Thousands Who Didn’t File Tax Returns May Lose Health Care Subsidies

By Robert Pear
The New York Times, October 25, 2015

Tens of thousands of people with modest incomes are at risk of losing health insurance subsidies in January because they did not file income tax returns, federal officials and consumer advocates say.

Under federal rules, anyone who receives an insurance subsidy must file a tax return to verify that the person was eligible and received the proper amount of financial assistance based on household income.

When the federal insurance marketplace opens for the third enrollment season next Sunday, users will see a new question: “Did your household file a 2014 tax return and reconcile any premium tax credit you used?”

If the answer to that question is no, consumers risk losing the subsidies they receive to help pay premiums. Without such assistance, many would find insurance unaffordable.

Many of the people potentially affected have incomes so low that they would not otherwise have to file tax returns. But if they received insurance subsidies in 2014, they were required to file this year.

(Christine Speidel, a tax lawyer at Vermont Legal Aid) identified three groups of people at risk: those who did not file a tax return; those who filed a return without the correct form to reconcile advance payments of the premium tax credit; and those who filed and reconciled this fall, too late for the information to be made available to health insurance exchanges before the open enrollment period.

In July, the Internal Revenue Service said 710,000 people who had received subsidies under the Affordable Care Act had not filed tax returns and had not requested more time to do so.

If those people do not return to the marketplace this fall, they may be automatically re-enrolled in the same or similar health plans at full price. And when they receive an invoice from the insurance company next year, they may be shocked to see that their subsidies have been cut to zero.

The I.R.S. also said 760,000 taxpayers had received subsidies and filed returns but had not attached the required form comparing the subsidies paid with the amount they were entitled to receive. Taxpayers describe that document, I.R.S. Form 8962, as daunting.

“The premium tax credit form, the dreaded 8962, is really hard,” said Eileen P. Duggan, a piano teacher and freelance writer in Maplewood, Mo., outside St. Louis, who filed the form with her tax return. “It’s enough to make you cry, that form. It was almost impossible to figure out.”

http://www.nytimes.com/2015/10/26/us/politics/thousands-who-didnt-file-tax-returns-may-lose-health-care-subsidies.html

IRS Form 8062 – Premium Tax Credit
https://www.irs.gov/pub/irs-pdf/f8962.pdf

IRS Instructions for Form 8962 (15 pages)
https://www.irs.gov/pub/irs-pdf/i8962.pdf

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Comment:

By Don McCanne, M.D.

This is just one more small but somewhat shocking example of the unnecessary administrative complexity created by the Affordable Care Act (ACA).

Based on income alone, many people are not required to file tax returns if their income falls below a certain threshold (amount varies based on taxpayer status). However, many of these low-income individuals purchase plans through the ACA insurance exchanges and qualify for premium tax credits. All individuals who receive these credits under ACA must submit Form 8962 for the premium tax credit. It must be attached to an income tax return (Form 1040, 1040A, or 1040NR), so these people are required to submit tax returns no matter how low their incomes.

The penalty for not submitting Form 8962 attached to an income tax return is the requirement to refund any premium tax credits received and a disqualification from receiving tax credits in the following year. That’s quite a penalty for people with low incomes when you consider that ACA was supposed to make health care affordable. After all, “Affordable” is in its name.

But look at Form 8962 (click on link above). Then glance through the 15 pages of instructions for filling out Form 8962 (link also above). Sophisticated taxpayers are likely to find this daunting, but think of what it would be like for many of the low-income individuals who would have difficulties with just the simplified Form 1040A tax return, not to mention this monstrosity. It makes you think that ACA means “Administrative Complexity for All.”

Since there are no premiums in a well-designed single payer system, there would be no need for premium tax credits. The entire health care system would be funded by simplified taxes based on ability to pay. The health care system would always be there for you whenever you needed it, regardless of your tax situation. Even if delinquent, the IRS could not penalize or take away your health benefits.

