I replaced the FAQ resource page previously on this site with a new FAQ page that lists the questions with links back to the DOL site where the answers appear.
A second federal judge ruled on Monday that it was unconstitutional for Congress to enact a health care law that required Americans to obtain commercial insurance, evening the score at 2 to 2 in the lower courts as conflicting opinions begin their path to the Supreme Court.
“Federal Judge Rules That Health Law Violates Constitution”, New York Times (January 31, 2011)
The new group health plan external review requirements require analysis on several levels.
Some of the more obvious issues involve whether the external review requirements apply, and if so, whether state or federal external review requirements will apply. As the note below suggests, these issues are just the beginning of the analysis.
Unless grandfathered, a group health plan must comply with either a federal or a state external review process. Thus, the first level of inquiry might be something like this:
#1 Is the plan a grandfathered plan? If so, the rules don’t apply.
#2 Does a state law external review process apply to the plan?
Point #2 involves consideration of several factors. As a general matter, plans that provide coverage through health insurance are typically subject to state external review laws (due to ERISA’s savings clause – see Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002)).
On the other hand, the state external review process must be equivalent to the minimum requirements imposed by the interim procedures for external review . . . so if the state law does not comport with the minimum standards set forth in the interim regulations, then the federal external review procedures apply.
#3 Is the plan a governmental plan, a church plan or a multiple employer welfare arrangement (“MEWA”)? If so, a state external review process may apply.
Point # 3 will require careful consideration – first, to ascertain the plan’s status under ERISA, second, to determine if state external review processes could apply, and third, even if they might otherwise apply, whether the state external review process meets the minimum standards.
A plan or issuer is subject to the Federal external review process where the State external review process does not meet, at a minimum, the consumer protections in the NAIC Uniform Model Act, as well as where there is no applicable State external review process.
Note: The requirement of external review poses a major change in plan administration for self funded ERISA plans. Moreover, several important additional issues remain to be sorted out.
For example, under the interim guidance, the standards will:
provide that an external review decision is binding on the plan or issuer, as well as the claimant, except to the extent other remedies are available under State or Federal law.
If an external review affirms the benefit denial, the regulations appear to contemplate that the decision can be challenged in a claim for benefits under ERISA (Section 1132(a)(1)(B)). What, however, are the plan’s options if the external review is in favor of the participant?
The quoted language above suggests that the external review decision must be binding – but then further adds the proviso regarding remedies under federal law. The form of the plan challenge to the external review decision is not clear from the regulations.
Further, assuming that the employer challenges the decision in federal court, does the independence of the external review become a factor to be reviewed under the analysis in MetLife v. Glenn? Does it serve, for example, to mitigate a conflict of interest whether the plan fiduciary both adjudicate claims and pays benefits?
Similar issues have arisen in the context of state external review statutes requiring “binding” external review. These administrative regimes raise substantial questions of due process and separation of powers.
I anticipate supplementing this line of inquiry with research acquired during work on an upcoming law review article. In the meantime, the interim rules remain the only official source of guidance and careful regard should be given to the effective dates and the technical releases concerning implementation.
The federal agencies regulating under the PPACA have determined that changing issuers should not result in a loss of a plan’s grandfathered status.
The new guidance was anticipated inasmuch as a change in insurers is frequently necessary and the distinction between self-funded plans (that could change claims administrators) and insured plans (which heretofore could not change insurers) was arbitrary and senseless. Individual insurance policies remain subject to the rule forbidding changes in insurers.
From the fact sheet on the new guidance:
On June 17th, the Departments of Health and Human Services, Labor, and the Treasury (the Departments) issued the “grandfather” regulation which, by addressing how health plans can retain a “grandfathered” exemption from certain new requirements, helps protect Americans’ ability to keep their current plan if they like it. At the same time, Americans in grandfathered plans will receive many of the added benefits that the new law provides. The regulation also minimizes market disruption and helps put us on a path toward the competitive, patient-centered market of the future.
The grandfather regulation includes a number of rules for determining when changes to a health plan cause the plan to lose its grandfathered status. For example, plans could lose their grandfather status if they choose to make certain significant changes that reduce benefits or increase costs to consumers. This amendment modifies one aspect of the original regulation.
Previously, one of the ways an employer group health plan could lose its grandfather status was if the employer changed issuers – switching from one insurance company to another. The original regulation only allowed self-funded plans to change third-party administrators without necessarily losing their grandfathered plan status. Today’s amendment allows all group health plans to switch insurance companies and shop for the same coverage at a lower cost while maintaining their grandfathered status, so long as the structure of the coverage doesn’t violate one of the other rules for maintaining grandfathered plan status.
(cross posted on erisaboard.com)
The amendment to the interim rule can be read in its entirety here.
It appears that the individual mandate under the PPACA may be headed for rough sailing. Here is an excerpt from an opinion today in which the Obama administration’s motion to dismiss was denied.
The government has never required people to buy any good or service as a condition of lawful residence in the United States.” See Congressional Budget Office Memorandum, The Budgetary Treatment of an Individual Mandate to Buy Health Insurance, August 1994 (emphasis added). Of course, to say that something is “novel” and “unprecedented” does not necessarily mean that it is “unconstitutional” and “improper.” There may be a first time for anything. But, at this stage of the case, the plaintiffs have most definitely stated a plausible claim with respect to this cause of action.
You can pick up a link to the opinion and other pertinent information here.
The Employee Benefit Security Administration has published several “frequently asked questions” installments. These FAQ’s supplement the several interim rules providing guidance on some of the many vague standards set forth in the PPACA.
The regulatory effect of a FAQ is perhaps an untested legal point, but presumably the FAQ’s give some insight on the intentions of the regulators as they contemplate promulgation of further regulations under the PPACA. I have added a resources page that contains a collation of three FAQ installments published on the EBSA website. You may access that page here.
The Department of Labor’s Employee Benefits Security Administration has posted the following related to grandfathered health plans under the Affordable Care Act:
Interim Final Regulation, available at
Fact Sheet, available at
FAQs, available at
PPACA SEC. 1251. PRESERVATION OF RIGHT TO MAINTAIN EXISTING COVERAGE.
(2) CONTINUATION OF COVERAGE- With respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.
