The Affordable Care Act at age five: a look back and a look ahead

Somewhere near their first birthdays, children learn to walk. At three years of age, they might start pedaling a tricycle, and at age five, they are poised to enter kindergarten. March 23, 2015, marks the fifth anniversary of the enactment of President Obama’s signature health reform law, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Has the ACA, at five years of age, made the same amount of progress as a child?

Critics argue that the ACA has failed, but proponents say that it is moving closer to achieving its goal of quality, affordable health care for all Americans. As a law that seeks to expand health insurance coverage for Americans, improve the functioning of health insurance markets, and control the efficiency and quality of health care, the ACA has “had a major positive impact, and one that will continue to bring efficiencies over time,” said Keith Fontenot, the managing director of government relations and public policy at Hooper, Lundy & Bookman, P.C.

Regardless of whether it has met its milestones, it is clear that the ACA has already made an impact. It has had significant effects on the uninsured rate, the affordability of coverage via the provision of subsidies, the use of preventive services, and the actions of large employers and insurers. Many ACA provisions have gone into effect over the last five years; however, due to design or delay, a number of significant reforms have yet to be implemented or fully realized.

This White Paper looks at the ACA’s impact on Medicare and Medicaid issues and its impact on the private insurance market. It also looks at major ACA changes facing health care providers and employers in the coming months.

Read further, “The Affordable Care Act at age five: a look back and a look ahead.”

Tears over drug tiers as specialty medications drive up care costs

The prices of life saving medications are playing an increasing role in driving health care costs. Specialty drugs represent about 1 percent of all U.S. prescriptions but make up nearly 32 percent of all U.S. drug spending, according to a report from the pharmacy benefits manager, Express Scripts. The trend is alarming for drugs that are used to treat serious conditions like hepatitis C, cancer, multiple sclerosis, and HIV. According to a Washington Post, one specialty drug, Sovaldi®, a hepatitis C treatment, costs $84,000 for a typical 12-week course. Although the causes are varied, some are pointing to the increased use of drug tiers among health plans as a driving component of the price hike.


The debate about who or what is really responsible for the costs is not a clear contest. Some suggest that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) is responsible due to the increased number of insured individuals. Insurers blame the unchecked drug manufacturers and drug manufacturers point at insurer’s health plans, which have increasingly added complexity and cost to the acquisition of drugs. The Washington Post says that drug tiers sit at the center of the debate. Tiers separate drugs into distinct classifications based upon type and cost. Some plans have tiers for preferred generics and non-preferred generics as well as preferred and non-preferred brand medications. Specialty medications, like Sovaldi, typically fall into the highest tiers of a prescription drug plan. A Kaiser Family Foundation study indicates that the tier system has taken hold in Medicare and Medicare Advantage plans where, in 2014, nearly all seniors “were enrolled in plans that had a specialty tier for drugs that cost the insurers at least $600 per month.” Many of the plans with such tiers charge the highest coinsurance rates allowed by Medicare—33 percent—for drugs in those tiers.


An analysis conducted by Avalere Health revealed that the trend is affecting plans sold on the ACA’s Health Insurance Exchanges as well. Specifically, the review determined that “[E]xchanges are placing a significant out-of-pocket burden on patients with serious illnesses by requiring particularly high cost-sharing for all medicines used to treat certain conditions.” The analysis determined that plans usually have four or five tiers, with the lowest tier charging a low coinsurance amount ($15 for example) and the highest tier charging higher rates (40 percent or more of a drug’s cost). The classes of medicines used to treat serious illnesses like cancer, HIV/AIDS, autoimmune diseases such as rheumatoid arthritis and multiple sclerosis, and bipolar disorder often fell into the tier imposing the highest costs on consumers. The concern is that plans offered on the Exchanges are placing the highest cost burders on the most vulnerable patients.


The answer to the question of how to bring down costs of life saving drugs is elusive. However, California lawmakers are taking a stab at it with California Assembly Bill 339. According to Capital Public Radio, the law would prevent health plans from putting all medications used to treat a certain condition into the highest cost prescription drug tier. The theory behind the law is to prevent insurance companies from discriminating against certain patients by placing all of the drugs used to treat a particular condition, HIV for example, in the plan’s highest tier. Critics say that the bill will not do anything to lower costs and will merely shift the cost burden towards premiums and away from the drugs themselves.


Is transparency the most powerful tool to improve health care?

At the second National Summit on Health Care Price, Cost, and Quality Transparency (the Summit), former Senate Majority Leader Bill Frist (R-Tenn) said, “There is no more powerful concept than transparency in pricing, value, and services.” The Robert Wood Johnson Foundation sponsored the Summit, which was held from March 16 through March 18, 2015. Both government agencies and private organizations made some information available about cost and quality for hospital and nursing facility services, but the information may not be as complete or as current as a user would hope.

Transparency in pricing

Because physicians, hospitals, and outpatient facilities do not make their charges public, the public is not aware of the tremendous variation in pricing. Elizabeth Rosenthal, a reporter for the New York Times, told the conference that the charges for services could vary by a factor of four or more even in the same community. The same procedures often cost far less in other countries than in the United States. According to Rosenthal, the average price of a screening colonoscopy without anesthesia in the United States was $1,185, but could run as high as $8,600, while the cost in Switzerland was $655.

