The Health Care Law Today and Tomorrow
July 11, 2012
Thank you, Dean Goldman, and good afternoon.
Over the last two weeks, there’s been a lot of commentary about what the Supreme Court decision on the Affordable Care Act means for politicians in Washington. We’ve heard speculation about winners and losers, about who’s up and who’s down, and about what this means for November. And with Congressional Republicans staging their 31st repeal vote earlier today, it’s clear that some want to keep the political battle going.
So I’m glad to be here with you today talk about what the health care law means for those outside Washington: the hard-working American families the law was designed to help. And to do that, we need to remember where we were as a country when the law passed.
Back in 2010, we faced urgent challenges relating to health care and our economy. Despite spending more on health care than any nation on earth, we had 50 million uninsured citizens and mediocre health results. And our health expenditures were consuming an increasing share of our GDP, threatening our global competitiveness.
Families, businesses, and government were all struggling under the burden of rising costs. Between 2000 and 2009, premiums doubled. The share of small businesses offering employee coverage dropped from nearly 70 percent to under 60 percent. And Medicare costs continued to rise, putting the Trust Fund on pace to be insolvent in 2016.
One small business owner in Florida summed up the frustration that so many Americans were feeling when he wrote to me: “I am near the breaking point. With guaranteed annual increases at 10 to 15 times inflation, eventually, we will go out of business or be forced to cancel insurance. Either way, it’s a lousy set of options.”
At the same time, the private health insurance market was becoming more consolidated and less competitive. Some Americans had dependable access to coverage in public plans: children, seniors, the disabled, veterans, and the poorest adults and pregnant women. Employees of large companies usually fared well. But that left a lot of hard-working families in a broken market where insurance companies made all the rules.
Insurers could cap your coverage, raise your rates, or even cancel your coverage with no accountability. And if you were one of the 129 million Americans with a pre-existing condition like cancer or even asthma, you had a good chance of being locked or priced out of the market altogether.
This was a successful business model for insurance companies: the five largest insurers made $12 billion in profit in 2009 alone. But it didn’t work so well for the rest of us.
The health care law was passed to address the twin issues of cost and coverage, and that’s exactly what has begun to happen over the last two years.
The law’s first principle is very simple: if you have coverage, you can keep it. So for the 250 million Americans with insurance today, the main change is that they’ll get a little more security.
The law puts in place new insurance rules prohibiting insurers from capping your coverage or cancelling it without cause when you get sick. Preventive care is now free for 54 million Americans with private plans. And there are new limits on how much of your premium insurance companies can spend on overhead costs like CEO bonuses and ads. As a result, 12.8 million Americans will get rebates from their insurance companies later this year. That’s right: insurance companies will actually be sending money BACK to their customers!
Despite what some have claimed, the Affordable Care Act does not cut Medicare benefits; in fact, it adds new benefits for seniors. The law has begun to close the insurance gap in Medicare prescription drug plans – the so-called “donut hole” – saving 5.3 million Medicare beneficiaries with the highest medication costs an average of about $600 each. New efforts against fraud and abuse are already paying off, returning a record $5.4 billion to the Trust Fund in the last two years. And yesterday, our department announced that more than 16.1 million people with Medicare have already gotten at least one free preventive service like a wellness visit or cancer screening in 2012 thanks to the law.
Small business owners are getting some relief too thanks to a new tax credit that covers up to a third of their health insurance bill. And all Americans with insurance will benefit from no longer having to pay an extra $1,000 per family to cover the uncompensated costs of Americans with no coverage.
The law is also beginning to provide better coverage choices for middle class families. Already, 3.1 million previously-uninsured young adults have been able to get coverage through their parents’ plans. And nearly 70,000 Americans, who had been totally shut out of the insurance market because of their pre-existing condition, are getting life-saving care thanks to new high risk plans.
At the same time, the law has begun breaking the stalemate in Washington on addressing health care costs. While everyone agrees that health costs are too high, there wasn’t much action in Congress prior to the law passing. And the ideas put forward by those who favor repeal would limit government health spending simply by shifting costs to seniors and patients.