(a) No Changes to Existing Coverage-
(1) IN GENERAL- Nothing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.
This oddly-worded provision in the PPACA is Orwellian reform-speak intended to assure that the new law will not result in any changes to existing coverage for the 85% of Americans satisfied with their health insurance coverage. Of course that is not true, as many Americans will lose their coverage, but that is another subject altogether.
For plan sponsors trying to understand the “grandfathered plan” exception to several (but not all) provisions of the PPACA, the NAIC has published a succinct set of guidelines here.
Questions awaiting regulatory guidance include the following as noted by the NAIC:
The statutory language of PPACA raises a number of questions that will have to be decided in the regulatory
process. The House legislation included a requirement that there be no changes in terms or conditions of
grandfathered plans.iv The final bill, however, did not contain this requirement. A case could be made, however, that
if substantial changes are made to a grandfathered health plan, it is no longer the same plan, and would lose its
grandfathered status. A related question will be whether or not states may change state laws governing
grandfathered plans, and if so, whether compliance with these changes would cause plans to lose their grandfathered
Under the PPACA, rescission is prohibited except in cases of fraud or misrepresentation. (PPACA Sec. 1001, amending the PHSA, 42 USC 300gg et seq.)
The health insurance industry agreed to comply with this requirement ahead of the September effective date.
The House bill required “clear and convincing” evidence and external review. The law as passed does not. Some insurers have agreed to this standard without regulation or requirement. Regulations may, however, impose an external review requirement on claims of misrepresentation.
Interestingly, the House bill would have required continuation of coverage during a challenge. The law as enacted does not.
This area will be interesting to follow.
Questions – what is the standard of review? Presumably, that under Firestone v. Bruch in the group plan setting. Are benefits continued if misrepresentation is alleged? In the case of individual policies, could a retroactive increase in premiums be required as in Werdehausen v. Benicorp Ins. Co., 487 F.3d 660 (8th Cir. Mo. 2007)? If not paid, then could the policy be cancelled for failure to pay premiums? What is the burden of proof?
The anticipated regulations have much to address. I do not expect this to be a very significant issue in the group market, but after the dust settles, I think there are still some surprises in store in the individual policy market.
The proposed rule takes an “all-or-nothing” approach, where failure to meet any one of the requirements means the provider will not receive an incentive payment.
Healthcare providers need additional time and greater flexibility to meet criteria of the Centers for Medicare and Medicaid Services’ proposed electronic health record rule, according to an article in Healthcare Leaders Media.
If the current rule is finalized, it would likely result in providers with advanced HIT systems not meeting requirements in fiscal 2011. For those physicians in small practices and rural providers, the letter notes, “the unrealistic timeframes are even more problematic because they have further to go in their implementation of EHRs compared to larger providers.”
Here’s another take:
Under the Medicare incentive plan, if physicians meet stage 1 requirements by 2011 or 2012, they can earn a total of $44,000 over five years, starting with $18,000 the first year. But if meeting the requirements takes longer, the totals are lower: $39,000 in 2013 and $24,000 in 2014. The bonuses turn into penalties in 2015 if meaningful use has not been reached.
The PPACA contains some specific mandates as to what affordable health insurance should look like, in that as of 2014, companies must offer plans in which employees’ contributions are no more than 9.5% of their household incomes. If a company fails on that measure, and employees apply for government assistance through the yet-to-be-built health insurance exchanges, the company will be fined $3,000 per affected employee. (The fine drops to $2,000 after the first 30 employees).
Mercer Analysis: Study: Many Health Plans Not Affordable
In short, coverage must be cheapened for those presently covered to extend coverage to those who are not covered.
Either way, experts say the level of health coverage would likely degenerate compared with current levels, in order to make the plans cheaper. Particularly if all plans must be affordable, “you’ll probably see the level of coverage going down,” says Umland, with employers making additional, richer coverage available for workers to purchase with aftertax dollars.
So much for Obama’s claim that you can keep your present coverage under his vision for reform.
SEC. 2719(b) of the PPACA imposes new external review requirements on group health plans. (Grandfathered plans, i.e., a health plan in which an individual was enrolled on March 23, 2010, escapes Sec. 2719.)
This is a significant augmentation of plan participant rights.
|(b) EXTERNAL REVIEW.—A group health plan and a health insurance issuer offering group or individual health insurance coverage—
(1) shall comply with the applicable State external review process for such plans and issuers that, at a minimum, includes the consumer protections set forth in the Uniform External Review Model Act promulgated by the National Association of Insurance Commissioners and is binding on such plans;
(2) shall implement an effective external review process that meets minimum standards established by the Secretary through guidance and that is similar to the process described under paragraph (1)—
(A) if the applicable State has not established an external review process that meets the requirements of paragraph (1); or
(B) if the plan is a self-insured plan that is not subject to State insurance regulation (including a State law that establishes an external review process described in paragraph (1)).
The NAIC model act on available for review on the NAIC website.
Note particularly the sections pertaining to the binding effect of the external review.* Are those sections a part of the process that must be incorporated into self-funded plans that are not grandfathered? It would seem so. I’d be interested in your comments on that particularly, and any general comment on external review from prior experience with state laws imposing similar requirements.
* From the NAIC Model Act:
|Section 11. Binding Nature of External Review Decision
A. An external review decision is binding on the health carrier except to the extent the health carrier has other remedies available under applicable State law.
Note: Certain plans are exempt from Subtitles A and C of the PPACA. These are group health plans that were in existence on March 23, 2010.
We don’t know yet what regulations will be forthcoming on this issue but it would be an expensive mistake to, say, subject a plan to the new external review requirements because of plan amendments. So be careful.
As with the implementation of many other aspects of health care reform, the finer details pertaining to retaining grandfathered status are still to be determined. It is clear that enrolled individuals may add family members to their coverage if on March 23, 2010, the plan permitted this enrollment. It is also clear that new employees and their families can be enrolled without jeopardizing the plan’s grandfathered status.
Apart from these two allowances, PPACA is silent on the changes that may be made to a grandfathered plan without losing grandfathered status or even if grandfathered status can be lost. There is hope that some design changes are permissible, because earlier versions of health reform bills expressly prohibited changes. But before more guidance on this is issued, any changes to a grandfathered plan should be very carefully considered.