Several speakers emphasized that the market for health care is unlike any other market in our economy for several reasons. Before making a decision to undergo a joint replacement, for example, the purchaser does not know who is involved in, and will bill for, some part of the procedure, what items are included, or the price of the individual components of the procedure, let alone, the total cost of the surgery and post-operative care. As a result, patients may be surprised by bills from a physician they never met and unexpected charges for supplies or use of the facility. One speaker told attendees about a patient who carefully checked to be sure his surgeon, facility and anesthesiologist all were members of his insurance plan’s network, but was billed $117,000 for the services of an assistant at surgery.

Transparency and quality

All speakers agreed that the value of a service depends both on the price and on quality. Yet, there is no consensus on the definition of high quality care. The currency and completeness of the available information varies. A nursing home may get a five-star rating on Nursing Home Compare but be deficient in an area that was not included in the reporting.

Stakeholders’ needs

The needs of major payers such as health plans and self-insured employers for cost or price information are very different from those of patients. Large organizations that are paying the expenses have access to prices, and they have bargaining power both to influence costs and to reward quality. For example, self-insured employers like Safeway use their knowledge and market power to set reference prices for common procedures rather than paying the charges that are customary in each community in a service area. With referenced pricing, the employee knows in advance what the employer’s plan will pay for a procedure and can be directed to providers who will accept the price. Some large payers make agreements with facilities they designate as Centers of Excellence based on the facilities’ quality of care. They agree to refer patients who need certain services to the designated facilities and may even pay the beneficiaries’ travel costs; the facility charges the employer or payer an agreed price.

Patients’ needs for price transparency involve both the cost of insurance and the cost sharing that they will have to pay for services. Large employers and public and private health insurance exchanges make this information available with varying levels of clarity. One approach used by both insurance exchanges and employers is to set minimum coverage standards for benefit plans. Employees or consumers use information provided by the employer or exchange to determine whether their preferred physicians are in the plan’s network and the medications they take are on the formulary. The employer or exchange may provide a decision tool such as a calculator to help the consumer determine the total cost of coverage, i.e., premiums, deductibles, and copayments. Uninsured patients will need transparency in the form of information from the provider on assistance programs that might be available.

Patients’ views of quality

Several speakers noted that the kinds of quality information reported on sites such as Hospital Compare are not necessarily easy to understand or relevant to patients. For example, the percentage of emergency department patients who receive a particular intervention may not be helpful information to a patient considering where to undergo a joint replacement. The research on patients’ use of quality information showed that they are interested in outcomes and patient experience. They are less interested in the frequency of surgical site infections than in the length of time they will be in rehabilitation and whether the surgery brought the mobility they expected. One study showed that patients responded well to the style of reporting used by the Leapfrog Group in its hospital safety scores. Specifically, the format includes a letter grade with basic information, combined with the option to drill down to more granular information.

Transparency and health reform

Many of the speakers believed that the need for transparency in both quality and pricing of health care would drive a transition to bundled payments for episodes of care and expansion of accountable care organizations (ACOs). These reforms would involve continuation of the gradual elimination of the fee-for-service payment system, replacing it with incentive payments that reward organizations for keeping patients healthy by minimizing the need for hospitalizations and the errors that lead to increased costs.

Highlight on Tennessee: Governor proposes 10% cut to mental health case management

Mental health funding through Tennessee’s Medicaid program, TennCare, would be cut under budget changes proposed by Governor Bill Haslam (R). These cuts would reduce funding for Level 2 Case Management Services by 10 percent.

Level 2 Case Management

Level 2 Case Management Services fund outpatient care for Tennessee’s mentally ill patients. Case managers working under Level 2 aid mental health patients in their daily lives by monitoring medication intake, assisting in employment searches, and coordinating everyday activities, such as buying groceries.

“It’s about quality of life,” said Frontier Health CEO and President Dr. Teresa Kidd. “Mental illness is one of those diseases . . . where you have periods of stability, you’re prone to relapse, and you may do well again. But helping people access the systems that they need to really be the most they can be is what case management does.” Frontier provided data showing that in 2014, approximately 2,200 people in Tennessee used Level 2 Case Management to cope with mental illness, and 92 percent of these people meet the state’s definition for serious, persistent mental illness.

Effect of proposed changes

The budget cuts proposed by Governor Haslam would not eliminate Level 2 case management completely, but it would limit case management services to 90 days after being hospitalized for mental illness, rather than allowing years of services if necessary. Kidd said that, not only is 90 days insufficient for these types of services, hospitalization is too costly a treatment method for how ineffective it can be.

“[I]t’s terrible for the person to have to wait until they get to crisis,” Kidd said. “The case management movement has been one of the most successful things that we have used in this state to actually decrease hospitalization.”

Others are concerned that the drop in the number of case managers will result in fewer patients receiving any necessary treatment for their mental illnesses, increasing interactions between law enforcement and the mentally ill.