Fareed Zakaria: Health IT is no magic bullet

By Bernie Monegain
Healthcare IT News, October 21, 2015

As Fareed Zakaria sees it, the remedy for America’s ailing and expensive health system is clear.

It might be hard for some to swallow, but, in his view, it is sure and proven.

“There’s absolutely no question that when we look at the ability to provide good healthcare at an affordable price, lower levels of massive inequality in healthcare outcomes or provision, a single government payer and multiple private providers is the answer. It’s absolutely clear that is the only way you can achieve that goal,” Zakaria said. “The revolution that’s needed here is not an information revolution, it’s a political revolution.”

Zakaria is a journalist, author and host of Fareed Zakaria GPS, a Sunday morning staple on CNN that delves into global issues and ways to solve them. For purposes of his broadcast “GPS” stands for Global Public Square.

Zakaria spoke to a crowd of more than 600 healthcare CIOs at the annual CHIME Fall Forum, October. 16 in Orlando, Fla.

“The fundamental point, I think, that you have to understand about healthcare is information technology, globalization are not magical solutions,” Zakaria told the audience.

This is especially so, because the fundamental structure of healthcare “makes it very difficult to achieve certain economies of scale.”

“What I’m always struck by when I look at healthcare,” Zakaria said,  “is the fundamental accuracy, impressions of the 1961 or 1962 article written by Kenneth Arrow, a Nobel Prize winning economist, who said healthcare is not going to operate like any other market.”

Indeed, noted economist, New York Times columnist and author Paul Krugman also references Arrow’s work.

“One of the most influential economic papers of the postwar era was Kenneth Arrow’s Uncertainty and the welfare economics of health care, which demonstrated – decisively, I and many others believe – that health care can’t be marketed like bread or TVs,” Krugman wrote in a 2009 column.

Exactly Zakaria’s point.

Healthcare “is all non-tradable work,” he explained. Yet, “people look at healthcare and they ask themselves, ‘Why aren’t you getting more and more productivity?'”

That approach works in most industries.

“We have wrung inflation out of literally every industry,” Zakaria noted. “In most cases you’ve seen enormous price deflation. Think about computers; think about technology.”

Higher education and healthcare have been elusive when it comes to controlling spiraling costs. In fact inflation rates have been two to three times higher than the national average, he said.

“In both cases, you have the consumer not paying, very complicated government regulation that involves lots of third parties that pay and reimburse on very complicated schedules,” Zakaria said.  “So all the normal price mechanisms that are at work that allow supply and demand to find equilibrium do not exist. “

As Zakaria sees it, the answer does not lie in technology – at least not in technology alone, but rather in the structure of the health system itself and leaders should be prepared to unravel the structure.

“I don’t mean to be the bearer of bad news. What I mean is you have a very complicated job ahead of you, which is the structure. In addition to that you have a Democratic system, which makes it very hard to change the structure.”

http://www.healthcareitnews.com/news/zakaria-health-it-no-magic-bullet

Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care,” The American Economic Review, December 1963: https://www.aeaweb.org/aer/top20/53.5.941-973.pdf

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Comment:

By Don McCanne, MD

Although Fareed Zakaria has wavered in the past on what we need to do to improve the health care system in the United States, he has now come to the firm conclusion that we need single payer.

As he states, “There’s absolutely no question that when we look at the ability to provide good healthcare at an affordable price, lower levels of massive inequality in healthcare outcomes or provision, a single government payer and multiple private providers is the answer. It’s absolutely clear that is the only way you can achieve that goal.”

He cites the 1963 landmark article by Nobel laureate Kenneth Arrow, “Uncertainty and the Welfare Economics of Medical Care,” (link above) explaining why health care cannot achieve a competitive equilibrium in the marketplace. In today’s terms, Arrow’s work explains why it is foolish to continue to rely on a marketplace of private health plans plus various public programs to try to manage spending in our $3 trillion health care industry.

As Nobel laureate Paul Krugman states, “health care can’t be marketed like bread or TVs.”

