The U.S. pays more for health care than every other country in the world.  Some blame the fee-for-service medical payment system for this.   They’re wrong.  Government regulations and a 3rd party payment system are the real culprits.  Instead of making health care more affordable as its name would suggest, the Affordable Care Act (ACA) has doubled down on the very factors that are at the root of the problem.

Health care reformers like to say that the fee-for-service payment system allows doctors to enrich themselves by prescribing expensive treatments and charge exorbitant prices.  That my be true in some cases but it wouldn’t happen in any case if people had to pay directly for their health care.  The truth is, right now, many, if not most, don’t care how much medical services cost them.  Patients seldom ask the price of a treatment the doctor suggests because they’re not paying directly for it.  A surgeon contributor to Kevin MD‘s blog, recently wrote that in 40 years, he couldn’t remember any patient asking the cost of operations he’s performed.

In general, people don’t pay the doctors, labs, hospital, or clinics for the health care they receive.  It’s an insurance company or the government who signs the checks.   For people who are covered by an employer or Medicare, even the cost of the insurance is discounted.  When it comes to medical bills, in most cases, people are spending what they think is someone else’s money – a 3rd party: an employer, an insurer or the government.  However, they are, in fact, paying for it.  They’re paying for it with higher insurance premiums, higher taxes and lower salaries.  And unless there’s change, the situation is about to get worse.

Health Affairs, the highly respected journal on health policy, reported the findings of researchers who conducted a series of focus groups and surveys to determine how people make decisions about their medical care.  They found that people today, given the chance, regularly chose more treatments, the newest treatments and the most expensive treatments over just as effective, but cheaper, alternatives to solve their medical problems.

In one part of the study people were asked to choose between a CT and the much more expensive MRI scan, each covering the same ground.  Even when the high cost of the MRI was emphasized, people were unwilling to accept the cheaper CT scan.  The belief held by many in the group was that you get what you pay for…. If it costs more, it must be better.  Illogical thinking didn’t stop there.  The researchers found that people will demand an expensive treatment even when the odds are only 1 in 500 that it would be successful.  If the cost for this would came directly out of their pockets, I doubt they’d do this.

Some of the participants in the Health Affairs study felt vengeful towards health insurance companies.  Making an insurance company pay for expensive medical treatments was a way, some said, of getting their monies worth and ‘getting back’ at health insurance companies.  That some would have this attitude isn’t surprising given the vilification heaped on health insurers by people involved in the health reform debates.  But this attitude also betrays a lack of understanding of how insurance works: the high cost of health care, in fact, drives the high cost of health insurance.

The Health Affairs researchers were surprised at the number of people in the study who didn’t see this.  While most people in the study understood or at least were familiar with the issue of unsustainable health care costs, few saw any role for themselves in keeping health care costs down by making more economical decisions.  The study researchers determined, furthermore,  that it would be very difficult to change consumer thinking on this.  The only solution, they concluded, was to explore better and more effective means of education.   Really?

No one person is going to chose cheaper medical care unless he sees it in his best interest to do so.  And that can only happen if he pays more directly for the medical services he chooses.  One only has to look at medical procedures that people do pay for to see the truth of that.  The real, inflation adjusted, price for cosmetic surgery, not covered by health insurance, fell over the last 20 years despite advances in technology and increased demand.  When there’s price competition, medical providers look for cheaper and more effective ways to get the best result at the cheapest price. Unlike most other medical services, cosmetic surgery prices are readily available.  They have to be.  Because when patients pay with their own money, they want to know the cost.

But prices for most medical procedures are rarely available because the people who use these services don’t need or want to know the cost.  In another recent study, analysts found, not only a lack of price transparency but a wide variance in cost such that the same medical treatment performed in the same city varied as much as 700% with no difference in quality.  This couldn’t happen if there was competition and there’s no competition when people have no incentive to “shop around”.

The new Affordable Care Act (ACA) has distanced people still further from the cost of the medical treatments they receive.  In the name of health care reform, regulations have been put in place that raise the cost of health insurance still more, giving people all the more reason to ignore the real cost of their health care.

Instead of making health care more affordable, the Affordable Care Act had done the opposite.  In this instance, it has all but disallowed catastrophic health insurance, the insurance that would cover serious illnesses at the lowest cost.  In the past, people with this type of insurance could pay for their day to day health care needs with dollars saved in tax free Health Savings Accounts and Flexible Savings Accounts. Instead of promoting a way to encourage people to directly pay for their medical expenses, the ACA has made the use of these accounts more costly.  It’s time to call it the Unaffordable Care Act.

