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Donald C. Fry: Challenges and unintended consequences

Now that the Supreme Court has upheld most of the federal health care reform legislation, Maryland businesses, employees, health care providers and the uninsured can expect to be impacted in many significant ways. But they must also brace for operational challenges and unintended consequences.

That’s the consensus of the heads of the state’s largest health insurer and two leading hospital systems who briefed Greater Baltimore Committee members on July 9 on health care reform in the wake of the ruling.

The Affordable Health Care Act’s thousands of pages of provisions and mandates constitute “one of the most complex health care systems that we have ever seen,” Chet Burrell, president and CEO of CareFirst BlueCross BlueShield, told GBC members.

“This is unbelievably comprehensive legislation,” University of Maryland Medical System president and CEO Robert A. Chrencik said.

The legislation is approximately 2,400 pages long, and its estimated cost is in the range of $600 billion. The Congressional Budget Office projects that, in the long term, the act will reduce the federal deficit, but the final costs will not be known until the legislation has been fully implemented.

Even with its complexities and uncertainties, the legislation is “a good thing for the individual and a good thing for families and for society at large,” said Ronald R. Peterson, president of Johns Hopkins Health System.

The basic provisions

Just to refresh, the four basic provisions of health care reform are a mandate for individuals to buy health insurance or pay a penalty, a mandate for employers of 50 or more to provide insurance to employees or pay a penalty, a major expansion of state-run Medicaid eligibility and health insurance requirements that include eliminating pre-existing condition exclusions, covering eligible dependents up to age 26 and covering preventative care.

Much of the Affordable Care Act is about accomplishing insurance reform, and it clearly will do that. In Maryland, much insurance reform has already been accomplished, Burrell and Chrencik noted.

Also, Medicaid eligibility has been significantly expanded in Maryland, and the foundation has been laid here for a separate health care exchange for small businesses.

Similar to pension reform trends, one likely impact of health insurance reform will be movement of employers away from offering “defined benefit” plans and toward offering “defined contribution” plans, agreed the experts who presented to the GBC.

Hospitals and health care providers support the federal reform act’s goals of expanding access to insurance, Peterson said. Uninsured patients “tend to access the health care process at a pretty late stage” of their conditions, he said, projecting that reform would reduce the percentage of uninsured Marylanders from 14 percent to 7 or 8 percent.

Irreversible movement

Accomplishing the other goals of the federal reform legislation – strengthening quality of health care and reducing its cost – are where unknown factors and unintended consequences could come into play.

Among other things, the legislation will provide grants to small employers that establish wellness programs, authorize Medicaid coverage of an annual personal comprehensive health risk assessment and require health plans to provide no-cost basic wellness services including preventative care and screenings for women, infants and children.

The health care industry is moving irreversibly in the direction of value-based payment to providers. Expect an emphasis on managing patient care and keeping patients out of high-cost situations, Chrencik said.

Such provisions could include incentives that reinforce productive behavior on the part of both providers and patients. One goal could be to reward providers whose patients “actually lose the weight and don’t just think about it,” Burrell said.

Other important quality-related issues include workforce development and information technology.

A key workforce challenge is recruiting more primary care doctors. Most current medical school graduates are opting for specialties rather than primary care practices, the experts reported.

In putting together health care reform, “there hasn’t been a whole lot of good thinking about how to inevitably expand more training slots,” Hopkins’ Peterson said.

Medical providers must also invest in information technology to better share information on patients when they move between providers.

“It’s a big deal, and as the margins of health care get squeezed, that’s a big problem,” Peterson said.

‘A series of experiments’

Meanwhile, a major concern among health care providers and insurers is how the cost of expanding already massive federal and state Medicaid budgets will be funded, Peterson said.

Federal funding for Medicaid, the government health care program for low-income individuals and families, has historically amounted to roughly 50 percent of its cost in most states, with the rest coming from the state.

The health care reform act calls for 100 percent federal funding of states’ Medicaid expansion costs between 2014, when the act takes effect, and 2016. After that, the federal share of expansion costs would gradually ease to 90 percent in 2020 and thereafter.

The potential cost of wide-ranging federal health care reform is unquestionably “the elephant in the tent,” Chrencik said. “Clearly, this act is trying to bend the cost curve.”

But many in the industry remain skeptical of the Congressional Budget Office estimate that the reform will ultimately result in a deficit reduction of $124 billion.

In any case, beyond the specific insurance reform, the Affordable Health Care Act’s cost-reduction provisions are, in effect, “a series of experiments,” and no one really knows what the ultimate cost implications will be, Burrell said.

Health care reform is a public policy priority for which the stakes couldn’t be higher. One way or the other, it will greatly impact the private sector, the economy and quality of life in our nation.

For business owners, it is important to identify someone in your company who will develop a strong knowledge of this important legislation. (To learn more about the Affordable Health Care Act, go to the Health Care Committee section of the GBC Web site,, to access a summary of the major provisions of this legislation.)

Although the Supreme Court may have issued a landmark decision on the legality of the legislation, one thing is clear: For government and industry policy-makers, the reform process isn’t over. It’s just beginning.

Donald C. Fry, president and CEO of the Greater Baltimore Committee, writes a monthly column for The Daily Record. His e-mail address is