Tuesday, 22 November 2016 00:41

Repealing and Replacing Obamacare – What Does It Mean?

Written by

Well the election is over, and regardless of which side of the political arena you were on, I think we can all agree that changes are coming – and that includes healthcare. During the campaign, the Trump camp pledged to repeal the Patient Protection and Affordable Care Act (PPACA). Now, was that campaign talk or for real? There is general agreement that some components of PPACA make sense and should be maintained. The questions are, what will the structure of the program look like, and at what cost will it be implemented?

So let’s first review the basic tenets, good and bad, of the PPACA.

  1. The biggest benefit is providing insurance for millions of people who previously did not have coverage. Approximately 20 million previously uninsured U.S. residents now have coverage through the PPACA. This includes 13 million who obtained coverage through the federal marketplace, with the balance obtaining coverage through Medicaid expansion and including young adults on their parents’ plans.
  2. It requires all insurance plans to cover essential health benefits, including treatment for mental health, addiction, and chronic diseases.
  3. Insurance companies can no longer deny anyone coverage for preexisting conditions, drop them, or raise premiums if get sick.
  4. Lifetime and annual limits on coverage were eliminated.
  5. Enrollees up to the age of 26 can remain on the health insurance plans of their parents.
  6. States are required to set up insurance exchanges or to use the federal government's exchange to provide easy access for consumers to shop for plans, and tax credits are provided based on income to reduce costs.

Now, what are some of the problems resulting from the PPACA?

  1. Many consumers have had their plans cancelled by their insurance companies because the plans don’t comply with the law regarding the provision of the 10 essential health benefits. In many cases, the cost of replacement insurance is higher. Others have lost their company-sponsored healthcare plans when businesses find that it is more cost-effective to pay the penalty and let their employees purchase insurance plans on the exchanges.
  2. Those who don't purchase insurance are assessed a tax, and in some cases, citizens opt to pay the tax rather than purchase insurance.
  3. Medicare taxes were raised on higher-income individuals and there was a reduction in the deductibility of medical expenses implemented to help fund the cost of the PPACA, as well as increases on taxes on manufacturers and pharmaceutical companies.

With the above as background, let’s discuss the issues surrounding repealing and replacing the Act. From a political and practical perspective, this may not be an easy task. Politically speaking, it will be difficult to take back some of the benefits currently in place as a result of the PPACA. Eliminating health benefits for those who now have access to health insurance through the health insurance exchanges or the expansion of Medicaid and the rollback of coverage for those up to age 26 may not be politically acceptable. From a practical standpoint, new insurance products need to be in place before the elimination of others so that current participants can move easily from one to the other.

In terms of specifics, some of the essential tenets of President-Elect Trump’s plan include the repeal of the individual mandate, the creation of high-risk pools by states for at-risk consumers, replacement of insurance subsidies with a tax deduction for purchase of individual insurance, increased flexibility for health plans to sell insurance across state lines to increase competition, and the promotion of health savings accounts to increase savings for healthcare costs. For Medicaid, Trump’s proposal would replace the current entitlement program by providing block grants to the states. This would provide states with more discretion in how to spend the funds, enabling the tailoring of allotment to suit each state’s individual circumstances and needs. He also favors removal of barriers inhibiting the lowering of drug costs, currently the third-largest area of healthcare spending. These include opening current markets to the importation of drugs from foreign markets that have been proven to be safe and reliable.

Clearly, we see a shift in the structure of healthcare insurance reform from one of increased government involvement to more of a free-market philosophy. This shift is based on the fundamental belief that more competition will result in a greater level of innovation, an increase in health insurance options to individuals at lower costs, and products that better meet the needs of consumers. It will be interesting to see whether this change in approach accomplishes the overall goal of providing greater access at lower cost to those in need of healthcare services. I’m sure these issues, proposed solutions, and the political landscape will become clearer upon the installation of our new president in January 2017.

Stay tuned …

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chairman of the national Healthcare Financial Management Association (HFMA), having served as the chair of its Board of Directors in 2011–12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. From 2002–2005, he served as a member of HFMA’s National Board of Directors and as president of the New Jersey chapter in 1997–98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

Contact the Author

This email address is being protected from spambots. You need JavaScript enabled to view it.

Comment on this Article

This email address is being protected from spambots. You need JavaScript enabled to view it.

Last modified on Wednesday, 23 November 2016 17:34

Greg Adams is the Chief Strategy Officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare including 20 years experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management and real estate development.  Greg is the Past Chair of the National HFMA, having served as the Chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as President of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and Chairman of the Finance Committee at St. Ann’s Home for the Aged, Jersey City, New Jersey.