by Ian R. Reynolds, Chronic Disease Management Coordinator, and Marie Ghazal, Chief Executive Officer

Abstract

With the passage of the Patient Protection and Affordable Care Act (health care reform) on March 23rd, 2010, the Rhode Island Free Clinic, and other free clinics around the nation, will remain essential in providing comprehensive health care to uninsured and underserved populations.  Because of high unemployment and increasing insurance premiums, projections for 2010 show that many more individuals in Rhode Island will become uninsured.  This trend shows no sign of changing until 2014.  In 2014, the majority of the health care legislation will be enacted, and the law will not be fully implemented until 2019.  Even then, the Congressional Budget Office estimates that many millions of Americans will still be without health insurance.  Also, issues surrounding cost control in the new law may make it difficult to fulfill the promise of extending coverage to an additional 32 million Americans (125,000 Rhode Islanders).  So, even with major changes to our health care landscape in America, free clinics will continue to be a fundamental component of health care for the uninsured and underserved.

The New Health Care Law

Introduction:
On March 23rd 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (better known as healthcare overhaul) into law (Herszenhorn, 2010).  This health overhaul package was the most far-reaching health legislation passed since the programs of Medicare and Medicaid were enacted. The new law promises to extend insurance coverage to 32 million additional Americans by 2019 and is estimated to cost $940 billion over the next decade (Appendix 1).  However, due to increased taxes, fees, and cuts, it is estimated to reduce the federal budget deficit by $138 billion over the next ten years, according to the Congressional Budget Office (CBO) (Galewitz, 2010).
The Patient Protection and Affordable Care Act has been cited as providing “near universal coverage” to American citizens (“Obama to sign bill,” 2010).  The key here is the word “near.”  Although many Americans will now be able to obtain affordable health insurance through the expansion of government programs, the implementation of premium credits, and new provisions for employers to provide coverage or face penalties, this law will still leave many individuals uninsured, even after the majority of its enactment in 2014 (Ohlemacher, 2010).  Thus, it is imperative for free clinics to continue to provide comprehensive health care to individuals that will still inevitably struggle to obtain it.

Major Provisions of the New Law:
As the Henry J. Kaiser Family Foundation summary of the new health care bill illustrates, the ability to extend coverage to an additional 32 million individuals is purposed to be achieved by: expanding Medicaid coverage to those at or below 133 percent of the FPL; providing premium credits (or subsidies) to individuals and/or families with annual incomes from 133-400 percent of the FPL; mandating that the majority of U.S. citizens carry health insurance (unless they fall under certain exemption criteria (Appendix 2)) or pay a tax penalty (Appendix 3); creating state-based American Health Benefit Exchanges through which individuals can purchase coverage and separate exchanges where small businesses can purchase coverage; provide small businesses tax credits to help pay for employee coverage, and require some employers to pay penalties for employees who receive tax credits to purchase health insurance through the Exchange.

The New Law and the Potential for Problems

Coverage for Most, but Not All:
Although most provisions of the law take effect in 2014, The Kaiser Family Foundation summary shows the law is not fully implemented until 2019.  Even at that point, many U.S. citizens and undocumented immigrants (an estimated 25,000- 50,000 in Rhode Island (Urban Institute, 2010)) will be without coverage.  The CBO estimates that 21 million Americans will be without health insurance in 2016 and that the majority of these individuals will avoid tax penalties because of exemptions to the mandate (Ohlemacher, 2010).  In addition, the CBO estimates that, even after the law is in full effect in 2019, 23 million Americans will still be without insurance (Lamoureux & Thompson, 2010).

Paying the Fine:
The CBO projects that 4 million people in the United States will pay the tax penalty (averaging $1,000 apiece), rather than obtain health coverage, even once the full fine has been imposed in 2016 (Dixon, 2010).  One can only assume that this number will be higher in 2014 and 2015, considering the penalties incurred will be substantially less.  Tax penalties will be collected by the Internal Revenue Service through tax returns, but the IRS will not have the authority to bring criminal charges or file liens against those that do not pay.  However, the CBO report approximates that the government will collect $4 billion a year in fines between 2017 through 2019 (Ohlemacher, 2010).

Mandate Exemptions:
Again, from the Kaiser Family Foundation, the law cites that individuals with incomes below the tax filing threshold ($9,350 for singles and $18,700 for couples) are exempt.  In Rhode Island, this represents nearly 37.7 percent (43,800 residents) of the nonelderly population that are currently uninsured (Kaiser Family Foundation [KFF], 2010b).  Although the expansion of Medicaid in 2014 will cover a large number of these individuals, many will remain uninsured, including legal immigrants who are barred from enrolling in Medicaid during their first five years in the U.S.  The law also states that individuals are exempt if the price for the lowest cost plan option exceeds 8 percent of their annual income.  It is evident that, even with subsidies, some middle class individuals will find the lowest cost plan exceeds 8 percent of their income, especially given that health insurance premiums are projected to continue to increase (Alonso-Zaldinar, 2010a).

