Health-care reform complex, far-reaching

June 27--RICHMOND, Va. -- In finding a way to provide health-insurance coverage for most of the nation's estimated 46 million uninsured, the White House and Congress have crafted legislation that touches just about every aspect of the $2.6 trillion U.S. health-care system.

Health-care reform signed into law March 23 will allow people like Beverly Houchens, 53, a Richmond woman who worked 26 years packing cookies and crackers at a local bakery before being laid off in 2006, to get on an insurance plan again.

Key provisions of the new health-care law will:

--require most individuals to have insurance and fine them if they don't;

--require many companies that don't have insurance plans to begin offering them to employees, and set minimum standards for what benefits those plans offer;

--expand Medicaid eligibility and create pools for affordable high-risk health insurance and exchanges for employers and individuals to purchase coverage;

--impose various fees, including some on drug companies, insurers and even tanning salons, to pay for the expansion;

--forbid many insurance-industry practices that have kept insurance unaffordable or unobtainable, such as not covering pre-existing conditions and charging people based on their medical history; and

--hold providers -- doctors, hospitals and others -- accountable for the health of their patients by offering financial incentives for better performers.

Insurers, hospitals and others are waiting for regulatory guidance on many of the new rules, said Doug Gray, executive director of the Virginia Association of Health Plans, whose members are insurers.

"This is really the equivalent of trying to ride a bike and build it at the same time," said Gray, referring to the process of implementing the federal law. "That's really what they are doing."

The legislation's significant expansion of Medicaid is an issue for states, which will bear some of the costs. There also is a legal challenge from some states, including Virginia, that say the individual mandate that requires people to buy insurance is unconstitutional. They have sued the federal government.

There is hardly agreement over the costs -- estimated at nearly $1 trillion over 10 years -- and the impact on the federal budget deficit -- a major savings, or a huge new burden.

Significant expansion

Whatever you think of health-care reform, it is the most significant piece of health legislation since Medicare and Medicaid were enacted in the 1960s, experts say.

"It's hard to ignore the fact that it covers 32 million more individuals eventually than are covered today," said Dr. Sheldon Retchin, CEO of the Virginia Commonwealth University Health System.

"It also provides some protections for patients in the private sector. What it doesn't really do, or I think there is some uncertainty about, is rein in costs. . . . In fact, it probably increases costs in both government-sponsored care and private-sector care. And that is going to be a problem."

Medicare and Medicaid were unprecedented in how they widened access to health care, said Louis F. Rossiter, a health economist and research professor at the College of William and Mary.

"In terms of the number of people covered, this is very large," Rossiter said. "Medicare has about 46 million people today. Medicaid has even more. . . . It's right up there with them."

Virginia's uninsured rate will drop from about 14 percent to 5.7 percent, Rossiter predicts.

"Costs will go up but so will coverage," said Rossiter, who served as Virginia health secretary during the administration of former Gov. Jim Gilmore, a Republican.

While some aspects of health-care reform go into effect this year, the core element of providing health insurance for the uninsured won't happen until 2014, when an individual mandate goes into effect requiring all U.S. citizens and legal residents to have health coverage.

Health-coverage options

Like most workers, Houchens' health insurance was tied to her job at Interbake Foods. When the company relocated its Richmond baking operations to Front Royal, Houchens said she could not afford to pack up and move. She found a job at another company.

"I had a job at Hewlett-Packard. I stayed there for two years," Houchens said. "Then they went through a transition. I was losing job after job."

She now works at a state juvenile facility, but it's through a temporary agency that doesn't provide health-insurance benefits.

She receives medical care at a CrossOver Ministry free clinic. When she needed surgery, CrossOver referred her to Access Now, a 2-year-old Richmond Academy of Medicine effort that arranges for patients of free clinics to see specialists, have tests done and get hospital care.

Houchens said the care exceeded her expectations. Nonetheless, she would like to be able to afford health insurance.

"Then I could move on so the services can be there for somebody else," she said.

Under health-care reform, she would have several options available to help her meet the individual mandate to have insurance. First, depending on her income, she might qualify for Medicaid, which will enroll people with income up to 133 percent of the federal poverty level -- $14,404 for an individual or about $29,326 for a family of four in 2009.

Second, she might be able to receive a subsidy to purchase affordable insurance through state-run insurance exchanges.

Third, if her employer is over a certain size, the company will face penalties if it does not provide employees with a plan that provides a minimum essential set of benefits at a cost that is affordable.

The exchanges and Medicaid expansion require significant work to be done at the state level, but that cooperation may come grudgingly.

Virginia Attorney General Ken Cuccinelli, a Republican, has mounted a legal challenge to the law's individual mandate. Cuccinelli said this month that the mandate represented "the greatest erosion of liberty" in his lifetime.

