Monthly Archives: May 2010

I Thought the Bill Was Supposed to LOWER Premiums

The New York Times has a story out today regarding Secretary Sebelius’ meeting yesterday with insurance industry executives, at which she asserted that insurance rates were at a “crisis point” and that “more and more people are dropping coverage because of the increase in prices.”  She also said that “the worst of all worlds is to have more Americans driven out of the market [by higher premiums] in the next couple of years,” before the coverage expansions take effect in 2014.

The Secretary’s comments are a startling admission from an Administration elected on a promise to cut the average family’s premiums by $2,500 per year “by the end of my first term as President.”  But it shouldn’t come as a shock to anyone who’s read the Congressional Budget Office report noting that the health care law would RAISE premiums in the individual market by $2,100 per year.  And the idea of people dropping coverage because of higher premiums will only be encouraged by a law that encourages healthy people to drop coverage, pay a tax penalty, and buy insurance only when they need it, as multiple studies suggest is occurring as a result of Massachusetts’ health care law.

So the real question to the Secretary is: Instead of turning insurance companies into a political punching bag, why won’t the Administration own up to the fact that, rather than helping lower premiums, as the President repeatedly promised, their government takeover of health care is making the problem worse?

Implementing Obamacare: More than Just Seeking Headlines

Wanted to point out an article in Politico this morning that may have missed your attention (as it did mine).  It points out that HHS’ implementation of the health care law is already behind schedule, as a breast cancer task force and an Alaska health task force were not appointed by the deadlines established in the Act.  It quotes an official at the CDC – charged with oversight of the breast cancer task force – as “uncertain as to whether the agency had even begun work on its task.  ‘My understanding, with everything regarding that bill, is that it is still with HHS…Right now, we have not made any steps to implement’ the act.”

Republicans criticized the many new boards, bureaucracies, and programs created in the legislation as a costly and ineffective symptom of Democrats’ government takeover of health care – and the delays already seen to date tend to confirm that view.  With the Administration apparently focused on sending out mailings to “educate” individuals about the law, implementing the law itself would appear to have fallen short – and fallen flat.

They Said It: CBO Chief Says Obamacare Unsustainable

From a slide presentation by CBO Director Doug Elmendorf on Wednesday (emphasis mine):

Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.

Putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including this year’s health legislation).

Revised Bill Summary: Update on H.R. 4213, House Extenders Bill

Earlier today the House finally completed consideration of the extenders package, voting to adopt the UI/tax extenders portion of the measure by a 215-204 vote, and passing the 19-month “doc fix” on a separate 245-171 vote.  The amendment stripped the six-month extension of higher federal Medicaid matching funds, as well as the six month extension of COBRA subsidies.  (Of note to budget/tax staff: The amendment also delayed implementation of the Section 412 carried interest provisions until December 31, 2010, instead of the date of enactment of the legislation.)  As a reminder, the base bill can be found here, and the manager’s amendment (which does NOT include the additional changes made this morning) can be found here.

CBO has also released updated scoring tables reflecting the latest changes.  Note that while the table shows the health subtitle as saving approximately $3 billion over ten years, this figure OMITS most of the nearly $23 billion deficit impact of the 19-month “doc fix.”  The amended legislation increases the deficit by “only” $79.4 billion over five years, and $57.7 billion over ten.

As previously indicated, the Senate is not voting today, so final disposition of the House-passed measure will likely wait until after the Memorial Day recess.

 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-December of 2010, and an additional 1% increase for 2011.  The legislation also guarantees a further funding “cliff” in January 2012, whereby Medicare payments would be cut by 33% absent further Congressional action.  The provisions would spend a total of $25.2 billion, but due to various interactions (mainly higher Part B premiums for seniors) would have a net deficit impact of $22.9 billion.  Most of the new Medicare spending (approximately $21.9 billion) would be exempt for PAYGO purposes, but it would increase the deficit regardless.  Raises the deficit by $22.9 billion over five and ten years.

Medicaid Funding:  Includes a six-month extension (through June 30, 2011) of increased federal Medicaid funding provided in the “stimulus,” which is designated as emergency spending for PAYGO purposes.  The bill clarifies that states with Section 1115 waivers covering childless adults in effect as of December 31, 2009 qualify for meeting the “stimulus” bill’s maintenance of effort requirements.  The bill also includes a new provision requiring that to obtain the additional six months of federal funding, state chief executive officers must certify “that the state will request and use such additional funds” – language which some may view as a politically motivated stunt.  Raises the deficit by $24.1 billion over five and ten years.