Cost Control- Runaway Premiums:
Some experts believe that the current law falls short of controlling health care costs.  For instance, experts at the Health and Human Services Department project a 1 percent increase in proposed costs over the first 10 years.  They think this increase could be even more, given some potential Medicare cuts may be “unrealistic” (Alonso-Zaldinar, 2010b). Many believe that, because of the early benefits of the law (such as allowing adult children under 26 to remain on their parents plan and barring insurance industries from denying coverage to children with pre-existing conditions), insurance premiums will likely increase more than was originally projected.  Also, some anticipate insurers will attempt to raise rates ahead of the major changes set for 2014 (Alonso-Zaldinar, 2010a).

Medicaid- Lost Coverage, Cost, and Limited Access to Care:
Lastly, the expansion of Medicaid, which would extend coverage to approximately 42,000 Rhode Islanders by 2014, may have some potential short falls, mainly related to costs (Davis, 2010).  In the short term, Rhode Island may see a depletion in Medicaid coverage.  The law requires that states maintain coverage for current Medicaid eligible children, but if a state is in deficit, they may cut adult Medicaid eligibility from 185 percent of the FPL to 133 percent.  This would leave an additional 5,000 to 6,000 adult Rhode Islanders without insurance coverage in 2011 (O’Conner, 2010). 
Some experts believe that by extending Medicaid, states may in turn have to extend their budgets, according to a Moody’s Investors Services report.  Medicaid currently represents an average of 20 percent of total state spending, and although the federal government will pay 100 percent of the cost for expanding Medicaid to the newly eligible through 2016, states are still responsible for covering individuals currently eligible, but not served by, Medicaid.  Also, federal funding for expanding Medicaid is reduced to 90 percent from 2020 and beyond.  Thus, states may find it difficult to finance this expansion (Barry & Lambert, 2010).
However, even if Medicaid is expanded according to plan, patients may still have trouble accessing care.  Even now, many physicians do not accept Medicaid patients because the plan pays less than private insurance (which will still be true despite the raise in Medicaid payment rates to 100 percent of Medicare rates in 2013) and involve a lot of claims filing and payment delays.  For instance, in 2008, the Center for Studying Health System Change found that only 40 percent of those questioned accepted all new Medicaid patients.  So, even those receiving Medicaid may have difficulty finding access to adequate health care (Rabin, 2010).

Current Trends: Before the Majority of the Law is Enacted in 2014

Increased Premiums and Number of the Uninsured:
A recent study from Mathematica Policy Research, Inc (2010) found that, in Rhode Island, rising health care costs continue to make it difficult for many residents to obtain insurance.  For instance, in 2008, the average cost of employer-based family coverage in Rhode Island was $8,023 per year, approximately 24 percent of average Rhode Island wages.  From 2001 to 2008, the average premium for single coverage in Rhode Island rose 61 percent, and the average premium for family coverage rose 66 percent.  In this same time period, the number of uninsured Rhode Islanders under age 65 rose to almost 12 percent.  Current projections for the year of 2010 estimate that 21 percent of Rhode Island adults and children (188,000 residents) will be uninsured at some point during the year.  Of this population, 88,600 are projected to be uninsured the entire year.

Conclusion

With passage of the Patient Protection and Affordable Care Act, the Rhode Island Free Clinic, and other free clinics nationwide, will still play an important role in providing comprehensive health care to those in most desperate need of care.  Recent projections from Mathematica Policy Research, Inc for 2010 and beyond illustrate a bleak outlook for the future of the uninsured up to 2014.  A lethal combination of premium increases and high unemployment will undoubtedly increase the number of uninsured in Rhode Island and throughout the U.S.
Although the number of uninsured will undoubtedly decrease in 2014 and beyond, the problem has by no means been solved.  The CBO has projected that, even after the law is fully enacted, many millions of Americans will still be without health insurance.  Also, there still may be issues with the new law, including cost control, weak tax penalties for neglecting to pay the individual mandate, the financial burden many states may face expanding Medicaid, and the reality that most Medicaid recipients have limited access to care.
So, by expanding resources and making health care more affordable and accessible to many Americans through premium tax credits, individual mandates, the expansion of Medicaid, new employer benefits and responsibilities, and state-based Exchanges, the United States has taken a step in the right direction.  Health care reform will absolutely grant many millions of Americans with what we feel is a basic human right: access to health care.  That being said, the Rhode Island Free Clinic will still remain essential to providing care to those Rhode Islanders that may fall through the cracks from now until 2014 and for the years to follow.

