Affordable Care Act Is Here to Stay
BY David Warner, Wilbur J. Cohen Professor in Health and Social Policy
The Supreme Court’s decision to uphold the Affordable Care Act means that changes already implemented will remain and projected changes in availability of insurance, penalties for those who do not obtain coverage, changes in taxes and fees and optional expansion of state Medicaid programs will all proceed as legislated in 2010.
Changes which have already been implemented include guaranteed issue for children with no lifetime limits, short term subsidies for employer funded health coverage for retirees younger than 65, a limited high risk pool, coverage for young adults on their parents' plans, and restrictions on pre existing condition limitations on insurance. In general these changes have been popular although they are not without cost to insurers. The short term changes for the retirees and high risk pool enrollees will be folded into the proposed state level insurance exchanges.
The exchanges which are now mandated at the state level will serve to provide coverage for many who have found it difficult to obtain coverage before and will provide income based subsidies through tax credits. Those who do not obtain insurance will have to pay an additional tax based on their income to the IRS. These exchanges will be far from universal. Large companies will not be eligible to use them and there may be separate exchanges for small businesses [under 50 employees] and individuals. If a state does not opt to develop an exchange then the federal government will operate one. Currently regulations say that a state must have developed an approved plan for an exchange by Jan. 1, 2013 otherwise the federal government can develop and run one. Since states are given some leeway in the richness of the benefit package they choose and other issues it would seem generally to their advantage to develop an exchange.
Changes in taxes and fees include expansion of the Medicare tax to investment income for higher income persons [more than $200,000 for individuals and $250,000 for families],a tax on medical devices and a reduction in the cost of medications for Medicare enrollees.
Finally in 2014, there will be a permitted expansion of Medicaid to cover low income adults, up to 133 percent of the federal poverty level, which will be entirely covered by the federal government in the early years and 90 percent covered in subsequent years. Although the Supreme Court made this optional, it is unlikely that a state will truly not participate if it is law in 2014 since their citizens will be on the hook to pay the federal taxes to pay for it and then all of those funds would go to other states.
There may be hope among many opponents to the law that they will easily repeal it; but just as it was difficult to pass it will be difficult to repeal. In particular the funding is not subject exactly to separate appropriations bills. The subsidies and penalties are administered as part of the tax system and the tax system has been particularly difficult to amend. Similarly Medicaid is an entitlement and the new law expands that entitlement if a state chooses to participate. And other initiatives are requirements on insurance companies, and requirements for research and quality assurance which are funded through Medicare and Medicaid as is the major expansion of physician and hospital information technology systems.
There may be some grand bargain on taxes, entitlements and health insurance in the offing but the Supreme Court’s decision has meant that the center of gravity of the status quo has definitely shifted in the meantime.
This was legislation which was difficult to pass, with a required 60 votes in the Senate and shifting coalitions in the House. It is also legislation which will be difficult to undo.
David Warner is a Professor of Public Affairs at the LBJ School of Public Affairs. His major research and teaching interests are in health finance, health policy and economics.