COBRA Subsidies:  Extends for six months eligibility for COBRA subsidies for individuals laid off through November 30, 2010.  The bill does not extend the length of the subsidy program beyond the current-law 15 months.  The bill designates this spending as emergency appropriations for PAYGO purposes, although it will still add to the deficit.  Raises the deficit by $6.9 billion over five and ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.  Saves $4.2 billion over five and ten years.

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”  Provides $400 million to California to adjust Medicare fee schedule localities, and includes clarifying language preventing Medicare providers from un-bundling reimbursement requests.

If Medicare Is So “Strong and Solvent,” Why the Doc Fix Rush?

Two major papers have stories covering the Administration’s $18 million Medicare propaganda effort – the Post has a story, the Wall Street Journal an excellent editorial – but the most interesting take may come from the irony in Associated Press piece, which notes that “for the third time this year, Congress is scrambling to stave off a hefty pay cut to doctors treating Medicare patients – even as the Obama administration mails out a glossy brochure to reassure seniors the health care program is on solid ground.”  The story goes on to relate how physicians have wearied of the constant “doc fix” patches, and includes quotes from Marilyn Moon, a former Medicare trustee, pointing out that when considering health reform, Congress should have used Medicare savings to fix the Medicare program, and specifically the SGR formula.

So even as the White House attempts to the content of defend its “educational” mailing, it’s worth asking: How “strong and solvent” is a program that needs a last-minute intervention from Democrats in Congress (funded by deficit spending, of course) to ensure seniors are actually able to see their doctors in the coming weeks?

A related word on the extenders package including the “doc fix:” While House Democrat leaders still do not appear to have settled on a strategy to pursue (or not) passage yet this week, the Senate will NOT be voting today.  Thus the final disposition of any House-passed measure will likely need to wait until after the Memorial Day recess.

Will Health “Reform” Leave the Sickest Behind?

The New York Times is out this morning with the below story regarding a study performed by the National Institute for Health Care Reform analyzing the inadequacy of the high-risk pools included in the health care law.  The study finds that as many as 7 million individuals could be eligible to enroll in the risk pool – a number that drops to 5.6 million if those with access to other coverage are excluded.  By contrast, the study finds that the $5 billion in funding included in the health care law would only cover about 200,000 people annually, due in part to the average $6,000-$7,000 subsidy provided to participants (as opposed to the $4,200 average subsidy provided in existing state high-risk pools).  The study notes that due to the higher subsidies provided, “the new federal pool will almost certainly be less costly for enrollees” than existing pools “and will probably offer superior benefits.”  But enrollees in existing pools will be “trapped in their inferior arrangements” due to the way the law was drafted.

In addition to the inequities present for those in existing pools, states too have worried about being left on the hook if the $5 billion in federal high-risk pool funding runs out early, as this study confirms it would.  But the paper also points out that states who allow the federal government to establish the new risk pools created by the law in their states (as 20 have done) have no requirement to maintain their existing pools – which may lead those states to eliminate their programs or (more likely) freeze enrollment.  This scenario would of course protect state budgets, but it would further stretch the $5 billion provided for the program, meaning Congress may be asked to consider a high-risk pool “bailout.”

The study closes with a pessimistic note about the insurance markets in January 2014, noting that a likely waiting list to enter the high-risk pools, coupled with their closure upon establishment of the exchanges in January 2014, could well release a flood of sicker enrollees into the exchanges right at their outset, potentially spiking premiums and discouraging healthy people from joining.  The sum total of these possible results – unfunded mandates on states, sick individuals unable to obtain coverage, and higher premiums – would leave anyone wondering where exactly the “reform” in the health law went.

Employers’ Financial Incentives to Drop Coverage

The new American Action Forum is out today with a study highlighting how the perverse financial incentives in the health care law could lead many employers to drop their existing coverage – because both firms and their workers will financially benefit from doing so.  Specifically, firms may decide to pay the $2,000 penalty for not offering coverage, and give their workers raises to offset the value of the foregone employer contribution towards insurance.  In the case of a family insurance plan costing approximately $12,000 where the firm pays 75% of costs, workers with incomes under two-and-a-half times the federal poverty level could receive MORE in federal subsidies and raises from their employers than under their current employer plan, and the firms would come out ahead financially too.  For these reasons, the study concludes that up to 35 million individuals could lose their coverage as a result of the law’s enactment – violating President Obama’s promise that “If you like your current plan, you can keep it.”

