Health-Care Reform's Winners and Losers
Health insurers dodged the “public option” bullet and have been enjoying higher profits since the law passed, with the largest U.S. insurers beating the consensus forecast of Wall Street analysts in every quarter since the start of 2009, according to a Bloomberg Government study. Still to come (if the Supreme Court allows it): millions of new customers required by the law to buy health coverage.
Drug and biotech companies spent $150 million lobbying in support of the health-care overhaul and got their money’s worth. The pharmaceutical industry accepted $80 billion in projected reimbursement cuts over 10 years in exchange for greatly expanded numbers of insured Americans. More insured patients will likely mean more visits to doctors, who will write more prescriptions. Brand names also got more protections against generics.
Medical researchers will get billions of dollars to test drugs and other treatments and fight everything from childhood obesity to smoking. A new Patient-Centered Outcomes Research Institute will receive $3 billion in funding over 10 years. The law also authorized $1 billion in grant money that has been distributed to almost 3,000 small biotechnology companies. If research is related to public health, the act has probably set aside money to support it.
Actuaries stand to become the new hot profession as they help set subsidies for lower-income people, compare the value of benefits paid by competing health plans, and make other calculations needed to implement the law. There are about 20,000 actuaries in the U.S., more than half employed by insurers. The Bureau of Labor Statistics figures their numbers will rise 21 percent over a decade.
Lawyers were spared from the medical community’s effort to limit damages in malpractice lawsuits. The law called for just $50 million in grants to support demonstration projects examining alternatives to the current tort system, and Congress didn’t even fund that effort. The Congressional Budget Office estimates that taxpayers could save $54 billion over 10 years if malpractice awards were capped.
Hospitals face $155 billion in Medicare reimbursement cuts through 2020. The industry could probably take the hit—which amounts to less than 2 percent of spending over that period—if lawmakers stopped there. But the recently passed extension of the payroll tax cut calls for further reductions in payments for patients who default on their bills, plus there are multiple proposals to reduce Medicare payments to teaching hospitals.
Home health-care providers will have to absorb a $40 billion cut imposed over 10 years, less than initially feared, yet still leaving an industry that accounts for only 4 percent of Medicare spending burdened with 9 percent of all the legislation’s Medicare cuts. What’s more, Congress is also considering whether to add a co-payment requirement for patients, opening up providers to increased bad-debt expenses.
State Medicaid programs will have to add 17 million Americans to their rolls over time, and federal subsidies will not cover the full cost after 2016. With tax revenue still depressed from the recession, many view the expansion of Medicaid as a budget-buster. The Congressional Budget Office (CBO) estimates the states will spend an additional $60 billion through 2021.
Radiologists are likely to lose income because the law ties compensation more closely to end results, rather than the number of tests doctors order. That means the medical equipment industry, already a frequent focus of cost cutters, faces even greater pressure. The CBO expects those changes to reduce payments and generate savings of $3 billion over 10 years.
Tanning salons were an easy target, as the World Health Organization has labeled tanning beds “carcinogenic to humans.” The $5 billion industry was hit with a 10 percent excise tax that is expected to generate nearly $3 billion over 10 years—assuming tanning salons stay in business long enough for the IRS to collect the money.