For Tim Fraas, a heart-transplant patient from Elgin, the prospect of reaching the $2 million cap on lifetime benefits for his health-insurance coverage wasn’t a mere possibility over the next few years. “It was going to happen for sure,” he says. “I was beyond worrying about it.”
That’s why he was more than merely glad to see Congress pass the Patient Protection and Affordable Care Act, which President Barack Obama signed into law on March 23. The biggest change to the health care system in a generation, the law is expected to cost $1 trillion or more over the next 10 years, and one of its provisions — the elimination of lifetime benefit caps — will take effect this fall.
“We’re planning a party,” says Fraas, a 53-year-old land surveyor, who is insured through his wife’s job as a teacher’s aide in Elgin School District U-46.
The personal health crisis that led to Fraas’ transplant in 2008 would give him the type of “pre-existing condition” that can make insurance unaffordable. It’s a situation that hamstrings many of Illinois’ 1.7 million uninsured citizens.
By 2014, the reform law will eliminate pre-existing conditions as a reason for insurance plans to deny coverage or boost rates, so Fraas, who hopes to return to work, knows he likely will benefit from the law in both the short and long term.
Such certainty is elusive, however, when it comes to other views about the law’s overall impact on Illinois’ citizens, employers, health care providers and state government.
The law will add more than a half- million people to a Medicaid program that already covers one in every five Illinoisans, and it will give the Illinois General Assembly and other state officials the responsibility for creating and administering a brand-new bureaucracy: an insurance “exchange” expected to serve more than 1 million people, many of whom will qualify for tax credits and subsidies to help them afford coverage.
Only two and a half months after a Democratic president from Chicago and the Democrat-controlled U.S. House and Senate performed political gymnastics to get the reforms passed without a single Republican vote, reactions to the law range from excitement to uncertainty and disdain.
“What this does is ensures that all low-income Americans have access to health insurance, including Medicaid at certain levels,” says Theresa Eagleson, director of medical programs at the Illinois Department of Healthcare and Family Services. “Certainly this is going to help folks who don’t have good access to insurance now.”
Though Eagleson doesn’t seem as concerned, state Rep. Rosemary Mulligan, a Des Plaines Republican, worries that the new law — much of which will be carried out by individual states beginning this year — will push Illinois into a budget hole even deeper than the $13 billion state budget deficit expected for the fiscal year starting July 1.
“Although some of the provisions are good … I’m not quite sure how all of it will work out,” she says. “I’m not saying it doesn’t have good ideas, but we should just tread carefully.”
The Illinois General Assembly isn’t among the legislatures challenging the constitutionality of the law’s insurance mandate for individual citizens, but that doesn’t mean critics are quiet here.
The Illinois Policy Institute says the law, with its increased Medicare taxes on the wealthy and new fees imposed on the pharmaceutical and insurance industries, will further depress the national and state economy, accelerate medical inflation, lead to the loss of 169,000 jobs in Illinois and harm, rather than help, the poor and uninsured.
“I don’t see much good that’s going to come out of it,” says John Tillman, the conservative think tank’s chief executive officer. “Nobody’s arguing about the fact that we need reform. The question is what form reform should take. This shifts power from the insurance companies to the government when the government already can’t handle its financial obligations. It will put the state budget of Illinois at risk.”
Jim Duffett, executive director of the Champaign-based Campaign for Better Health Care and a supporter of the new law, says he isn’t surprised by the critics. “These are the same opponents who embraced the status quo,” he says. “Every mistake and every problem with the bill will be perceived with the ‘sky is falling’-type of mentality. The law is going to have a very positive, tremendous impact.”
U.S. Sen. Dick Durbin, a Democrat, says critics largely ignore the analysis of the nonpartisan Congressional Budget Office. Tillman says the CBO often gets estimates wrong about the long-term impact of major programs, but Durbin says the health care reform law “is good for business, good for jobs and good for the economy.”
Durbin says the law is the “largest tax cut in history” for middle-class families and will help slow or decrease, not increase, the price of premiums.
Reforms in the law to improve the health care system will “not only save the system costs but also reduce premiums for businesses,” he says. “In turn, businesses will have the economic capital to grow, potentially creating 2.5 million to 4 million additional jobs over the next 10 years, at a rate of 250,000 to 400,000 per year. This includes 17,775 jobs in Illinois by 2020.”
One of the law’s most significant changes takes effect in 2014, when Medicaid is expanded to low-income uninsured adults without children up to 133 percent of the federal poverty level, or $14,404 a year for an individual. These adults make up more than one-third of all the uninsured.
Illinois’ Medicaid program currently covers low-income adults without dependent children only when they have permanent disabilities or are senior citizens, and then only if they are at or below the poverty line.
The reform law would add an estimated 600,000 to 700,000 Illinoisans to Medicaid, putting them in a pool with 2.6 million Illinoisans already on Medicaid and other state-subsidized health care programs. The programs together cost $15 billion a year, with $9 billion, or 60 percent, reimbursed by the federal government.
