Volume 69, no. 6 June 2013
Some health-reform advocates are still upbeat about the wonderful coverage soon to be available when the Affordable Care Act (ACA) is fully implemented, even as the “most transparent Administration in American history” is racked with scandals and accusations of cover-ups. But the wheels are coming off the train.
The End of Employer-Provided Medical Insurance?
The White House expected that large employers would continue to offer high-quality insurance, but to its surprise business is instead searching for ways to avert catastrophic costs.
Lawmakers left the definition of employer-sponsored coverage vague, opening the way to unexpected interpretations. A close reading of the rules has led some to conclude that the “essential benefits” mandates apply only to the individual and small-group markets (WSJ 5/20/13). Employers with more than 50 employees need only cover preventive services, without an annual or lifetime limit, to avoid the $2,000 across-the-workforce (“sledgehammer”) penalty. Many are looking into “skinny” plans, which are even more limited than “mini-meds” (on which waivers will soon expire). Sicker employees may opt out and join an Exchange. In that case employers face the “tack hammer” penalty of $3,000 each, but they are betting that many will forgo coverage to avoid the cost. Even with subsidies, a full-time worker earning $9/hr would have to pay $70/month for a midlevel plan. If the healthy opt out, premiums of Exchange policies could escalate rapidly.
Some will be worse off if their employer offers “affordable” coverage than if he offers no coverage, writes Linda Gorman. The premium for family coverage is not considered in the affordability calculation, and those who are eligible for “affordable” employer coverage are not eligible for subsidies on the Exchange.
Regulatory uncertainty remains, and the rules are nearly impossible to understand.
As state regulators try to protect consumers against rate shock by forcing insurers to cut costs or operate at a loss, carriers may opt to leave the state (NY Times 4/5/13).
Considering those who have to pay more for premiums despite subsidies, or who have their work hours cut, or who lose their insurance entirely, some 30 million to 40 million people (1 in 10 Americans) will be harmed by the ACA, writes Daniel Kessler (WSJ 4/29/13). This could be a serious underestimate. The Congressional Budget Office (CBO) estimated that the number losing employer-based coverage could be as high as 20 million, but former CBO director Douglas Holtz-Eakin placed the number at 42. Given the strong incentives employers face, the actual number could turn out to be two to three times higher, writes Peter Ferrara (American Spectator).
The IRS as Enforcer
Can the IRS—enormously powerful and disdainful of the law—be trusted to administer and enforce the ACA? The IRS has been shown to abuse reporters; target, harass, and intimidate opponents of the Administration; and publicly release organizations’ confidential donor lists. Then-Acting IRS Commissioner Steven Miller calls it “horrible customer service” and misunderstanding based on “foolish mistakes” by “people trying to be more efficient in their workload selection” (WSJ 5/18/13).
The IRS cannot enforce the individual mandate without an invasive system of reporting your personal health information. And who has the power to control and consolidate Americans’ health information—the recipe for the type of abuse at the heart of the IRS and Dept. of Justice scandals? Almost half of Americans’ health information will soon be in the hands of top Obama donor and billionaire Judy Faulkner, founder and CEO of Epic Systems. Faulkner is also the only industry representative appointed by Obama to the panel overseeing the $19 billion electronic records incentive program from which her company benefits, writes Michelle Malkin.
“Contribute to the Republican Party? Attend a Tea Party protest? Good luck getting your Obamacare health insurance tax subsidy application approved,” writes Ferrara (op. cit.).
But Doesn’t It Improve Health and Save Money?
The Oregon Health Insurance Experiment (OHIE), the only randomized, controlled study ever conducted on the effects of having insurance vs. no insurance (NEJM 5/2/13), is casting doubt on the basic assumptions behind the Medicaid expansion.
In 2008, Oregon handed out Medicaid slots by lottery to the very people covered by the ACA expansion, and compared the winners with the losers. Although Medicaid increased medical spending from $3,300 to $4,400 per person, there were no discernible differences in blood pressure, cholesterol, blood glucose control, or risk of heart attack after 2 years. It did lower financial strain on beneficiaries and improve measures of depression, but it did not measure a depression-based clinical outcome, notes Avik Roy in a detailed analysis of the study (Forbes 5/2/13). The results certainly do not justify spending $450 billion a year on the program; Roy notes that for 37% less than the cost of the Medicaid expansion, each beneficiary could have had a $150/month concierge doctor and a $2,000 catastrophic insurance policy. One measure of the beneficiaries’ own opinion of the program’s value is that only 30% of the lottery winners actually enrolled.
No health benefit, huge cost, much harm: what’s not to like?
