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Holes in the ACA: A Damage Assessment

Posted by John McDonough  January 14, 2013 05:19 PM

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In my experience and memory, just about any major complex law, federal or state, gets revisited and revised repeatedly by the legislative body that created it, especially when that law is health-related. The adjustments may be large, small or in-between; substantive or technical; most often they get noticed by the tiny "attentive publics" and ignored by 99.99% of everyone else.

And so it is with the Affordable Care Act (aka: ACA, Obamacare). Many assume that partisan gridlock on Capitol Hill has blocked Congress from altering the ACA, and they are mistaken. The repeal of the CLASS Act in the new year's "fiscal cliff" tax law, (the ACA's entire Title VIII) led me to consider: how much alteration has already occurred, and how much real damage has been done? I knew there were more than a few items, and I had never seen a list of all of them.

By my count, (and please let me know what I have missed) there have been eight consequential, substantive changes to the ACA since its signing in March 2010.  Seven were done by Congress and one by the U.S. Supreme Court (SCOTUS). I list them in order of consequence, recognizing that many will disagree with my rankings:

1. Medicaid Expansions Are Voluntary for States (Title II). SCOTUS Chief Justice John Roberts engineered the biggest health reform change when he convinced his colleagues that the ACA's mandatory Medicaid expansion to nearly everyone with a household income below 133% of the federal poverty line ($30,657 for a family of 4) should be optional for states. This has set off an unexpected dynamic for states, with most Democratic governors and legislatures embracing the expansions and most Republicans rejecting them.

The Congressional Budget Office estimates that only 10 instead of 16 million previously uninsured Americans will get Medicaid coverage because of the ruling, and that three of the six million will obtain privately-subsidized coverage through the new health insurance exchanges. The "Roberts Rule" enshrines health care rationing as national policy as the only group of U.S. citizens without some guaranteed access to health insurance after 1/1/14 will be poor Americans who live in states where their governors and legislatures refuse massive federal subsidies to expand Medicaid. Hands down, this is the biggest.

2. The CLASS ACT is repealed in toto (Title VIII). The repeal of the ACA's Community Living Assistance Services and Supports Act, in January 2013, comes in number two, not for what it was, but for what it might have been. The voluntary public insurance program for persons with permanent or temporary disabilities had real flaws that could have been fixed -- though fixable only in ways that would have shrunk even further the small proportion of Americans, 2-3%, projected to enroll, pretty close to the same size as our nation's dysfunctional long term care insurance market.

Still, CLASS offered a one-in-a-generation (or less) opportunity for America to face up to the needs and challenges of our society's disabled populations. It's true that Congress created a long term care commission as it repealed CLASS earlier this month, and it's also likely the results from the commission will be ignored because most Members of Congress do not want to touch this issue. Because America's sizable and growing disabled population has lost a lot of hope for a genuinely national solution, I regard this as the second biggest loss.

3. $5B cut from the Prevention and Public Health Fund (Title IV). The ACA's "prevention of chronic disease and improving public health" title established one of the nation's most significant prevention investments ever by establishing the Prevention and Public Health Fund, and committing $15B in hard cash through 2014 to make the commitment real. A Health Affairs brief calls the fund: "the most substantial effort in many years to fund the public health infrastructure and support community-based public health and prevention work." Derided by Republicans as money for "jungle gyms and walking paths," the investments have jump-started waves of activities to make the Americans healthier.

In February 2012, President Obama signed legislation cutting the fund by $5 billion to pay for other initiatives, including a short-term continuation of the recently-expired payroll tax cuts. Opponents want to eliminate the entire fund and they will be able to turn it into a dodo after 2014 if Republicans control either the House or the Senate. I put this number three because of what it says about Congress' real commitment to prevention -- too much talk, too little action.

4. Funding for Community Health Centers is cut (Title V). Sen. Bernie Sanders (D-VT) and Rep. James Clyburn (D-SC) won major increases, $11B, in funding for federal qualified community health centers in the ACA's Workforce title. In 2011, the federal health center appropriation was reduced by $600 million, which will add up to a $3 billion reduction over five years, or 30% of the funding directed to support existing health centers. (About $1.5B is targeted for the construction costs for new and modernized health centers.) While Title V represents one of the most substantial commitments ever to health care work force improvement, the health center funding was one of its jewels. Everybody, Democrat or Republican, talks a good game when it comes to addressing the health care workforce -- and the issue still gets the short end of the stick.

