June 27, 2012 | By | Posted in General News

ACA decision could affect Pennsylvanians young and old

By Melissa Daniels | PA Independent

HARRISBURG — Reaching from the young and uninsured to seniors who rely on Medicare, benefits of the Affordable Care Act have already trickled through the nation’s health care system.

But when the U.S. Supreme Court decides on the constitutionality of ACA, as it’s expected to do Thursday, it could leave the fate of existing provisions up to the carriers and manufacturers who regulate them.

The Doughnut Hole

One popular provision of ACA closed the Medicare Part D “doughnut hole,” a gap in prescription insurance coverage for the elderly. After spending a certain threshold on medication, Medicare would stop contributing to a beneficiary’s costs until spending reached another level.

But ACA fixed this long-lamented situation by expanding discounts on drugs when Part D beneficiaries hit the coverage gap. The discount gets progressively larger until 2020, when recipients would pay 25 percent of the cost for brand name and generic drugs.

The program was rolled out in 2010, with a $250 rebate to those in the “hole,” generating $61 million among more than 247,000 Pennsylvanians, before the discounts began.

So far in 2012, more than 48,000 Pennsylvanians in the Medicare Part D plan saved an average of $645 on prescription drugs, with the total discount amount at $31.2 million, according to figures from the Centers for Medicare and Medicaid Services.

The discount provision also triggered savings in state-run health care programs.

Pennsylvania operates a program called the Pharmaceutical Assistance Contract for the Elderly, which provides prescription coverage to some 350,000 low-income seniors regardless of health conditions. Enrollees pay a flat co-pay for prescription medication, and the program picks up the rest of the cost with no limit to the amount of drugs or dollars they would pay.

Estimates from the House Appropriations Committee Democratic Chairman’s office show that the PACE program would generate $335 million in savings between 2010 and 2018.

Tom Snedden, the director of PACE in Pennsylvania’s Department of Aging, says it’s unlikely that PACE would expand despite the cost-savings generated by ACA. But since about 80 percent of PACE recipients are also Medicare Part D beneficiaries, closing the hole means the program has less to chip in.

If the prescription provision is somehow tossed out with the ACA decision, PACE recipients needn’t worry about losing the discount, Snedden said. The state, however, would lose the savings.

“If the discount goes away in the doughnut hole, it doesn’t matter. PACE will pay, it always has,” Snedden said. “Where the impact will be is that currently, it’s the PACE program that’s saving money as a result of the discounting in the doughnut hole.”

Manufacturer rebates

ACA legislation raised the amount that drug manufacturers had to pay to the state for Medicaid rebates. That rate was 15 percent, but ACA expands it to 21 percent.

In the 2010-11 budget year, Pennsylvania received  $111 million from prescription drug rebates, and $137.5 million the next year.

An estimated $143 million would be generated from the rebates in the 2012-13 budget year. That leaves potential for a budget hole should the U.S. Supreme Court throws out the entirety of ACA.

But if the rebate program continues in the long term, the rebates would generate an estimated $1.05 billion from 2010 to 2018, offsetting a significant portion of the state’s increased spending in Medicaid expansion.

Snedden said it may be up to the manufacturers to decide whether to continue the provision.

“Depending on what the court says, if they throw out the entire act, I’d be concerned manufacturers would say, ‘We’re not agreeing, we’re going to stop providing higher rebates because it was all part of a package deal,’” Snedden said.

Insurance expansion

In Pennsylvania, an estimated 65,000 people younger than 26 became insured under their parent’s health-care plan because of the ACA.

Dr. Bret DeLone, who spoke at a news conference Wednesday at the Republican Party of Pennsylvania’s headquarters, says it’s possible this provision will carry on, for reasons of dollars and cents.

For insurance carriers, insuring young people is not expensive compared to other age groups, creating a profit center, he said.

“It has the advantage of being popular and it’s a group of people that do not drive costs very high, who don’t need a lot of health care,” DeLone said, “and they benefit by having the opportunity not to be uninsured.”

DeLone said that the individual insurance requirement  of ACA negatively affects other young people who may otherwise decide to go without health insurance. Their health needs, he said, are oftentimes different than the elderly despite the fact they are charged the same premiums.

Overturning the entire ACA presents an opportunity to revamp the insurance system to allow consumers to make specific choices, he said.

“If the individual mandate is found to be unconstitutional, (insurance carriers) will lose some young and healthy people who otherwise would’ve been obligated to buy, I think, prohibitively expensive health care insurance that, frankly, they don’t need,” he said.

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Eric Boehm is a reporter for PA Independent. He can be reached at or at (717) 350-0963.

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