What does the ACA mean for residents and their future practice?

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act, better known as the Affordable Care Act (ACA) or “Obamacare,” into law.1 The ACA is the most significant piece of health care legislation signed into law since the enactment of Medicare and Medicaid in 1965. There have been numerous failed legislative attempts over the last several decades to rein in the rising costs of health care and the increasing number of uninsured Americans, including promising initiatives from Sen. Ted Kennedy (D-MA), President Richard Nixon (R), and President Bill Clinton (D), all of which failed to gain sufficient support.2,3

The practice environment for current residents and young surgeons has changed tremendously over the last years, and legislation such as the ACA will continue to dramatically alter the landscape of medical practice. Physicians today practice in a much more regulated environment and are challenged with budget cuts, strict administrative oversight, and public reporting, which influence patient care on a daily basis. As a result, physicians need to possess more than medical knowledge—they need to be well-versed in the basics of the health care delivery system, particularly the effects of legislation such as the ACA.

Health care costs have grown steadily from 7.1 percent of the gross domestic product (GDP) in 1970 to 17 percent of the GDP in 2009, and are expected to reach 20 percent by 2017. In 2009, 17 percent of the U.S. population (45 million Americans) was uninsured. Additionally, Medicare and Medicaid spending has become an ever-increasing portion of the GDP, and is expected to reach 6 percent by 2019.3-5 Given the potentially disastrous consequences of these trends for the American health care system and the U.S. economy in general, it is unsurprising that President Obama made health care reform a key election issue in 2008.


Soon after his election, President Obama requested that key House and Senate committees develop legislation to increase access to health care, control costs, and improve the quality of care. The ACA builds on existing programs, such as Medicare, Medicaid, and the employer-based insurance system, to expand coverage to uninsured and underinsured Americans.

Funding for the ACA comes from many of the stakeholders involved, including employers, consumers, providers, insurance companies, and state and federal governments. The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) estimate that the law will reduce the number of non-elderly uninsured individuals by 12 million in 2014, 19 million in 2015, and 26 million in 2017.6 Moreover, whereas federal outlays for health care are initially expected to increase, the ACA is projected to increase federal tax receipts and eventually reduce the federal budget deficit by $152 billion by 2024.6

The ACA may profoundly change the environment in which physicians practice in the future. Of particular importance for residents, fellows, and young surgeons are several ACA provisions that have direct implications for graduate medical education (GME).

Many sections that affect GME were likely motivated by critical reports, such as the Medicare Payment Advisory Commission’s June 2010 Report to the Congress: Aligning Incentives in Medicare, which highlighted key concerns regarding GME, including a perceived lack of diversity among physicians, excessive focus on specialty care at the expense of preventative medicine and chronic disease management, and a lack of emphasis on value.7 Additionally, the report described the $6.5 billion for indirect medical education, an amount found to be inappropriately high, and several budget cuts were suggested.

The entire 907 pages of the ACA are available online.8 A summary of the law’s key components follows, with a particular focus on the implications for early-career physicians.9

Individual mandate and insurance exchanges

As of March 31, 2014, all Americans are required to have health insurance coverage meeting certain minimum standards or be subject to a tax penalty, referred to as the individual shared responsibility mandate. This penalty will rise from 1 percent of the yearly household income or $95 per person (whichever is greater) in the first year, to 2 percent of the household income or $325 per person in 2015, and to 2.5 percent of household income or $695 per person in 2016, with subsequent adjustments for inflation.10 Certain individuals are exempt from the penalty, including people who would have to pay more than 8 percent of their income for coverage, those exempted from filing a tax return based on income or religious objections, and those who are in the country illegally. Additional exemptions are described in the ACA.

Americans with an annual income between 100 percent and 400 percent of the federal poverty level are eligible for subsidies in the statewide health insurance exchanges established by the Secretary of the U.S. Department of Health and Human Services (HHS).

Insurance exchanges are organized on a state level and allow U.S. citizens, legal immigrants, and small businesses to buy approved health coverage. The exchanges can be run by either a governmental agency or a not-for-profit organization, and multiple insurance exchanges may be available in a single state. Insurance exchanges also can be run as Consumer Operated and Oriented Plans, which are managed by its members (insurance holders, for example) and may encourage personal responsibility and cost savings.

Although the federally run exchange used in more than half the states and several state-run exchanges were initially plagued by technical difficulties that led to lagging enrollment numbers, more than 7.1 million Americans had signed up by the April 1 deadline, meeting and exceeding the government’s goal of 7 million enrollments.