U.S. health care spending last year totaled $2.68 trillion.  That’s 10 times what health care cost in 1980 and  two-and-a-half times per capita more than most developed nations in the world.  Speaking to the American College of Physicians, Ezekiel Emanuel, M.D., well-known health care policy consultant, blamed the fee-for-service payment system for the high cost of medical services in this country.  He said doctors were the only ones who could change that.  He couldn’t be more wrong.  It’s not the fee-for-service payment model that’s the problem and doctors aren’t the only ones who can change the system.

Just a few days before Dr. Emanuel’s address, Medicare officials announced they would consider covering gender change surgery for people afflicted with what is called gender identity disorder.  Not only is this procedure extremely expensive and not always successful, it calls for a lifetime of treatments and hormone therapy necessary to maintain the desired gender effect.   Medicare coverage of this treatment would not just affect those 65 and over but all of us because whatever Medicare covers becomes the basis for all other health care insurance coverage.  We all would end up paying extra for it.

Now it happens that this particular matter was at least temporarily tabled by the decision makers at Medicare but the push to add still more benefits to everyone’s health insurance continues unabated.  AB 460 is under consideration by the California legislature right now.  It’s a bill requiring all health insurance to include infertility treatments for gay couples.  If a couple cannot become pregnant after a year of co-habitation (I’m not kidding here) their health insurance would provide for egg donations and surrogates for gay male couples and sperm donations and artificial insemination for lesbian couples.

Because government directly provides Medicare and Medicaid and regulates all other health insurance, special interest groups are free to pressure elected officials and un-elected bureaucrats to support their pet projects with your tax and health insurance dollars.  This is a big reason the cost of health care has gotten out of hand and it’s nothing physicians acting as physicians can do much about.

Reader comments accompanying the Medicare gender-change announcement  expressed concern for the people who are gender-challenged and felt these people should be helped.  I’m sure many likewise feel compassion for family-aspiring gay couples.  Rather than demanding that everyone else should pay for rectifying these problems, these special interest groups should spend their energy raising money amongst themselves for these special causes.

Most of us would not willingly pay extra for sex change surgery or infertility treatments for gay couples or a host of other things that have nothing to do with us.  Unfortunately, the Affordable Care Act (ACA)  and the un-elected bureaucrats of Health and Human Services (HHS) have begun, in the name of health reform, to add even more benefits we’ll have to pay for.  Dr. Emanuel’s fellow doctors can’t do much about this either.

Our next blog will look at the other reason health care costs in our country are so high; and it’s not fee-for-service.

The Affordable Care Act’s (ACA) individual mandate requiring everyone to purchase health insurance has gotten all the attention so far; but there are many more ACA mandates on the way.  One was recently announced; and, potentially, it’s just as significant.  After January 1 2014, all individual health plans sold must include 10 required benefits that today only 2% of plans now cover.  This mandate alone will raise the cost of individual health insurance now and, eventually, affect us all.

Starting in 2014, the ACA  requires all health plans sold to individuals and small group organizations and all state Medicaid plans to cover what Health and Human Services (HHS) has determined are  Essential Health Benefits:

*   ambulatory patient services
*   emergency services
*    hospitalization
*   maternity and newborn care
*    mental health and substance abuse (drug and alcohol) services
*    prescription drugs
*   rehabilitative facilitative services and devices
*    preventive and wellness services and chronic disease management
*   pediatric services, including vision and dental care

HHS will also ensure that there will be no dollar limit on the amount spent on these benefits annually or within anyone’s lifetime.

As for the details under each category, HHS has asked each state to determine the amount, manner, and duration of services covered by using one of the state’s current most popular, by enrollment, health care plans as a benchmark.  Any of the  ACA’s  Essential Health Benefits not now in the plan must be added.

So how did HHS come up with these 10 benefits?  They said the health coverage benefits deemed essential would be determined by using a typical employer sponsored benefit plan as a model.  But very few company plans actually include all these types of benefits; and the ones that do could not be considered ‘typical’.  In fact, only 2% of all health care plans available cover all the essential health benefits, with mental health, substance abuse and pediatric services being the least covered benefits and maternity benefits falling close behind.

HHS also said the Institute of Medicine (IOM), an independent non-profit organization that provides unbiased advice to decision makers, would advise them how best to determine benefits that could be considered essential.  But the Institute’s 300 page report to HHS stressed that plans must be affordable and modeled on mid-tier health plans offered by small employers.  The Institute specifically warned against adding costly excessive benefits.  The fear expressed in the report was that if the plans were too expensive, healthy people would rather go without costly health insurance.  This would leave an insurance pool dominated by people who use more insurance than they’ve paid for which would drive up the price of health insurance still more. IOM analysts, in their report, specifically cautioned against adding any nice-to-have benefits.  They compared that with a shopper who adds all the things he wants to the grocery cart; but when he has to check out, finds he doesn’t have the money to pay for it.