5. An I.R.S. information-reporting requirement on payments to corporations was repealed (Section 9006 of Title IX). In order to raise an estimated $21.9B over ten years to pay for health reform, Congress included Section 9006 in the ACA's Title IX (the revenue raising title). The section would have required businesses to file 1099 forms for any transaction over $600 with other corporations, such as vendors or suppliers. While it was seen by the government as an effective tool to increase taxpaying compliance by corporations, business groups, especially small businesses, attacked it as a huge and new paperwork burden. Businesses formed a broad coalition to attack the provision, and Democrats who supported the ACA ran for cover. The provision was repealed on April 14, 2011 in the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. More important than the repeal of Section 9006 was the "pay-for" Congress chose to use to make up for the lost revenue. For that, see #6 next.

6. Congress twice imposes new penalties on Insurance Exchange subsidy recipients whose incomes increase over the course of a coverage year (Title I). To make health insurance more affordable, the ACA provides refundable tax credits to individuals and families with household incomes between 100% and 400% of the federal poverty line (based on the most recently filed tax return). The subsidies are based on a sliding scale so that the lower one's income, the more generous the subsidies. But many people's incomes rise and fall frequently over the course of a year, even in amounts that bump them from one subsidy category to another, up or down.

Twice now, Congress has stiffened penalties on subsidy recipients whose incomes increased by enough to make them eligible for only a lower subsidy level. Congress did it first in late 2010 to help pay to prevent Medicare physician payment cuts; and they did it again in the spring of 2011 (see item #5 above) to pay for the cost of eliminating the corporate reporting requirement.

It is well known in the health policy community that household incomes at lower levels show enormous fluctuation. Because of these new rules, many lower income households are going to get hit with substantial penalties because, for example, an unexpected holiday pay bonus pushed a family into a higher income category. A lot of families are going to get unpleasant surprises at tax time because of this -- and this is one issue Congress really ought to fix.

7. Unspent funding for Health Insurance Co-ops is rescinded (Title I). Former Sen. Kent Conrad (D-ND) proposed and got included in the ACA a program to provide up to $6B in loans to help health insurance cooperatives to get off the ground.  Conrad proposed it as a substitute for the "public option" that many progressives wanted in the ACA. The public option didn't happen, and the co-op provision did, even though many doubted it would ever get launched. It did get launched and the U.S. Department of Health & Human Services has awarded about $2B in loans to 24 state co-ops. In 2011, Congress reduced the funding to $3.4B as part of broader budget cuts. In the "fiscal cliff" tax law signed earlier this month, Congress eliminated the remaining $1.4B for yet-unfunded co-ops even though many were awaiting final HHS approval. Because the loans would have been repaid, the actual savings will be less than $200M.

8. "Employee Free Choice" vouchers are eliminated (Title X). During the lengthy ACA debate, nobody annoyed Senate Finance Chairman Max Baucus (D-MT) more than Senator Ron Wyden (D-OR) who had fervently championed his own comprehensive health reform bill and pushed hard for elements of it when it failed to advance. In final negotiations with Majority Leader Harry Reid in December 2009 on the Senate version of health reform, Wyden demanded and got his ounce of flesh. It was an "employee free choice" provision requiring that any employer who offers employee health insurance must give their eligible workers a "free choice voucher" that the worker could use to buy health insurance on his or her own through a State Insurance Exchange -- IF the employer's premium would cost the worker between 8 and 9.8% of his or her income. Business groups hated the provision from the start, and waited for the opportunity to get it deleted. The moment came in the budget deal of August 2011 when Senate leaders agreed to delete the ACA's section 10108. Wyden was unhappy.

So many memories and so little time and space!

No contest, the biggest damage and biggest blow to the structure and integrity of the ACA came from the Supreme Court's decision to make Medicaid expansion a state option. CLASS is prominent because it represents the repeal of an entire title of the ACA, even though the actual harm to individuals from repeal is debatable. 

Of the others, I suggest that items 3 (Prevention Fund cuts), 4 (Health Center cuts), and 6 (penalties for subsidy recipients with income changes) are the most significant. All three can be fixed by a future Congress, so the damage is not as enduring at that from items 1 and 2.

Overall, given the scope and intensity of opposition to the Affordable Care Act for the past 34 months, it could have been a lot worse. The United States' health reform law has been banged and bruised more than a little, and it is standing tall.

(Thanks to Lara Shkordoff for research assistance.)

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »

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