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The Gerald R. Ford School of Public Policy at the University of MichiganThe Gerald R. Ford School of Public Policy at the University of Michigan

Health care reform act unfolding, shifting the field

Monday, December 6, 2010
Health care reform act unfolding, shifting the field image

This September, the U.S. Census office announced that 14.3 percent of Americans are living in poverty, and 16.7 percent (50.7 million) are uninsured. The Patient Protection and Affordable Care Act signed into law eight months ago will welcome 32 million of these to the rolls of the insured. Whether you love it or hate it, this reform is shifting the landscape of the U.S. health system. Ford School alumni with health policy expertise share their insights on the landmark changes, and talk about how these policies are impacting their work in the field.

At the base of Capitol Hill, kitty corner to the United States Botanic Gardens, sits the Office of Legislation for CMS, the Centers for Medicare and Medicaid Services. Jennifer Boulanger (MPP '87), deputy director of that office (where she has worked on and off for more than two decades), talks about the role her staff played in the Affordable Care Act, and what they're working on now.

During the health care reform debate, the Office of Legislation was a go-to organization, supporting legislators, their staff, and Congressional committee staff members by explaining Medicare and Medicaid policies and operations, and how proposed policies could be implemented by the organization. When lawmakers shared goals they wanted to accomplish, says Boulanger, CMS worked with them to ensure that those goals could be achieved by the agency.

Tim Gronniger (MPP '04), a professional staff member for the House of Representatives Committee on Energy and Commerce, is one of the Congressional staffers who worked with Boulanger's office. Gronniger and his colleagues in Energy and Commerce have a single charge, he explains: to make sure the priorities of the committee are carried through. For the past two years, that meant shepherding through health reform. To do this, Gronniger and other staff worked with committee members to shape policies that would expand coverage and control costs, Boulanger's office and other agencies to craft legal language, agency representatives to make sure the proposed policies could be successfully implemented, House leadership to ensure that members of Congress were satisfied with the content, and the Congressional Budget Office (CBO) to make sure the policies would work from a budgetary perspective. While some critics suggest that this act will run up the deficit, CBO (the non-partisan government score-keeper) tallied the health care reform bill's savings at $143 billion over ten years. In the second decade, the CBO predicts even more dramatic savings—between one-quarter and one-half percent of gross domestic product (GDP). "That's a much bigger number than it may sound, says Alan Cohen (MPP '75), senior budget advisor for the U.S. Senate Finance Committee. "A half-percent of GDP is estimated to be approximately $1.3 trillion, so the savings should be somewhere between $650 billion and $1.3 trillion in the second decade."

Boulanger confirms the Act will achieve cost savings. After insurance reforms and coverage, the law will leverage federal health care investments to control costs and get better quality care for the people who depend on these programs. To accomplish this, the ACA has provisions that incentivize better quality care including "value based purchasing" that rewards hospitals for meeting performance standards, reducing the number of avoidable hospital readmissions, and decreasing health care-acquired infections. The ACA also establishes new tools to make CMS more nimble, including creating a center for innovation to test new payment models and other ideas. "They see Medicare as a laboratory for figuring this stuff out," says Boulanger, who points out that over time, Medicare payment and quality innovations have been adopted by other insurers.

While Boulanger and Gronniger were busy assisting elected officials during the debate and subsequent legislation, they are no less busy today. "Congress was ambitious with the Affordable Care Act, setting high goals within tight timeframes," says Boulanger. "So my agency is working hard to meet those deadlines."

 

When an economic recession strikes, massive numbers of people lose their jobs and benefits, increasing demand for need-based health programs. Unfortunately, that’s also when state budgets take colossal hits.

From his office in Boston, across the street from the Massachusetts State House, Aron Boros (MPP '06), director of federal finance for the Commonwealth of Massachusetts, talks about how the ACA will impact states. Massachusetts is a national leader in Medicaid coverage—providing free or subsidized coverage for anyone whose income is less than 300 percent of the federal poverty level. However, while Boros and his peers already meet and exceed many of the regulations imposed by the newly passed health care legislation, they still have work to do, and he is well aware of the amount of work other states are going to need to do to conform to the new regulations.

In light of all this work—being duplicated by 50 states across the nation—why does the federal government oversee the Medicare program for elderly and disabled Americans, but give states the job of managing the need-based Medicaid program? The answer eludes him. When an economic recession strikes, massive numbers of people lose their jobs and benefits, increasing demand for need-based health programs. Unfortunately, that's also when state budgets take colossal hits. The combination of pressures forces states to limit access to health programs just when people need them most. Beyond that, Boros points out, 49 of our 50 states have a Constitutional requirement to balance the budget each year. At the federal level, the government can maintain programs when there's a deficit, catching up when financial conditions improve, but state-run Medicaid programs can't do that. "So states are required to either increase taxes during a recession (which no governor wants to do), or limit Medicaid enrollment, services, or provider rates (which is also a terrible idea in the middle of a recession)." It's a tight bind for any legislator.

Ideally, Boros would love to see the Medicaid program fully paid for by the federal government. It's not that he's an advocate for big government; it's just that he thinks the shift would allow for improved efficiency, more rational quality improvement, a reduction of administrative expenditures, and an easy way for members to retain coverage even when they move from one state to another. "It's just a spectacular idea from start to finish," says Boros, who would be happy to move to Baltimore if they transferred his job down there.