HHS promised, after they posted the initial list of their possible essential benefits in November 2013, they would hold ‘listening’ sessions around the country before any final decision was made.  But, when the final rule concerning essential benefits was issued at the end of February, there were few changes.  Over 6000 comments were received and ignored.  So, again, how did they choose their mandatory list of essential benefits?  Maybe it was the shopping cart paradigm they followed after all.

People spending their own money wouldn’t buy plans that include all those benefits.  They’d be too expensive.  What’s more, most people don’t need the insurance protection those benefits provide.  The idea is to force everyone to pay for benefits only a few will need.  Why is everyone paying for benefits many, if not most, people can afford to pay for themselves?   Up until now, for example, most people have managed to pay for maternity expenses themselves.  Truly poor people are covered by Medicaid.

In effect, when everyone’s paying, with no dollar limit, for the mental health and substance abuse treatments used by the few it becomes a subsidy on those benefits for the recipients.  The cost of anything that’s subsidized goes up with the increased demand.  The insurance covering these costs must go up as well.  It’s an insidious cycle.

Right now, these dictated benefits are being force-fed to people who buy their own insurance and people in small groups; and states must offer these benefits to everyone on Medicaid.  Right now, larger employers are exempt from compliance.  However, it’s only a matter of time before they too will be forced to cover all 10 health care categories.  And what stops HHS from adding still more categories?  Actually, nothing.

Because of the Affordable Care Act (ACA), the cost of everyone’s health insurance will be going up.  But the cost will be going up the most for the very people the health care reform law was supposed to help – people who must purchase their own individual health care plans.  These people, 27 million of them, are not covered by any employer’s large group plan.  They’re on their own.  They’ve always faced higher rates and, because of that, frequently go without health insurance.  Right now, however,  it looks like the Affordable Care Act will actually make things worse for them.

Major health insurance companies across the country are predicting premiums for individuals buying their own plans to climb 40 – 116%.  Even the subsidies offered to people buying health insurance on the new exchanges won’t be enough to offset such large increases.

The cost of any insurance is determined by centuries-old formulas based on how much risk insurers can accept in insuring people against calamities. If there’s a high degree of probability that they’ll need to pay out more because of circumstances beyond their control, they have to increase the price of the insurance or go out of business.  This risk can be mitigated if large groups of people purchase the same insurance plans because it’s unlikely that they’ll all suffer hardship.  This is why individual insurance plans are more expensive… there’s no one else to share the risk.  The ACA seemed to address this by requiring health insurance companies, after January 1, 2014, to group all individual and small group participants into one big risk pool, theoretically lowering the overall risk as well as the cost of health insurance for these people.   Unfortunately, that won’t work.

Before we explain, let’s take a look at how the ACA will raise the cost of health insurance for everyone this January.

For starters, health insurance plans in 2014 can’t charge differently for people on the basis of their health status, sex, occupation, credit worthiness or how long they’ve had coverage.  Age and smoking can be considered in charges but only on a limited basis. The concept of charging everyone the same regardless of the higher risks carried by certain categories of people is called community rating; and states that have forced their health insurers to use it have larger and fewer insurance companies and higher premiums than the rest.  Now the entire country will face these consequences.

Guaranteed issue, another insurance concept, is guaranteed to raise insurance rates as well.  This occurs when all insurance policies must accept everyone regardless of their health condition and regardless of whether they’ve had health insurance up to now.  Oliver Wyman Management Consultants predicts this alone will push premiums up by 40%.  More about guaranteed issue later….  The sad part is that the very real plight of people not able to get insurance because of pre-existing conditions could have been handled by subsidized risk pools for such people.  Instead,  we’ve introduced a moral hazard that will degrade our national sense of fairness and honesty and cost us millions in dollars that could be put to better use.

Another integral concept of the insurance business is to limit losses by capping the total dollars an insurance plan will pay out in one year to any one policy holder. Beginning 2014, insurers must, according to the health reform law, cover all yearly medical expenses on all health insurance plans no matter how high these costs might be.  This will not only raise premiums for everyone but raise the overall cost of medical care as well.  When the sky’s the limit, prices will go up….. ask any economist.  People can go bankrupt over medical costs.  That’s another real problem.  Like the issue of insuring those with pre-conditions,  the ACA uses an ax and sledgehammer on the problem instead of specifically helping those people directly.