The alternative vision put forward by the Affordable Care Act is to do on a national scale, what America’s best health systems have done in their communities: that’s bring down costs by IMPROVING care. Prior to the health reform law, many of the financial incentives in Medicare and Medicaid actually penalized care improvements.
So over the last two years, we’ve begun to change incentives in our health care system to reward providers for improving care. And we’ve had an enthusiastic response from doctors and hospitals. For example on Monday, we announced that a total of 154 health organizations serving 2.4 million Americans have already signed up under the law to form Accountable Care Organizations, in which providers share in the savings when their patients stay healthy – a huge first step.
All this progress has happened in the last two years. So when people talk about repealing this law, it’s important to be clear about what’s really at stake. It’s not the future political fortunes of elected politicians in Washington, all of whom already have excellent health care. It’s the health and economic security of middle class families across America.
Repeal would subject these families once again to the worst insurance abuses. It would raise the price of seniors’ medications and add financial barriers to their preventive care. It would end tax credits that are helping hundreds of thousands of small businesses cover their employees. It would force millions of young adults to once again begin their careers without the security of health coverage. And it would mean the best quality care would continue to be out of reach for most Americans.
Now is not the time to roll back this progress and start over. It’s time to build on this progress by moving forward to implement and improve the law. And that’s exactly what our department is doing.
As most of you know, two major parts of the coverage expansion in the law don’t take effect in 2014. First, new marketplaces will be set up in each state where families and small business owners can make an apples-to-apples comparison of health plans and choose the one that’s right for them.
Insurers will be forbidden from discriminating against anyone because of a pre-existing condition or charging more based on gender. Farm families, small business owners, entrepreneurs, and others who can’t afford coverage will qualify for a tax credit, averaging about $4,000 per family. And Members of Congress and their families will have to get their coverage there too, alongside their constituents.
Over the last two years, we’ve partnered closely with states to start setting up these consumer-friendly marketplaces. Far from a “federal takeover,” the law gives states maximum flexibility in shaping these marketplaces. They can decide to fully operate their own state market, to partner with HHS to do it, or to have us do it.
In fact, if states can come up with their own way of covering more people at the same quality and cost, the law allows them to do that too. And the President has asked Congress to move up this provision so states can have this flexibility in year one.
Yesterday, I received letters from 12 Governors saying that they plan to establish their own marketplaces. And in the months to come, we’ll keep working with states to get these marketplaces up and running by 2014.
The second key change coming in 2014 is that states will begin receiving a very generous federal match to expand Medicaid coverage to uninsured adults making less than $15,000 and families of four making less than $31,000.
Here’s what states are being offered. For the first three years, the federal government will pay 100 percent of the costs for additional coverage, as well as paying doctors who serve Medicaid patients at a higher rate. After 2017, the federal government will pay at least 90 percent of the costs – a much more generous match than the average of 57 percent for Medicaid today. States will also have flexibility in setting the benefits for the newly covered people. And their expenditures will be offset by reduced spending on uncompensated care for the uninsured and other savings in the law.
Unprecedented federal support, access to affordable coverage for low-income residents, and steep reductions in costs for the state, its citizens and its health providers: we think this is a deal that states—in the end— won’t want to turn down.
And we’ve been through this before with the CHIP program. When Congress expanded coverage for kids in 1997 and offered to pay 70 percent of costs, states were initially skeptical. Only eight states began covering eligible children in the first year. But within two and a half years, all 50 states had decided the benefits far outweighed the costs and committed to participating.
The 2014 Medicaid expansion offers states an even better deal, and we’re hopeful states will take advantage of it to cover their neediest working families and ensure their hospitals and doctors get paid.
Yesterday, I sent a letter to Governors laying out all this information. And we’re going to keep working closely with states to make sure hard-working families have access to affordable coverage.
Now that the Supreme Court has spoken, we need to stop refighting old political battles and trying to take away benefits that millions of Americans are relying on. Instead, we should move forward with implementing and improving this law to provide more security to Americans who have insurance, better choices for those who don’t, and lower costs for all.