Appendix 1: Financing Health Reform
* Impose a tax on individuals without qualifying coverage of greater of $695 per year up to a maximum of three times that amount or 2.5% of household income to be phased-in beginning in 2014
* Exclude the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through an HRA or health FSA and from being reimbursed on a tax-free basis through an HSA or Archer Medical Savings Account. {Effective January 1, 2011}
* Increase the tax on distributions from a health savings account or and Archer MSA that are not used for qualified medical expenses to 20% (from 10% HSAs and from 15% for Archer MSAs) of the disbursed amount. {Effective January 1, 2011}
* Limit the amount of contributions to a flexible spending account for medical expenses to $2,500 per year increased annually by the cost of living adjustment. {Effective January 1, 2013}
* Increase the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income for regular tax purposes; waive the increase for individuals 65 and older for tax years 2013 through 2016. {Effective January 1, 2013}
* Increase the Medicare Part A (hospital insurance) tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and impose a 3.8% tax on unearned income for higher-income taxpayers (thresholds are not indexed). {Effective January 1, 2013}
* Impose an excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual coverage and $27,500 for family coverage (these threshold values will be indexed to the consumer price index for urban consumers (CPI-U) for years beginning in 2020).  The threshold amounts will be increased for retired individuals age 55 and older who are not eligible for Medicare and for employees engaged in high-risk professions by $1,650 for individual coverage and $3,450 for family coverage.  The threshold amounts may be adjusted upwards if health care costs rise more than expected prior to implementation of the tax in 2018.  The threshold amounts will be increased for firms that may have higher health care costs because of the age or gender of their workers.  The tax is equal to 40% of the value of the plan that exceeds the threshold amounts and is imposed on the issuer of the health insurance policy, which in the case of self-insured plan is the plan administrator or, in some cases, the employer.  The aggregate value of the health insurance plan includes reimbursements under a flexible spending account for medical expenses (health FSA) or health reimbursement arrangement (HRA), employer contributions to health savings account (HAS), and coverage for supplementary health insurance coverage, excluding dental and vision coverage. {Effective January 1, 2018}
* Eliminate the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments. {Effective January 1, 2013}
Source:  The Kaiser Family Foundation

Appendix 2:  Exemptions to the Mandate
Exemptions to the individual health insurance mandate will be granted for:
* Financial Hardship
* American Indians
* Those who have been without coverage for less than 3 months
* Undocumented immigrants
* Incarcerated individuals
* Those for whom the lowest cost plan option exceeds 8 percent of an individual’s income
* Those with incomes below the tax filing threshold ($9,350 for singles in 2009)
Source:  The Kaiser Family Foundation

Appendix 3:  Tax Penalty
Starting in 2014, U.S citizens and legal residents not exempt from the individual mandate will be required to have health coverage.  Those that do not have coverage at that time will pay a tax penalty.
* 2014- Pay the greater of $95 or 1.0 percent of taxable income
* 2015- Penalty will increase to the greater of $325 or 2.0 percent of taxable income
* 2016- Penalty will increase to the greater of $625 per year or 2.5 percent of taxable income up to a maximum amount of $2,085
* Beyond 2016- Penalty will be increased annually relative to the cost-of-living adjustment
Source: The Kaiser Family Foundation

References:
1.  Alonso- Zaldivar, R. (2010a, April 25).  Health care law’s unfinished business: cost curbs.  The Washington Post.  Retrieved from http://www.washingtonpost.com
2.  Alonso-Zaldivar, R.  (2010b, April 23).  Report says health care will cover more, cost more.  The Associated Press.  Retrieved from http://license.icopyright.net/user/viewFree
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5.  Chollet, D., Ballou, J., Barrett, A., & Bell, Thomas. (2010). Study of Rhode Island’s Uninsured:  Current Costs and Future Opportunities.  Mathematica Policy Research, Inc. Final Report
6.  Davis, M. (2010, May 16). Health Care Summit; without cost controls, insurers see higher rates.  Providence Business News.
7.  Dixon, K. (2010, April 22).  U.S. budget office: 4 million likely to pay health fine.  Reuters.  Retrieved from http://www.reuters.com
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10.  Lamoureux, N. & Thompson, K. (2010, April 7).  NAFC- Health Care Reform Legislation.  National Association of Free Clinics.  Retrieved from www.freeclinics.us
11.  O’Conner, C.  (n.d.).  Why is opening another free clinic still a good idea?  Retrieved from http://www.npbd-hipdb.hrsa.gov/welcomesq.html
12.  Ohlemacher, S. (2010, April 28).  Nearly 4 million people could pay without health coverage.  The Associated Press.  Retrieved from http://www.google.com/hostednews/ap
13.  Rabin, R.C. (2010, April 26).  With Expanded Coverage for the poor, Fear of a Big Headache.  The New York Times.  Retrieved from http://www.nytimes.com
14.  The Henry J. Kaiser Family Foundation. (2010, April 8).  Summary of New Health Reform Law.  Focus on Health Reform.  Retrieved from http://www.kff.org
15.  The Henry J. Kaiser Family Foundation (2010b, April 22).  Rhode Island:  Distribution of the Nonelderly by Federal Poverty Level (FPL), states (2007-2008), U.S. (2008) [data file].  Retrieved from http://www.statehealthfacts.org
16.  Urban Institute. (2010). Undocumented Immigrants: Facts and Figures [data file].  Retrieved from http://www.urban.org/publications/1000587.html
17.  U.S. Department of Health and Human Services. (2010, April 16). The 2009 HHS Poverty Guidelines.  Retrieved from http://aspe.hhs.gov/poverty/09poverty.shtml

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