There’s one premium-cost raiser that is aimed specifically at individuals and small groups.  It’s the Essential Health Benefits (EHB) that the ACA says must be covered in every health care plan sold to individuals and small groups.  These benefits are listed under 10 broad coverage categories that most plans today don’t cover such as mental health, prescriptions, drug rehabilitation, maternity and newborn care plus pediatric vision and dental care..  Only 2% of health plans today include all the services listed under these Essential Health Benefits. What this means is that individuals, whether they want or need this extra coverage, must pay for it.

The authors of the ACA decided the best way to lower the cost of health insurance was to force everyone to buy it.  This doesn’t affect workers whose employers provide health benefits.  It doesn’t affect poor people or old people.  The government covers them.  Who’s left?!  It’s the individuals and small employer groups that this controversial provision targets.  The health care reform law calls for insurance companies to group these people together into their own large risk pool to lower their premium costs.  This, it turns out, is nothing but a sucker punch.

The penalty for not buying health insurance, $95 rising to $695 after 2 years, is tiny compared to the cost of the insurance.  Even later, when the penalty is based on income, it still is much less. Healthy people will forgo costly health insurance, pay the fine, and figure they’ll get health insurance when they need it because of guaranteed issue.   The people and their families who have conditions requiring immediate health care will predominate the new risk pool.  With few healthy people paying for many health care costs, the cost of health care will go up even more for the very people the Affordable Care Law was supposed to help.  Affordable, this law is not.

Unless the state health insurance online exchanges are open for business on October 1, or soon after, there won’t be time enough for the millions of people expected to be processed and enrolled in new health insurance plans by January 1, 2014. That’s the grand opening of the Affordable Care Act (ACA), and it’s through the state exchanges that people will receive the benefits of that law.  Given all the promises and hype about the health care reform initiative, a less than smooth beginning would be a huge embarrassment and a loss of faith in the government’s ability to solve our health care problems.

Not all states are building their own exchanges. Just  17 have declared their intention to build a State-based Exchange with 7 others electing to work with the federal government to set up a Partnership Exchange.  Twenty-six other states have taken an ACA option that calls for a federally run exchange in states declining to create one of their own.

What are the chances that 6 months from now, all the states will have their health insurance market places operational? -  Right now, it doesn’t look promising.

To help with the cost of building these exchanges, Health and Human Services (HHS) has offered the states funds to create their exchanges and maintain them over an initial period. Every state applied for the initial planning level grant; but only 12 states, so far, have been approved for level 2 funding, suggesting that development of exchanges for the other states hasn’t moved past the planning stage.  Exactly how close the states are to completion is not well publicized

New Mexico, one of the states building their own exchange, waited until January, 2013 to finalize agreements with an IT contractor.  Worse, the bill to actually start work on the exchange didn’t pass the New Mexico legislature until earlier this month and was signed into law by the governor just 3 days ago.  Minnesota and Idaho are in similar straits.  These late starts don’t bode well for an October completion date.

However, even states that started soon after the ACA was passed are experiencing delays. Media sources have cited vague and changing HHS ‘guidance’ to explain the delays in developing Connecticut’s exchange. Last year alone, government instructions on how health care reform is to proceed amounted to 70,000 pages!  Developing an easy to use, error-free, and accurate system on time under these semi-chaotic conditions alone would be daunting.

Meanwhile, it’s the federal government that’s on the hook for building 26 exchanges and partnering with 6 more.  No one expected this many states to abdicate control over their own health care exchanges.  One official, Gary Cohen, Director of the Center for Consumer Information and Insurance Oversight, assured lawmakers that development of these exchanges was ‘on track’ to be up on October 1.  However, another official admitted the work to be done by the feds is ‘staggering’; and Scott Serata, president and CEO of Blue Cross and Blue Shield Association, doubted the veracity of government assurances that all is going well.

Honest, straight-forward information about the progress of the exchanges being developed is not readily available. The Kaiser Family Foundation maintains a site that purports to track each state’s exchange activity.  But the information offered is largely based on official announcements and press releases, not much on specific development activity.  That there’s activity is evident.  Gartner Consulting sees all the big IT development companies, Xerox, Accenture, IBM, CGI and others are fully engaged by both the states and the feds.  But will their efforts be enough?.

Respected critics cite the late starts, scope and complexity of the task in their determination that not all the exchanges will be finished on time.    John Goodman, noted health care economist, believes only Massachusetts,  Utah and maybe Maryland and Colorado will be ready.