While the scenario might represent a win for the employer and/or employee – both could come out ahead financially, even if the individual would be forced to change his health coverage involuntarily – it would be a definite loss for federal taxpayers, who would be forced to assume the burden instead.  It’s one of many reasons why Democrats’ government takeover of health care will ultimately prove fiscally unsustainable.

Policy Brief: Health Care Facts President Obama Doesn’t Want You to Know

Propaganda Campaign Targeting Seniors Omits Findings of Medicare’s Own Actuaries

The Administration recently announced it would be mailing flyers to more than 40 million seniors at taxpayer expense to “educate” them about the provisions of the newly enacted health care law.[i]  However, an examination of the leaflet[ii] reveals that the Administration’s newest political campaign to sell the health care law resulted in the omission of facts that Democrats may consider to be inconvenient truths:

CLAIM:          “More affordable prescription drugs.”

FACT:             All seniors paying Part D premiums will see their costs rise so that only a few million seniors will benefit.  Specifically, the Congressional Budget Office (CBO) found that “the law would lead to an average increase in premiums for Part D beneficiaries of about 4 percent in 2011, rising to about 9 percent in 2019.”[iii]  While 2.9 million seniors were fully exposed to the Part D “doughnut hole,” and thus will receive all the new law’s benefits, more than 17 million seniors will pay higher prescription drug premiums so this much smaller subset can benefit.[iv]

CLAIM:          “This [legislation] will extend the life of the Medicare trust fund by 12 years.”

FACT:             The Medicare actuaries found that the law’s Medicare provisions “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund, despite the appearance of this result” because of Democrats’ budgetary double-counting.[v]  The CBO agrees: hundreds of billions of dollars in “Medicare savings” will be re-directed toward creating a new entitlement program, such that the legislation “would not enhance the ability of the government to pay for future Medicare benefits.”[vi]

CLAIM:          “Improvements to Medicare Advantage.”

FACT:             Projected enrollment in the popular Medicare Advantage (MA) program will be cut in half.   According to Medicare’s actuaries, “enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law).”[vii]  The actuaries also found that the bill’s cuts will “result in less generous benefit packages,” leading those seniors who still have access to MA plans to lose their extra benefits.[viii]

CLAIM:          “The guaranteed Medicare benefits you currently receive will remain the same.”

FACT:             According to Medicare’s actuaries, about “15 percent of Part A providers would become unprofitable within the 10-year projection period” because of the health care law.[ix]  The actuary report also found that the Medicare provisions may lead some providers to terminate their participation in Medicare entirely, “possibly jeopardizing access to care for Medicare beneficiaries.”[x]

CLAIM:          “Insurance companies will be prohibited from denying coverage due to a pre-existing condition for children starting in September, and for adults in 2014.”

FACT:             The health law gives an exemption from the pre-existing condition restrictions to insurance companies selling Medigap plans.  So AARP and other plans selling insurance to vulnerable seniors can continue to impose waiting periods on beneficiaries needing care for chronic conditions, as AARP currently does.[xi]

CLAIM:          “The new law creates a program to preserve [retiree health] plans and help people who retire before age 65 get the affordable care they need.”

FACT:             One recent study found that a single provision in the health care law—eliminating a tax subsidy for employers who cover their retirees’ pharmaceutical expenses—could result in as many as two million retirees losing their drug coverage.[xii]  Moreover, the Medicare actuaries found that the new retiree health program was under-funded, and would run out of funds “within the first one to three years of operation.”[xiii]

CLAIM:          “The new law creates a new voluntary insurance program called CLASS to help pay for long-term care and support at home.”

