By Nancy Remsen
The Burlington Free Press, Feb. 19, 2011
MONTPELIER, Vt. – The consultants who urged Vermont to move to a single-payer health-care system received 170 comments — complimenting, questioning and criticizing their draft report — but nothing persuaded the researchers to revise their basic recommendation, they told lawmakers Friday.
“It kept us busy and sleepless for a couple of weeks, but we really benefited from these comments,” William Hsiao, a Harvard University professor of economics and lead author of the report analyzing three health reform designs, told the House Health Care Committee. His team had double-checked its calculations and models, Hsiao said. “Our conclusion and recommendation didn’t change.”
Hsiao and three other principal authors came to the Statehouse to deliver their final report and field questions from two panels of lawmakers charged with writing a bill that would move the state toward ensuring all Vermonters had medical coverage, simplify the current claims chaos and curb mushrooming medical costs.
Gov. Peter Shumlin presented the Legislature with his plan to achieve a single-payer health system last week. It was based on the preliminary recommendations from Hsiao and his team.
The consultants haven’t been the only ones peppered with questions and comments in the month since Hsiao outlined the single-payer plan. Lawmakers have received plenty of feedback, and they had dozens of questions for the panel.
One of the top issues: How reliable is the estimate of $580 million savings from making the switch to a single-payer claims system? About $400 million of the savings would cover the cost of extending standard medical coverage to all Vermonters plus pay for investments in primary care and update some community hospitals.
Hsiao joked his team felt they were being “punched on both cheeks” on the question of the accuracy of the savings. Some people complained the researchers underestimated the savings, while others said they overestimated.
He cited, for example, Fletcher Allen Health Care, which submitted its own analysis of the savings it might experience as a result of processing fewer medical claims. Fletcher Allen argued Hsiao overestimated the medical center’s savings.
Hsiao countered, “They used a much narrower analysis of how a single-payer system would affect them.” He said the state’s largest medical center underestimated its savings by assuming Medicare and Medicaid claims wouldn’t be processed through a new, single claims pipeline — but they would. And Fletcher Allen calculated only clerical savings, he said, not savings for doctors and nurses who would spend less time on insurance paperwork.
Jonathan Gruber, economic professor at Massachusetts Institute of Technology and a co-author of the report, suggested Hsiao was almost too conservative in his assumptions about savings.
Hsiao explained, “Our approach was to try to underestimate the savings and overestimate the cost. We didn’t want to mislead the Legislature and governor into doing something risky.”
Deb Richter, a Vermont primary-care physician and long-time advocate for a single-payer system, is one of those who believe the state would save more. Still, she said after the presentation that she agreed with Hsiao: “It is better to underestimate than overestimate.”
Sen. Kevin Mullin, R-Rutland, asked the researchers whether creating a single-payer system that guaranteed coverage to all residents would make Vermont a magnet. “We keep hearing it isn’t an issue, but not to my satisfaction,” he said.
Gruber noted that under the federal Affordable Care Act, other states would have universal coverage, too. He added that studies of the impact of generous welfare benefits on migration have shown “it doesn’t seem to matter.”
Nicolas Rockler, an economist with Vermont-based Kavet, Rockler and Associates and another researcher, added, “The unemployed aren’t very mobile.”
Mullin also asked about the impact of the reform on medical professionals. He said some doctors told him if the state moved to a single-payer system, they would leave. He noted the state already has shortages among some medical professionals, especially in rural areas.
Hsiao said he received a telephone call from someone identifying herself as a doctor who said she knew a dozen physicians who would move to Vermont if it made the switch. He added that the plan called for using about $50 million of the $580 million in savings to recruit and retain primary-care physicians.
Rep. George Till, D-Jericho, asked Hsiao to address the concerns of employers who self-insure.
The House Health Care Committee had received a letter recently from John O’Kane, government programs manager at IBM Corp., arguing it should be allowed to continue to offer its own insurance plan.
Hsiao told lawmakers that self-insured plans could continue to operate but noted, “It would be up to employers and workers whether they wanted double insurance.” Vermont’s IBM employees and their families all would be eligible for the state’s standard coverage and would be paying for it, Hsiao said.
O’Kane, in a telephone interview, said IBM would object to paying for coverage the company didn’t want.
