Health Reform Insights
Candid personal observations from SPBA President Fred Hunt
This e-mail is mainly a series of heads-up background on things you may hear in the news so that you will not be blind-sided, and so you will understand the context in order to be able to explain to others.
>> PUBLIC OPTION: This was the main battleground of the health reform legislation, and seemed defeated, but a new bill has been introduced into the House to require a “robust” public option among the options in every state’s exchange. Don’t panic. The bill right now, with 128 sponsors, is just a stalking horse to put the idea on the table. There is virtually zero chance of it passing before Congress adjourns. Lame Duck sessions are unpredictable, but still doubtful. This bill is like when you plant bulbs in your garden. The planter hopes it will come up next Spring….especially if the Congressional Budget Office (CBO) comes up with some glowing estimate that it will save billions of dollars.
Reminder: CBO estimates can be easily rigged by the Congressmen requesting it. The Congressmen set the assumptions. So, for example, if CBO is told to assume that health costs will drop and no one will have expensive medical needs…the estimates will look phenomenal. Then, next year, proponents of this would cloak the bill as a way to help solve the deficit.
This proposal should not come as a surprise. Not only is there a strong pool of single-payer sentiment in public opinion and political circles, but anyone watching the Massachusetts version of exchange as the model for the national health reform (described below) can see that there is a chance that there won’t be any private insurers to be in exchanges, and so public option could be the needed default.
Caution: Don’t fall into the too-widely-believed fantasy that public option equates with cheap or free coverage with readily available services. Deficit-conscious Congress will want something closer to self-supporting than Medicare & Medicaid have been (especially since the exchanges will not be for old or needy folks). There is also the major serious issue I have discussed in the past that medical providers are going to be backing away from serving government-plan patients, because it is does not cover their costs of operation. So, existence of even a “robust” public option does not spell the death sentence for private health employee benefit plans.
The bigger risk to the willingness of employers to sponsor health plans will be out-of-control health costs (the same risk we’ve faced for 30 years). Sky-high medical costs could some day change the cost/value balance between sponsoring a plan and paying a fine to government (although the rising costs will also hit the government plans, so that is not an easy escape.
MASSACHUSETTS AS MODEL: Health reform proponents proudly pointed to the Massachusetts health reform as the shining model of what national health reform will be. Wow, that’s like comparing an upcoming cruise to the Titannic! Things are going badly in just about every way in the MA model. The State’s budget load for health costs have jumped from 16% of the state budget in 1990 to 22% in 2000, to 35% in 2010. Similarly, the average cost for health coverage for a family of 4 in MA is $14,723, compared to a national average of $13,027, and costs are rising faster than nationally. Many people are gaming the system by only signing up for coverage when they need it or opting for the fairly-low fine rather than pay for coverage. So, the problem of uninsured has not been solved (as it similarly, will not be solved in the national health reform).
As I have warned before, state financial solvency is a very weak link in the health reform and national economic chain. Besides presumably following the MA example of fast-increasing draining of the state’s finances, health reform also adds about 1/3 more people in Medicaid, and a few years ago, SPBA & states were warning that even the previous drain of Medicaid was killing states economically. So, state bankruptcy or much higher costs or cut-backs is a major risk for almost every state.
As states brace for their own exchanges, here are the main worries on their mind:
(1). Anti-selection against state exchanges, by people gaming the system by only signing up when they need expensive services and/or the state exchanges becoming the dumping ground for the sickest.
(2). What will be the impacts of integrating with Medicaid, CHIP, etc.?
(3). Prior to 2016 when separate systems need to be in place for individuals + small group, should the states start out with a merged system?
If we look at the “model” of MA, another huge problem is showing itself. The 5 major participating insurance companies have lost $116 million recently, and 3 of the 5 are under state supervision for financial solvency fears. State policies of reviewing (veto or virtually setting) premium costs based on political expediency, not actuarial science is a key cause. So, ask yourself, how can insurance companies survive in this kind of system, and if insurers don’t participate in exchanges, then what???
For patients in MA, costs & waiting times have increased, and ER use has not declined. In other words, the major supposed-achievements of health reform are getting worse, not better.
So, what is MA thinking of doing in response? MORE price-setting. They want to extend price “review” to medical providers…and there are reports that they also plan to make accepting participation in the government plans a condition of being licensed.