FACT:             The plain text of the health care law notes that individuals must pay premiums into the CLASS program for five years before becoming eligible for benefits.  In addition, an individual must be “actively employed” and “not a patient in a hospital or nursing facility” in order to enroll in the program.[xiv]  These restrictions mean most Medicare beneficiaries would be ineligible to enroll in the program.  For those few beneficiaries who might be able to enroll, many may not see benefits from it—the Medicare actuaries found that the entire CLASS program faces “a significant risk of failure” and “there is a very serious risk” the program will become “unsustainable.”[xv]

With the federal government facing trillion-dollar deficits, many may question the wisdom of spending millions of taxpayer dollars to mail seniors an incomplete, biased leaflet designed largely to promote the President’s agenda.  Moreover, what does it say about the law itself that the Administration ignores the conclusions of its own non-partisan experts?



[i] E-mail from Centers for Medicare and Medicaid Services, May 27, 2010

[ii] Claims come from Medicare flyer, available at http://www.medicare.gov/Publications/Pubs/pdf/11467.pdf

[iii] Congressional Budget Office, impact of H.R. 3590 and reconciliation legislation on Part D premiums, March 19, 2010, http://www.cbo.gov/ftpdocs/113xx/doc11355/Comparison.pdf

[iv] Medicare Payment Advisory Commission, “Report to the Congress: Medicare Payment Policy,” March 2010, http://medpac.gov/documents/Mar10_EntireReport.pdf,  pp. 286-88

[v] Solomon Mussey, Department of Health and Human Services, Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” on the Medicare Trust Fund, April 22, 2010, http://www.cms.gov/ActuarialStudies/Downloads/PPACA_Medicare_2010-04-22.pdf,  pp. 1-2

[vi] Congressional Budget Office, Letter to Honorable Jeff Sessions, January 22, 2010, http://www.cbo.gov/ftpdocs/110xx/doc11005/01-22-HI_Fund.pdf.

[vii] Richard Foster, Department of Health and Human Services, Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended, April 22, 2010, http://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf , p. 11

[viii] Ibid.

[ix] Ibid., p. 10

[x] Ibid.

[xi] See for instance the New York State Insurance Commissioner’s website comparing Medigap plans, http://www.ins.state.ny.us/caremain.htm#tables

[xii] “Assessing the Coverage and Budgetary Implications of Legislation Modifying the Deductibility of Retiree Drug Spending Eligible for Subsidies,” American Benefits Council report by The Moran Company, March 16, 2010, http://www.americanbenefitscouncil.org/documents/hcr_rds-report_031610.pdf, p. 5

[xiii] Richard Foster, Medicare actuaries report on financial effects of PPACA, p. 15

[xiv] Title VIII of H.R. 3590 as enacted, new Section 3204(c) of CLASS Act, p. 1906

[xv]Richard Foster, Medicare actuaries report on financial effects of PPACA, p. 15

Health “Reform’s” Assault on Small Business

NFIB President Dan Danner has an op-ed in the Wall Street Journal this morning outlining why the organization believes the health law will harm small business so much that it has joined the constitutional challenge to the health law’s mandates.  It’s a succinct summary of how the law’s myriad new taxes, regulations, and fees will raise costs, increase paperwork burdens, and unfairly penalize one of the engines of American job creation.

… This law is death by a thousand cuts for small business owners. According to the Congressional Budget Office (CBO), the overhaul will cost about $115 billion more than first projected, bringing the total to more than $1 trillion. Small businesses will also now have to deal with an onslaught of new taxes and burdensome paperwork.

Supporters say the law will significantly help small businesses, focusing on the much-talked about small business tax credit. But the reality is that the tax credit is complex and very limited because firms qualify based on number of employees and average wages. The credit, which is only available for a maximum of six years, puts small business owners through a series of complicated “tests” to determine if they qualify and how much they will receive. Fewer than one-third of small businesses even pass the first three (of four) tests to qualify: have 25 employees or less, provide health insurance, and pay 50% of the cost of that insurance.

More importantly, the credit is temporary, but health-care cost increases are permanent. When the credit ends, small businesses will be left paying full price. They’ll also be forced to deal with all sorts of new taxes, fees and mandates buried in this 2,000-page law.

One of these new taxes is a so-called health insurance fee. It’s a massive $8 billion tax (that escalates to $14.3 billion by 2018) on insurance companies based on their market share. This tax will be paid almost exclusively by small businesses and individuals because the law specifically excludes self-insured plans, the plans that most big businesses and labor unions offer, from having to pay the tax.