Further caution – Grandfathered plans are still subject to a number of the new requirements, such as PHSA Sec. 2708 (excessive waiting periods), PHSA Sec. 2711 (lifetime limits),PHSA Sec. 2712 (rescissions) and PHSA Sec. 2714 (extension of dependent coverage).
Effective Date – Plan years beginning six months after enactment. Since most plans are calendar year, 1/1/2011 will be the first plan year for the majority of plans.
Edward A. Zelinsky, Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University, questions the significance of the Patient Protection and Affordable Care Act in his post The Bi-Partisan Rhetoric of Health Care Apocalypse is Wrong on the OUPblog.
Professor Zelinsky writes:
First, the Patient Protection and Affordable Care Act, while significant, is more incremental in nature than either side cares to acknowledge.
Second, many provisions of the Act have delayed effective dates. It is questionable whether future Presidents and Congresses will permit these provisions to go into effect as written.
Third, the Act merely postpones many tough decisions which must be made about health care and about health care cost control in particular. At its core, the Act’s efforts to control health care costs are tepid and deferred. Indeed, for the long run, the Act is likely to exacerbate the nation’s problem of health care costs and will thus require further confrontation with this intractable problem.
I am in agreement on points two and three, but skeptical on the first point. As always, his comments are thought-provoking and informative.
You can read the post in its entirety here.
The goal of many health care reformers is actually to get to a single payer system. President Obama has espoused this point of view and the “public option” was one track to get there.
The Patient Protection and Affordable Care Act (”PPACA”) will get there as well, but in two steps rather than one. The first step will be to force private sector options into untenable economic arrangements while all the while decrying the profit motive as the critical problem as premiums increase. This will make for great political theater and the actors are already taking positions on stage.
For example, I posted yesterday about the unworkable tangle of parameters that are embedded in the medical loss ratio strictures under the PPACA. Today we have Senator Rockefeller complaining about the characterization of expenses under the MLR rules.
The Senate Commerce Committee investigation began in August, 2009. The Committee staff report Chairman Rockefeller released today includes a review of recently filed 2009 medical loss ratio (MLR) information and highlights health insurance companies’ new efforts to “reclassify” their administrative expenses as medical expenses in the wake of health care reform. This staff report updates an analysis of 2008 insurance industry data that the Senate Commerce Committee released last November.
The Huffington Post finds this report an opportunity to accuse health insurance industry of ” starting to game a key element of health care reform months before it even takes effect . . .”
Really? I don’t think so.
Other than individual policies, the insurance industry appears to have met the MLR standard. The Wall Street Journal carries a more balanced view of the Senate Report, stating that:
In most instances, among the large, publicly managed-care companies–including Aetna Inc. (AET), WellPoint and UnitedHealth Group Inc. (UNH)–MLRs for individual policies last year didn’t reach the upcoming 80% minimum, though most met that mark for small-group plans. Most of the big insurers also met or came close to the 85% MLR for large group plans, according to the committee report. Cigna Corp. (CI) was the only major insurer with an individual-market MLR that surpassed the upcoming minimum, the report showed.
Those numbers represent an average of each of the companies’ many subsidiaries with varying MLRs. The report cites an Oppenheimer analysis that says the markets where WellPoint subsidiaries have low MLRs are “the most profitable tail” of WellPoint’s business.
. . .
Cigna said Thursday it is too early to say how the new MLR minimums will affect the company and that since the definitions are being worked on, the insurer doesn’t intend to restate its MLR at this time. UnitedHealth Group said it doesn’t intend to change how it calculates the ratios before new guidance is provided. Aetna said recently it hasn’t reclassified any costs.
Robert Zirkelbach, spokesman for industry trade group America’s Health Insurance Plans, said government data show that “the percent of premiums spent directly on medical care has increased for six straight years. At the same time, health plans are doing more in the areas of disease management for chronic conditions, care coordination, prevention and wellness, and health information technology.
“It is important to ensure that the new MLR requirements do not undermine essential programs and services that are working to improve the quality and safety of patient care,” Zirkelbach said.
Last year, he said, the percentage of premiums used on overhead costs and profits declined for the sixth straight year.
The Procrustean MLR concept is flawed as explained by James Robinson in his influential Health Affairs article noted in my prior post. If the predictable “accounting nightmare” is troublesome, it is only the fault of the politicians that voted for a bill they most assuredly did not understand.
For those who hope to undermine the private sector insurance industry in favor of a Canadian-style single payer system, however, the real gaming is the notion that any of these bureaucratic hurdles has any goal other than the migration to a single payer system.
That change in the American system will likely disappoint affluent Canadians, however, who have heretofore chosen the U.S. for their own health care.
The EBSA Request for Comments Regarding Section 2718 of the Public Health Service Act (Medical Loss Ratios), as added by the Patient Protection and Affordable Care Act (“PPACA”) has been published in the April 14 issue of the Federal Register and can be viewed here. Comments are to be submitted by May 14, 2010.
Section 2718 of the PHS Act (among other provisions), requires health insurance issuers offering individual or group coverage to:
- submit annual reports to the Secretary on the percentages of premiums that the coverage spends on reimbursement for clinical services and activities that improve health care quality, and
- to provide rebates to enrollees if this spending does not meet minimum standards for a given plan year.
Under the PHS amendments, the National Association of Insurance Commissioners (“NAIC”) will establish (subject to approval by HHS) uniform definitions of the activities being reported and standardized methodologies for calculating measures of these activities no later than December 31, 2010.
The law imposes a crude and complex control mechanism based on medical loss ratios that is enforced by rebate requirements, taxes and penalties. In a nutshell, the amount expended on medical services and “quality” must be at least 85% of premium revenue (as defined) for large group plans and 80% for small plans and individual plans.
Ironically, the concept of assessing value through MLR’s appears to have made its way into the law despite serious deficiencies in its usefulness as a metric of quality or efficiency. From “Use And Abuse Of The Medical Loss Ratio To Measure Health Plan Performance”, Health Affairs (July/August 1997), by James C Robinson:
The medical loss ratio is not a straightforward indicator of either medical or administrative expenditures. It certainly is not a measure of clinical quality or social contribution. The medical loss ratio is an accounting monstrosity, a convolution of data from myriad products, distribution channels, and geographic regions that enthralls the unsophisticated observer and distorts the policy discourse.