Employer coverage

The ACA offers incentives to small employers to provide insurance for employees and penalizes larger employers that refuse to provide insurance. Businesses with more than 200 employees must enroll these individuals in a health plan or pay a $2,000 penalty per full-time employee, excluding the first 30 employees. Employers with fewer than 50 employees receive tax credits for offering health insurance. The employer mandate has been delayed until 2015.

Extended coverage and improved benefits

The ACA extends parental coverage to children up to age 26 and, since enactment, has mandated that children under 19 years old with pre-existing conditions have access to coverage. Beginning in 2014, no one may be denied coverage due to pre-existing conditions. Additionally, plans must cover preventative services with proven benefits without charging a deductible or copayment, and there lifetime limits on coverage are prohibited. To direct money toward actual patient care rather than administration, the ratio of health insurance company spending on administrative costs versus actual medical care is limited. This provision mandates that all health plans must offer certain benefits within their tiers of coverage (bronze, silver, gold, platinum), and thus offer an adequate, baseline level of protection.

Medicaid expansion

The ACA allows states to expand Medicaid to low-income U.S. citizens younger than age 65. Originally formulated as a mandate to extend Medicaid to all Americans with annual incomes of less than 138 percent of the federal poverty level ($16,000 for an individual or $32,500 for a family of four) who are ineligible for Medicare, the Supreme Court in 2012 ruled that states could choose whether to comply with the mandate.11 As of April, 27 states and the District of Columbia had planned to expand Medicaid, five were debating the expansion, and 19 states were maintaining the status quo.12

At present, 42 states and the District of Columbia use the Medicaid program to supplement GME. Medicaid’s $2 billion to $3.8 billion contributions to GME, either directly or through Medicaid managed care programs, make Medicaid the second-biggest GME payment source behind Medicare’s $9.5 billion contribution to indirect and direct GME funding.10,13 Most of this money is allocated to teaching institutions, and states that proceed with Medicaid expansion may have more resources for resident training. Several states with a large number of residency programs, such as California, have not supported GME via Medicaid for years, regardless of the ACA’s Medicaid expansion provision. For the future practice of current residents, the access of uninsured Americans to insurance could decrease the amount of uncompensated care provided and foster the overall health of a state’s population.14

Physician Payments Sunshine Act

To increase transparency in physician-industry relationships, the ACA included the Physician Payments Sunshine Act, which requires companies to report their dealings with physicians to the Centers for Medicare & Medicaid Services.15 Currently, no penalties are imposed on physicians with financial relationships with industry, and although these reporting requirements do not affect residents, they do apply to surgeons in fellowship training.

Patient-Centered Outcomes Research Institute (PCORI)

One of the ACA’s major goals is to increase the value and decrease the cost of medical care. Measures include the support of preventative and outpatient care, the introduction of integrated care models such as accountable care organizations, and a focus on evidence-based medicine through institutions such as the PCORI.16

National Health Service Corps

To improve health care in rural and underserved areas, the ACA provided increased funding to the National Health Service Corps, which offers loan repayment and other incentives for those health care professionals who work in underserved locations and specialties. Physician supply to rural areas is one part of the discussion concerning the future of the physician workforce, which will heavily influence the practice environment for future generations of physicians.

Additionally, the ACA allows for the redistribution of currently unused residency slots that can thus be assigned to training programs in primary care and general surgery in states with low physician-to-patient ratios, large health care professional shortage areas, and a large number of rural hospitals. Since its inception, five rounds of redistribution have occurred, with 63 hospitals from Arizona to Pennsylvania receiving additional slots in the first round alone.17

The physician workforce

A dramatic physician shortage has become increasingly apparent over the last decade, particularly in primary (surgical and nonsurgical) care and in rural regions, and is anticipated to intensify with the implementation of the ACA. Millions of previously uninsured or underinsured Americans will enter mainstream health care. Physicians and surgeons are expected to see many more referrals and will face more advanced conditions in patients who have not had access to health care in many years, if ever.

With the overall number of residency slots in this country still capped, up to 80 percent of graduating residents pursuing subspecialty training, and a large number of experienced surgeons expected to retire in the near future, there is an anticipated shortage of up to 91,000 physicians (among them 46,000 surgeons) by 2020.18,19 This imminent workforce crisis has attracted considerable attention, and steps to mitigate its effects include the establishment of multiple medical schools and the previously described redistribution of unused residency slots. In addition, several medical schools and training programs encourage students and residents to rotate in rural, underserved areas and have successfully increased the interest of graduates in practicing in these locations.20,21