While the health insurance fee was designed to “go after” large health-insurance companies, the reality is that insurers aren’t simply going to absorb this new tax; it will be passed on to customers. Specifically, it will be passed on to the plans that 87% of small businesses and individuals buy. A study by the Federal Policy Group published last October found that the amount of taxes passed on to the typical family of four could be $500 or more per year.

Adding insult to injury, the law also requires all businesses to issue IRS 1099 forms to document every business-to-business transaction of $600 or more. To someone who’s never run a business, this may sound like nothing. But Congress hopes to raise $17 billion in added tax revenues and fees from this new mandate. That’s hardly nothing.

The burden of raising that expected revenue falls again on the backs of small business owners who already suffer under unmanageable federal paperwork burdens. What’s worse, this new reporting requirement has absolutely nothing to do with health-care reform. It was included to help pay for the nearly trillion-dollar price tag of the bill. Why should small business owners have to pay for a bill that causes them so much harm? They shouldn’t, which is why NFIB is fighting against this law in court.

Revised Bill Summary: Manager’s Amendment to H.R. 4213

Last night the House Rules Committee reported out a rule for consideration of the extenders package today, along with an additional amendment to that package.  (Text of the manager’s amendment is here, and text of the new base bill introduced last Thursday is here.)  As has been widely reported, the manager’s package would reduce the length of the “doc fix” by two years (such that it would expire on December 31, 2011 instead of December 31, 2013), and reduce by one month the extensions of unemployment and COBRA subsidies.  The manager’s amendment also eliminates a nearly $4 billion transfer to the Medicare Improvement Fund, allowing savings from the 3-day payment window provisions to reduce the bill’s overall deficit impact, instead of being redirected into a “slush fund.”

The overall bill would raise deficits by $109.4 billion over five years, and $87.7 over ten.  The health subtitle would add $45 billion to the deficit over five and ten years.  Within that total, the SGR provisions would raise the deficit by $21.9 billion over five and ten years (down from $65 billion in the earlier version).  The COBRA subsidies would cost $6.9 billion over five and ten years (down from $7.8 billion due to the shorter extension period), and the Medicaid FMAP provisions would raise the deficit by $24.1 billion over five and ten years (unchanged).

According to CBO, the cost of the 19-month “doc fix” (through December 31, 2011) is $22.9 billion.  The difference stems from the fact that the amendment would actually provide an increase to the SGR formula for 2010 and 2011, but the maximum allowable adjustment under statutory PAYGO reflects a freeze in current payment rates.  Thus the maximum allowable amount under statutory PAYGO (the amount of a freeze for 19 months) is about $21.9 billion, but CBO estimates the total cost of the SGR provision at $22.9 billion, with the difference of approximately $1 billion being the cost of providing payment updates.

Also of note, CBO estimates that Medicare physician payment rates will be cut by 33 percent in January 2012 absent further congressional action.

 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-December of 2010, and a 1% increase for 2011.  The legislation also guarantees a further funding “cliff” in January 2012, whereby Medicare payments would be cut by 33% absent further Congressional action.  Most of the new Medicare spending (approximately $21.9 billion) would be exempt for PAYGO purposes, but it would increase the deficit regardless.  Raises the deficit by $22.9 billion over five and ten years.

Medicaid Funding:  Includes a six-month extension (through June 30, 2011) of increased federal Medicaid funding provided in the “stimulus,” which is designated as emergency spending for PAYGO purposes.  The bill clarifies that states with Section 1115 waivers covering childless adults in effect as of December 31, 2009 qualify for meeting the “stimulus” bill’s maintenance of effort requirements.  The bill also includes a new provision requiring that to obtain the additional six months of federal funding, state chief executive officers must certify “that the state will request and use such additional funds” – language which some may view as a politically motivated stunt.  Raises the deficit by $24.1 billion over five and ten years.

COBRA Subsidies:  Extends for six months eligibility for COBRA subsidies for individuals laid off through November 30, 2010.  The bill does not extend the length of the subsidy program beyond the current-law 15 months.  The bill designates this spending as emergency appropriations for PAYGO purposes, although it will still add to the deficit.  Raises the deficit by $6.9 billion over five and ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.  Saves $4.2 billion over five and ten years.

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”  Provides $400 million to California to adjust Medicare fee schedule localities, and includes clarifying language preventing Medicare providers from un-bundling reimbursement requests.