If you think that the fight over healthcare reform is at end, you ain’t seen nothing yet.
Last night’s House vote that ended in a declared victory for the Democrats, and a sigh of much needed political relief for the President, was simply a minor skirmish in a bigger regulatory battle that will be waged over the next several months and years.
In the bill’s broad strokes, insurers such as United Health Group Inc. and WellPoint Inc. will be compelled to cover children with pre-existing health problems and let parents keep their kids on their insurance plans through age 26.
Insurers will also be banned from revoking coverage because of severe illness and from limiting lifetime or annual benefits.
The reality is that the Democrats and President have only won the first round.
After the Senate passes the final version of the bill through an arcane process known as reconciliation, and the President signs the legislation into law, the clash over the future of healthcare in America will shift to federal regulators, states and the courts. It is in this arena where the healthcare marketplaces will be structured and rules governing providers’ profits will be written, and where the scope of actual medical benefits covered will be decided.
Heading for Court
While the hotly charged political mêlée between the two parties may have captured the bulk of the headlines, drug makers, healthcare providers and insurance companies have been quietly regrouping their forces to slog it out in regulatory trenches and courtrooms across the country.
In the aftermath of the U.S. medical system overhaul, drug makers and health insurers are anticipating millions of new customers. They also know that their industry will face new fees to the government and stricter rules that may narrow profit margins and fuel mergers.
Companies like Pfizer, Inc, the world’s largest pharmaceutical concern, and UnitedHealth Group, Inc., the nation’s biggest health insurer, will grow in the remake. Investors know this, and they have pushed the stocks for nearly every company in the healthcare sector higher.
According to the Congressional Budget Office (CBO), the non-partisan agency charged with evaluating the costs of legislation, revamping healthcare will cost $940 billion over the next 10 years. Industry fees and taxes will help defray the cost of adding to the ranks of customers who can afford to pay their doctors, drugstores and hospitals. Because the legislation creates pressure to curb medical costs, there is likely to be a dramatic swing in corporate mergers as a means to lower expenses.
With each merger will come a host of challenges that will have an exponential impact on the eventual cost of delivering healthcare to the millions of Americans currently covered and the millions more who will be added with the advent of this new law.
Duck. Here Come the Regulations.
Over the next two years, the U.S. Health and Human Services Dept. will be charged with setting penalties on hospitals with high readmission rates. It will take even longer for the agency to design and test new payment systems. U.S. health insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Starting next year, insurers will owe a rebate to customers if they spend less than 80 percent on benefits for people in individual or small-group plans.
The one part on which most industry observers agree is that each new rule will not only lead to scuffles at the regulatory level, but bloody confrontations in the courtroom. Healthcare providers may be facing limitations on their earnings, but for their attorneys, the uncertainty attending the new legislation will produce hundreds of millions in new fees.
During the past several presidencies, Health and Human Services (HHS) has become a virtual backwater among federal agencies. Likewise, the appointment of the cabinet-level secretary to head HHS has been relegated to a political afterthought. Up until now, most Americans would be hard-pressed to name any past HHS secretary, let alone identify Kathleen Sebelius, the former Kansas governor who heads the agency.
Soon that will change.
Given that her agency is charged with setting new formulas for Medicare payments, defining the “essential benefits” that insurers must provide, and drafting rules on how carriers can verify claims, Sebelius will be on the frontline of the fracas. In addition to building a new wing to house the mountains of new regulations that will be churned out by HHS, the agency is going to have to expand its digs just to accommodate the onslaught of lobbyists who will be camped out in its hallways over the coming months and years.
If you thought the struggle was finally at an end and that peace was at hand, keep your eyes peeled and your flak jackets on. The true battle over healthcare reform in America is about to begin.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