ObamaCare Shakedowns
The Fourth Scandal. Since Congress denied additional funding, HHS Secretary Sebelius has been making phone calls to industry executives, asking for contributions to nonprofits such as Enroll America to enroll uninsured persons. It is unlawful for public officials to raise money from industries they regulate, but they could do so as private citizens (http://tinyurl.com/dyxd54r).
Pre-existing Condition Insurance Plan. Since the $5 billion allocated to the program has almost run out, although only 135,000 of the anticipated 400,000 signed up, and a Republican bid to tap other funds failed, Sebelius is proposing that states that run the program figure out how to pay for it. A new HHS policy will cap rates to physicians and hospitals and prohibit balance billing (NY Times 5/20/13).
Doctors Stuck During Grace Period. With Cover California, nonpayment of premiums for subsidized policies leads to cancellation after a 3-month grace period, but the insurer is liable for claims only during the first month. The implied physician mandate may cause some doctors to have to close their offices, said Dr. Paul Phinney, president of the California Medical Association (Sacramento Bee 5/22/13).
Enrollment Difficulties
The 21-page form for applying for subsidies has been whittled down to three, partly by using smaller type and providing less space for answers. The 61-page online version is still in draft form. It has nine pages of questions and instructions to determine what a family is and how everyone is related. There is a strong warning of federal penalties for providing untrue information. Applicants are informed that answers will be checked against electronic databases and data from the IRS, Social Security, Homeland Security, and consumer reporting agencies. They need to be sure that an “authorized representative” they choose to help them can be trusted with their Social Security number, income, and other information. Many helpers will be foot soldiers in Obama’s new army of “navigators” (Grace-Marie Turner 5/10/13).
The next hurdle is payment. More than one in four uninsured Americans who are eligible for subsidies will not be able to enroll because they are “unbanked.” Many insurers require automatic payments through a checking account. ACA does not require acceptance of credit cards or pre-paid debit cards, and insurers want to avoid transaction costs (Kaiser Health News 5/20/13).
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Organized Medicine Update
The American College of Physicians (ACP) and American Academy of Family Physicians (AAFP) broke ranks with the AMA and dozens of state and national societies, refusing to sign on to a letter calling for repeal of the Independent Payment Advisory Board, saying they support the concept (MedScape 5/7/13).
Physician-owned Hospital Drops Medicare
The ACA aimed to end the boom in physician-owned hospitals. The restrictions on new facilities or the expansion of existing ones were the price of the hospital industry’s support for ObamaCare. Citing the fact that the nation’s 275 doctor-owned hospitals represent half of the 100 facilities meriting Medicare bonuses for cost efficiency and patient satisfaction, lobbyists will be advocating a loosening of expansion limits. Meanwhile, Forest Park Medical Center in Dallas has stopped accepting Medicare patients so it can entirely escape ACA restrictions. It performed more than 17,000 surgeries in 2012, compared with around 12,000 in 2011 (WSJ 5/14/13).
Romney’s 47%
When Romney remarked that 47% of Americans paid no income tax, the question might have been why that percentage is not much higher. The whole idea, said Treasury Secretary Andrew Mellon in the 1920s, was to fund the entire federal government by a modest levy (1% to 7%) on the yearly surpluses of the rich, and minimize the burden, as from tariffs, on everybody else. An income of $75,000 was the threshold for income tax at the time (B. Domitrovic, Forbes 3/26/13).
Medical Meltdown Coming?
Financial analyst Richard Maybury writes that the chaos in medical pricing results from indicative planning (IP)—the use of price controls, taxes, and other government tools to steer activity into government-preferred channels. IP began in France in the 1940s and has been adopted by all governments to gather power for the alleged purpose of redesigning the world.
The socialization of medicine in the U.S., he states, is responsible for costs 10 times as high as they should be. He thinks the U.S. is in stage one of socialist rot, in which “medical personnel try to obey the plethora of laws and rules, which change continually.” In stage two, they deliberately disobey and spend great amounts of time trying to stay under the government’s radar.
A physical therapist told him, “We’re all scared.” He explains how socialism leads to shortages and triage, and provides advice for patients based on the military’s advice to troops who might become POWs: Lead all medical gatekeepers to see you as being like them. Converse with everyone who comes to care for you. Be ready to give out packets of your medical records. Try to recognize the favors and say thanks. For this fascinating patient perspective, see Early Warning Report, May 2013, chaostan.com.
AAPS Calendar
Jul 20. OtherCare: Liberation & Innovation, Ann Arbor, MI.
Aug 10. Thrive Not Just Survive XVIII, Minneapolis, MN.
Sept 25-28, 2013. 70th annual meeting, Denver, CO.
ACTION OF THE MONTH
View videos from AAPS spring meeting on Maintenance of
Certification (MOC), and share with colleagues.