U.S. Rep. Aaron Schock, a Peoria Republican, pointing to an analysis from the conservative Heritage Foundation, says the Medicaid expansion would cost Illinois an additional $1.8 billion from 2014 to 2019 ($1.5 billion for benefits to recipients and almost $381 million in administrative costs).
But Eagleson notes that the federal government will pick up 100 percent of the cost of the new benefits during that period and a big chunk of the administrative expenses. Even after 2019, the federal government will continue to cover at least 90 percent of the cost of the benefits expansion, which means Illinois would have to come up with about $200 million a year in 2020 and beyond, Eagleson says.
Tillman and other critics have questioned whether enough doctors would be willing to serve additional Medicaid patients when Medicaid rates for many medical services are lower than Medicare and private insurance rates, and when payments, at times, also have been slow.
But Eagleson says the state’s success with the Primary Care Case Management program (also known as Illinois Health Connect), which pays primary care doctors monthly fees for providing “medical homes” for most Medicaid patients, shows there should be enough capacity.
In fact, Illinois Health Connect is operating with 5.3 million slots for 1.8 million current Medicaid patients, according to Vincent Keenan, executive vice president of the Illinois Academy of Family Physicians.
Medicaid patients in some parts of the state say they don’t have much of a choice of doctors willing to accept them. But in theory, Keenan says, there are more than enough slots statewide for the new Medicaid patients, as well as for uninsured people who might end up buying health insurance through the new “insurance exchange” to be operated by the state beginning in 2014.
But there may be pockets of the state without enough doctors, he says. And Eagleson says state government needs to work to expand Medicaid patients’ access to specialty doctors.
Toby Basil wishes she wouldn’t have to wait until 2014 for Medicaid. Unemployed, living with a friend and suffering from degenerative spinal disk disease, the 47-year-old Springfield woman likely would qualify for Medicaid but now has only limited medical benefits from Capital Township that will expire after June.
A former customer service representative for a telephone company, Basil owes thousands of dollars in medical bills and can’t afford the $1,000 to get her wheelchair repaired. “My anxiety level would be less if I weren’t worried about the bills in collections,” she says.
In the short term, the state this year will receive federal money to offer uninsured people with pre-existing conditions cheaper premiums than had been offered in the past through the Illinois Comprehensive Health Insurance Plan, says Michael McRaith, director of the Illinois Department of Insurance.
Illinoisans also will benefit when the federal law gives the state insurance department new regulatory powers to review and potentially reject “unreasonable” health insurance rate increases beginning this year, McRaith says.
“As a public policy matter, to assure that small businesses and individuals struggling to pay premiums get value for the premiums they pay, that’s a significant improvement,” he says.
Officials from the state’s largest private insurer, Blue Cross and Blue Shield of Illinois, have had no comment on the reform law. Jeff Ingrum, chief executive officer of Urbana-based Health Alliance Medical Plans, says he has no problems with many parts of the law. But he says the federal government’s penalties for individuals who refuse to get insurance — $95 a year in 2014 and $695 or more by 2016 — may not be enough to avoid large numbers of healthy people opting out. That could mean financial headaches for insurers who won’t be able to turn away people with pre-existing conditions, he says.
Regardless, supporters of the reforms say insurance companies will receive a windfall from the expanded access to coverage. But Ingrum says, “It’s hard for me to see, with all these government regulations, us making more money.”
Wheaton resident Linda Cherrington, 60, says she hopes the new 35 percent tax credit for small businesses, as well as the future insurance exchange, makes insurance more affordable for her family’s residential remodeling company. Premiums for the company have risen 355 percent over the past 10 years.
“I wanted more in the bill, but I’m glad something’s being done,” she says.
Most business groups, including the Illinois Chamber of Commerce, opposed the legislation and continue to have concerns about many parts, including the employer penalties for not offering certain levels of insurance, the limited subsidies for small businesses and the lack of tort reform.
“It just does not address bending the cost curve in the way we hoped it would,” says Laura Minzer, executive director of the chamber’s health care council. “Yes, it will increase coverage significantly, which we do support.”
The law isn’t expected to have a major impact on existing health plans, although experts say most health plans, except those that are self-insured, eventually would be subject to certain minimum benefits standards.
Several large Illinois-based employers, including Caterpillar Inc. and John Deere, have reported hits to their earnings because the law reduces federal subsidies to companies providing prescription-drug benefits to retirees, raising the possibility of private benefits reductions to those people in the future and the prospect of those retirees entering the Medicare Part D program.
Provisions in the law that are designed to make health care more efficient could mean fewer headaches during labor negotiations about rising health costs, says Hank Scheff, director of employee benefits for Council 31 of the American Federation of State, County and Municipal Employees.
The law’s new tax on so-called “Cadillac” health plans won’t take effect until 2018, and Scheff says unions will work with employers to make plans more efficient so they don’t qualify for the tax. He adds that the health plans covering state employees aren’t expected to be subject to the tax.
