Understanding Health Care Reform

Bridging the Gap Between Myth and Reality

Arthur M. Feldman, MD, PhD

• Publisher: Productivity Press
• Year: 2011
• ISBN:
  9781466516793
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

After nearly a year of debate, in March 2010, Congress passed and the president signed the Patient Protection and Affordable Care Act to reform the U.S. health care system. The most significant social legislation since the civil rights legislation and the creation of Medicare and Medicaid, the bill's passage has been met with great controversy. Pol

Chapter 1

Reforming the Private Insurance Industry

At the heart of this debate is the question of whether we will continue to accept a health care system that works better for the insurance companies than it does for the American people. Because if this vote fails, the insurance industry will continue to run wild in America. They will continue to deny people coverage. They will continue to deny people care.

President Barack Obama, March 19, 2010

The real cure for what ails our health care system today is less government and more freedom.

Steve Forbes, “A New Birth of Freedom, Vision for America,” March 30, 1999

Susan G. knew from early childhood that she wanted to be a doctor. She stood out among her peers from her very first day as a medical resident. Her colleagues immediately looked to her as a leader of their group. Her confident yet gentle nature gained her the trust of her patients, and the nurses and staff physicians quickly saw that she was going to become an outstanding and caring physician.

One morning Susan awoke with severe pains in her chest and difficulty breathing. She immediately walked over to the emergency room where doctors performed an electrocardiogram and placed a small device around her index finger to measure the level of oxygen that was circulating in her blood stream. The electrocardiogram was normal—ruling out a heart attack; however, the level of oxygen in her blood was low, suggesting that something was significantly wrong with the function of her lungs—the organ that puts oxygen into the bloodstream. A CT scan was performed. It showed two masses in her lung—each the size of a quarter and enlargement of several lymph nodes.

A biopsy of the lymph node provided the diagnosis was adenocarcinoma of the lung—a form of lung cancer that is commonly found in smokers and older men and women but rarely in nonsmokers in their twenties. The cancer had spread from her lungs to the lymph nodes. Needless to say, Susan, her family, and the small group of friends and colleagues who knew the diagnosis were devastated by this news.

The traditional treatment for lung cancer includes radiation treatment combined with an aggressive form of chemotherapy—but the prognosis was grim. There was, however, a ray of hope. A group of leading experts in lung cancer in Boston had found that some young people who had the same form of cancer as Susan had specific mutations in the DNA of the cancer cells. DNA is the body’s template for building proteins and tissues. The mutated DNA caused the production of a protein that was different from the normal protein in that it allowed or facilitated the ability of the cancer cells to multiply, to grow, and to spread to other parts of the body. In collaboration with the pharmaceutical industry, the lung cancer scientists had developed specific drugs to block the effects of these abnormal proteins—and these drugs had proved miraculously effective in early studies. The huge questions then became, could doctors identify a mutation in the DNA of Susan’s cancer cells, was there a drug for people with that specific mutation, and would Susan’s insurance cover the costs of her treatment?

Insurance policies that would cover the cost of hospital and medical expenses first appeared in the United States in the first half of the twentieth century. Hospitals began to provide services to individuals on a prepaid basis during the 1920s, a practice that led to the development of Blue Cross organizations. Today, over 200 million Americans have private health insurance policies, the majority paid for by their employers. A smaller number of people have individual health care policies. Individual health care policies have become unaffordable for most Americans and are not available for those with preexisting medical problems. The cost of employer-sponsored health care policies continues to rise: premiums have risen 114 percent over the last decade alone.¹

Costs rose just over 7 percent in 2009 and another 9 percent in 2010—more than the increase in overall U.S. health care spending. In California, Anthem Health Insurance raised their rates a whopping 39 percent while other insurance companies have increased the costs of their policies between 50 and 75 percent.² These high costs are passed on to employers or to their employees. The increased costs for employers can result in a company’s products being less competitive in the global marketplace. In this chapter, we will look at how the private insurance industry works, how the Patient Protection and Affordable Care Act will control some of the common abuses of the insurance industry, the limitations of the health reform legislation as it applies to the private insurance industry, and some recommendations for strengthening the legislation.

Private Insurance Industry in the United States

To ensure a profit, U.S. health insurers price the policies they sell to individuals based on their ability to predict the risk that a person will develop a costly medical condition. Since less than 20 percent of the population accounts for over 70 percent of health care costs and 5 percent of the population accounts for over half of all health care costs, insurance companies can make a profit if they eliminate a large portion of that 20 percent of the population from their insurance products.³ They exclude high-risk patients by refusing to pay for care that is related to preexisting conditions, refusing to cover some high-risk people at all, and rescinding policies when people get sick. For group health policies, the costs simply escalate. These spiraling costs have led many employers to reduce benefits to employees, cap the amount paid for the care of a beneficiary in any year, decrease employee wages, or increase co-payments or cost sharing.⁴ With the recession causing a glut of qualified applicants for a relatively few positions, some employers have been able to drop health care benefits altogether. A decrease in wages or an increase in co-payments can result in low-income families with health insurance having to choose between health insurance and other expenses such as housing, food, and education. Even middle-income families are adversely affected by the rising costs, and workers often make career choices based on the affordability of the health care benefits rather than what is best for their careers.⁵

Susan had to deal with her own insurance carrier’s capricious policies. Her doctors had identified a group of experts who could possibly help her—but the insurance carrier would not pay for her to see the Boston doctors because they were out of network. Susan had selected an insurance product from the menu of benefits provided by her employer that was affordable for a medical resident with limited finances and large medical school debts—but the plan was affordable because it had limited benefits. Her policy mandated that she see a doctor who was part of a panel of approved providers—a so-called preferred provider network. Using a designated panel of doctors who had prospectively agreed to provide care at a predetermined price lowered costs for the insurance company—but for Susan, it precluded her from seeking the consultation of experts who might be able to help her. Susan’s colleagues and family fortunately chipped in, and within days Susan was on a train to Boston.

