The Health Care Law's Unfinished Business

A 360 Degrees Analysis

The single biggest unanswered question about Obama & Company's new health care overhaul law is What's it really going to cost us? - and its weak spot.

Many experts believe the law falls short on taming costs, and that will force Congress to revisit health care in a few years.

While it seems hard to believe now, Republicans might want to participate in a debate over costs, perhaps opening the way for limits on malpractice lawsuits and other ideas they've advocated.

"Now that the baseline question of coverage has been answered, it would be irresponsible if we didn't come back and try to do more on costs," said Sen. Mark Warner, D-Va., who voted for the bill and led efforts to squeeze more savings.

"I think there is going to be a debate in the Republican Party on whether they should waste all their energy on repeal or make an effort to do something on cost containment," Warner said.

For now, the political parties are too polarized -- and lawmakers too exhausted -- to contemplate health care 2.0. Conservatives are planning court challenges, and some Republican leaders hold out the promise of repeal. But economic reality probably will bring lawmakers back to the table.

Insurance premiums are likely to keep going up over the next few years. Experts predict that the law's early benefits -- such as expanded coverage for children and young adults -- could nudge rates a little higher than would otherwise have been the case. Also, insurers and medical providers could try to raise their prices ahead of big shifts set for 2014.

Under the 10-year, $1 trillion plan, 2014 is when competitive insurance markets for individuals and small businesses are expected to open, and tax credits start flowing to help millions of middle-class households now uninsured. Medicaid will expand and pick up millions of low-income people. Most Americans would be required to carry health insurance, except in cases of financial hardship. Insurers no longer could turn away those in poor health.

More than 30 million previously uninsured people would gain coverage quickly -- and they'll start going to the doctor for care previously postponed. Increased demand will push up health care spending, putting more pressure on premiums.

The cost controls in the bill are unlikely to provide much of a counterweight. Democrats scrambling to line up votes for the final bill weakened a provision that would have enforced austerity through a hefty tax on high-cost employer coverage.

Other savings in the law -- mainly Medicare cuts -- may prove politically unsustainable, according to the government's own experts.

The problem isn't that the 2,700-page law is devoid of ideas for curbing costs. Many mainstream proposals are incorporated in some form. But what will work?

While the law creates a commission to keep pursuing deeper Medicare savings, there's no overall cost control strategy and no single official to coordinate many experiments seeking greater efficiency.

"This bill takes a sort of spaghetti approach to cost control," said MIT economist Jonathan Gruber, who supports the broad goals of the overhaul. "You throw a bunch of stuff against the wall and see what will stick. Health care, Round Two, is when we will make a serious effort at cutting costs down, based on what this law has shown us."

If the law gets a B plus for expanding coverage to 95 percent of eligible Americans, it probably deserves a C minus or D for cost control. The U.S. spends $2.5 trillion a year on health care, with some results worse than what other developed countries get by spending far less.

"Most people who have problems with health care costs now are not going to see much change in the next few years," said Mark McClellan, who ran Medicare under former Republican President George W. Bush. "Hopefully some of these ideas will work, but it's not automatic. I do hope we can revisit this in a more bipartisan manner."

A look at some of the law's main cost control provisions:

- INSURANCE MARKET

Starting in 2014, the overhaul sets up new state-level insurance supermarkets called exchanges, intended to enable small businesses and individuals buying their own coverage to pool purchasing power. In theory, that would inject competition into markets now dominated by one or two major insurers in most states.

It also would reduce insurers' overhead by giving them access to many customers in one place. The companies would be heavily regulated by state and federal authorities, and proposed premium increases would get a close look.

"Individuals and small businesses will, over time, have something much more predictable to look at," said Christine Ferguson, former Massachusetts public health commissioner under Republican Gov. Mitt Romney. "We will have much more predictable rates of growth in health care costs."

Romney, a potential GOP presidential candidate in 2012, signed a similar law in Massachusetts, but is now calling for repeal of the federal version.

- PAYMENT REFORMS

Using Medicare as the lab, the law includes experiments designed to change the way medical providers are paid. It encourages them to keep patients healthier by avoiding foreseeable complications.

Doctors and hospitals could band together to better coordinate care. Instead of paying piecemeal for visits and tests, providers would get a lump sum for managing patients with certain health conditions. Primary care providers would be encouraged to create "medical homes" for their patients, serving as wellness coaches and medical gatekeepers.

Successful experiments would be adopted as national policy.

- MEDICARE BOARD

The law sets up a board to hunt for Medicare savings. Congress could reject the proposals, but it wouldn't be able to tinker with them.

- INSURANCE TAX

Employer-sponsored health insurance is part of total compensation, but traditionally it's been tax-free.

The law imposes a 40 percent tax on health insurance plans worth more than $27,500 for a family plan, $10,200 for individual coverage. (Family coverage now averages $13,375.)

That could have been a firm nudge to get people into more frugal coverage. But facing stiff opposition from labor unions, Obama and congressional Democrats punted, postponing the effective date until 2018. That's after the president leaves office, assuming he's re-elected.