I’m not that pessimistic.  I think California, awarded a whopping $909 million by the feds and the first state to pass legislation initiating an exchange, will have an exchange up on time.  I also believe New York’s will be up and running as well.  (Accenture, a consulting and IT development company accepted $359 million to build and operate the California exchange while  New York  turned to the contractor responsible for its current Medicaid system to build its exchange.)

However, there’s a larger issue here.  Supporters of the health reform bill are putting everything they have behind getting enrollment started in a big way.  A successful kick-off would silence critics and start health reform in this country on a positive note.  Even more importantly, affordable insurance plans depends on many healthy people participating in these exchange market places.  Will these enrollment goals be met if all the health insurance exchanges were operational on October 1?

Far from it.  Even if all the exchanges were operating smoothly, participants would have to wade through an impossibly complex qualification process.  HHS recently released a sample enrollment form listing the most basic information required for the average applicant.  It’s 21 pages long!  A longer, 60 page document listed the information necessary to process all the benefits offered by an exchange.

The complexity reflected in the amount of information needed to obtain benefits presents a formidable barrier for those who want those benefits.   The Associated Press called it more complicated than any tax form.  The sad part is that the people who designed the form worked hard to make it as simple as possible.  The really sad part is that getting qualified is only the beginning of the process.  Choosing among 5 types of health insurance offered by innumerable health insurance companies will be another challenge.  So, despite the Herculean efforts being spent to get the health insurance exchanges finished in time, other factors will ultimately define the initial failure or success of the Affordable Care Act.

The states’ online health insurance exchanges form the cornerstone of the 2010 health care reform law.  It is through them that people will receive the benefits of the Affordable Care Act (ACA) and those benefits, by law, will be available starting January 1, 2014.  To make that possible, the exchanges must be up and running October 1, 2013, in order to process the 27 million people expected to participate.  That’s less than 7 months from now.  Many experts, however, doubt that this deadline can be kept by most of the states.  If true, this will have serious consequences.

What it is and why it’s important

Exchanges(n) are, by definition, organized market places for trading in specific types of goods.  The New York Stock Exchange is one example.  The state health insurance exchanges being set up are online internet-based market places that will make available 5 types of government approved health plans, represented by any number of health insurance companies.

But the exchanges defined by the ACA are much more than places to buy and sell health insurance.  These exchanges will also process requests for government subsides and tax credits and qualify more people for Medicaid, the government health insurance for the poor.  They will serve as the portals to people who, until now, had little or no health care coverage, one of the biggest objectives of the health care reform law.

Who Can Use It

Unlike most exchanges, only certain people can use these online systems.  To qualify, individuals must be either unemployed, receive inadequate or no insurance from an employer, or have an income level that qualifies them to receive government tax credits and subsidies to purchase health insurance through the exchange.   Others, whose income falls  133% below the poverty level can use the exchange to apply for Medicaid. (within states that have agreed to cover this expansion of Medicaid eligibility)  Small businesses with up to 100 employees can also use the exchange to provide employees with health coverage.

Complications in Building the Exchanges

Simply determining eligibility will be a daunting computer programming task.   To determine who qualifies, each system must interact with data sources from Social Security (for identity), IRS (work employer status) Homeland Security (immigration status),  state Medicaid agencies and other government offices.  Information on what health plans are offered by each company in each state and exactly what benefits are covered and how much employees must contribute is information that’s not easily available.  How this data is captured and stored has to be developed and implemented.  The logic for determining exactly who’ll be eligible to receive benefits is based on government regulations, a moving target.  In the last year alone, Health and Human Services (HHS) issued 70,000 pages of guidance.

This promises to be a daunting computer programming endeavor.  Designing and setting up such a complex online system will rival any commercial or government system ever built. Computer systems a fraction of this size take years to build, are very often delayed; and many efforts fail altogether and are scrapped.

Unfortunately, faced with the uncertainly of the Supreme Court decision, the initial lack of essential requirements from HHS, and unwilling to risk the estimated $30-40 million needed to build such an enterprise, most states delayed development of an exchange despite the looming deadline.

Given the immense scope and complexity of this task,  health care and IT analysts predict many states won’t make the October 1 exchange enrollment start date.  John Goodman, health care economist, predicts that besides Massachusetts and Utah with existing exchanges, only Maryland and maybe Colorado will have an exchange operational by the October 1 deadline.

What happens if exchanges are not up in time?  Theoretically, people can qualify for government support and enroll in approved health plans without an online exchange.  They can do what they did before there ever was an internet: stand in line at state government agencies, fill out paper forms and go home and wait for a letter in the mail.  That narrow funnel won’t accommodate the millions who will flood the system with their requests for health insurance and public assistance.