Given the short comment period, the rapidly approaching effective date and the lack of regulatory guidance, the MLR feature of health care reform will undoubtedly create substantial confusion for health plan insurers. The “accounting monstrosity” fails to recognize the blended features of claims payment, administrative and profit functions in the contemporary health insurance industry.
In short, the MLR requirement’s greatest defect lies in its failure to constitute a useful metric of what it purports to measure.
Note: Section 1004(a) of the PPACA provides that the provisions of Section 2718 of the PHS Act shall become effective for plan years beginning on or after the date that is 6 months after the date of enactment of PPACA. (The date of enactment of PPACA is March 23, 2010).
Physicians say they are shunning Medicare because they are tired of dealing with the yearly threat of a payment cut under federal law requiring that reimbursement rates be adjusted annually based on a formula tied to the health of the economy.
“Ditched by your doctor – blame Medicare“, CNN Money, Parija Kavilanz, senior writer (March 2, 2010)
Choice of doctor is vital to any notion of health care reform. As Congress considers health care reform, however, here is a startling fact. Medicare is already constricting physician choice by cutting pay to physicians.
Now President Obama is on record as stating that Americans will still be able to choose their doctors under the health care reform. Yet, he and his Democratic cohorts are responsible for a 21% cut in Medicare reimbursement rates. And that is before the cuts planned in the health care reform legislation.
The AARP has inexplicably failed seniors abysmally on the issue. If Medicare continues to reduce benefits to physicians, seniors will be hard pressed to find medical care from any doctor, much less their preferred physician. If those are the promises of health care reform, seniors would be well advised to pass on Obamacare.
Scott Brown’s quip that the open Massachusetts’ Senate seat was, in fact, the “people’s seat“, rather than a Kennedy sinecure to be conferred upon the annointed, raises an interesting question about Obamacare in the Bay State. Why would the regular working folks in Massachusetts want it?
1. Massachusetts already has “reform in place. In 2006, Massachusetts enacted “An Act Providing Access to Affordable, Quality, Accountable Health Care”. Obamacare adds no net benefit for the residents of Massachusetts. All residents are required by law to have coverage. A series of individual and employer taxes and fines together with state health insurance options, including an exchange (“Commonwealth Health Insurance Connector Authority”) are in place to facilitate this mandate.
2. Health care reform as proposed will increase premium costs for Massachusetts’ residents. An estimated 45% or more residents are enrolled in HMO’s. These and other “fully insured” plans will be subject to taxes under the Senate health care reform bill – and these taxes will be passed on to consumers.
3. Massachusetts will be paying for reform – even though it has already had “reform” (and the deficits to show for it). Worse, under the proposed legislation, Massachusetts residents will effectively be paying for reform in other states – like Nebraska that got a free pass on Medicaid funding.
With the addition of significant new costs, with nonprofit health plans dominating a highly competitive health insurance Massachusetts market, and with 97% of the state’s population already covered, Massachusetts will be essentially subsidizing health reform and coverage expansions in other states.
4. From the standpoint of extending coverage, the proposed national reform legislation (which largely resembles the Massachusetts plan) will work no better than the struggling state plan. In terms of consumer protection, those protections are already provided in the state plan.
5. The proposed plan will tax the benefits of those who presently have “Cadillac” plans (which have been assessed at values more on par with a Ford).
From the “people’s” point of view, Obamacare makes no sense for Massachusetts.
The Senate health care legislation bill is now available for public review. Here are the links:
From the Senate Democrats’ Site:
Manager’s Amendment Now Available, 12/19/2009
Download the complete text of the Manager’s Amendment, #3276 to Reid Substitute amendment #2786 (Click for PDF)
Download the complete text of the Patient Protection and Affordable Care Act, the Senate health insurance reform bill. (Click for PDF)
(The Manager’s Amendment details the deal-making necessary to get the votes for cloture. This is where, for example, the indoor tanning salon business tax and other revenue-oriented measures appear.)
From the Senate Republicans’ Site:
Is the Senate bill on a collision course with the House bill previously passed? Politico.com assesses the odds here.
Edward Zelinsky, Morris and Annie Trachman Professor of Law at the Benjamin N. Cardozo School of Law of Yeshiva University, has proposed a means of restoring a measure of fiscal soundness to the Medicare program in his post entitled “Bend The Cost Curve: Raise the Medicare Eligibility Age to 67”.
As Congress debates national health care reform, there is a growing disparity between the rhetoric of cost reduction (which everyone nominally favors) and the reality of electoral politics (which inhibits elected officials from alienating constituents by actually reducing costs). Indeed, there appears to be an inverse correlation between the vociferousness of Congress’ claim to be bending the medical cost curve and Congress’ willingness to undertake the practical steps to control medical outlays.
The post may be found on the OUP blog which provides ongoing scholarly comment on a variety of issues, including healthcare policy. (See, e.g., today’s post ” Understanding “Broad Partisan Support” for Health-care Reform” by Elvin Limm.)
Facts are stubborn, but statistics are more pliable.
Quote by Mark Twain.
The Senate’s prior versions of health care legislation are now merged in a bill which will face the threat of filibuster when presented to the full Senate which could happen as soon as Saturday. The Democratic leadership will need 60 votes to open debate. An overview of the bill can be read here. The text can be read here.
The CBO’s scoring of the 2,074 bill at a cost of $849 billion is viewed as a boost to its prospects for passage. The CBO’s scoring mechanism is controversial, however, in how it matches costs to anticipated revenue and its projections of coverage in view of the paltry fines for failure to enroll. More on that later.
H.R. 3962, the House health care bill, passed by a vote of 220 – 215. Changes to the original bill were required to obtain the necessary votes.
Highlights of some of the changes are highlighted in this summary prepared by the House Committees on Ways & Means, Energy & Commerce, Education & Labor. This clinical, upbeat summary does not begin to present the political theater and practical obstacles that attended the passage of the bill and that threaten its prospects for shaping any final health care legislation.
