The bill is law.
Now the scramble to interpret the 1,071-page behemoth is well under way.
The $787 billion American Recovery and Reinvestment Act, signed into law by President Barack Obama in Denver on Feb. 17, contains $137 billion in health care provisions, including significant changes to COBRA, $87 billion to help states with Medicaid, $19 billion to modernize health information technology systems, and $10 billion for health research and construction of National Institutes of Health facilities.
In the days leading up to and immediately following the passage of the bill into law, health care leaders had plenty of opinions about the content of the stimulus package, and even more questions and concerns about how certain aspects will be implemented.
"Because we know that spiraling health care costs are crushing families and businesses alike, we are taking the most meaningful steps in years towards modernizing our health care system. Taken together with the enactment earlier this month of a long-delayed law to extend health care to millions more children of working families, we have done more in 30 days to advance the cause of health reform than this country has done in a decade."
- President Barack Obama, moments before signing the stimulus package in Denver on Feb. 17
Perhaps. But what was included in the package left some wondering how well the health care provisions had been thought through by the Obama administration and Congress.
"Right now, what's in there is very vague," says Sharon Alt, president of third-party administrator Alt Benefit Consultants in Fort Worth, Texas, and a nationally recognized expert in the health insurance and employee benefits industries.
"There are probably a lot of things that President Obama and his staff didn't think about. There's going to be a need for a lot of education, and where do we go from here? This is going to confuse the heck out of employers."
The COBRA changes affect virtually every employer in the country, and with near immediate implementation, employers and third-party plan administrators need plenty of guidance to make sure they are compliant with the new provisions.
William Short, president of AmeriFlex, a TPA in Mount Laurel, N.J., says he thinks the COBRA provisions were put together so quickly that nobody really thought about the implications. He said the day the bill was signed that companies like his as well as employers would be waiting for guidance and regulations from the Department of Labor before proceeding.
"There is nobody in the country that is ready and compliant [right now]," Short says. "There haven't been any final implementation guidelines that we need."
"Thanks to the action we have taken, 7 million Americans who lost their health care along with their jobs will continue to get the coverage they need."
- President Obama on Feb. 17, referring to changes to COBRA.
Before the passage of ARRA, a qualified beneficiary who elected COBRA was wholly responsible for the payment of 100 percent of his COBRA premiums for the duration of the COBRA coverage period. The new law changes this by allowing employees who were involuntarily terminated from employment between Sept. 1, 2008, and Dec. 31, 2009, to have 65 percent of their COBRA federally subsidized for up to nine months. This includes former employees who already declined COBRA coverage during this period, and will be paid through credits against employers' payroll tax liability.
Short says that will put an extra burden on employers who must "front" the 65 percent.
"This is going to be a huge cash flow drain on employers. They are going to have to retroactively go back and offer these benefits to people," Short says, calling the plan as drawn up "a terrible idea" for employers.
Alt says she doesn't believe fronting the 65 percent for the government will be a major problem, responding that employers file taxes two days after payroll, and this is an immediate tax exemption for the employer.
"They don't have to wait for the government to send it back to them," Alt says.
She said she thought it would have created much bigger problems for employers if those over the age of 55 were able to jump back on an employer's health plan and retain COBRA coverage until they became Medicare eligible or secured coverage through a subsequent employer. That was originally part of the House bill, but the language was removed prior to passage of the stimulus act.
Still, employers can expect significant costs under the new COBRA. One of the reasons is adverse selection.
"If employers have to retroactively offer subsidized COBRA coverage for laid off workers, it will impose huge costs on employers," says Dr. Devon M. Herrick, senior fellow at the National Center for Policy Analysis. "The reason is that those most likely to continue coverage will be the sickest workers. An unintended consequence is that it will be more expensive for employers to provide health insurance."
Alt says we need to wait and see. She says that, up to now, terminated employees who elected to go with COBRA tended to be sick people who needed to maintain coverage.
"People don't elect COBRA unless they're sick. But if the government is going to subsidize 65 percent [of the cost], the hope would be that more healthy people would take the COBRA now. Now they're only paying 35 percent. If someone is unemployed, 35 percent may still be too much. Only time will tell if there is adverse selection," Alt says. "I tend to think you'll get more healthy people."
While the adverse selection issue could go either way, Alt says she thinks it will become evident fairly quickly, "It won't take long for them to elect or not elect. I'd say within 90 days you're going to know if you've got an adverse selection problem."
"It's an investment that will take the long overdue step of computerizing America's medical records - to reduce the duplication and waste that costs billions of health care dollars and the medical errors that every year cost thousands of lives."
- President Obama on Feb. 17, regarding the $19 billion in the stimulus package designated for the modernization of health information technology systems.
The need to computerize and standardize medical records is widely supported, but finding a consensus about how to do it effectively is another matter altogether.
"Everyone agrees the United States needs to increase its use of health IT," Herrick says. "However, if electronic records are imposed from the top down, we will likely end up with a system that is cumbersome and doesn't meet the needs of providers. There are all manner of HIPAA requirements that will make it difficult to share information - the very connect that this technology is designed to encourage."
The stimulus package includes $19 billion to modernize health information technology systems. What remains to be seen is how this will be accomplished, and Alt admits that is a concern.
"I think electronic medical records are a great idea. What gives me pause is the privacy of these health records. Who has access to them? There may be some table of bureaucrats looking at your health information and basing your care on what is cost-effective. That looks to me like a slight move toward socialized medicine," Alt says.
"If you hated the HMO when the insurance company was telling your doctor what kind of care to provide," Alt says, "you're really going to hate the government telling your doctors how to care for you."
"An historic commitment to wellness initiatives will keep millions of Americans from setting foot in the doctor's office for purely preventable diseases."
- President Obama, referring to $10 billion for health research and construction of National Institutes of Health facilities.
The provision in the stimulus bill to create a "comparative effectiveness" agency also creates some concerns, according to Herrick and the National Center for Policy Analysis.
"Although few would argue that knowing the comparative effectiveness of clinical treatments is bad, many people are justifiably worried by the implications," Herrick says. "Once the comparative effectiveness of a given treatment is known, the natural progression is to begin weighing costs vs. benefits. Say a newer drug therapy is only slightly more effective than an older therapy but costs 10 times more. Government bureaucrats could use that knowledge to refuse reimbursement for the newer drug; or require step therapy where the older drug must be tried first. Taken to its furthest logical conclusion, comparative effectiveness could be used to prioritize which conditions are treated aggressively and which ones less so."
A Feb. 19 press release from the NCPA says the new federal health council will promote government rationing of health care, a practice pioneered by Oregon.
A new NCPA analysis on the Oregon Health Plan, authored by NCPA Senior Fellow Linda Gorman, shows a surprising shift in how Oregon's health care dollars for treating low-income patients are spent, previewing health care rationing on a national level. The report on Oregon shows that lifesaving services have been deemphasized in favor of less essential care.
"Oregon is the only government in the United States that explicitly rations medical treatment based on treatment cost and effectiveness, limiting doctor/patient choices," the NCPA release says. "Oregon's Health Services Commission does this by ranking treatments by cost and effectiveness, the same approach to be used by the new Federal Council for Comparative Effectiveness Research."
Brian Anderson is a Denver-based freelance writer and a former editor of Senior Market Advisor.
