What Health-Care Reform Means to Indiana
Source: The Indianapolis Star (Indystar.com) – March 23, 2010
By: John Russell, Daniel Lee, and Shari Rudavsky
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It’s been called a landmark restructuring of the nation’s health-care landscape. And the legislation, which runs thousands of pages, is reverberating across Indiana.
The changes will affect patients, employers, doctors, hospitals, drug companies, medical-device makers and many others. Here’s a look:
PHARMACEUTICAL COMPANIES:
Brand-name drug makers, such as Eli Lilly and Co., will pay a combined $80 billion over 10 years in rebates and other measures, beginning next year. But they stand to gain much more in new business because of wider insurance coverage that could attract new customers.
Lilly, one of Indiana’s largest employers, could use more business. It is struggling to launch new medicines faster than its blockbusters will lose their patent exclusivity, starting next year. Lilly is in the process of shedding more than 5,000 jobs, many of them in Central Indiana.
The brand-name drug makers also scored a big victory at the expense of generic drug makers, by winning 12 years of patent protection for biotech drugs, a growing and lucrative part of their business. The industry trade group, the Pharmaceutical Research and Manufacturers of America, said comprehensive health-care reform “will benefit patients and the future of America.”
INSURERS:
Indianapolis-based WellPoint and its peers face new costs and complexities from reform but also stand to gain millions of new members in the coming years.
One of the first effects of reform, according to health-care consultant Ron Wince, may be confusion as customers flood insurer phone lines asking what the changes mean for them.
Wince, CEO of Arizona-based Guidon Performance Solutions, said new requirements starting this year that allow children to stay on parents’ plans until age 26 and that forbid insurers to deny coverage to children with pre-existing conditions also could result in more processing work for insurers. Reform would change other longtime practices of insurers as changes are rolled out through 2014 and beyond. Insurers would not be able to deny coverage to people with pre-existing conditions and would not be able to impose lifetime limits on coverage.
Insurers could benefit from having more people in the risk pool, and subsidies would help some with low incomes pay for coverage. But the industry also has complained that the penalties for those who don’t buy coverage are too weak, which means people will wait until they are sick to buy insurance.
THE UNINSURED:
The uninsured are the big winners here; 32 million uninsured people are estimated to gain health insurance as a result of this bill.
Starting in 2014, the bill would extend Medicaid coverage to people who make 133 percent of the federal poverty level. Currently, Indiana offers Medicaid to those at 23 percent of the federal poverty level, or about $5,071.50 for a family of four.
That could be significant for people ages 50 to 64 -- after which Medicare kicks in -- who may have difficulty finding affordable coverage, said June Lyle, AARP Indiana state director.
MEDICAL-DEVICE MAKERS:
Indiana’s huge medical-device industry will have to pay hundreds of millions of dollars in new taxes to fund health-care restructuring, a fact that some fear will hurt innovation. The law contains a 2.3 percent sales tax on a wide range of devices, from needles to artificial joints, starting in 2013. However, the sector was able to reduce an additional industry wide tax to $20 billion from $40 billion over a decade.
Cook Medical, a Bloomington-based maker of stents, catheters and hundreds of other devices, projects the new law will cost it $15 million to $20 million a year.
“When you take that kind of money off the books, it will definitely hurt innovation,” said Kem Hawkins, the company’s president. Zimmer Holdings, a Warsaw-based maker of artificial joints, said it disagrees with the taxes but added: “We applaud expanded insurance coverage for millions of Americans.”
HOSPITALS:
Local hospital administrators say they are hopeful reforms will lead to better preventive care. But they also worry about strained finances.
Now, the uninsured often seek care through costly emergency room visits. Clarian CEO Dan Evans said that could lessen if people have coverage. Dan Sellers, chief financial officer of Wishard-parent Health and Hospital Corp., said individual states that have increased access to care have seen an increase in demand for primary and preventive care services.
The Indiana Hospital Association worried that the legislation relies too much on Medicaid, which the association said was paying state hospitals 50 cents for every $1 of care provided before recent cuts. Evans worried that because of low rates there would not be enough physicians to treat the increased number of patients on government plans.
SMALL BUSINESSES:
Many small-business owners have decried the bill, saying it would increase their taxes and overall costs. Although the bill includes a temporary tax credit, only about 12 percent of small businesses would benefit during the five years the credit exists, said Barbara Quandt, Indiana state director of the National Federation of Independent Business.
“There are a lot of small businesses that are barely hanging on in this difficult climate, and something like this could be the tipping point for them,” she said.
Fifteen years ago, when Steve Fero started his recruiting firm, Career Solutions Group, he offered “Cadillac” benefits for his small staff. The company covered 95 percent of the premiums. A year and a half ago, as premiums approached $1,500 per month per employee, he stopped covering his three employees. The requirement to provide health insurance might dissuade others from starting their own companies, he said.
“That becomes a real threshold for any startup business, knowing that there is a government-mandated health plan out there,” Fero said.
SENIOR CITIZENS:
There’s good news and bad news for seniors. AARP says most should benefit from a number of provisions.
First, the legislation passed by Congress closes the notorious “doughnut hole” that affects about one in eight Medicare recipients -- the coverage gap in the Medicare prescription drug program created in 2006. Now, seniors whose total drug costs reach $2,830 must pay for all their drugs until they have spent $4,550. The new law will close that gap.
The measure includes other benefits for seniors, including free preventive services such as cancer screenings and funding for states to improve community services for people with disabilities.
Yet seniors who use Medicare Advantage plans -- private plans combining hospital, physician and drug coverage -- could see their premiums increased or benefits reduced. That’s because the law reduces Medicare payments to those plans.
UPPER-INCOME TAXPAYERS
If a law costs nearly $100 billion a year, someone’s got to pay. In this case, that mostly means the wealthy.
If the Senate passes the package of changes, the biggest tax increases will come in Medicare payroll taxes. Those take two forms, both starting in 2013:
Single people earning more than $200,000 and couples starting at $250,000 will pay 0.9 percent more on their wages and self-employment income.
For people at those income levels, all their investment earnings will be taxed 3.8 percent, marking the first time the hospital insurance tax has hit nonwage income.
All contents © 2010 The Indianapolis Star. All Rights Reserved.
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