The sheer heft of the bill poses a serious impediment to access for most – even if the modifications were published online as initially promised. In the meantime, there is no shortage of commentary on what the legislation means for various groups.
It’s an open secret in Washington that only about 15-20 percent of doctors are members of the AMA. Sermo, a 110,000-member, non-partisan online community of doctors — 25 percent of whom say they are members of the AMA — has recently released polls showing that 92 percent of doctors don’t think the Democratic bills address the “real sources of cost increases,” and 94 percent don’t think there can be “effective” health reform without tort reform (which the Republican bill includes but the Democratic bills do not).
. . .
Recent polls show that seniors are no more in lock-step with the AARP than doctors are with the AMA. Gallup, Rasmussen, and Reuters polls from the past several weeks show that seniors are opposed to the Democratic bills — by margins ranging from 43-38 percent opposed to 59-36 percent opposed. Rasmussen shows that 47 percent of seniors are strongly opposed with only 19 percent strongly in favor.
“Critical Condition”, NRO Weekend (November 6, 2009)
Of the many deceiving aspects of the healthcare reform debate are the significance of “endorsements” of the various proposals. Both the AMA and the AARP have waffled on the concept of reform they endorse. In fact, at times, it appears that the AARP has taken one position in communication with its members and a contrary position in the media.
In any event, it is important to note that the AMA is virtually irrelevant as a measure of physician opinion, representing a bare 20% of doctors. The AARP has likewise run far beyond its purported constituency in endorsing Pelosi-care.
It remains to be seen whether the House of Representatives members will vote for the evolving health care bill or not. In the meantime, these blind endorsements of the most recent House bill (which is even at present in closed door revision sessions), should carry little ballast with the voters who will reshape the Congress in mid-term elections.
Prices are not costs. Prices are what pay for costs. Where the costs ar not covered by the prices that are allowed to be charged, the supply of the goods or services simply tends to decline in quantity or quality . . .
Thomas Sowell, “Basic Economics : A Common Sense Guide to the Economy” (3rd ed. 2007)
The nonpartisan Joint Committee on Taxation has revised estimates of the tax burden imposed by the Senate bill. According to the report, the bill would raise $121 billion in fees on drug companies, health insurers and the makers of medical devices, up from the $29 billion over the amount it reported last month.
Of course, only the very naive would fail to understand that these taxes will be passed on to consumers. At the same time, history is replete with examples of the deleterious effect of attempts to control prices through government control. (The economist Friedrich Hayek has provided several such examples in his classic work, The Constitution of Liberty, and observes that price controls must be combined with direct control of production, i.e., who is to perform what services for whom, to be effective.)
These basic economic axioms appear lost on the proponents of non-market-based health care delivery models. Yet, one only has to look to Massachusetts to see the inherent problems in health care legislation that does not realistically encounter the cost of entitlements.
Edward A. Zelinsky, Morris and Annie Trachman Professor of Law,
Benjamin N. Cardozo School of Law delivered the Dr. Arthur Grayson Distinguished Lecture at Southern Illinois University last week. This lecture will be published in the Journal of Legal Medicine.
Here’ is the abtract:
Whatever happens in Washington in the weeks and months ahead, the United States is fated for the indefinite future to conduct a prolonged and difficult national debate on health care. The reason for this protracted and arduous argument can be summarized in a single word: cost. Yet, paradoxically, the rhetoric of unspecified cost reduction is used to avoid the painful choices needed to prune health care outlays, choices which inevitably involve agonizing denials of medical services in a world of finite resources. Medical costs cannot be controlled without denying something to somebody. Yet, paradoxically the term “cost” is used in contemporary political discourse to avoid the difficult choices involved in such denials. It is easier to favor unspecified cost reductions, than to identify particular service denials which would actually reduce medical care expenditures. Elected officials are reluctant to deny medical services to cut costs, but health care costs cannot be meaningfully controlled without such service denials. Our employer-based system of medical care is a major reason we confront this difficult situation. Yet, again paradoxically, the employer-based system, though flawed, is the best tool available to us to control medical care costs since employers must respond to competitive pressures in the marketplace and thus are better positioned than is government to implement the painful service denials necessary to curb health care outlays. However, even under the best of circumstances, medical care costs are not a problem which will be solved but rather are a reality to be permanently and painfully managed and controlled.
Zelinsky, Edward A., Reforming Health Care: The Paradoxes of Cost (September 27, 2009). Cardozo Legal Studies Research Paper No. 277; Journal of Legal Medicine, Vol. 31, No. 2, 2010 may be downloaded on SSRN.
Senate Finance Committee Chairman Max Baucus has released the eagerly awaited text of his version of the health reform bill. The “chairman’s mark” – the America’s Healthy Future Act bill – would bar insurers from discriminating against people based on health status, denying coverage because of pre-existing conditions, or imposing annual caps or lifetime limits on coverage, according to Baucus, D-Mont. Implementing the bill would cost about $856 billion over 10 years, but it would not add to the federal budget deficit, Baucus says.
Baucus Puts Bill In Play, National Underwriter (9/16/2009)
Sen. Baucus’ version of a health care reform bill will be taken up by the Finance committe next week according to a report in the National Underwriter. The accompanying press release and text may be accessed on the Senate committee’s website. The bill would implement health care exchanges sans “public option”.
Supplemental post – 9/17/09
The CBO letter to Sen. Baucus outlining cost projections can be accessed here.
While cost projections are much improved over the HR 3200 deficit/tax burden,
But more importantly, the Congress is getting ready to spend $1 trillion over the same 10 years mostly to expand Medicaid and provide subsidies to the uninsured to help them purchase private health insurance and be able to pay their medical bills. The health industry, by giving up $500 billion, gets millions more patients armed with public and private health insurance cards. Not a bad deal—particularly when the other $500 billion needed to finance the bill comes from new levies on taxpayers, not bigger industry cuts.
“Health Reform Bills Would Be Great For the Business Of Health Care” By Robert Laszewski, The Health Care Blog (August 27, 2009)
A well researched article which first appeared on Kaiser Health News appears on The Health Care Blog and succinctly explains how the Obama reform proposals will ultimately be financed by taxpayer levies in large part. He illustrates that the big players in the delivery of health care all receive payback over time that will keep the health care industry healthy (with some winners and losers to be sure in the shake-out).