Speaking after his presentation, Hsiao said he was surprised at IBM’s opposition, given that the company faces similar circumstances for its employees in many countries. “They can still offer a uniform package,” he said, by providing supplementary coverage to Vermont’s standard plan.
“I understand rising health-care costs have been straining IBM,” Hsiao said, noting he met with their representatives in Vermont. “I’m surprised IBM wouldn’t consider this, because this would lower their costs for workers and their families.”
Armed with more information in the 200-page final report from the Hsiao team and with the Shumlin administration’s 80-page bill, House Health Care Committee Chairman Mark Larson, D-Burlington, said his committee would proceed with its review of the state’s next steps.
“The first question,” Larson said, “is whether there is enough evidence to believe a reformed system would be better.” He posed that question to the panel.
Gruber responded, “We aren’t in such a great place now. With no change, we know where we are headed — which is not sustainable.”
http://www.burlingtonfreepress.com/article/20110219/NEWS03/110218018/Health-care-consultant-sticks-with-single-payer
Legislative committees approve copays for Medi-Cal
Calif. Assembly, Senate Budget Committees Pass Spending Plans
California Healthline
February 22, 2011On Friday, California’s Assembly Committee on Budget and Senate Budget and Fiscal Review Committee passed nearly identical state budget plans.
Changes to Medi-Cal
Both budget committees approved a plan to establish mandatory copayments for Medi-Cal beneficiaries, which would reduce state spending by about $584 million, according to a Senate analysis.
The plan calls for copays of:
$3 and $5 for some prescription drugs;
$5 for physician and dentist visits;
$50 for emergency department visits; and
A maximum of $200 for hospital stays.The plan also calls for the state to reduce Medi-Cal payments to health care providers by the amount of the copays.
Health care providers have expressed concern that they will face higher costs if Medi-Cal beneficiaries are unable to afford the higher copays.
http://www.sacbee.com/2011/02/20/3416369/browns-countdown-day-42-medi-cal.html
Although California has been at the bottom of the states in Medicaid payment rates, the state legislative committees recently passed another 10 percent cut in those rates. Now they have also approved legislation to reduce rates further by the amount of these copayments, amounts that will surely be absorbed by the providers since the Medicaid population lives in poverty or near-poverty and will not be able to pay these copayments. That’s understandable when you consider that the federal poverty level for 2011 is an annual income of $10,890 for an individual.
Yet the Patient Protection and Affordable Care Act will greatly expand the Medicaid population. The losses faced in the Medi-Cal program cannot be made up by an increase in volume. The additional load displaces privately insured patients, and the losses to the providers increase. The physicians who refuse to see Medi-Cal patients thrive, whereas those overloaded with Medi-Cal patients are threatened with insolvency. Let me emphasize that, based on my own personal experience, this is no exaggeration.
As a welfare program representing a population without an adequate political voice, Medicaid will always be underfunded. Simple common decency dictates that we should eliminate this program and replace it and the rest of the dysfunctional financing system with an improved Medicare for all program that serves everyone well.
Single Payer: Health Care Reform Vermont Style
Krauthammer backs into single payer
Krauthammer on health care, trains, Mideast
By Susan Taylor Martin
St. Petersburg Times
February 20, 2011
Susan Martin: Besides being a commentator, you are a medical doctor who criticized health care reform as a “2,000-page bill that will generate tens of thousands of pages of regulations.” Isn’t that a great argument for the simplicity of Canadian-style universal health care?
Charles Krauthammer: It is. But it seems to me there are two choices. We have the best medical care in world but it is the most expensive and we waste a lot. What you need to do is reduce the complexity and inefficiency. If we can’t get it right, we’re eventually going to a single-payer system. At least it doesn’t have this incredible, absurd complexity of ObamaCare. It’s the worst of the worst. It has the complexity of our (present) system and doesn’t give the universal coverage of single payer.
http://www.tampabay.com/news/perspective/article1152425.ece
Comment:
By Don McCanne, MD
Charles Krauthammer may be a conservative columnist, but he is very bright, having been awarded a Pulitzer Prize, and, as a Harvard-trained physician, he can speak knowledgeably about our health care system. His conclusions? Our health care system is the most expensive and wastes a lot due to its complexity and inefficiency, while Obamacare has brought us this incredible, absurd, worst-of-the-worst complexity which would not only be reduced by single payer, but single payer would also provide us with universal coverage.