Unfortunately, an overall increase in residency slots, likely the only durable solution to physician shortages, has yet to be achieved. In an attempt to accomplish this goal, Reps. Joseph Crowley (D-NY) and Michael Grimm (D-NY) introduced the Resident Physician Shortage Reduction Act of 2013, which was aimed at increasing the number of residency slots by 15,000 in 2019. A major obstacle to this expansion is the extremely high cost involved, and decisions on this bill have been at a standstill since its assignment to the Senate Finance committee. Movement on this topic may emerge from a highly anticipated Institute of Medicine report on the governance and financing of GME. The report—which initially was to be released in April but at press time had not been published—is expected to provide “recommendations for policies to improve graduate medical education, with an emphasis on the training of physicians.”22

Opinions on the ACA

Despite—or perhaps because of—the significant media coverage and often politically motivated discussions that the ACA has inspired, correct public knowledge about the ACA is surprisingly limited. In the fall of 2013, fewer than 40 percent of the public knew about its key components, such as insurance exchanges.23 Additionally, approximately 30 percent to 40 percent of the general population had a favorable opinion of the ACA, and roughly the same percentage had an unfavorable one, with a clear division along self-identified party affiliations.24 In the first months of 2014, disapproval of the ACA seemed to be on the rise, particularly among less-educated and older Americans, in contrast to the rising numbers of individuals enrolling in the statewide insurance exchanges.

Patients will expect their physicians to help them navigate the ACA and address their concerns and knowledge gaps. Physicians themselves, however, seem to disagree on key elements and implications of the ACA. Some surveys demonstrate a fairly even split between physicians considering the ACA to be “a good start” versus a “step in the wrong direction”25; others draw a more negative picture, particularly among surgical specialists, more than 60 percent of whom are concerned that the ACA may have negative implications for patient care.26

Physician reimbursement

The future of physician payment has garnered much attention over the last several years for obvious reasons and has been accompanied by an environmental shift focusing on the development of quality metrics instead of simple quantitative measurements to calculate physician reimbursement.27

One payment model outlined in the ACA calls for establishing bundled payments. Introduced in August 2011, the Bundled Payments for Care Improvement initiative and its ultimate effects will directly affect practicing surgeons. Under this paradigm, the traditional fee-for-service payment system would be replaced with a single payment made to a third-party administrator for all services rendered to a patient during the length of a treatment “episode”; that is, the preadmission, inpatient, and postdischarge care delivered in association with a surgical procedure.28 According to this model, a bundled payment would then be distributed among those physicians and institutions responsible for a patient’s care and would be constructed to reward the meeting of preset quality metrics. The implementation of the bundled payment approach will directly affect the practicing surgeon, especially with regard to how such payments are distributed among providers and a hospital. Although multiple models exist, the overall result of this new compensation methodology remains unclear.29

Administrative burdens

Most surgeons and residents have felt the pressures of meeting increased administrative requirements and regulations in medicine, such as greater demands from insurers for documentation and justification items. This climate of increasing paperwork and less time to devote to direct patient care has contributed substantially to overall physician dissatisfaction. With the implementation of the ACA, many fear that these requirements will become more cumbersome. Of all medical specialties, the surgical community probably has the most significant reason for alarm because more administrative duties correspond to less operative availability, which is the primary interest, as well as source of income and billing, of general surgeons.

Change in practice models

A particular concern among surgical residents and junior attending surgeons appears to be the decline of the traditional “private practice” business model for which surgeons have long been known. Increasingly, physicians join large health care networks as employees, a trend fostered by the developments in health policy, medical innovation, and changing attitudes toward resident training and physician lifestyle.30 Current surgical graduates are enthusiastically joining hospital-based practices, which may provide larger compensation packages to junior surgeons but lack the degree of autonomy available in the traditional small business model.

The ACA and its associated requirements may accelerate this shift from private practice to employment. The effects of this change on the future of surgical practice are an important consideration that both residents and attending surgeons should monitor.


Health care in the U.S. faces a challenging future. Whether the ACA is an important first step in the right direction or a wrong turn on the way to reform of the U.S. health care system, it represents one of the most profound changes to our health care environment in recent times and remains a highly debated topic among the public and physicians alike. Regardless of personal opinion or preference, physicians have an obligation to be informed about the key components of the ACA both to help their patients navigate the new health care landscape and to look out for their own professional interests.

Only by demonstrating strong interest, personal engagement, and active participation in shaping our new health care environment can we, as surgeons, guarantee what the American College of Surgeons has successfully represented for more than 100 years—highest standards and better outcomes.


We would like to thank Matt Coffron; John Hedstrom, JD; Kristin McDonald; and Heather Smith from the American College of Surgeons’ Division of Advocacy and Health Policy, Washington, DC, for their help with this article. The information in this article is current as of April 2014.


The views expressed in this article are those of Dr. Ward and the other authors and do not necessarily reflect the official policy or position of the U.S. Department of the Navy, U.S. Department of Defense, or the U.S. government, with which Dr. Ward is affiliated.


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