Texas Physician Challenges ACA
In its unexpected ruling that the insurance mandates in ObamaCare are taxes, the U.S. Supreme Court opened the door for issues that it could not address or resolve because neither party in the case filed by NFIB and 26 states brought them up.
Texas physician Steve F. Hotze, M.D., and his business have filed suit challenging the individual mandate and the application of ObamaCare to mid-size companies like his (Hotze v. Sebelius, 4:13-cv-01318 (S.D. Texas)). Most importantly, all revenue-raising bills must originate in the House of Representatives, as expressly required by the Origination Clause in Article 1, Section 7, of the U.S. Constitution. Having originated in the Senate, the ACA is therefore unconstitutional in its entirety.
Hotze notes that ObamaCare will cause millions to lose their health insurance and their ability to access their own physician, despite promises by Democrats to the contrary when they passed the bill.
The case filed by AAPS in 2010 (AAPS v. Sebelius), now pending in the D.C. Circuit, raises the same issues. Any disagreement between venues on a legal issue increases the likelihood of Supreme Court review.
In a motion to dismiss a case brought by the Pacific Legal Foundation, the government argues that H.R. 3590 did originate in the House as the Service Members Home Ownership Act, and the Senate may amend a House bill in any way it likes, including the “gut and amend” process, replacing it entirely. H.R. 3590 was not, however, a revenue raising bill (Wash Times 3/31/13).
BCBS Penalized for Hidden Fees
Blue Cross Blue Shield of Michigan, acting as a claims administrator for a self-insured (ERISA) plan, found that it was losing business when it explicitly listed its administrative fees, so it decided to conceal them under hospital claims. In Hi-Lex Controls v. BCBS of Michigan (case no. 11-12557, U.S. District Court for the Eastern District of Michigan), Judge Victoria Roberts ruled that BCBSM violated ERISA’s prohibition against self-dealing and breached its fiduciary duties. It also engaged in fraud and concealment to hide violations from Plaintiffs. Judgment was entered for more than $5 million.
How States Use Taxes to Defraud Feds
Health insurance premium taxes and provider taxes generate billions of extra federal subsidies to states, at the expense of taxpayers in other states—and of people struggling to pay rising premiums. The big for-profit players in Medicaid managed care (Centene, Humana, Molina, WellCare, and WellPoint) “make enormous amounts of money because of the huge fiscal incentive that states have, through premium taxes, to outsource the administration of their Medicaid programs to private insurers,” writes Avik Roy (Forbes 5/25/13).
“Complexity is the best friend of clever—but dishonest—people who take advantage of subtleties of the law to enrich themselves,” Roy writes. “And one of the biggest perpetrators of financial shenanigans in our health-care system is state governments.” About $75 billion year flows to states through an accounting trick—which is playing a huge role in talking points to advocate for Medicaid expansion.
IRS Seizes 60 Million Medical Records
An as-yet-unnamed “healthcare provider” has filed suit against the Internal Revenue Service for unlawfully seizing 60 million medical records involving 10 million Americans, including state judges, in the course of executing a search warrant for the financial records of one employee. Reportedly, agents threatened to “rip the servers containing the medical data out of the building” if information technology personnel did not hand over the records voluntarily (Washington Times 5/17/13).
Even as the politicized tax enforcement scandal spreads, the IRS expands its political power thanks to the ACA. In 2014, the IRS will start auditing health records in addition to Form 1040, “playing Thelma to the Health and Human Service Department’s Louise” (WSJ 5/14/13).
The IRS will also distribute ObamaCare subsidies, since they are technically “advanceable tax credits.” In addition, the IRS is supposed to distribute the $8 billion tax on health insurers according to market share—with the IRS determining market share.
As she solicits insurers and others for “independent” donations, “giving in advance to Ms. Sebelius can quickly begin to look like protection money to avoid corporate tax retribution” (ibid.).
Exchanges: False Claims Act Gold Mines
To participate in ACA Exchanges, insurers will have to provide very substantial amounts of information—and will be subject to the False Claims Act as enforcer of requirements for the accuracy of complex data pertaining to reinsurance, risk adjustment, and risk corridors. Liability is significant—as is the risk of error. The ACA creates a whole new class of qui tam relators, and eliminates three important defenses, including the “direct knowledge” requirement. Thus, “health insurer participation in the Exchange program is high-risk and should be undertaken with the greatest care,” writes W. Bruce Shirk (BNA’s HCFR 5/15/13).