Gov. Bob McDonnell, a Republican, opposed health-care reform that Republicans in Congress voted overwhelmingly against. McDonnell has named interim state Medicaid agency director Cynthia B. Jones to head the Virginia Health Reform Initiative. Jones is a longtime state employee who has worked under Republican and Democratic administrations.

The health-care law's expansion of Medicaid eligibility is expected to add 270,000 to 425,000 people to Virginia's Medicaid program, at a cost of $1.5 billion between 2017 and 2022, state officials predict. The federal government, which would cover 100 percent of the expansion costs initially, would gradually drop that match to 90 percent.

"A single-payer model would have been simpler, but Congress and the public preferred to build on America's current system, which relies on employer-based coverage," said Jill Hanken, an attorney with the Virginia Poverty Law Center. Tens of thousands of extremely poor Virginians will have health insurance for the first time, she said.

Details still evolving

Those who live and breathe health insurance are waiting like everyone else for details in the form of regulatory guidance.

"Most of the law has yet to be written," said Laurens Sartoris, president of the Virginia Hospital and Healthcare Association.

In the 2,000-plus page bill, "There are many, many directives to people within the federal government to interpret, to set up administrative agencies, to promulgate regulations," Sartoris said.

At the state Bureau of Insurance's life and health division, Jim Young, manager of special projects, said staff are reading regulations as quickly as they come down. On June 14, federal regulations were issued on grandfathered plans -- plans in place on the day the health-care law was enacted that theoretically do not have to comply with the law.

From their read of the regulations, Young said, it looks like they do.

"When we looked at those provisions, it seems like . . . almost all the provisions that apply to group or individual health-insurance coverage" apply to grandfathered plans as well, he said.

An immediate benefit in the new law for some are the high-risk insurance pools for people unable to get affordable health-insurance coverage because of pre-existing medical conditions. Some states already have such pools. Under health reform, the federal government is providing money to states to fund high-risk pools, which are meant to bridge the gap until other health-care-law provisions are in place.

McDonnell and leaders in 14 other states have opted not to create state high-risk pools but to leave that to the federal government. There is criticism the money allocated to states for that program -- $5 billion over four years -- is not enough to cover all who may be eligible.

The health-insurance exchanges will bring insurance companies millions of new customers.

"We see the exchanges as an opportunity," said Scott Golden, spokesman for Anthem Blue Cross and Blue Shield in Virginia, which has 3 million plan members in the state.

"There are still a lot of decisions that need to be made before we will get a clear picture of what the exchanges will look like and how they will be administered," he said.

In the meantime, existing customers should expect to see some premium increases.

"In the near term, our rates will be increased to cover the cost of the expanded benefits, such as covering preventive care at 100 percent without co-payments and covering dependents up to age 26," Golden said. "In 2014, our rate structure will change significantly for individual and small-employer coverage when most provisions of the law take effect."

"Up or down -- we really don't know yet,"

The question of cost

Heritage Action for America, the grass-roots advocacy arm of the Washington-based Heritage Foundation, recently launched a campaign to repeal health-care reform.

The conservative group has consulted financial analysts who say the government's estimates of costs and deficit reductions are off base.

"To claim that this is going to cut the federal deficit is voodoo accounting," said Michael Needham, CEO of Heritage Action.

"Actual research has shown it will increase the federal deficit $2.5 trillion over the next 10 years," he said. "It's not going to bend the cost curve down. It will increase health-care spending in the U.S. by $222 billion over the next 10 years."

Needham's group also estimates that millions of lowand middle-income Americans will drop employer-sponsored coverage in favor of federally subsidized coverage, at a huge cost to taxpayers.

Rossiter, the William and Mary economist, said states are justified in being worried about costs.

"While the [Medicaid] coverage expansion will be covered 100 percent at first and then fall to 90 percent, there are also provisions to require states to raise payments to providers," Rossiter said. "States like Virginia where our provider payments are low, that's where they get hit."

Retchin, at VCU, agreed on the point that the revenue projections may be overstated.

"There are cost savings which involve largely reductions in Medicare rates," he said. "I just don't see the potential for really realizing those cost savings."

Retchin would have preferred more incremental reform that would, for instance, provide the uninsured with primary-care access and prescription-drug coverage, similar to how VCU's Virginia coordinated care program operates. It pays community physicians to take care of uninsured patients who might otherwise come to VCU's emergency department for nonemergency problems.

"We all have concerns about the costs. I wouldn't have done it this way," he said. "But it's hard to ignore the benefits to real people."

Contact Tammie Smith at (804) 649-6572 or TLsmith@timesdispatch.com.

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