We hear it over and over again from informed individuals: Since costs are out of control and too many individuals will remain uninsured or under-insured, a single payer system may be inevitable. But there has been a shift. We used to hear this from informed liberals, but now we hear it primarily from informed conservatives (with a few notable exceptions such as Bernie Sanders).
It’s not that we don’t understand the efficiency and effectiveness of single payer; we clearly do. The opposition has been primarily from those who, on an ideological basis, oppose any role of government in health care, other than as a safety net for the indigent. But even their icon of liberty, Friedrich Hayek, stated in his classic, The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”
The logic for single payer is there, and there is no longer any reason to perpetuate the ideological divide. The conservatives need to revisit Friedrich Hayek, and the liberals need to review again the tenets of social justice, perhaps beginning with Article 25 of The Universal Declaration of Human Rights. Once we get our respective camps in order, we should find that we have a common meeting ground.
“The Road to Serfdom” by F.A. Hayek:
http://www.press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html
“The Universal Declaration of Human Rights”
http://www.un.org/en/documents/udhr/index.shtml
Krauthammer backs into single payer
Krauthammer on health care, trains, Mideast
By Susan Taylor Martin
St. Petersburg Times
February 20, 2011Susan Martin: Besides being a commentator, you are a medical doctor who criticized health care reform as a “2,000-page bill that will generate tens of thousands of pages of regulations.” Isn’t that a great argument for the simplicity of Canadian-style universal health care?
Charles Krauthammer: It is. But it seems to me there are two choices. We have the best medical care in world but it is the most expensive and we waste a lot. What you need to do is reduce the complexity and inefficiency. If we can’t get it right, we’re eventually going to a single-payer system. At least it doesn’t have this incredible, absurd complexity of ObamaCare. It’s the worst of the worst. It has the complexity of our (present) system and doesn’t give the universal coverage of single payer.
Charles Krauthammer may be a conservative columnist, but he is very bright, having been awarded a Pulitzer Prize, and, as a Harvard-trained physician, he can speak knowledgeably about our health care system. His conclusions? Our health care system is the most expensive and wastes a lot due to its complexity and inefficiency, while Obamacare has brought us this incredible, absurd, worst-of-the-worst complexity which would not only be reduced by single payer, but single payer would also provide us with universal coverage.
We hear it over and over again from informed individuals: Since costs are out of control and too many individuals will remain uninsured or under-insured, a single payer system may be inevitable. But there has been a shift. We used to hear this from informed liberals, but now we hear it primarily from informed conservatives (with a few notable exceptions such as Bernie Sanders).
It’s not that we don’t understand the efficiency and effectiveness of single payer; we clearly do. The opposition has been primarily from those who, on an ideological basis, oppose any role of government in health care, other than as a safety net for the indigent. But even their icon of liberty, Friedrich Hayek, stated in his classic, The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”
The logic for single payer is there, and there is no longer any reason to perpetuate the ideological divide. The conservatives need to revisit Friedrich Hayek, and the liberals need to review again the tenets of social justice, perhaps beginning with Article 25 of The Universal Declaration of Human Rights. Once we get our respective camps in order, we should find that we have a common meeting ground.
“The Road to Serfdom” by F.A. Hayek:
http://www.press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html
“The Universal Declaration of Human Rights”
http://www.un.org/en/documents/udhr/index.shtml
Health Mandate Unconstitutional, Single Payer Constitutional
Legality of Health Mandate
Letter to the Editor
The New York Times, February 17, 2011
To the Editor:
Your Feb. 10 editorial “A Debate Bigger Than Reform” criticized my testimony before the Senate Judiciary Committee on the unconstitutionality of the individual insurance mandate.
My testimony exclusively concerned why the individual mandate was outside existing Supreme Court doctrine, which limits Congress’s power under the commerce clause and the necessary and proper clause to regulating or prohibiting economic activity.
Current doctrine has never recognized a power to compel the citizenry at large to engage in economic activity, a power Congress has never before claimed. Therefore, nothing in my testimony would “fundamentally weaken” or “severely limit” the current powers of Congress.