Prepare for Bounty Hunters, Doctors Advised
A new cottage industry has arisen to prepare doctors who accept government payments for audits. The motivational facts distributed by Doctors Management include :
$6.4 billion collected under False Claims Act for healthcare fraud since 2009
1,430 new indictments for healthcare crime in 2011
743 defendants convicted in 2011
47 months average prison sentence for healthcare fraud
$350 million added to Healthcare Fraud prevention in 2011
9 cities with Medicare Fraud Strike Teams.
Correspondence
An Accidental Wreck? Supporters of ObamaCare are expressing shock and wringing their hands over rising insurance costs being caused by their handiwork. It is all part of the socialists’ long-term strategy. Act 1: Pass a bill in the middle of the night before Congress has a chance to see what is in it so a crisis can be created. Act 2: High anxiety over the coming crisis. Act 3: Cries of suffering over the middle class being crushed by high insurance premiums and lost jobs as employers can’t afford the mandates. Act 4: The “final solution” of fully socialized medicine to “fix” the system that the socialists deliberately broke.
These are truly bad actors, who deserve no Academy Award for their poor performance but do deserve to be held accountable.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY
A Shocking Surprise? According to an Apr 23 article in Johns Hopkins Medicine, time with patients seems to be “squeezed out” of training. A study that closely followed first-year residents at Baltimore’s two large academic medical centers found that they spent just 12% of their time examining or talking with patients and 40% of their time behind a computer. In fact, interns spent nearly as much time walking (7%) as they did at patients’ bedsides.
Dean Kross, M.D., Pittsburgh, PA
ObamaCare Lies. Americans will be shocked to learn the extent to which they have been deceived by ObamaCare. The Obama Administration now says that the public should not expect any cost savings, and it wants another $1 trillion over 10 years. Americans with the least income will face substantial after-tax salary reductions even if they get subsidized coverage. They will have to make cuts in buying food and adequate housing to pay for healthcare coverage. The only winner will be the industry that provides administrative services to government to adjudicate claims.
Stanley Feld, M.D., Dallas, TX
Instability. Austrian economists teach that any “investment” or spending based on taxation or artificially low interest rates results in malinvestment. It has a correction in its future. Years ago, I began to view Medicare in this way. Since the source of Medicare money is robbery—taxing people to pay for the care of people they don’t know—I felt that Americans would always urge legislators to cut physicians’ fees. Making my long-term plans based on this revenue source seemed a bit foolhardy. I believe the same instability characterizes anything subsidized by the taxpayers. And it also displaces investments that people consider more valuable.
G. Keith Smith, M.D., Oklahoma City, OK – http://www.SurgeryCenterOK.com
Non-insurance Coverage. Under ACA regulations, about 130 million Americans could be shocked to find themselves “insured” with only limited coverage for routine services they could afford to buy themselves—but no hospital benefits. Perhaps that’s the idea—to drive them to government Exchanges and closer to nationalized medicine.
Twila Brase, Citizens’ Council for Health Freedom – http://www.cchfreedom.org/
ObamaCare’s Fatal Flaw. The Administration is openly admitting that their health law won’t work without the willing cooperation of people who can expect to be harmed by the law, including young people. As Ayn Rand said, “A viler act than to murder a man is to sell him suicide as an act of virtue.”
Paul Hsieh, M.D., Aurora, CO
Making Life Fair. People are unequal in many ways more important than money—e.g. status and leisure. Why not levy a big tax on college professors to distribute to people with low-status, boring, 40-hour-per-week jobs?
John Goodman, Ph.D., National Center for Policy Analysis
Medicaid Expansion. Medicaid is already the largest item in state budgets. States are foolish to believe the Administration’s promise to pick up the tab for 90% of the expansion. Paying for Social Security, Medicare, and debt service leaves nothing to pay for ObamaCare’s extravagant promises. Inevitably, state taxpayers will be stuck with the bill. The Medicaid expansion shows the toxic combination of short-term incentives and crony capitalism that marks the road taken by Greece and Spain.
Carolyn Cox, Tucson, AZ
Fair Pricing. My colleagues and I charge by the unit of time. We do not make coded widgets for third-party eavesdroppers. Such time valuation from us is all you will ever get or need. If it is not enough, you want a magician, not a physician, and we could not easily develop a trusting relationship with you. We are not professionally obligated to be disadvantaged or subjugated to a mutually untrusting servile mercantile role.
Don Gehrig, M.D., St. Paul, MN
Abolish FFS? The National Commission on Physician Payment Reform, headed by former Senate Majority Leader Bill Frist, M.D., calls for eliminating fee-for-service payment in 7 years, replacing it with “blended payment” and Accountable Care Organizations (ACOs). If I choose to pay a physician a fee for providing a service for me, who is Bill Frist to forbid it?
Greg Scandlen, National Center for Policy Analysis