Many details about the insurance exchange are unknown, though tax credits and subsidies would be available to households earning up to 400 percent of the federal poverty level, or up to $88,200 a year for a family of four. The sliding scale of credits will be designed to limit a family’s total premium to between 2 percent and 9.5 percent of income, and subsidies will be designed to offset other out-of-pocket costs, though exact details haven’t been worked out.
The Illinois Hospital Association supports the legislation because it will give about 1 million Illinoisans coverage over the next 10 years, association president Maryjane Wurth says.
In theory, she says, the $8 billion in Medicare funding that Illinois hospitals won’t receive over the next 10 years — as the law trims previously scheduled Medicare rate increases — will be offset by rising numbers of insured patients. But she says the financial hits to hospitals are “front-loaded” to begin in 2010, while the benefits hospitals may see won’t be fully realized until later.
“We’re concerned about the stability of the Illinois market,” she says.
Wayne Lerner, chief executive officer of Holy Cross Hospital on Chicago’s southwest side, has the same concerns but says the hospital expects in 10 years to spend $6 million to $9 million less on uncompensated care. It spends $30 million of its $100 million annual budget on the uninsured now.
The law’s increased payments for primary care services through Medicaid and Medicare will help persuade more doctors to enter primary care rather than other specialties that traditionally pay higher salaries, says Dr. Janet Albers, a family physician at Southern Illinois University School of Medicine. Primary care doctors are needed more than ever as the health care system changes, she says.
Springfield resident Tina Lathan’s sister, Verta Wells, didn’t survive to see the reform law passed. Wells, a former Springfield waitress, died July 2 at age 41 of breast cancer that she beat once but which had returned and spread to her brain, bones and other organs. She had delayed getting care to detect the return of that cancer when she was uninsured and feared high out-of-pocket costs.
Wells was one of the thousands of uninsured Americans who die prematurely each year because of their inability to obtain health insurance. Durbin, who learned about her situation, told her story on the floor of the U.S. Senate in December.
Lathan, 45, says she can understand how upper-income people subject to the law’s increased Medicare taxes might oppose it, but she hopes that her sister’s three sons — all young adults and all uninsured — benefit from the reforms.
“My ‘Verta bird’ is still soaring,” Lathan says. “She’s not here, but she still has an impact.”
Fraas, the heart transplant patient from Elgin, says the flaws in the law are worth the beginning it marks in changing a flawed health care system. “At least something is happening,” he says. “I don’t think the work will ever be done.”
Dean Olsen is the medical/health reporter at the State-Journal Registerin Springfield.
The details
The federal health care reform law is expected to cover 32 million more Americans, but 23 million would remain uninsured by 2019. Among those left out would be about 7 million illegal immigrants who are explicitly excluded from the law’s benefits. Others include those who would be exempt from the individual insurance mandate based on their income, and those who wouldn’t be poor enough to be included in the Medicaid expansion.
Here are some of the law’s provisions for the near-term:
- Small business tax credits: Offers tax credits to businesses with 25 or fewer full-time employees to make employee coverage more affordable. Tax credits of up to 35 percent of premiums will be immediately available to firms that choose to offer coverage, effective beginning with tax returns for calendar year 2010.
- Medicare Part D “doughnut hole”: Provides a $250 rebate to Medicare beneficiaries who hit the gap in drug coverage in 2010. Beginning in 2011, institutes a 50 percent discount on brand-name drugs in the doughnut hole. Completely closes the doughnut hole by 2020.
- Employer health care costs: Beginning this year, employers will be allowed to reduce health care costs through a temporary reinsurance program for early retirees. Participating employers, including state and local governments, will be reimbursed for 80 percent of medical claims between $15,000 and $90,000 incurred by retired employees.
- Rescissions: Health insurance “rescissions,” when an insurance company retroactively cancels a person’s coverage after he or she gets sick, will be prohibited except in instances of fraud, effective this year.
- Preventive services: After September 23, all health insurance plans will have to provide first-dollar coverage for a defined set of preventive benefits.
- Lifetime dollar limits: After September 23, health plans won’t be able to impose lifetime dollar limits. Annual coverage limits will be prohibited entirely in 2014.
- Premium value: After January 1, health insurance companies that spend less than a certain percentage of premium dollars on health care will be required to rebate excess premiums to policyholders. For plans sold to individuals and small employers, health insurance companies will be required to spend 80 percent of premium dollars on health care rather than administration and profits. For plans sold to employers with more than 50 employees, the target is 85 percent or more to be spent on health care.
- Improved coverage for children: Young adult children, up to age 26, will be able to receive coverage through a parent’s health insurance policy, although the cost of that coverage may be more expensive than for younger children. Illinois law already requires plans that provide coverage to dependents to allow adults to remain on their parents’ plans until age 26 (and up to age 30 for military veterans). The federal law makes self-insured plans offer coverage to adult children up to age 26.
Source: Illinois Department of Insurance
Illinois Issues, June 2010
