Pressure rising on healthcare long before overhaul takes effect

Reporting from Washington —  Despite passage of the landmark healthcare overhaul this spring, the nation’s existing health system is continuing to fray, raising the prospect that the country could experience a crisis before the law establishes a new safety net in 2014.

Three months after President Obama signed the law, state governments struggling with budgets savaged by the recession are contemplating further cuts in healthcare aid for the poor, despite the promise of more federal dollars.

At the same time, several million laid-off Americans and their families who have used federal assistance to hold on to health insurance will lose coverage in coming months as the special assistance program expires. Those with jobs face their own challenges as employers continue to look for ways to pare health benefits and shift more costs to employees, if not drop health coverage altogether.

And people in all walks of life face rising healthcare prices and skyrocketing insurance premiums, which in many parts of the country are rising at double-digit rates this year.

“If the economy does not improve substantially, we may be taking some steps backward before we take steps forward,” said Ron Pollack, a leading supporter of the healthcare overhaul who heads the consumer group Families USA.

Obama’s senior healthcare advisor acknowledged that the road ahead may be rough. “Will plans continue to raise prices? Will some people continue to lose coverage? I think the answer is yes,” said Nancy-Ann DeParle, head of the White House Office of Health Reform. “It is something we are concerned about.”

DeParle called the next several years a “bridge period” until 2014, when Americans will get guaranteed access to health coverage along with billions of dollars of federal subsidies to help them pay their insurance bills.

The Obama administration thinks a series of initiatives in the new healthcare law will help hold the line during this period.

Since the law’s passage, administration officials have begun offering new tax breaks to small businesses to encourage them to offer their employees health benefits. The administration is developing regulations designed to increase oversight of insurance companies and prevent major rate increases.

The Department of Health and Human Services is working with states to set up high-risk pools for people who have been denied coverage.

“I think we have tools that will help make things better than they would have been” if the healthcare legislation had not passed, DeParle said.

Early research suggests that some of the short-term aid in the healthcare law, such as $5 billion for new high-risk pools, may be inadequate.

“This is not about healthcare reform,” said Helen Darling, president of the National Business Group on Health, an organization of large employers that provide coverage to about 50 million workers, retirees and dependents. “It’s just existing pressures on the system. … It’s business as usual.”

In a March survey, a sampling of 507 large employers reported that their healthcare costs would jump an average of 6.5% this year, slightly less than last year, but still more than three times as fast as prices are rising in the overall economy.

Many large employers are shifting more of those costs onto employees. Small businesses, which are already less likely to offer their employees health benefits, are under even more pressure as they wrestle with insurance premiums that are shooting up by more than 20% in some parts of the country.

More of these businesses appear to be either cutting benefits or shedding employees to offset rising healthcare costs, according to early responses to an economic survey by the National Small Business Assn. due out next month.

So far, federal and state officials have managed to hold together a healthcare safety net with the help of billions of dollars of stimulus spending authorized by Congress last year. Washington provided an estimated $2 billion in 2009 to help more than 2 million people and their dependents hold onto their health benefits after being laid off.

But now, under pressure to control spending, Congress appears certain to end the COBRA assistance, which provided unemployed workers with a 65% subsidy to help them pay their premiums. Normally, people who lose their jobs but want to keep their insurance through COBRA must pay the full cost of the premiums, making it unaffordable for most.

Democrats on Capitol Hill are moving to provide states with extra money to prop up their Medicaid programs for the poor, which have seen a huge surge in enrollment since the recession began. But for many states, even the extra aid is not expected to be enough.

California officials are planning to impose new limits on the number of prescriptions and doctor visits for people on its MediCal program. In North Carolina, state officials have already cut payments to doctors and other providers, and they are looking at ways to pare the number of people eligible for some services, such as home care. And in New Mexico, which also slashed provider payments recently, state leaders are discussing ways to cut long-term care services and some prescriptions.

“We don’t want to eliminate things at a time when we want to cover more people,” said Katie Falls, New Mexico’s human services secretary. “But getting from 2011 to 2014 is going to be very difficult. … And we’re coming up short.”

noam.levey@latimes.com