The proponents of health reform appear to be correct. MA is probably an accurate model for where national health insurance will take us.
ONGOING SKIRMISHES: Almost every one of the hundreds of specific issues getting regulatory interpretation is also a battleground for special interests in that arena. For example:
> MLR skirmishing has heated up. Insurers were perceived as making progress in convincing NAIC (who is doing the drafting for HHS) to be a bit more lenient. So, now Senator Rockefeller and others who consider insurers to be sneaky are applying more pressure to come up with a tight interpretation. The outcome will do much to spell the future if insurers will stay in the US health insurance market.
> Abortion is a running battle popping up in several issues.
YOU’LL HAVE 500 BOSSES: Normally, the interpretation & implementation of new laws is done almost exclusively by the major agencies, such as IRS/Treasury, DOL & HHS. However, health reform creates or empowers a reported 500 commissions, study-groups, etc., and much of the long & short term impacts & outcomes of health reform will be steered by them.
INFORMATION SOURCES EVERYWHERE?
>> Now that the legislative process is over, there are starting to be briefings for both Democrat & Republican Congressional staffers.
>> i-phone has a new app for health care reform. It gives access to various health policy papers. It is mainly designed for health policy-makers. It had 400 downloads in its first hour of availability, and became the 38th most popular app in the Apple Store .
>> Insurance companies are coming up with their own informational websites, a combination of explanation and infomercial.
>> There is also an unending offering of briefings & webinars from associations, law firms, consultants, etc. On the one hand, that is good, but for your own protection, please keep two cautions in mind: First of all many of the details have not been decided and some will take years to fully emerge from the agencies and the hundreds of commissions. Second (and related to the first), many experts feel the need to give a complete story, so if there is a blank piece (something not yet decided) they make some logical assumption. However, we have found over the years that logical assumptions are often not the final outcome, so the logical assumption leads to mistakes. So, as much as you and the presenter would like to have a handy presentation with all the answers, it is risky. This is why SPBA does not hesitate to tell you when there is no answer to your question, and why we get you at SPBA meetings & webinars hearing directly from the decision makers. This warning is not to disrespect other presentations, my intent is merely a real-world caution we have seen people learn the hard way over the decades, and we get hundreds of calls from members who themselves or their clients heard some inaccurate “fact” from somewhere else.
OTHER NEWS BLIPS:
<< HHS has created a new position for a chief privacy officer to help/oversee privacy policies of providers as they undergo major changes in EHR and other information handling. The job will also probably be guidance and oversight for the rush of IT vendors to create the new systems for doctors & hospitals.
<< In the states which have the new federal high risk pools up and going, they have had 351 applications from 21 states, mostly FL & TX. If those numbers seem low, remember that the prices in the government program set were either unaffordable for most of the people who would need it, and employers tended to get gun-shy the more they considered the bureaucracy factors.
<< Republicans were very angry about President Obama’s recess appointment of the new CMS director Berwick. Many Democrats also felt it was a snub or slap to the Senate and the separation of powers. So the White House is planning a new concept of submitting the name for nomination of the person already appointed. It is not clear whether the White House felt the pressure, or will go through a charade to be able to say that Berwich got the advice & consent of the Senate (and not mention that the process was after the fact).
<< Treasury is getting strong pressure to ease PPACA rules for Flex.
<< On the new business-to-corporation1099 requirement, there are indications (not final decision) that IRS will consider payments made by credit card do not need to be included in the $600 tally triggering 1099 filing because the intermediary banks apparently report to IRS as part of their processing. This is not final, but a positive sign.
<< Legal eagles will be amused that in the original defense against state constitutional challenges to health reform, the mantra was that it was allowed under the commerce clause of the constitution and was not a tax. Recently, the mantra seems to be reversing. Recent statements now say that it is not the commerce clause, but is merely a tax. Go figure!
<< Big Bucks: Legislation is long over, but payments for lobbying services continue to report, analyze, and try to influence health reform. For example, federal lobbying reports show:
PhaRma (association of drug companies) spend $4,650,000 from April-June 2010 + $7,010,000 from January to March 2010.
AMA spent $6,360,000 from January-March.
Does money talk? Interestingly, if you compare associations & businesses who paid the biggest bucks for lobbying & political payments, they have gotten the roughest treatment. It is not just health issues. BP was a mega donor to the politicians now damning them.