In the meantime, however, Boros advocates for states to be fearless in their expansion of Medicaid—even now. Beyond the obvious humanitarian reasons for doing so, Boros believes there are some sound fiscal reasons, too. To explain his rationale, he cites Michigan as an example. In the cash-strapped Wolverine State, the federal government contributes 56 cents or more for every dollar the state spends on Medicaid. "If the Michigan legislature expands Medicaid in the state, and they pay a hospital 44 cents," posits Boros, "that hospital is going to get another 56 cents from the federal government, and they're going to spend that money in Michigan where the state will tax it. It's a very effective way to stimulate the state economy."

Boros is quick to praise his state's health care leadership, noting that some fundamental elements of the federal health bill are based on experiments piloted in Massachusetts—including the requirement for everyone to buy insurance, tax code enforcement of that requirement, government subsidies for people to buy their own health insurance programs, and the Connector program, which allows people to easily compare rates and coverage. Still, Massachusetts isn't trouble-free, says Boros, who understands that the last two years have been difficult and the upcoming year will be no different. "Like all states, we're facing financial challenges and we'll likely be making changes to our program," he says. "But unlike other states, even in these hard times we've maintained eligibility and the vast majority of our services."

States aren't the only ones trying to adapt to changing health care legislation. Carol Kim (MPP '99), spent eight-and-a-half years working with Los Angeles County Supervisor Zev Yaroslavsky to manage the county's $4 billion health care system—the second largest in the nation. Today, she's working on the issue from another angle—the corporate one—as manager of communications for HealthNet Inc.

A Fortune 200 publicly traded company with $16 billion in revenue and close to 10,000 employees, HealthNet provides all kinds of insurance—including HMOs and health insurance options for military families and Medicaid and Medicare recipients. Kim chose to work with HealthNet to approach the issue of health care from another, very important side. "Health care is very much a public-private partnership, whether we want to call it that or not," says Kim. "It's a symbiotic relationship between government and the public and private sectors on many different levels. We're all linked in the delivery of services."

Today, Kim is working to navigate some of the early requirements of health care reform. One of the first of those expands parental coverage options for adult children to the age of 26. HealthNet, like many other insurance companies, now has to make that adjustment, notifying millions of plan members of the change. "Everyone in the health care industry—whether they're insurers, doctors, pharmaceutical companies, or service providers—is trying to read the crystal ball and feel our way through this, with 2014 as the goal," says Kim.

Jim Hudak (MPP '71), chair of the Ford School Committee, is looking to the future, as well. As chief administrative officer of CRC Health, a provider of behavioral health services, Hudak appreciates what the act will do for millions of uninsured Americans, and what it will do for his company, which focuses on treating those with drug and alcohol addictions, mental health problems, and other behavioral diseases. Beyond that, he points out, the ACA will have huge benefits for society. In the case of drug and alcohol abuse, he explains, those who don't receive treatment can miss out on educational and employment opportunities, can acquire medical conditions directly or indirectly related to their addiction, and can turn to criminal activities to finance their habits, harming society and driving up the costs of incarceration. In recent testimony before the California legislature, CRC Health quantified some of the benefits of early intervention: according to a UCLA study, for every $1 spent on rehabilitation, states can realize as much as $7 in cost savings down the road; according to a Rutgers University study, untreated alcoholics incur general health care costs at least 100 percent higher than those of non-alcoholics. "These aren't theoretical benefits and it's not a do-good-humanitarian issue," Hudak explains.

"Like almost any legislation, ACA is going to cut both ways,” Hudak says. "For us as a provider of health services, it’s a very good thing. For us as an employer, it’s not so good."

Because he's in charge of employee benefits at CRC Health, however, Hudak also sees the ACA from the employer perspective. "Like almost any legislation, ACA is going to cut both ways," he says. "For us as a provider of health services, it's a very good thing. For us as an employer, it's not so good." Hudak's actuaries are predicting increased health care costs next year—perhaps as much as 12 percent.

Senior budget advisor for the U.S. Senate Finance Committee, Ford School alumnus Alan Cohen explains that the cost-containment measures established by the ACA are just getting started, and we'll begin to see their effects over the next few years. While the ACA contains dozens of measures aimed at lowering health care costs, Cohen offers a few examples to illustrate. First, Medicare payment reforms that tackle escalating costs, he explains, should help contain employer-provided health care costs, as well, because as the single-largest insurer in the nation, Medicare sets payment trends for the entire industry. Second, insurance premiums should decrease as more and more people become insured. "Premium costs for each American family are inflated by more than $1,000 per year because those with insurance cover the medical costs of those without. As more and more people carry health insurance, that hidden tax will shrink," says Cohen. Third, moving to a system of electronic health records, he explains, will not only improve care coordination, but will also save money for everyone involved by reducing the cost of treatment, especially duplicative tests and procedures.

"There are a lot of promises that this Act will control health care costs, and I hope that's the case," says Hudak, "but until I see it, I'm not going to believe it." Ultimately, Hudak is in favor of the Act, in spite of the cost. "The political process isn't perfect," he says. "My hope is we'll fix it as we go forward." Carol Kim concurs. "While the dust won't settle for several years, there are opportunities for us to address the health care problems we've faced— to meet the gap. This is a very exciting time."

Reactions? Predictions? We'd love to hear your thoughts about the Patient Protection and Affordable Care Act: fspp-editor@umich.edu


Below is a formatted version of this article from State & Hill, the magazine of the Ford School. View the entire Fall 2010 State & Hill here.