Congress has many constitutional ways to address the market distortions that are inflating the costs of both health care and health insurance. And, although I would oppose such a program, existing doctrine would allow Congress to impose a “single payer” tax-and-spending scheme like Medicare on everyone.
Randy E. Barnett
Washington, Feb. 12, 2011
The writer is a professor of legal theory at Georgetown Law School.
http://www.nytimes.com/2011/02/18/opinion/l18mandate.html
Medicaid peril
Letters to the editor
Huntsville Times, Thursday Feb. 17, 2011
Thank you for Monday’s editorial on Medicaid by Mike Hollis. As he mentions, Medicaid pays for more than half of Alabama births and 40 percent of child healthcare. But that funding affects every single one of us, no matter what insurance we have. If an obstetrician lost funding for half her deliveries, would she stay here? If she left, her non-Medicaid pregnant patients would also lose their obstetrician.
This is exactly what happened recently to some North Alabama hospital maternity wards. Obstetricians couldn’t afford to maintain privileges at those hospitals, because they had to deliver too many babies for uninsured women. Without doctors, the maternity wards closed, so all women in those communities now have to drive elsewhere to have their babies.
Reducing Medicaid funding would put every pregnant woman and newborn in our state at risk. It doesn’t matter how much money you can pay your doctor if that doctor is not around. The same thing could happen to children now able to get care from excellent pediatric subspecialists. Pediatric surgeons, cardiologists, cancer specialists and others rely on 40 percent or more of their income being paid by Medicaid. Without that money, they may not be able to continue caring for children with private insurance either.
So let’s talk “personal responsibility.” The only way to preserve our own access to quality healthcare is to provide adequate health insurance to everyone else. Those who can’t support that concept out of compassion can do it out of pure self-interest.
Pippa C. Abston, MD, PhD
Huntsville, Al.
http://blog.al.com/times-views/2011/02/letters_to_the_editor_huntsvil_346.html
Medical malpractice insurance loss ratios
Calif. insurance commissioner seeks lower medical malpractice rates
By Kathy Robertson
Sacramento Business Journal
February 17, 2011
California Insurance Commissioner Dave Jones, already at loggerheads with health plans over high rates and excessive rate increases, is turning his attention to medical malpractice companies.
Jones expressed concerns about high medical malpractice rates Thursday and said he’s asked companies that do business in California to reduce them.
The Doctors Company, the largest medical malpractice insurer in California, had a 10.1 percent loss ration for 2009, according to department figures posted on its website.
That means for every $1 of premiums collected, 10-cents was paid out in claims.
Norcal Mutual Insurance Co, the second-largest medical malpractice insurer in California, had a loss ratio of 29.72 percent in 2009, and the Medical Insurance Exchange of California, No. 3 in the state, had a loss ratio of 25.34 percent.The nonprofit Consumer Watchdog applauded Jones’ call for rate reductions.
The group pointed to data from the National Association of Insurance Commissioners that shows for every $1,000 in premiums paid in 2009 in California, $222 went to pay claims of injured patients, $243 to pay insurance company adjusters and defense lawyers and more than $280 to profit, not including additional investment income earned or taxes paid.
http://www.bizjournals.com/sacramento/news/2011/02/17/jones-seeks-lower-malpractice-rates.html
National Association of Insurance Commissioners – Countrywide Summary of Medical Malpractice Insurance (37 pages):
http://www.naic.org/documents/research_stats_medical_malpractice.pdf
And…
Medical-liability bill approved by House committee
By Jessica Zigmond
ModernHealthcare.com
February 17, 2011
Members of the House Judiciary Committee on Wednesday voted 18-15 to approve the medical liability reform bill that physician Phil Gingrey (R-Ga.) introduced late last month.
Ultimately, the law would limit non-economic damages to $250,000 and makes each party liable only for the amount of damages that is directly proportional to that party’s percentage of responsibility.
http://www.modernhealthcare.com/article/20110217/NEWS/302179959/
Comment:
By Don McCanne, MD
California has a combined medical malpractice loss ratio of 22 percent. That is, of the very expensive malpractice insurance premiums being paid, 78 percent does not end up compensating those experiencing medical injuries but is diverted to the insurers and defense lawyers. This is yet one more of a multitude of reasons why our tort system is serving these injured individuals so poorly.
