’ll decide
to pay the $2,000 penalty versus paying about $300 per employee
for insurance every month,” said Bill Hammett of Hammet Health
Insurance Services, a past president of the San Diego Association
of Health Underwriters. “But I don’t think that’s what they’ll
ultimately do that because they care about their employees and
they have to stay competitive with other employers.”
He expects the government to raise the penalty if too many
businesses opt to use it.
“I think the government will try to drive the behavior they want
and raise the penalty from $2,000 to $3,000 and then to $4,000 if
they need to,” he said.