Once the reform music stops playing, only the taxpayer will be unable to find a comfortable chair. Laszewski states that:
From the looks of these health care bills, this “health care reform” thing will be great for business! But as far as “bending the curve” and beginning to make our health care system any more affordable or sustainable—or any less of a burden on patients and taxpayers—I can’t find it.
Despite President Obama’s pledge that “if you like your health care plan you can keep it”, he has admitted that he intends to scuttle the popular Medicare Advantage program.
A recent USA Today article, “Seniors Defend Medicare Plan Obama Calls Wasteful”, it is clear that many seniors desire to keep their plan. According to the article:
Medicare Advantage has its roots in the 1970s but was bolstered in 2003 in hopes that private companies could manage Medicare patients more efficiently. Partly because it often has lower out-of-pocket costs than traditional Medicare, enrollment has nearly doubled over six years, according to a Kaiser Family Foundation report.
Obama’s proposal to eliminate Medicare Advantage (seeYouTube clip here) dovetails with his desire for a single payer system. As noted in “Obama Proposes Eliminating Medicare Advantage, Ousting 9 Million Seniors from Their Health Plans”, this breaks a campaign promise:
For Obama to suggest eliminating Medicare Advantage outright, however, is extraordinary. First, Obama made a campaign promise that he will let Americans keep their current health insurance. Eliminating Medicare Advantage would force 9 million seniors out of their current health plans and back into traditional Medicare. Second, a man who wants to reform America’s health care sector ought not begin the effort by proposing to take something away from seniors, America’s largest and most politically active voting block .
It must be recalled that, despite his campaign pledge, which he continues to repeat (at best irresponsible), he ultimately intends to replace the private market with a single payer government operated health insurance monopoly. (See YouTube clip featuring “Obama on Single Payer Insurance“).
(b) GRACE PERIOD FOR CURRENT EMPLOYMENT BASED HEALTH PLANS.—
(1) GRACE PERIOD.—
(A) IN GENERAL.—The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before the first day of Y1 must meet the same requirements as apply to a qualified health benefits plan under section 101, including the essential benefit package requirement under section 121.
The foregoing excerpt from the House bill gives the lie to President Obama’s promise that “if you like your present plan you can keep it.” After the “grace period”, the reform measures mandates will drive a substantial number of employer-based plans from the marketplace. Yet, President Obama continues to promise what he must know is untrue.
The Ordinanceâ€™s health care expenditure requirements are preempted because they have an impermissible connection with employee welfare benefit plans. By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how to provide employee health coverage, and ensuring uniform national regulation of such coverage. Golden Gate Restaurant Association v. City and County of San Fransisco et al., (N.D. Cal) (December 26, 2007)
In a well-reasoned opinion, a California district court has held that ERISA preempts the San Francisco Health Care Security Ordinance. The 2006 ordinance consisted of an employer health spending requirement and a government health care program, funded in part by those employer contributions. (The opinion can be viewed here.)
The litigation focused on the employer spending requirement, which was to become operative on January 1, 2008. Under that portion of the ordinance employers faced a multi-tier assessment based upon how many employees they had.
Since ERISA preempts state and local laws that invade its purview, the ordinance was clearly doomed from its genesis given the its various levies, penalties, and administrative and recordkeeping requirements. The district court based its holding on several bases.
Reason # 1 – The Ordinance Had An Impermissible Connection With ERISA Plans
First, the Court held that the Ordinanceâ€™s health care expenditure requirements were preempted “they have an impermissible connection with employee welfare benefit plans.”
By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how to provide employee health coverage, and ensuring uniform national regulation of such coverage.
The court evaluated the ordinance with reference to the following series of factors:
(1) whether the state law regulates the types of benefits of ERISA employee welfare plans;
(2) whether the state law requires the establishment of a separate employee benefit plan to comply with the law;
(3) whether the state law imposes reporting, disclosure, funding, or vesting requirements for ERISA plans; and
(4) whether the state law regulated certain ERISA relationships, including relationships between an ERISA plan and employer and, to the extent an employee benefit plan is involved, between the employer and the employee.
(citing Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir. 1998)
On each point except the second factor, the court found the ordinance defective.
Reason # 2 – The Ordinance Expenditure Requirements Made Unlawful Reference to Employee Benefit Plans.
This analysis presented the easiest reason for finding the ordinance preempted.
The Court held that the provisions of the ordinance made unlawful reference to employee benefit plans by:
(1) specifically referencing the existence of ERISA plans in its expenditure requirements provisions. Ord. Â§ 14.1(b)(7) (calculating employer liability by looking at â€œamounts paid by a covered employer to its covered employees or to a third party … for the purpose of providing health care services for covered employees.â€); Final Regs. Â§ 6.2(E) (specifically referring to different types of ERISA plans, and providing that employers do not receive credit if an employee declines coverage under a plan â€œthat requires contributions by a covered employee.â€).
(2) determining liability exclusively with reference to employer-provided health benefits, mostly under existing ERISA plans, which plans are essential to the operation of the Ordinance
Note: Strategies for circumventing ERISA’s preemption through artful drafting of “pay or play” legislation have been bandied about for years. The viability of such proposals are, in my judgment, seriously questionable. See, Lawmakersâ€™ Negligence in Proposing Health Care Initiatives Bureau of National Affairs (August 2007. The San Francisco ordinance presented no test case for the concept, however, as it fell flatly on the impaling preemptive provisions as gracelessly as one can imagine.