Reforming the system has continued to be an elusive goal. The Republicans have now cleared a malpractice reform bill through the House Judiciary Committee. The legislation is similar to that passed many years ago in California, yet obviously the California approach is not working well.
We do need malpractice reform, but not because it will save money; it won’t. We need to replace the system with a non-adversarial dispute resolution process designed to provide compensation for medical injury. Since most individuals suffering medical injury currently do not sue, the probability is that expanding compensation for which patients are entitled will cost more than any savings recovered by a reduction in defensive medicine.
There is some question as to how much defensive medicine could be eliminated anyway since, presumably, tests to prevent lawsuits are tests that could identify an important problem that would otherwise be missed. Just because a test has a low yield doesn’t mean that it shouldn’t be done.
We need to strengthen the relationships between patients and their health care professionals. They need to work together as a team, even when inevitable cases of medical injury occur. That is why we need malpractice reform that, above all, places the interests of patients first.
Medical malpractice insurance loss ratios
Calif. insurance commissioner seeks lower medical malpractice rates
By Kathy Robertson
Sacramento Business Journal
February 17, 2011California Insurance Commissioner Dave Jones, already at loggerheads with health plans over high rates and excessive rate increases, is turning his attention to medical malpractice companies.
Jones expressed concerns about high medical malpractice rates Thursday and said he’s asked companies that do business in California to reduce them.
The Doctors Company, the largest medical malpractice insurer in California, had a 10.1 percent loss ration for 2009, according to department figures posted on its website.
That means for every $1 of premiums collected, 10-cents was paid out in claims.
Norcal Mutual Insurance Co, the second-largest medical malpractice insurer in California, had a loss ratio of 29.72 percent in 2009, and the Medical Insurance Exchange of California, No. 3 in the state, had a loss ratio of 25.34 percent.The nonprofit Consumer Watchdog applauded Jones’ call for rate reductions.
The group pointed to data from the National Association of Insurance Commissioners that shows for every $1,000 in premiums paid in 2009 in California, $222 went to pay claims of injured patients, $243 to pay insurance company adjusters and defense lawyers and more than $280 to profit, not including additional investment income earned or taxes paid.
http://www.bizjournals.com/sacramento/news/2011/02/17/jones-seeks-lower-malpractice-rates.html
National Association of Insurance Commissioners – Countrywide Summary of Medical Malpractice Insurance (37 pages):
http://www.naic.org/documents/research_stats_medical_malpractice.pdf
And…
Medical-liability bill approved by House committee
By Jessica Zigmond
ModernHealthcare.com
February 17, 2011Members of the House Judiciary Committee on Wednesday voted 18-15 to approve the medical liability reform bill that physician Phil Gingrey (R-Ga.) introduced late last month.
Ultimately, the law would limit non-economic damages to $250,000 and makes each party liable only for the amount of damages that is directly proportional to that party’s percentage of responsibility.
http://www.modernhealthcare.com/article/20110217/NEWS/302179959/
California has a combined medical malpractice loss ratio of 22 percent. That is, of the very expensive malpractice insurance premiums being paid, 78 percent does not end up compensating those experiencing medical injuries but is diverted to the insurers and defense lawyers. This is yet one more of a multitude of reasons why our tort system is serving these injured individuals so poorly.
Reforming the system has continued to be an elusive goal. The Republicans have now cleared a malpractice reform bill through the House Judiciary Committee. The legislation is similar to that passed many years ago in California, yet obviously the California approach is not working well.
We do need malpractice reform, but not because it will save money; it won’t. We need to replace the system with a non-adversarial dispute resolution process designed to provide compensation for medical injury. Since most individuals suffering medical injury currently do not sue, the probability is that expanding compensation for which patients are entitled will cost more than any savings recovered by a reduction in defensive medicine.
There is some question as to how much defensive medicine could be eliminated anyway since, presumably, tests to prevent lawsuits are tests that could identify an important problem that would otherwise be missed. Just because a test has a low yield doesn’t mean that it shouldn’t be done.