Reforming the Private Insurance Industry

The Patient Protection and Affordable Care Act addresses the most egregious actions of the health insurance industry in its first ten pages.^{6,7 and 8} It prohibits health insurance companies offering group or individual health insurance coverage from placing lifetime limits on dollars paid to an individual (2010), placing so-called unreasonable annual limits on spending (by 2014), rescinding coverage from an individual who develops a medical problem while they have insurance (2010), denying coverage to children with preexisting conditions (2010), and rejecting insurance coverage for an individual or a new member of a group policy because of a preexisting medical condition (by 2014). Private insurance companies are also forbidden from establishing rules that limit coverage eligibility for any full-time employee based on the salary of the employee or from instituting any eligibility rules that discriminate in favor of higher-wage employees—a group that has been found to have fewer medical problems. The health care reform act also expands the coverage an insurance carrier must provide for individual and families. A private health insurance company must extend benefits to dependent children up to the age of twenty-six and must provide full coverage for preventive services recommended by the United States Preventive Services Task Force including immunizations and preventive care and screenings (2010).

Susan’s problems were not over. Her tumor had one of the mutations that the Boston doctors had been studying and they had a drug that had been developed that was targeted for people with lung cancer who had the same DNA mutation, but her insurance company would not pay for her routine care while she was enrolled in a clinical trial. It was absurd. The insurance company would pay for traditional treatment including radiation therapy, chemotherapy, and repeat CT scans to assess the effectiveness of the therapy at an estimated cost of $150,000. But they would not pay for routine care during the clinical trial—care that would only include CT scans at a cost of approximately $10,000. Fortunately, the clinical trial was able to cover almost all of the costs, and she was enrolled in the study. What is most important is that the health care reform legislation provides protection for individuals like Susan. An individual who is covered by a group or individual health plan can no longer be denied participation in a clinical trial as long as the study is a federally funded or is a non-federally funded study approved by the Food and Drug Administration that is evaluating the effectiveness of a new drug or device for the treatment of cancer or other life-threatening disease. The private insurance company is now obligated to pay for routine costs of care for the person in a clinical trial that are typically incurred by an individual with that disease who is not enrolled in a trial.

If Susan attempts to purchase her own insurance in the private market, she will not be afforded protection from denial because of her preexisting condition until 2014. In the short term she will be able to obtain insurance from a new high-risk pool designed to provide insurance for individuals who are at high risk of requiring expensive medical care or who have preexisting conditions that place them at high risk. U.S. citizens and legal immigrants who have a preexisting medical condition and who have been uninsured for at least six months will be eligible to enroll in the program. Premiums for the pool will be established for a standard population, and premiums may vary by age (no more than a fourfold increase for older Americans). Maximum cost sharing will be limited to $5,950 per individual and $22,900 per family. The health care reform act sets aside $5 billion to fund the pool.

In the future it will be far easier for people like Susan to understand what they are purchasing when they sign up for a health insurance plan. The bill mandates that private insurance companies use a standard summary of benefits that clearly explains to consumers the coverage they are receiving including exceptions, limitations on coverage, cost-sharing provisions, deductibles, coinsurance and co-payment obligations, the renewal ability, and continuation of coverage provisions so that the consumer can compare different products. Insurance companies must provide easily understood examples to illustrate common benefit scenarios including coverage for serious or chronic medical conditions and a contact number for the consumer to call with additional questions. They must make a Web address available where a copy of the actual policy can be reviewed. In addition, they are required to implement an effective appeals process that will make it easier for beneficiaries and their caregivers to resolve conflicts regarding payments and benefits.

The health care reform legislation also attempts to limit the escalating price of health care insurance premiums. First, an insurance carrier must submit to their state official and to the secretary of Health and Human Services for review any planned unreasonable increases in premiums prior to implementation of the increase. Second, the rates that an individual health insurance company sets for either the individual or small group market can only vary among individuals based on whether the insurance covers an individual or a family, the rating area in which the insured individual lives, the age of the person insured (rates can be up to three times higher for older adults), and whether the individual uses tobacco products (rates can increase by 50 percent for smokers). A state must report on trends in premium increases. They must institute penalties against health insurers that are unable to keep their costs in line. These penalties may include being excluded from state-run health insurance exchanges. Because most states are unprepared to monitor private insurance companies, the health care reform bill provides funding for grants to states to support ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication Page
• Table of Contents
• Preface
• Introduction
• 1 Reforming the Private Insurance Industry
• 2 How Will Health Care Reform Affect the Medicare and Medicaid Populations?
• 3 Can We Lower Health Care Costs by Eliminating Waste?
• 4 Role of Disease Prevention in Health Care Reform
• 5 How Will Health Care Reform Affect the Medically Underserved and the Safety Net Hospitals That Care for Them?
• 6 How Can We Improve the Quality of Care in the United States?
• 7 Will There Be Enough Doctors to Care for 35 Million New Patients?
• 8 Can Research Guide Us to Improved Care at Lower Costs?
• 9 How Will Health Care Reform Change the Way We Practice Medicine?
• 10 Will We Ever See Tort Reform in the United States?
• 11 Conclusion
• Index