Implications – This decision further illustrates the fundamental problem with pay or play legislation and the continuing influence of the Fourth Circuit’s opinion in RILA v. Fielder (cited several times in the district court’s opinion). These defects have not prevented legislatures from moving ahead with their proposals. Massachusetts has had one of the longest runs yet. On the other hand, given the financial problems that lie in the future for the Massachusetts health care program, a more aggressive stance by that state to gain revenues from employers will likely find that program facing a preemption challenge as well. When that day comes, the Massachusetts plan will be held preempted. See, :: Reluctant Massachusetts Tax Collector Has Good Reasons
See also – :: Healthcare Security Ordinance Challenged As Preempted By ERISA; :: Retail Industry Leaders Association Takes Out Another â€œPay Or Playâ€ Mandate Through ERISA Preemption Challenge; :: Maryland Bows To ERISAâ€™s Preeminence ; :: Retail Industry Leaders Association v. Fielder: A Case of Preemption Over Federalism
Uninsured cancer patients are nearly twice as likely to die within five years as those with private coverage, according to the first national study of its kind and one that sheds light on troubling health care obstacles.Â People without health insurance are less likely to get recommended cancer screening tests, the study also found, confirming earlier research. And when these patients finally do get diagnosed, their cancer is likely to have spread.Â Â Study: Insured Cancer Patients Do Better The Washington Post, December 20, 2007
The WP article recapitulates some important information about the effect of insurance on cancer screenings and treatment.Â The article notes that the uninsured are believed to account for just a fraction of U.S. cancer death – around 4 percent – but the correlation between outcomes and insured status is nonetheless significant.Â Â The author notes that “[h]ard numbers linking insurance status and cancer deaths are scarce, in part because death certificates don’t say whether those who died were insured.”
According to the WP:
- Most fatal cancers occur in people 65 or older – an age group covered by the federal Medicare program.
- More than 80 percent of adults under 65 have some form of coverage, including private insurance or the Medicaid program for the poor.
- The uninsured were 1.6 times more likely to die in five years than those with private insurance.
The new research will be published in CA: A Cancer Journal for Clinicians, a cancer society publication.
Barbara Calder lives in nearly constant pain. Her limbs dislocate at the slightest movement, even when she turns over in bed at night. She wears her hair short because brushing it hurts too much.
Mrs. Calder suffers from Ehlers-Danlos Syndrome, a rare genetic disorder in which the connective tissue that binds the body together gradually falls apart. But, although she began suspecting she had the disease 16 months ago and had health insurance, she spent a year battling numerous roadblocks just to see a specialist who could diagnose her condition. Now Mrs. Calder says she is left wondering whether she’s going to die suddenly because she can’t get the test that would tell her whether she has the fatal form of the disease . . .
Mr. Calder, whose father was a doctor and mother was a nurse, grew up believing the U.S. health-care system was the best in the world. But he says his wife’s struggle has eroded that faith. “I’ve actually turned around to where I’m thinking, ‘Yeah, Europe may not be a bad thing.’ ” “How U.S. Health System Can Fail Even the Insured”, Wall Street Journal (November 16, 2007)
The Wall Street Journal editorial staff has evidently bought into the idea that universal health care translates to universal coverage. The adjudicative record of Medicare fiscal intermediaries does not bear this out.
“There are three kinds of lies: lies, damned lies, and statistics.”
– Benjamin Disraeli, British politician (1804 – 1881)
An article appearing in the Wall Street Journal yesterday gives context to the frequently cited U.S. health care spending statistics.
Consider these two widely published observations:
#1 Over the past eight years, the percentage of firms offering health benefits to employees has dropped from 69% to 60%.
#2 Measured as a share of Gross Domestic Product (GDP) spent on health care, “a metric of health system performance and value that some consider definitive”, the U.S. spends far more on health than other countries.
Should these points provide impetus for a universal government-run health care system? Would this solution enhance national competitiveness?
Healthcare is on everybody’s mind these days. Michael Moore’s Sicko, released June 29, 2007, recounts the healthcare horror stories of not just of the 47 million Americans who don’t have insurance. Even for those who of us who do, this Consumer Reports survey published in September 2007 found that:
- 29 percent of people who had health insurance were “underinsured,” with coverage so meager they often postponed medical care because of costs.
- 49 percent overall, and 43 percent of people with insurance, said they were “somewhat” to “completely” unprepared to cope with a costly medical emergency over the coming year.
Commentary on the State Children’s Health Insurance Program, By Beth Wellington (September 28, 2007)
As the foregoing quote reveals, the dispute over the SCHIP program is not so much about children’s medical benefits. Consider the following editorial comment:
The Childrenâ€™s Health Insurance Program is not just about children. In some states, half or more are adults. But just as with the Social Security entitlement, false terms are applied and concerted campaigns are mounted to nudge families into greater and often unnecessary dependency. The Atlanta Journal Constitution, “SCHIP is another â€˜polite fictionâ€™ of entitlement”, columnist Jim Wooten (October 22, 2007)
The outcome of the wrangling over expansion of the SCHIP program will have a significant impact on private group health plans. As noted in SCHIP and “Crowd-Out”: The High Cost of Expanding Eligibility, the continuing expansion of government-sponsored health care beyond the intended beneficiaries of SCHIP will cause a decline in private insurance coverage:
On the aggregate, for every 100 children newly eligible for SCHIP, between 30 and 35 children lose private coverage. Disaggregating the analysis by income eligibility thresholds, however, indicates crowd out grows in magnitude when the program is extended beyond its intended focus of covering uninsured children in families below 200 percent of the [federal poverty level).
Noncitizens make up about 20% of the 46 million uninsured people in the United States. Hospitals generally do not collect information on patient immigration status, and there are no reliable national figures on hospital costs for undocumented immigrants. Nevertheless, the soaring cost of uncompensated care has made the problem of providing care for uninsured immigrants a hot political issue, particularly in border states and those (such as the southeastern states) whose immigrant populations have grown rapidly in recent years. Some uninsured immigrants needing emergency treatment (including pregnant women, children, adults with dependent children, and elderly, blind, or disabled patients with incomes below Medicaid thresholds) qualify for emergency Medicaid coverage. In many other cases, hospitals receive no payment for their care, although in 2003 Congress appropriated $250 million per year for 4 years (starting in 2005) to partially compensate hospitals for treating undocumented immigrants. “Immigrants and Health Care â€” At the Intersection of Two Broken Systems” The New England Journal of Medicine (August 9, 2007)
A recent article in the New England Journal of Medicine illustrates the huge gap between politicians’ promises and economic reality. The NEJM article provides further proof that we do not have reliable data on the population of potential recipients of care, so no one can really accurately project the costs of universal health care.
On the Republican side, Representative John Shadegg, an influential conservative from Arizona, said, â€œThis debate is the opening salvo in a battle over the future of health care in America.â€ Senator Mel Martinez of Florida, chairman of the Republican National Committee, acknowledged Tuesday that a vote against the bill would be portrayed as a vote against health care for children.