Imagine marketing fire or police or disaster relief services like bread or TVs. Those services should be there, ready for any of us whenever we need them. The same is true for health care. That would work just fine if we made our government the single payer.

I thought people should shop more for health care. Then I actually tried it.

By Sarah Kliff
Vox, October 19, 2015

I spend most of my time writing about the health care system. But every now and again, I actually use the system, too. This past week, those two activities collided on a very specific subject: shopping for better medical prices, and why patients don’t do it.

I recently decided to select a medical service strictly on price. This is something many economists think ought to happen more, to lower health spending. I was ready to do my part. Most patients, though, don’t do this, even when they have to spend way more out of pocket to get the more expensive care.

In retrospect, I wish I hadn’t either. The lower-cost procedure — in this case, an MRI — did indeed save my insurance plan money. But it created a worse medical experience for me, and was helpful in highlighting the trade-offs that patients must make in the shopping experience.

This past June, I stress-fractured my left foot. Though I spent six weeks in a very stylish walking cast over the summer, the injury has stubbornly refused to heal. Earlier this fall I saw an orthopedic specialist, who recommended an MRI to get a better sense of what exactly was wrong. He referred me to a large academic medical center for the scan, and I made an appointment.

My insurance quickly intervened — and, as a health care wonk, I was very excited!

I got a phone call one evening from a woman who asked if I’d consider switching to a private imaging center nearby that charged about $400 for an MRI — about half as much as the academic center cost. She offered to help me make the appointment, right then and there.

For me, the cost would be exactly the same; I’d have a $50 copay for the procedure regardless of where I got my foot scanned. But I’d long understood MRIs as a commodity health care service, essentially an advanced photograph that would come out the same regardless of who snapped it. So, in the sake of doing my part to lower national health spending, I switched to the cheaper center.

To preface: I understand my list of complaints is relative minor and at the end of the day probably won’t affect the ultimate outcome of my care. At the same time, I didn’t think I was making any trade-off when I chose a cheaper MRI. Now I know that isn’t true.

The first issue arose when I went back to the orthopedic specialist.

He wasn’t familiar with the place my insurer sent me, and the imaging center had forgotten to fax him a copy of my test. This meant a half-hour wait for me in his office, and more work for the office administrators to track down the images and radiological report. 

Getting an MRI at the expensive medical center would have meant a smoother experience. The administrators there would know the exact drill of how and when to ship off my scan. Instead, I inadvertently created a new inefficiency in my own attempt to reduce wasteful spending.

Then there was the image itself. It did show a stress fracture that hadn’t healed, but it was blurry and a little harder for the doctor to make out what exactly was going on. The academic center he refers patients to, he told me, typically sends back much clearer images.

Knowing what I know now, I’m way more torn on whether I would choose the lower-cost MRI facility.

On the one hand, I did save my insurance plan about $400. If everyone at Vox shopped like I did, then that might do a lot of work to reduce our premiums. That would probably make us all pretty happy! My slightly blurry scan was still enough for my doctor to diagnose the fracture, although I still don’t know if he’d have seen something else on a clearer image.

At the same time, my own experience convinces me I’ve downplayed the trade-offs inherent in shopping for even basic health services. If I went back and did it again, I probably would have gone to the academic medical center for the scan.

Recently, I wrote about a new study looking at 75,000 patients who switched from a no-deductible plan to one requiring $3,750 in spending before the benefits kicked in. It showed that even with that really high deductible, patients didn’t shop on price. Instead, they saved money by just going to the doctor less.

One economist who contributed to the study described the finding as “surprising,” and I agreed: When patients have to cover the full cost of their health care, why wouldn’t they look for a better deal? I even called out MRIs specifically as an area where you’d expect to see price shopping but didn’t.

My own health care experience is far from unique. But it was a helpful, first-person demonstration of how shopping for health care might not be a zero-sum game, and that even with basic services, there can be clear winners and losers.

http://www.vox.com/2015/10/19/9567991/health-care-shopping-mri

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Comment:

By Don McCanne, MD

One anecdote does not a study make. But Sarah Kliff is a very astute observer of our health care system, and she has an important lesson for us that further challenges the rationale of consumer-directed health care (CDHC).

