Health Care Reform • Northwest Indiana Business Magazine

Health Care Reform

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It's been nearly a year since a majority of the then-Democrat-controlled Congress approved President Barack Obama's controversial health care reform package. But debate hasn't stopped over the law that goes into full effect in 2014.
The Patient Protection and Affordable Care Act of 2010 provides health insurance coverage for about 30 million Americans who don't have it. But one of its more thorny aspects is the requirement that Americans who lack health care coverage must purchase it.
In late December, a federal judge in Virginia ruled that forcing individuals to buy health insurance is unconstitutional. The issue is sure to linger in court for months, or even years. The same federal judge will allow the rest of the reform package to move forward to full implementation.
But the purchase requirement is far from being the only aspect of the historic legislation under scrutiny. In Northwest Indiana's wide-ranging health care community, reform is impacting doctors, hospitals, mental-health providers and insurance brokers in different ways. Some are positive; some aren't.
“When it comes to health care, it's something that affects everybody across the board and sometimes when you least expect it,” says semi-retired surgeon Dr. Rade M. Pejic of Michigan City. “It's a step in the right direction. The intent was good.”
Pejic, who teaches part-time at Louisiana State University in New Orleans, says the law's requirement that Americans must purchase health insurance could have been avoided with a single-payer approach, where everyone with a job pays for health insurance out of their paycheck. But he says he knows this kind of approach comes with a stigma of being branded “socialized” medicine.
“Right now, about 55 to 57 percent of health care in this country is paid for by government. That includes the armed services, federal employees, Medicare and Medicaid. So, you already have up to 57 percent of Americans under a form of national health care.”
“The term ‘national health care,' unfortunately is stigmatized by people saying ‘Well, this is socialism. It's anti-business. It's against capitalism.' They say this because people don't understand what they are really talking about,” Pejic says.
Pejic believes it was the HMO lobby that came out against a single-payer national health care system, which Obama supported, when Congress was debating the reform package in early 2010. Pejic says having a national health care system is morally and ethically the correct thing to do, especially since medical bills are the No. 1 cause of personal bankruptcy in the U.S.
“Health care delivery should not be treated like building homes, making bricks, selling cars or computers,” Pejic says. “When you talk about pain and suffering, death and dying, you need to approach it differently.”

More Positives Than Negatives

Pejic sees more positives than negatives from health care reform, and so does Aileen Wehren, vice president of systems administration for Porter-Starke, a mental health and addiction service treatment provider in Valparaiso.
Reform, Wehren says, will make mental health treatment available to more people. For example, single men who do not have a disability are ineligible to obtain financial assistance through Medicaid. That will change through reform.
“By eliminating that disability requirement, you broaden the number of people who have insurance coverage through the Medicaid program significantly,” says Wehren. “I see that as a real advantage because there are people who simply won't seek care because they don't have a mechanism to pay for it. And even though we offer a discount to individuals who are uninsured, that still can be too much of a barrier to care.”
Wehren says that when people learn more about reform, most begin to accept it. For example, allowing children up to 26 years old to stay on a parent's health insurance coverage is a popular part of health care reform. “I think most families see that as a real positive because there are lots of kids who are in college who are not covered with health insurance. This gives them an opportunity to have coverage,” Wehren says. “I think most people are in favor of the kinds of changes that will improve access to care.”
The negative reaction to health care reform, Wehren says, is perhaps because President Obama pushed for it during an economic downturn. “When there's an economic downturn, the need for Medicaid coverage increases. You have more people who need that coverage. It happens at exactly the time when there's an economic downturn, when states have less money available to do that,” Wehren says. “So, it's a bit of a Catch 22 and I think that's what states are grappling with. They're saying, ‘You're going to expand this insurance program and you're going to do it at the absolute worst time for us.' But yeah, that's how that works.”
For Willis Glaros, health care reform, so far, has been a boon to his small business. “It's had a very positive affect for us. We're having the best year we've ever had,” Glaros says.
Glaros is president and CEO of Employer Benefits Systems of Dyer. Glaros started the firm in 1978 and has a staff of four. EBS is a national firm that provides companies assistance in purchasing and managing health insurance benefits.
“We also help set up wellness programs, provide educational materials, a benefit platform,” Glaros says. “Companies need our help more than ever. We've grown because of our expertise.”
For consumers, Glaros sees a positive in reform through elimination of maximum benefits, through allowing children to be covered under their parents' health insurance plan until the age of 26, and making sure children under 19 aren't denied coverage because of a pre-existing condition.
Those changes have caused some premiums to increase, and they're likely to increase even more as the full reform package goes into effect in 2014, Glaros says. “Right now, it's a wait-and-see game,” Glaros says. “While I do not believe the bill will be overturned, there is a good likelihood that some of the more contentious sections may be altered due to political pressure.”