We need to strengthen the relationships between patients and their health care professionals. They need to work together as a team, even when inevitable cases of medical injury occur. That is why we need malpractice reform that, above all, places the interests of patients first.
Stop the presses! A Republican favors single-payer
By James Clark
Health News Florida, Feb. 16, 2011
As a former state director of social services (South Carolina), health policy chief in Florida’s Agency for Health Care Administration, and assistant Secretary for programs in the Department of Children and Families, I find the current debate on health care reform has failed to fully inform the general public. The discussions have mentioned the “elephant in the room”: the cost of the current delivery system, and then have gone downhill.
Heated rhetoric about the special interests that benefit from the quagmire of competing interests, including the insurance industry, pharmaceutical companies, hospitals, over-specialized physicians and nursing homes, only have confused the public trying to understand the debate. Invective and rhetoric regarding “socialized medicine, big government and insensitive Republicans who want to abandon the poor and deny care to persons with previous health care issues or who have too little money to buy insurance” have increased the tension.
Medicaid started out fifty years ago as a small effort to help those who couldn’t afford health insurance, and grew into the biggest item in the state budget, and in the recently enacted health care reform package will grow even larger. Medicare expenditures have grown to such a level that they cannot be sustained without significant tax increases.
Employers have not been able to afford to provide health care as a benefit and insurance and provider costs have continued to rise. With expanded Medicaid coverage some employers will find it preferable to deny lower wage employees health
insurance in favor of the promised expanded Medicaid system.
Most states are broke and won’t be able to afford the expansion even with federal matching funds. A few state legislatures have attempted to deal with the issue. California passed a single payer law that was vetoed by their governor. Vermont has a governor and legislature willing to try it out and recently met with the federal officials to obtain waivers to try a new single payer approach. Massachusetts implemented Governor Romney’s expanded health care initiative and is now considering a single payer system.
Florida recently elected a governor with a background in health care delivery and a self-paid campaign that frees him from obligations to the insurance companies or medical provider interests. He wants to cut spending and reduce bureaucratic regulation and it may be time for Florida to take a second look at single payer coverage.
It might also be time to expect the able-bodied Medicaid recipients to repay the taxpayers with hours of public service equal to the value of their free medical care. Mayor Giuliani required public assistance recipients to clean the streets and parks up to the value of their financial grant. When I interviewed these folks I found that they had no problem in repaying the city for the benefits they received.
The largest cost in the health care budget is that of administrative costs. Administrative expenses are greater in America than any other country.
In Medicaid and Medicare there are over 7000 different billing codes, and multiple levels of eligibility. Some Medicaid recipients are also elderly and we operate two overlapping systems to provide service to them. In addition, the amount of funds paid to providers differs from state to state and what is covered differs from state to state. The “non-system” would make a great “Saturday Night Live” skit if it were not so tragic.
Doctors are plagued by complex rules and procedures to be reimbursed and the degree of fraud in the system is fueled by the complexity. A single payer system would address this issue.
There is a “window of opportunity” with the budget restraints now faced by the states. We can reduce the bureaucracy, take care of the issue of tort reform for medical liability, provide universal health care, address pre-existing conditions, eliminate the excessive profits associated with rising insurance premiums and most importantly of all accomplish it without raising taxes.
There would no longer be a profit motive or insurance premiums and American families could keep the $12,000 a year now spent on insurance premiums. Hospitals and doctors would no longer be dunning folks for dollars they don’t have and then spreading out the costs associated with the non-insured among the insured.
William Hsiao, an economist who analyzed the Vermont proposal, said it would reduce expenditures in Vermont by 25 percent! Doctors and other providers might have to earn a bit less but levels of remuneration would still be greater than all others with advanced degrees currently earn.
This is a difficult issue; however, our legislators and our governor have a unique opportunity to reduce the bureaucracy of health care, reduce the cost of health care and return some savings to the taxpayers. Let’s “get to work” and show the folks in Vermont how to do it.
http://www.healthnewsflorida.org/analysis_opinion/hnf_entry/single_payer_health_insurance_is_it_time_for_a_second_look
Sanders' State Leadership in Healthcare Act, S. 73
FACT SHEET
“State Leadership in Healthcare Act”
From the Office of Sen. Bernie Sanders (I-Vt.)