The concept behind CDHC is that the consumers (i.e., patients) are placed in charge of a portion of the spending on health care, through deductibles and other cost sharing, by using their own money. They then, theoretically, are motivated to shop for better prices. Although Sarah Kliff had met her deductible and thus would not benefit by price shopping, as a well informed journalist covering health care financing, she wanted to see how this concept might work anyway.

As she explains, she accepted the advice given in a cold call from a representative of her insurer – a representative who supposedly assists with obtaining higher quality care at lower prices. Indeed, the price was lower – for the insurer – but the quality was worse, and the patient experience was inferior. (It is ironic that HHS allows the insurers to log these interventions as “quality improvement” that applies to the medical loss ratio, allowing the insurers to retain even more revenue as profits).

She mentions a recent article of hers (covered in a Quote of the Day last week) about an important study that showed that patients with high deductibles do not shop health care prices. Rather the study showed that patients reduce their use of health care services – much of it that would be beneficial – and the sick do so at a greater rate. Thus CDHC does not achieve its goal of reducing prices but rather has the perverse result of reducing beneficial health care services instead.

We want a system that improves quality and the patient experiences while using patient-friendly methods of containing spending. We will not get that from the private insurers, but we would achieve that goal if we established our own public, single-payer national health program.

Hedge Funds Attack American Health Care

Hedge Clippers, September 30, 2015

It’s not just one highly unethical man: dozens of high-flying financial speculators at hedge funds and private equity firms are driving up the price of pharmaceuticals across the country.

Out of the twenty-five drugs with the fastest-rising prices over the past two years, twenty are owned or have been acquired by firms with significant activity from hedge fund, private equity, or venture capital firms. 

Yes, you read that right: 80% of the drugs with the fastest-rising prices were involved in hedge fund, private equity or similar speculative attacks in the past two years.

The exact circumstances of each deal varies, but the outcome is always the same: branded pharmaceuticals — drugs for which no lower-cost generic alternative drug exists — see their prices increase many times over to satisfy the greed of speculative investors.

One company that stands out in all this is Valeant, a drug manufacturer that partnered in 2014 with a hedge fund called Pershing Square Capital Management to attempt the takeover of Allergan, another pharmaceutical company.

Billionaire hedge fund manager William “Bill” Ackman runs Pershing Square, and his manipulative moves exploded prices for medications needed by ordinary Americans – Americans who aren’t billionaires, and who can’t afford to pay billionaire prices for their medications.

Valeant produces twelve of the twenty-five branded drugs that have increase most in price over the past two years. Among the top fifty, Valeant produces twenty-seven.

Given that branded drugs are essentially a license to print money, it appears that Valeant was pumping up the prices of these medications to finance the Allergan takeover attempt – and/or to ensure big profits for billionaire hedge fund manager Ackman.

Looking back at the data on the pharmaceuticals with the largest price increases in the past two years, Horizon Pharma’s Vimovo is at the very top of the list.

The Vimovo acquisition follows a pattern similar to other pharmaceutical purchases made by companies with hedge fund, private equity, or venture backing.

• Speculative private capital is used is used to acquire an existing branded drug from an established pharmaceutical company.
• Because the drug is branded, no generic exists, and the producer is granted a monopoly on the sale of the drug.
• Once the acquisition is completed, the company drastically increases the price of the pharmaceutical.
• Because no generic exists, customers who need the drug are forced to accept any price dictated by the companies.

The only winners in this game are the pharmaceutical companies and their financiers: the hedge funds, private equity firms, and the venture capitalists. These speculators stand to make fortunes.

#HEDGEPAPERS NO. 22 – Hedge Funds Attack American Health Care

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Comment:

By Don McCanne, MD

The full Hedge Clippers article, available at the link above, provides many examples of outrageous drug price manipulation by hedge fund, private equity, or venture capital firms. These confiscatory price increases have not been for financing new drug research, rather they have been for the sole purpose of redistributing money from patients in need of these drugs to the the money managers at the very top of the income and wealth scales, further compounding our crisis of inequality.

Government intervention is imperative. It would be automatic if we enacted a single payer national health program.

U.S. Health Care Could Be More Like Denmark’s

By Steffie Woolhandler
Room for Debate, The New York Times, October 20, 2015

In last week’s Democratic debate, when Bernie Sanders cited Denmark as a role model for the United States to follow, Hillary Clinton was quick to point out that “we are not Denmark.”

The United States isn’t Denmark, but it can, like Scandinavia, implement changes to its health care system that save money, cover everyone and help us live longer.

In the 1950s, U.S. health statistics were world class: infant mortality rate among the lowest, life expectancy among the highest, and health costs about average. One by one, other nations — not just Denmark and Sweden, but Australia, Britain, Canada and Taiwan, to name a few — adopted national health programs. By the end of the 20th century, the U.S. was the lone hold out for private, for-profit health insurance, and its health statistics lagged behind dozens of countries. Meanwhile, costs soared to twice the average in other wealthy nations.

For Americans, national health insurance would mean comprehensive coverage, a free choice from a smorgasbord of any doctor or hospital and lower costs. Other countries have seen huge savings by evicting private insurers and the reams of expensive paperwork they inflict on doctors and hospitals. Aetna keeps 19 cents of every premium dollar for overhead and profit, leaving only 81 cents for care. And U.S. hospitals devote 25.3 percent of total revenue to administration, reflecting the high cost of collecting patient copayments and deductibles, and fighting with insurers.

Obamacare will direct an additional $850 billion in public funds to private insurers, and boost insurance overhead by $273.6 billion. Yet it will leave 26 million uninsured and similar numbers with such skimpy coverage that a major illness would bankrupt them. Most Americans have coverage that limits their choice of doctors and hospitals, and inflicts steep financial penalties when they stray “out-of-network” by accident or necessity.

In contrast, insurance overhead in single-payer programs (and fee-for-service Medicare) takes only 1 percent to 2 percent. In these programs, hospitals don’t need to bill each patient; they’re paid a lump sum budget, the way we fund fire departments, sharply cutting hospital administrative costs. Moving to a single-payer system would save about $400 billion annually on paperwork and administration — enough to ensure every American top coverage.

Messages like “We are not Denmark” insist we put blinders on and refuse to learn from others. That reasoning would have us ignore innovations like vaccination or CT scanners (British inventions), echocardiograms (a Swedish one) or cardiac stents (first used in France). A single-payer reform — like the one advocated by the 20,000 members of Physicians for a National Health Program — could save thousands of American lives each year. That’s as American as apple pie.

http://www.nytimes.com/roomfordebate/2015/10/20/can-the-us-become-denmark/us-health-care-could-be-more-like-denmarks

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Comment:

By Don McCanne, MD

We need to be sure that the fundamentals do not get lost in political rhetoric. The fact is that health system performance in the United States has lagged behind many other nations while our costs have soared to twice the average of wealthier nations. Bernie Sanders says that we can learn from Denmark (meaningful rhetoric). Hillary Clinton says that we are not Denmark, but we are the United States of America (dismissive rhetoric). Steffie Woolhandler says that saving lives through single-payer reform would be as American as apple pie (Yankee Doodle Dandy rhetoric).

So how about a little Yankee Doodle Dandy? James Cagney or Mickey Rooney – you choose: https://www.youtube.com/watch?v=StDpLge_ITM

Where else but in America could we choose which Yankee Doodle Dandy we prefer? And we can even choose health care for all if we were willing to give up our uniquely American health care system, as dysfunctional as it is. But that would mean adopting policies of health care justice already in use in other nations. Apple pie anyone?

PNHP does not take any position on candidates or political parties. Rather we support the policy of health care justice for all through single payer reform.