Reforms Bring Anxiety

But for local hospitals and health care systems, reform brings anxiety about dealing with an influx of new Medicaid-eligible patients by 2014 and how care and service will be paid for by the government.
“We're in for 10 to 15 years of reimbursement experiments. What's written into the law is basically a strong bias of getting away from fee-for-service as a payment source to risk-based payments,” says Phillip A. Newbold, president of Memorial Hospital and Health Systems in South Bend.
For example, under fee-for-service, if a heart-attack patient is treated for four days and discharged, all is well. If that same patient needs an extra day or two to be treated for an infection obtained in the hospital, that, too, is covered, says Newbold.
But under bundled payment (also called episode-based payment), hospitals will be reimbursed a set amount and all services and treatments must be covered by that payment. Any extras, Newbold says, must be absorbed by the hospital.
“It puts physicians, the hospitals and health systems at risk for things they can prevent. I think that's a good thing to have happen. There are things, like falls in the hospital, infection rates, preventive care, as long as we do that very well, there's a promise at the end of the year for some incentive or reward,” Newbold says. “So, what they're doing is paying for performance–we're going to learn what works and what doesn't.
Newbold says even if the cost of service is reduced, even by a little, it's worth it.
“It doesn't sound like a lot but if we can just bend these costs by 2 percentage points, I think we're going to look back and call this a huge success,” Newbold says. “But if we can't and we continue to eat so much of our gross domestic product in health care services, then I think we're just going to be on the wrong path.”
Newbold says reform legislation is silent on putting a burden on individuals to lead a healthier lifestyle to keep health care costs down.
“We still have no incentive to lead healthier lifestyles, eat a better diet, get more exercise, stop smoking and wear seat belts,” Newbold says. “Ultimately, we're going to have to weigh in on what happens to accountability if you choose an unhealthy lifestyle, but we're not there yet.
But other executives for Northwest Indiana hospitals are much less optimistic. “We are going to be facing draconian reductions in reimbursement … The law imposes some significant burdens. I'm not sure everybody understands how significant those burdens are and how difficult it's going to be for local health care facilities to cope with some of these changes and what that means in terms of health care,” says Gene Diamond, regional chief executive officer for Franciscan Alliance, formerly known as the Sisters of St. Francis Healthcare System. Based in Mishawaka, the not-for-profit Franciscan Alliance operates 13 hospitals in Illinois, Indiana and Michigan, including in Michigan City, Crown Point and Hammond.
Diamond says the reform law shifts $575 billion in Medicare payments away from hospitals and health care organizations to Americans who are underinsured or uninsured. For Franciscan Alliance's hospitals in northern Indiana, the estimated loss is $140 million in Medicare payments, Diamond says, adding that the loss of that funding will force the health care system to do things differently.
“We have to figure out how to deliver our services more effectively and more efficiently. … From a clinical standpoint, we have to figure how to get patients into the hospital, through the hospital and out of the hospital a little more quickly by using good utilization practices,” Diamond says. “And making sure that whenever and wherever possible, patients who don't need to come into the hospital, don't come into the hospital and patients who shouldn't be readmitted to the hospital, aren't readmitted. We just have to learn to do things differently and that involves a tremendous amount of reorganization–we've got a tall task ahead of us.”
Donald P. Fesko, CEO of Community Hospital in Munster, says the Medicare reimbursement changes that will come by 2014 are forcing hospitals to change their business model.
As of now, Medicaid covers about 50 percent of the cost for a patient's stay. “That doesn't come near the cost of any hospital,” says Fesko. “That's one of the business challenges that all hospitals are going to face as you increase the amount of Medicaid patients because of the reimbursement that they provide.”
Fesko says there are still so many “unknowns” about the reform package, that it makes planning for the future difficult. “It's hard to put a dollar amount that you are either going to increase or decrease revenues,” Fesko says. “It's hard to estimate the impact it's going to have on your hospital until the full bill is defined.”

Consolidation on the Way?

As 2014 gets closer, Fesko and Diamond predict much consolidation will happen, primarily with smaller health care organizations or freestanding hospitals, which may need to merge with larger organizations. “Stand-alone hospitals in the Chicago area are now moving to join systems or sell themselves to other facilities,” Diamond says. “Folks who have assessed this law and its implications have decided they need to either get out of the business or find a partner as quickly as they can in order to address the challenges posed by ‘Obamacare' and survive them.”
Diamond says that while he is skeptical of the Obama administration's price tag to fund health care reform, a positive is getting coverage for those who are uninsured or underinsured.
“They are a large burden on the health care system now, particularly here in the northern Indiana region. We have a large number of indigent patients who make their way to our door. Obviously, it's our mission to care for them and we do, but it results in a significant financial burden on us,” Diamond says. “That attempt to cover some of those folks, we're not going to cover all of them, is an improvement.”


  • Michael Puente

    Michael Puente works full time for WBEZ 91.5 FM Chicago Public Radio. He covers politics, environment and features in Northwest Indiana, southwest Michigan and Chicago’s South Side. For 11 years, Michael wrote for the Post-Tribune of Northwest Indiana. Michael also spent two years writing for the Daily Herald of Arlington Heights, Ill., covering Chicago’s northwest suburbs. Michael is a contributing writer for Cafe Latino Lifestyles Magazine in Chicago and an adjunct faculty instructor at Calumet College of St. Joseph in Hammond.

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