Section 1332 of the Patient Protection and Affordable Care Act – the “Waiver for State Innovation” – allows states to waiver out of some of the requirement of federal health reform if they meet certain standards. The provision in the new law was authored by Sens. Bernie Sanders (I-Vt.) and strongly supported by Sen. Patrick Leahy (D-Vt.) and Rep. Peter Welch (D-Vt.).
The Sanders-Leahy-Welch “State Leadership in Healthcare Act” moves the availability of state waivers from 2017 to 2014. This would allow a state to avoid the expense of setting up an exchange – which is otherwise required in every state in 2014 – only to dismantle it later.
The federal waiver would allow a state to:
a) Collect all the federal funding and use for financing coverage for individuals through a plan designed by and for that state.
b) Coordinates this waiver process with Medicare, Medicaid and CHIP waiver processes that may be required depending on the design of the system.
The federal waiver would not allow a state to:
a) Offer lower quality or less affordable care to their residents than would be available in the exchange.
b) Obtain waivers from the health insurance market reforms implemented under the law such as those benefiting ending the use of pre-existing conditions to exclude individuals from coverage or those allowing young adults to stay on their parents’ plans longer.
How does the waiver provision of the law work?
Step 1: The state passes a law to provide health insurance to its citizens.
Step 2: The Secretary of Health and Human Services and Secretary of the Treasury review the state law and determine that the plan is:
a) At least as comprehensive as its residents would receive in the exchange;
b) At least as affordable;
c) Deficit neutral to the federal government; and,
d) Covers at least as many people.
Step 3: If the federal government finds that the alternative state system meets these requirements without certain federal rules, states can get a waiver. The state plan could receive waivers from:
a) The section requiring establishment of the exchange
b) The designs for how federal subsidies would have to reduce premiums and co-pays.
c) The employer penalty for providing coverage
d) The individual mandate.
Tax day surprise for some exchange participants
A Slippery Slope To Defunding The Health Law
By Timothy Jost
Kaiser Health News
February 15, 2011
A key provision of the health law that will provide 19 million consumers with tax credits to help afford their health insurance has been raided once. Now, Republicans are planning to raid it again.
Here’s the background: In late December Congress was looking for money to help pay for a plan to stop dramatic scheduled cuts in doctors’ Medicare reimbursements. As a temporary fix, the lame duck Congress changed a part of the new health law so that some consumers will have to pay back a hefty chunk of their tax credits. That change is expected to save the government $16 billion over 10 years.
Now Congress is again looking for money – this time to offset the funds lost with the repeal an unpopular health law provision that involves 1099 tax reporting requirements. Republicans are proposing another increase in the liability of tax credit recipients to raise the necessary revenue.
To understand why the proposal is worrisome, it is necessary to understand the function of the new tax credits. They are designed to help finance insurance premiums beginning in 2014, and are, perhaps, the most important provision in the new law for making health care affordable to middle-class Americans. They will be available on a sliding scale to families with incomes up to 400 percent of the federal poverty level. This is $88,200 for a family of four, but most of the money will go to families with far less income.
Here’s how they work. The amount of the tax credit for which people are eligible is based on annual income for the year the credits are received. But, because people will likely need help paying their insurance premiums during that tax year, the law provides for advance payments of the credits. These payments are made directly to the insurer on a monthly basis. The insurance exchanges, through which individuals will purchase health coverage, will determine eligibility for tax credits based on a taxpayer’s prior year tax return. (Taxpayers can provide more recent information if their income or family circumstances have changed.) At the time taxpayers file their annual tax return, the advance payments will be reconciled against the tax credit for which the taxpayers are eligible using their annual income reported on their return. If the advance payments are greater than the final tax credit, the taxpayer will get a bill from the Internal Revenue Service.
Excess advance payments can happen easily and will happen often. The income of hourly-wage lower and middle-income Americans often fluctuates from week to week and is difficult to predict. Dependents may leave or return home. Family members may become eligible for Medicaid or CHIP. Taxpayers may be eligible for a premium tax credit in the early months of the year while unemployed but then get a job with coverage and no longer need premium assistance. Or they may lose a job part way through the year and face dramatically reduced income, even though their full year reported income remains high.
All these changes will affect the subsidy calculation. It will be difficult for the exchanges to keep up with changes in family circumstances and for families to know what changes they should report and to whom. It is inevitable that there will be some inconsistency between advance payments based on estimated income for the year and the final credit determined at tax time.
Originally, when the health overhaul was signed into law, the amount the government could recover was capped at $400 for families with incomes below 400 percent of poverty. The amendment adopted in December increases the amount families will owe on a sliding-scale basis. Under the December amendment families with incomes at 200 percent of poverty will have to pay back as much as $1,000; families with incomes at 400 percent will have to pay back up to up to $2,500. It also, however, puts some limits on overpayments for families up to 500 percent of poverty.
The “1099 fix” legislation, which is likely to be considered this week by the House Ways and Means Committee, would require families at 200 percent of poverty to pay $1,500, and families earning a dollar more than 400 percent of poverty to pay back their entire tax credit.
It is important to understand what is at stake here.
Fear of potential end-of-year liability could be a substantial deterrent to participation in the advance premium tax credit program. It was estimated that the December amendment increased the likely number of uninsured after 2014 by about 200,000 people, who would rather be uninsured than face substantial repayments. Millions more consumers will face unanticipated financial burdens. This is likely to create a powerful backlash, as Americans who thought they were receiving a tax credit to help them purchase insurance find out it was in fact only a loan, and that they owe the IRS a substantial debt.
http://www.kaiserhealthnews.org/columns/2011/February/021511jost.aspx
Update: Today (Feb. 17) the House Ways and Means Committee approved the 1099 repeal bill, including the requirement for “consumers earning more than 400 percent of the poverty line to pay back the subsidy.”
Comment:
By Don McCanne, MD
In choosing to base reform on private insurance plans, our policy makers introduced an administrative complexity that that would have been totally unnecessary had they selected instead a universal risk pool funded equitably through taxes. The private insurance model requires that a specific premium be assigned to each individual or family, even though those premiums are no longer affordable for the majority of us. Thus they had to devise a very complex system of subsidies to lessen the financial burden of premiums (though still unaffordable for many even with the subsidies).
These subsidies, of course, are based on the current year’s income, but the advance payments made directly to the insurers are based on the previous year’s income. Because income levels change frequently for many individuals and families, many will be receiving incorrect subsidies. The Internal Revenue Service determines the corrected subsidies, based on actual income, when the tax return is filed the following year.
If income increases, it is likely that excessive premium subsidies will have been credited since the payment to the insurers is semi-automatic. Under the Affordable Care Act (ACA) as originally enacted, once the tax return is filed, the individual or couple is billed for overpayments of the subsidies, up to a maximum of $250 for an individual or $400 for a family. Since this is an additional tax bill added to full income taxes already being paid, it was felt that amounts above these limits would be a hardship for most individuals and families.
That has changed. The newly enacted “doc fix” (postponing scheduled sharp reductions in physicians’ reimbursements for Medicare) was paid for partly by raising the reimbursement requirement up to $2500. There are very few families that would not have difficulty paying this tax day surprise, added to their full income taxes.
Today the bill eliminating the burdensome 1099 requirement for small businesses cleared its first hurdle by a party-line vote in the House Ways and Means Committee. The lost revenues would be offset by a further increase in the subsidy repayment requirement – up to a full refund for those over 400 percent of the federal poverty level. Thus a family of four with an income of just one dollar over $89,400 (400% FPL for 2011) could be hit with a bill from the IRS for nearly a full year’s prem
ium – on top of their full income taxes – if their subsidies had been based on a very low income the prior year. Now that’s a tax day surprise that would be devastating for any of us.
Admittedly, this is only a minor technicality, but try to tell that to those who will receive massive tax day bills from the IRS.
This is not only unfair, it is so unnecessary. We can fix this by funding a single national risk pool that covers everyone, using equitable progressive tax policies.
No longer would we have to link individuals and families to premiums in the private insurance market. We don’t need the private insurers at all (and we certainly wouldn’t need to give them 15 to 20 percent of the premiums for their own intrinsic purposes). The system will have already been paid for through taxes, and people would simply receive the care that they need, when they need it.
Simpler. Cheaper. And better. Taking care of us all. Why don’t they get it?