The success of the ACA depends on a significant number of previously uninsured people becoming insured.  A low initial turnout, regardless of the reason, would be an embarrassment and cast yet another shadow on the already beleaguered  health care reform law.

Up until now, most of the news about the Affordable Care Act (ACA) centered around the individual mandate requiring all people to have health insurance. But there’s another ACA mandate, the employers’ mandate, requiring companies to make health insurance available to their employees.  Although the full implementation of the health reform law isn’t until January 1, 2014, companies must take actions this year to comply with the law; and these actions will effect the people who work for them.  Original estimates saw smooth compliance and little disruption in connection with this mandate.  Predictions now see something else.  They see companies reducing work hours, cutting their work force, raising workers’ costs for health insurance, and some even dropping health benefits altogether.

According to the health reform law, companies with at least 50 Full Time Equivalent (FTE) workers must pay a penalty if they don’t offer their full-time employees government approved health insurance. However, the hours of part-time workers are used in determining the number of full-time employees.  The weekly hours worked by both full-time and part- time employees are added up and divided by 30 (the number of hours a week one full-time employee would work under the law)  If the result is less than 50, that company is not obligated to provide workers’ with health insurance.

However, if the hourly calculation results in more than 50 FTE, a lot more questions need answering.  If the company doesn’t offer any health insurance and at least one employee qualifies for a government subsidy, that employer must pay a penalty each year of $2000 times the number of FTEs minus 30.  A company with just one employee over the 50 FTE threshold would pay $42,000 the first year.  ($2000 X (51 – 30 = 21))  This penalty will increase every year along with the relative cost of health insurance.

If a company has more than 50 FTE, does offer employees health insurance but doesn’t cover at least 60% of health care expenses or if employees must pay more than 9.5% of their income for coverage, the employer is still on the hook.  The company employees must then be offered another option.  They can purchase health insurance from a government run exchange and receive a premium tax credit.  If they accept, the company must then pay a $3000 penalty every year for every employee receiving a tax credit, up to a maximum amount of $2000 times the number of the company’s FTE minus 30.  This penalty will also rise every year to match any increase in the cost of health insurance.

Small companies employing part time, low-skilled help and operating under a tight profit margin need to evaluate their financial prospects under the ACA employer mandate.  Will they limit hiring and reduce work hours to keep under the 50 FTE limit to avoid penalties and the added expense of health care benefits?  Human resource experts say many will.  Nearly half of all retailers, restaurants and hotels are in this category as well as most franchisees.  This has the potential of effecting the very people who can least afford it.

Meanwhile, health insurance costs are going up for all companies.  Somehow ‘experts’ failed to see that providing free preventive medical treatments, covering 26 year old ‘children’ on parents insurance,  eliminating the annual limit that insurers must cover, and other regulations plus a tax on insurance companies would effect the cost of even large group health insurance.  The  Congressional Budget Office (CBO) and other analysts originally saw little danger that companies would drop expensive health care benefits for their employees and just  pay the much cheaper penalty.  Now it’s become a very real possibility.  The CBO now expects employers will dump coverage for 7 million workers,  double its previous forecast,  and admits the figure could be as high as 20 million.

To deal with higher insurance costs, many large companies, while not dropping coverage altogether, are raising employees’ share of the cost this year, according to a Kiplinger report.  Other companies are planning to replace conventional health benefits with consumer directed health care plans that provide incentives for employees to make more value-oriented health care decisions.  The most popular version has employers contributing to tax-free Health Savings Accounts (HSAs) that workers can use for day to day medical expenses or save for future medical needs.  Large medical expenses are covered by a cheaper high deductible or catastrophic health care policy provided by the employer.

We were famously told that if we liked our health insurance plan, we could keep that plan.  I don’t think so…. not after this year.

After 3 years of rumbling court fights, legislative threats and golden promises, the Affordable Care Act (ACA) moves into first gear and begins 2013 with new taxes and a few changes to our health care system.  But the speed picks up sharply October 1 when people will begin test driving the new health insurance exchanges, the cornerstone of the ACA.

October 1, 2013 is the official kick-off date for the health insurance exchanges to begin offering health insurance plans that will take affect Jan. 1, 2014.  The people qualified to buy insurance through the exchange are:

*   new Medicaid enrollees (people earning less than 138% of the Federal Poverty Level (FPL)
*   people qualified to receive government subsidies ( families of 4 annually earning up to 4 times the FPL which, in 2012, would be $92,200)
*   employees of businesses who can’t or won’t provide minimum health insurance coverage
*   small businesses seeking health insurance for their employees
*   self-employed individuals

As required by the ACA, March 1 was to be the deadline this year for employers to inform their employees of the exchange and the new options available to them under the ACA.  However, the Labor Department, has delayed this deadline until later this year.  At that time, employees must be told in writing the percentage of their company-provided health insurance they’ll be responsible for in the coming year.  If their share is more than 40%, or more than 9.5 percent of the employee’s household modified adjusted gross income, employees may be eligible to purchase subsidized health insurance through the exchange.

The health care reform law forces businesses, particularly small businesses, to make critical decisions that could result in major changes to employee health care.   The big date for them is June 30.  The number of full time employees employed on that date will determine a business’s  status under the ACA.  Small businesses, defined by the law as having less than 50 full time employees including full-time equivalents (FTEs),  are exempt from providing the mandatory health benefits required by the law.

Full time employees, according to the ACA, work  30 or more hours a week/120 hours a month.  A company’s FTE number is calculated by adding the number of hours all part-time employees work in a month divided by 120.  If a small business does provide health insurance, it still must conform to most of the minimum standards as defined by the ACA.  Businesses with more than 50 employees including FTEs face hefty penalties if they don’t provide health insurance or if the insurance they provide doesn’t meet ACA guidelines.

Other changes scheduled in health care this year are, for many, welcomed ones:

-  Seniors in the Medicare Part D doughnut hole will pay only 47.5%  of the cost for brand name drugs and 79% for generics.  However, the limit they must reach before they gain full coverage, $4750.00, will be computed using the full retail cost of the drugs.
-  Medicaid patients should find more doctors willing to accept them as patients.  Starting January, 2013 and continuing through 2014, Medicaid doctors will be reimbursed at the level Medicare doctors are paid.
-  Sick people will be covered by their health insurance plans for up to $2 million in medical expenses this year, compared to last year’s $1.25 million.
-   Everyone, sick or healthy, will cheer the requirement that health insurers provide a clear easy-to-understand summary of their health care plans’ benefits and coverage.  In addition, each summary must conform to a standard form to make it easy for prospective buyers to choose between competing health care plans.  Also, a glossary of the terms used must accompany each plan summary, enabling readers to understand health insurance  jargon.

These are the scheduled changes to health care we’ve been told to expect.  However, with all the legal wrangling, political maneuvering, and sheer enormity of what is being attempted  here, some unscheduled surprises are sure to occur.  Look for my predictions in the next blog, Health Care in 2013: the Reality.

Under the Affordable Care Act (ACA), Medicaid, the health program for the poor,  will be expanded, enabling 32 million more people to have health insurance.  The law will also subsidize the cost of medical coverage for families of four earning up to 4 times the Federal Poverty Level.  This means that families with incomes up to $92,200 will get help purchasing health insurance.  In order to fund the down payment on this massive effort, five new taxes, totaling quarter of a trillion dollars, will take effect this year starting January 1.

Every one of us will be affected by at least one of these taxes.  Incredibly, three of these specifically targets sick people.  Previously, people whose annual medical expenses totaled 7.5% of their income could deduct from their taxes all health care costs over that amount.  Now, their costs must reach 10% of income before they can take deductions and lower the cost of their medical expenditures.

Sick or injured patients requiring a new medical device or in need of a treatment or test involving  new medical equipment, as defined by Section 201(h) of the Federal Food Drug and Cosmetic Act (FFDCA), will most likely pay more for it to cover a new 2.3% sales tax on medical devices.  Under the law, instruments, machines, implanted devices and the parts and accessories used in diagnosis, cure and treatment of various conditions will be subject to a 2.3% sales tax to be paid by the manufacturer for each unit sold regardless of whether the company is profitable or not.

Another tax affecting sick people limits the amount people can put into their Flexible Savings Accounts (FSAs) to $2500 annually.  35 million people use FSAs to save tax free dollars for medical expenses not covered by their employer’s benefit plans.  Up until now, they could save up to $5000 to cover out-of-pocket health care needs, co-pays, deductibles, orthodontia, and costly health care situations such as the care and education of special needs children.

Let’s think about this:  Lower tax deductions for sick people.  Higher costs for people using medical equipment.  Higher out-of-pocket costs to cover health care needs.  Why are we making health care more affordable for some people by making it less affordable for others?

Here’s another tax that begins this year.  This one applies to individuals and married couples earning $200,000/$250,000.  Both employer and employee must pay an extra .9%  Medicare payroll tax on amounts earned above the $200,000/ $250,000 threshold.  An added problem is that, unless they work for the same company, a married couple  must be responsible for computing and submitting this portion of their payroll tax themselves, something never required before.

The last 2013 tax is one that has been heating up the email rumor mills for the last 2 1/2 years.  The email purports that hidden in the  ACA is a new 3.8% tax on all home sales.  Well, not quite.  There is a new 3.8% tax in the health reform bill; but it only applies to those with an adjusted gross income of $200,000 ($250,000 for married couples).  They will be subject to a new 3.8% Medicare payroll tax on ‘unearned’ income such as stock sales, rent, dividends, royalties, and, yes, real estate sales.

Of course, these new taxes won’t come close to paying for the ACA.  There are other taxes, fees, program cuts, and penalties as well as the $761cut to Medicare. But the biggest toll being paid for this bill is the huge increase in insurance rates we’ll all have to pay.  Free preventive medical services and birth control, required health insurance coverage for adult children on their parents policies, and higher limits on annual medical expenses have already raised rates.  Next year, health insurance will be covering much more.  None of this comes free.

Buried among all the scary articles about the high cost of health care comes some really good news:  Affordable, consumer-friendly devices are being made available that attack the medical issues most responsible for health care’s high cost.  It’s the chronic diseases, heart disease, high blood pressure, diabetes and stroke that account for 75% of that cost.  For the most part, these medical issues are also the most preventable; and that’s where the new, easy to use, devices come in.  This got a lot of attention at this year’s Consumer Electronic Show (CES), the big showcase of the latest in product developments.

Two of these innovative medical tools even made it to the coveted top 10 of the Last Gadget Standing, a contest that awards new innovative products that will make a difference and endure.  SecuraPatch,  a wireless adhesive the size of a quarter made to look like a band-aid, was one of them.  Its sensors are designed to track heart and respiration rate, skin temperature, stress, activity and even posture.  Based on parameters that the user or medical advisor has set up, the medical information is collected and transmitted continuously via email or text message to the wearer, caregivers or medical personnel.  It can be set up for 24/7 monitoring, providing emergency responses to any life threatening situations.  SecuraPatch will be available by June and promises to be moderately priced.

30 million Americans have diabetes and must test their blood sugar level multiple times a day.  Telcare’s Wireless Blood Glucose Meter, another of the Last Gadget Standing finalists, collects these findings via smart phone and provides immediate advice to the patient and, if necessary, warning alerts to medical caregivers.  The application also collects the patient’s  diet, exercise and medications and provides graphical analysis of the interactions of these factors.  For encouragement and support, a social networking base is available.  Since its launch, doctors and patients have reported significant improvements and parents of diabetic children have found it particularly helpful.  It is FDA approved and costs just $150.

The health related booths at CES featured one break-though medical device after another.  They ranged from the amazing,  the NeuroSky headset that allows the wearer’s brainwaves to control a toy helicopter, to the mundane, the Hapi fork that vibrates when a person eats too fast.  But the device that touched my heart, literally and figuratively, was AliveCor’s Electrocardiogram (ECG/EKG).  Lives have already been saved because of this invention.  It’s a tool that snaps onto an iPhone 4 or 4s like a case and wirelessly communicates with an app on the phone.

Normally, an ECG reading requires a visit to a medical facility where medical personnel attach electrodes to various parts of one’s body before a ECG readout is possible.  To record their ECG on AliveCor’s instrument, however, a person simply holds the phone horizontally with both hands, mirroring a depicted graphical display. The measurement is then transmitted to people or institutions designated to receive it.  It provides A-fib sufferers  long-term remote monitoring and gives information to medical caregivers that they couldn’t get from one-off office visit testing.  Post-surgery monitoring can take place on an on-going basis without numerous doctor visits.  Children suffering from heart problems have especially benefited, making it easy to get their readings and giving their doctors more information over time.  This FDA-approved, life saving tool requires a doctor’s prescription but costs just $199.00.

SecuraPatch, Telcare’s Blood Glucose Meter, and AliveCor’s ECG Meter as well as many of the other affordable personal medical implements at this year’s CES are made possible by the convergence of 3 breakthrough technologies: Bluetooth communications, Cloud computing, and the development of the Smart Phone.  Bluetooth provides short distance almost instant wireless transmitting.  The Cloud refers to a form of shared storage that allows people, through computer programs or Smart Phone applications, to transmit and retrieve information to and from the Cloud.  The cost of access to these super-useful technologies has come down such that they’ve spawned hundreds of products never dreamed possible before.

The idea that someone could own their own serious ECG machine would have been crazy just a short time ago.  The fact that a person’s real-time vital signs can now be instantly available to doctors and care givers in other locations makes for better medical decisions and immediate response. The notion that all this could be had with comparatively little cost will contribute significantly to bringing down the cost of health care; and that’s welcome news indeed.