â€œIf we allow that to be the end of the conversation, then we will probably have a very bad election cycle,â€ Mr. Martinez said. “Childrenâ€™s Health Plan Focus of New Struggle”, The New York Times (August 1, 2007)
The Senate added its weight yesterday to that of the House in pushing forward the extension of the State Childrenâ€™s Health Insurance Program. The Senate legislation, though less expansive than that passed in the House, nonetheless adds 3 million lower-income children to the program. The vote was 68-31.
Now the Senate version of the legislation must be reconciled with the House bill which passed earlier this week. Under the House bill, the $50 billion expansion would be financed in part by cutting government payments to Medicare health maintenance organizations. For additional comment on the measure, see :: Senate Passes â€œVeto-Proofâ€ Version Of SCHIP Legislation
“This is the children’s hour,” House Speaker Nancy Pelosi (D-Calif.) declared last night. “We are able to meet our moral obligation to our children.” “Children’s Health Bill Approved By House”, The Washington Post (August 2, 2007)
A divided House on Wednesday approved sweeping healthcare legislation that would expand government benefits for children and seniors while boosting tobacco taxes and cutting Medicare payments to private insurance companies. The largely party-line 225-204 vote came after hours of rancorous debate and parliamentary stalling tactics by Republicans. Cheers rang out in the House chamber when Speaker Nancy Pelosi (D-San Francisco) announced that the legislation had passed. â€œHouse passes boost in kidsâ€™ health planâ€, Los Angeles Times (August 2, 2007)
Scheduled to expire on September 30, the Childrenâ€™s Health Insurance Program is now in the political spotlight. According to the New York Times, President Bush has threatened to veto the House bill, developed entirely by Democrats, as well as a more modest bipartisan measure, that is expected to pass in the Senate.
For those unfamiliar, the State Childrenâ€™s Health Insurance Program (SCHIP) is a national program intended to benefit the so-called “working poor”. These individuals earn too much money to qualify for Medicaid, but find it difficult to purchase health insurance. The program, created in 1997 under a Republican Congress, represented a substantial expansion of health care on a par with the Medicaid program itself which dates back to the 1960’s.
How do these developments affect group health plans? In several ways.
Presidential candidate Rudy Giuliani proposed tax benefit to promote the purchase of private health insurance. The idea in a nutshell: build a larger market base through tax incentives so that competition will drive down the cost of health insurance.
Giuliani proposes a tax exemption of up to $15,000 for a family and $7,500 for individuals. Consumers would be able to purchase an insurance policy to fit their needs, with any remaining funds going to a health savings account for deductibles or other uncovered medical expenses.
More from the candidateâ€™s website:
- Excerpts From Mayor Giulianiâ€™s Town Hall Meeting In Rochester, NH, July 31, 2007 (08-01-2007)
- A Healthy Choice: Hillarycare vs. Rudycare (08-01-2007)
- AUDIO: Mayor Giuliani Talks Health Care on WFLA Radio in Florida (07-31-2007)
- AUDIO: Rudy Talks Health Care with Bill Bennett (07-31-2007)
- Rudy Giuliani Discusses His Commitment To Giving Americans Increased Control And Access To Health Care (07-31-2007)
- VIDEO: John Harwood on Rudyâ€™s Health Care Plan (07-31-2007)
- Mayor Giuliani Calls for Market Approach to Health Care (07-31-2007)
- Mayor Giuliani to Announce Health Insurance Tax Break Plan (07-31-2007)
According to the New York Sun, Mayor Giuliani is headed to New Hampshire today to begin a two-day rollout of his health-care plan.
The candidateâ€™s website furnishes a link to a video in which Guiuliani speaks on the issue of using tax incentives to encourage a private market for individual health insurance. In the presentation, he states that, without a private market, â€œwe canâ€™t afford itâ€. The only way you drive down the costs, he says, is with a â€œbig marketâ€.
Introducing For-Profit Hospitals: Historically, most hospitals have been non-profit institutions or religious institutions. Now almost all of Coloradoâ€™s hospitals are owned by 3 big corporations. This has meant pressure to cut services, cut staffing levels, cut payment to providers, cut services but increase charges to increase maximizing profit. Colorado hospitals are making 4.5 times as much profit as the national average. They spent $2.25 billion in new buildings in Colorado.
Solution: We need to decide if we fundamentally believe healthcare should be a for-profit or non-profit model. Strengthen medical anti-trust laws (FEDERAL).
Rep. Morgan Carroll’s Blog, Healthcare Held Hostage (July 26th, 2007)
What passes for health care reform ideas these days is nothing short of appalling.
The foregoing excerpt reads more like a question than a proposal. Of course, the solution, identified as “federal”, makes the proposal largely irrelevant anyway since Rep. Carroll is a state representative.
The representative’s foggy notions of potential reforms do not end here, however, but ramble on to include other equally nebulous proposals, to wit:
- “[F]ix ERISA so it doesnâ€™t block consumer protection by the states (FEDERAL).”
- “We need prompt pay reforms (STATE) and ERISA reforms (FEDERAL).”
- “[F]ix ERISA so it doesnâ€™t block consumer protection by the states (FEDERAL) (listed twice)
- “Consider an audit to better determine the source of the waste. (It appears to use more resources to deny healthcare than to pay claims. STATE & FEDERAL).”
CEO compensation caps, premium rate caps, and attacks on “special interest groups” (all core concerns of Rep. Carroll) play into the populist sentiment for change, but offer nothing useful in terms of specific recommendations. Thus far, however, she enjoys reputable company since the presidential candidates’ vapid proposals on health care reform, though more artfully phrased, are no more specific.
The United States District Court for the Eastern District of New York handed down another victory for the Retail Industry Leaders Association. In this decision, filed July 14, 2007, the district court ruled that ERISA preempted the Suffolk County, New York Fair Share Act. The reasoning of the opinion essentially follows that in Retail Industry Leaders Association v. Fielder, â€” F.3d â€”-, 2007 WL 102157, C.A.4 (Md.) (January 17, 2007)
From the RILA press release: