Day: November 10, 2010

Case Against Blue Cross Shows Difficulty of Lowering Health Care Costs

By Alison Young, USA TODAY

PONTIAC, Mich. — As health care costs soared nationally, a small Michigan firm gave Ford Motor Co. a proposal to cut its physical therapy costs. The automaker signed up for an in-state pilot program, which was so successful Ford expanded it last year to cover about 390,000 employees, retirees and their families nationwide.Yet the cost-saving program created by Pontiac-based TheraMatrix has come under attack from Blue Cross Blue Shield of Michigan.

Court records allege Blue Cross used its position as the state’s dominant insurer to try to crush TheraMatrix as it worked to also sign up Chrysler and General Motors. A USA TODAY review of hundreds of pages of e-mails and internal documents that are part of a lawsuit TheraMatrix filed against Blue Cross indicates that TheraMatrix’s efforts to carve out a niche market in managing outpatient physical therapy costs was seen as a threat by officials at Blue Cross and by some Michigan hospitals.

MORE: Feds accuse Mich. Blue Cross of anticompetitive contracts\

“They tried to destroy us,” says Robert Whitton, a physical therapist who founded TheraMatrix in 1981. TheraMatrix has cut Ford’s physical therapy costs by about half, Whitton says, saving millions of dollars annually. Under Blue Cross, Ford’s costs averaged $745,000 a month just in Michigan, he says. “We shouldn’t have been in this position for creating a program that helped save health care costs.”

Blue Cross denies trying to hurt TheraMatrix’s business.

“The picture that they’re trying to paint is the big whatever giant with a chainsaw in his hand coming down on the little guy,” Jeffrey Rumley, Blue Cross’ general counsel, told USA TODAY. “I just don’t buy into that too easily.”

The dispute provides a window into some of the factors that make overhauling the nation’s health care system so difficult. The aggressive tactics employed against TheraMatrix raise questions about whether relationships between hospitals and insurers are inflating medical prices and stifling competition needed to control costs.

Court records depict Blue Cross — a non-profit created under Michigan law to provide affordable health care — as working with a major hospital to stop expansion of TheraMatrix’s program. They also reveal that Blue Cross barred TheraMatrix from the insurer’s medical provider network, which covers most Michigan patients.

A Detroit-area jury awarded TheraMatrix $4.5 million in July, finding that Blue Cross breached an agreement with TheraMatrix to process claims for its Ford program, then wrongfully interfered with TheraMatrix’s efforts to launch a Chrysler program. Blue Cross has appealed.

Last month, the U.S. Justice Department sued Michigan’s Blue Cross, accusing the insurer of a different kind of anticompetitive behavior: paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross. Blue Cross says the suit is without merit.

Amid growing consumer fury over double-digit insurance rate hikes, the power wielded by huge insurance companies is under increasing scrutiny:

 • The Massachusetts Attorney General’s Office has been investigating whether relationships between insurers and hospital networks in that state have driven up health costs for consumers.

 • Pennsylvania’s insurance department is investigating whether Blue Cross plans in that state are engaged in anticompetitive practices. Blue Cross is a national brand, but its companies are independently operated.

 • In 24 states, two or fewer health insurers control 70% or more of the market, a study this year by the American Medical Association found.

 Effective antitrust regulation is critical to lowering health care costs, Christine Varney, the assistant attorney general who heads the Justice Department’s antitrust division, told lawyers at a health care conference in May. “The goals of health care reform cannot be achieved,” she said, “if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers.”

A battle over business

TheraMatrix’s battles with Blue Cross go back to 2005. That’s when Ford Motor Co. decided to try to save money by carving out physical therapy benefits from an employee health plan administered by Blue Cross. That February, Ford hired TheraMatrix to manage that aspect for its Michigan employees.

At the time, physical therapy spending for all Michigan Blue Cross customers was increasing by almost 17% a year, an internal Blue Cross report shows.

Like many major employers, Ford has a “self-funded” health plan. That means Ford pays Blue Cross an administrative fee to handle paper work and maintain a provider network, but Ford — not the insurer — is responsible for the medical bills. In 2003-04, Ford paid Blue Cross a $54 million administrative fee, plus other costs, a Blue Cross memo says.

TheraMatrix saved Ford money by creating a network of physical therapists willing to accept $68 per visit — significantly less than what Ford had been paying under Blue Cross. TheraMatrix also reviews treatment plans so patients don’t get too many or too few visits.

But the project was nearly derailed when Blue Cross said it couldn’t process claims for TheraMatrix, records show. About the same time, TheraMatrix alleges, Blue Cross decided to create its own discount physical therapy network.

Ford kept TheraMatrix; the program began in August 2005.

Michigan hospitals, which provide outpatient physical therapy, weren’t happy about the lost business, records indicate. They could have joined the TheraMatrix provider network, but most wouldn’t agree to the lower rate, says Whitton, TheraMatrix’s CEO.

The state hospital association gave its members an option if they wanted to take action. In an Aug. 1, 2005, letter about TheraMatrix, the group highlighted a provision in Blue Cross’ hospital contracts: If an employer such as Ford carves away categories of care, hospitals can revoke Blue Cross discounts for any other services used by patients on the employer’s plan. Association spokesman Kevin Downey says the group never suggested its members “should” revoke discounts.

None ended Ford’s discounts.

By early 2006, Chrysler, which also used Blue Cross to administer its health plan, was looking to hire TheraMatrix. This set off a series of urgent e-mails among top Blue Cross executives, court records show.

David Kee, head of Blue Cross’ Chrysler account, warned: “We need to do something fast and dramatic.” His strategy included showing that Chrysler could lose its hospital discounts if it went with TheraMatrix. “I think a carefully worded document, perhaps from the hospitals themselves could be valuable,” he wrote.

About a week later, e-mails show, such a letter was being offered by Beaumont Hospitals Vice President Mark Johnson — who had been a Blue Cross vice president before joining the suburban Detroit hospital system in 2004.

Blue Cross Vice President Kim Sorget said in reply that Kee could “use the letter as leverage with his customer to not proceed with the carve out.”

In August, after the TheraMatrix trial, Blue Cross re-hired Johnson as a vice president. Blue Cross said Johnson, Kee and Sorget were unavailable for comment.

Beaumont spokesman Mike Killian says the hospital system had a financial duty as a non-profit to stop honoring the discounts if necessary. When Ford went with TheraMatrix, it cost Beaumont $400,000 a year, Johnson testified at trial. Beaumont facilities would have lost $2 million a year if Chrysler and GM had followed suit, he said.

In spring 2006, Chrysler and the auto union UAW agreed TheraMatrix would start managing physical therapy for the automaker around July 1.

Two weeks later, Blue Cross kicked TheraMatrix out of the insurer’s provider network, which meant a huge loss of patients and doctor referrals.

“It was devastating,” says TheraMatrix President Bob Read. Blue Cross controls more than 60% of Michigan’s insurance market, covering nine times as many people as its closest competitor.

Blue Cross took the action because TheraMatrix’s relationship with the insurer is “competitive and damaging not only to BCBSM’s financial interests, but also to its business relationships,” Sorget wrote TheraMatrix.

The move outraged Ford officials.

“This is clearly a retaliatory action against Theramatrix,” Ford’s employee benefits director Lee Mezza wrote to Sorget. Mezza said TheraMatrix had cut Ford’s costs by 40%, and he accused Blue Cross of caring more about hospital revenue than saving customers money, according to a redacted letter in court records and a full version Mezza e-mailed TheraMatrix.

Ford spokeswoman Kimberly Harry said the company has no comment. Mezza, who has retired, is on Blue Cross’ board of directors and didn’t respond to an interview request.

Blue Cross refused for more than a year to let TheraMatrix back into its provider network, and the Chrysler program became critical to TheraMatrix’s survival, Whitton says.

Within the UAW, Blue Cross board member Chuck Gayney — a top UAW benefits official — continued to raise the specter of hospitals revoking discounts for Chrysler’s union employees, union memos show. UAW spokesman Michele Martin had no comment.

Beaumont Hospitals gave Blue Cross the letter about potentially canceling discounts for Chrysler and Ford on June 26, 2006.

The next month, Chrysler decided not to go forward with the program. Chrysler spokesman Michael Palese said the company had no comment.

Blue Cross, in court records, contends TheraMatrix hasn’t proven the insurer’s actions influenced Chrysler’s decision.

Blue Cross let TheraMatrix back into its provider network in August 2007, but a year later was again threatening to kick it out. The offense: TheraMatrix was discussing a potential program with General Motors, a letter sent to TheraMatrix shows.

Whitton says that’s when TheraMatrix sued Blue Cross.

‘You get the care that you need’

Neither Chrysler nor General Motors went ahead with a TheraMatrix program. In 2009, Ford expanded its Michigan contract with TheraMatrix to employees and retirees nationwide. The program has a 98% satisfaction rate, TheraMatrix says.

Ford retiree Mike Harris, 57, praises TheraMatrix. “You get the care that you need,” says Harris, who undergoes treatments for neck and back problems at a Detroit-area TheraMatrix clinic.

Butch Stokes, a UAW-Ford benefits representative at Local 737 in Nashville, says he initially was skeptical of the TheraMatrix carve out. “It’s worked great,” he says, because members have a good choice of providers and fewer hassles than with Blue Cross.

David Balto, policy director of the Federal Trade Commission’s competition bureau from 1995-2001, says Blue Cross’ conduct “clearly crosses the line.” The case shows the dangers of the lack of insurance competition nationally: “Ultimately it’s the consumer who is harmed,” he says.

Blue Cross general counsel, Jeffrey Rumley, says he’s not aware of anything in the TheraMatrix case “that would have a nexis to antitrust activity.”

The Michigan Attorney General’s Office asked TheraMatrix in September to produce documents about Blue Cross’ “competitive conduct.”

The U.S. Justice Department also is reviewing records, a June e-mail to TheraMatrix shows.

Both agencies said they can neither confirm nor deny any possible investigation.

TheraMatrix’s Whitton says his company is struggling to rebuild: “We are still in jeopardy.”

Editor’s Note: This is not surprising when you let a third party negotiate provider contracts upon your behalf. More employers are beginning to realize that they can do better by direct contracting with willing medical providers.

Bill, I read Lisa’s article  (See Post below) and she did a good job on the major points.   I enjoy the blog.

By the way, The Michigan BCBS which was sued for “anticompetitive” behavior is one of the most outrageous suits I have seen.  This is how commerce works all over the world. If you  want to buy something in volume, you will ask the seller for a volume discount.  BCBS asked the hospitals for a volume discount.  That is as American as apple pie and motherhood.  There is a seller and a purchaser to all transactions.  The government decided not to sue the seller of the services at a discount, they decided to sue the purchaser for asking for a discount in exchange for buying a volume of services.  WOW…that is simply un-American.  Consumers could be sued for buying at a discount when they purchase a volume of goods or services…What country is this?   I was under the impression I lived in the United States of America where capitalism thrives and is supported by our government.  I must have been in a coma, because when I awoke and read this in the WSJ, I thought I was transported to some other country that hates the idea of capitalism.  Why did the seller agree to discount there services if they felt it was “anticompetitive”?  Maybe the government should sue the hospital as well.  While they are at it, maybe they can sue the patient for getting sick in the first place!

My thoughts as always.  Thank you,

 Dr. Alan M. Preston

Alan M. Preston, MHA, Sc.D.

Healthcare Policy, Biostatistics, Epidemiology

 Editor’s Note: Dr. Preston has been CEO of four different Managed Care Payors, CEO of a large Multi-Specialty Physician Group with primary care clinics, an outpatient surgery center, physical therapy, occupational medicine, radiology, and urgent care. Dr. Preston periodically teaches and is adjunct professor at the University of the Incarnate Word, San Antonio.

Tue, Nov 9 2010, 04:43 GMT
by John Mauldin

Lisa Cummings is an expert global benefits consultant with an emphasis on advising Fortune 500 companies of best practices regarding plan design and legal compliance. She is an ERISA attorney by training and has a rich experience with health and retirement plans in the US and around the world.

The Effects of ObamaCare

By Lisa Cummings

It Does What?

Have you ever seen a television commercial touting diet pills, weight loss in a bottle, and bought them, thinking, “The ad seems reasonable, with a nice actor I’ve seen,” and then get the bottle home and read the side effects? Although you were promised a return to the slim, beautiful you, the side effects on the bottle warn of “potential for heart attack, broken bones, upper respiratory infection, edema, loss of balance, and death.” Talk about the cure being worse than the condition!

Health-care reform as signed into law is a prime example of the cure prescribed by Dr. Obama being worse than our current condition of rising health-care costs and uninsured Americans.

We all know that health care in America is on course to change significantly with the passage of the Patient Protection and Affordable Care Act (“the Act”) on March 23, 2010. Most of you may think of this as “health-care reform,” though some refer to it as “ObamaCare.”

You may have heard about what ObamaCare was intended to do, but have you heard about the unintended outcomes of this massive restructuring of US health care? As of the date of this writing, over 55% of Americans would like to have ObamaCare repealed,[1] and that’s based on what they know about it. Let’s also consider the challenges that aren’t commonly known.

Intended Outcomes of Health Care Reform: Just What Dr. Obama Ordered

Coverage for all with capped premiums

First, we’ll begin with a recap of what the President and Congress intended to enact: ObamaCare’s premise is that all Americans should have health insurance and shouldn’t have to pay more than a set amount for their coverage. ObamaCare requires that an employee whose “household income” is less than “four times the Federal Poverty Level” (currently $73,240 for a family a four) pays no more 9.5% of his household income for employer-sponsored health insurance coverage. This is like car insurance being required by a state and then limiting the amount the driver has to pay for monthly premiums, basing the cost on an ability to pay.

General provisions of ObamaCare, generally starting in 2014

You can’t be turned down for health insurance coverage.

You can cover your children on your health plan up to age 26 (starts in 2011).

If you can’t afford health insurance, you will receive assistance from the government to purchase it.

You can purchase health insurance more easily.

Your personal health records will be digitized, resulting in cost savings.

On the surface, these items sound wholesome, kind of like motherhood and apple pie. However, some of the additional items required by ObamaCare include hundreds of requirements for individuals, for businesses, for insurance companies, for health care providers such as doctors and hospitals, and for government entities.

To get a visual idea of the complexity surrounding the new health-care requirements, you can peruse the following chart prepared by the Joint Economic Congressional Committee, which outlines the bureaucratic Frankenstein that is being created. I’m printing the chart in a size that is too small to read here, just to give you the idea.

Side Effects of Obamacare: Beware, the cure may be worse than the current condition.

The Health Reform Act and accompanying Reconciliation Act encompass over 1000 pages. Since their passage in March, dozens of additional interim final regulations, guidelines, and memos have been written, and in addition direct conversations from the HHS Secretary have now been made into law.

Here are some of the more audacious requirements of ObamaCare, along with the year they become effective:

• Moves 18 million people onto Medicaid programs. Remainder of uninsured will go to state health exchanges (2014).[2]

To put ObamaCare in context, keep in mind nearly 60% of Americans receive their health care from their employer. 19% of Americans have no health coverage.

Once ObamaCare is in force in 2014, the uninsured will be redistributed: a third will go to Medicaid, 28% will go to Government health exchanges, and the remaining 41% will continue to be uninsured.

• Adds new taxation on capital gains, including a new 3.8% tax on the sale of your home (2013)

• Mandates auto-enrollment in long-term care at a cost of $123 per month for everyone (the CLASS Act), requiring an affirmative opt-out if you don’t wish to be covered (as soon as HHS can determine how to implement).[5] This section is so outrageous, Sen. Kent Conrad (D-ND), Senate Budget Committee chairman, called it “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”[6] (Yes, Sen. Conrad voted for ObamaCare and the self-described Ponzi scheme.)

• Adds a medical device tax of 2.9% on everything from CT scanners to surgical scissors, to be passed along to health-care consumers (2013)[7]

• Enhances the Nanny State: restaurant chains will have to post caloric content next to prices on the menu, and nutritional information must be posted on the outside of all vending machines (2011).[8]

• Triggers loss of insurance coverage by large numbers of lower-paid employees, starting in 2011

A large number of “mini-med” plans, typically limited-coverage plans for employer groups in the retail and fast-food industries, and providing child-only coverage, will not be able to meet federal regulations on the minimum annual dollar limit. The minimum annual limit for benefits covered by the health plan is $750,000 in 2011. HHS has so far granted waivers for more than 30 employers, including such diverse employers as McDonalds, Jack in the Box, the United Federation of Teachers Welfare Fund, and a New York teacher’s union, to allow coverage to continue for 2011.[9] What about the other 1,000,000 individuals who were previously covered under these plans? Does that mean they will no longer have coverage starting January 1, 2011?

• Subjects college student medical plans to possible elimination since they will not meet the “Medical Loss Ratio” requirements recently approved by the National Association of Insurance Commissioners.[10]

The Pork Included in ObamaCare

The Cornhusker kickback: the federal government picks up Nebraska’s Medicaid expansion bill forever.[11]

The Louisiana Purchase: Louisiana receives $300 million for increasing Medicare subsidies.[12]

$100 million special funding for a hospital in Connecticut[13]

Funding of asbestos clean-up in Montana[14]

The Gator Aid, by which three counties in south Florida are exempted from Medicare Advantage cuts[15]

Unintended Consequences of Health Care Reform

“We have to pass the bill so that you can find out what is in it.” – House Speaker Nancy Pelosi, March 9, 2010

Well, now we know. Here are some of the outcomes of legislation that was passed without having been read:

Employers may decide it is cheaper to drop health care plans altogether and instead pay the $2,000 penalty per employee. Large employers typically pay in excess of $9800 per employee for health plan coverage today.[16] After the new requirements for health-care reform are added to the already large costs, they may decide to split the cost savings with the employee and reinvest the difference in their businesses, whether in the US or in other countries where perhaps a higher return on investment can be achieved. Employers may decide to limit the number of full-time employees, favoring part-time employees instead. Employer penalties only apply to full-time employees working more than 30 hours a week. Would you try to move employees to less than 30 hours a week to save taxes?

Remember, employers today provide 59% of all Americans with their health insurance. The Congressional Budget Office estimates that today over 150 million Americans have their health insurance with their private employer. If employers decide to get out of the health insurance game, then the majority of Americans will have to look to the government health exchanges to purchase their health insurance.

When 2014 arrives, every employer with a health-care plan will need to make the same calculation: Determine the per-employee cost implications of providing a health-care plan and compare them to the benefit of dropping the plan, paying the penalty, and reimbursing the employee for his employee-mandate fee. The employer might also decide to share the cost savings with the employee to help reimburse the employee for his premium cost to purchase government-exchange health insurance.

Aside from the hard-dollar cost savings, the employer will also need to analyze whether providing a health-care plan can help the employer attract and retain highly prized employees. The logical conclusion is that employers who hire positions in great demand will be more likely to keep employer health-care plans, while employers who hire less unique skills will more likely terminate their health-care plans, pay the penalties, and redeploy the savings where there is a higher return on investment.

Healthy people will pay more for insurance coverage. Instead of individuals being able to choose the coverage they need, they will be required to purchase only government-approved benefit choices. Younger individuals will be required to subsidize older individuals, who will be required to have preventive-care screenings, with an expected increase of 17% in premiums, or up to $500.[17]

Health-care cost curve bends in the wrong direction by increasing overall health spending by $222 billion between now and 2019.

Neglects Medicare funding, which is already due to become insolvent in 2016

Retirees in Medicare Advantage plans may lose their coverage due to decreased government funding. Starting in 2011, the government reimbursement will be frozen at 2010 levels.

Health providers will be reimbursed less for Medicare patients, causing providers to reduce the number of Medicare patients they treat. This is an outcome of the reconciliation act that followed the passage of ObamaCare, migrating funding away from Medicare providers to pay for part of the ObamaCare provisions.

Consolidation of health markets: from small community hospitals, to doctors, regional hospitals, and insurance companies[19]. The consolidation of health-care providers will lead to increased costs for hospitals and doctors, simply because there is a reduced supply of providers.

If uninsured individuals choose to pay the tax instead of signing up for insurance through a government exchange, the government-exchange premiums will become so expensive, individuals won’t be able to afford to buy insurance. Just look at the outcome of the Massachusetts mandated health-care coverage for an idea of how this will turn out.

Child-only policies will stop being issued due to the required annual benefit levels being increased along with the new requirements that at least 85% of all insurance premiums be used on health-care providers. This means that higher-cost child-only coverage plans will fail to meet the limits and must be discontinued. This will cause the children to lose their own cheap coverage and instead either have to move to their parents’ employer plans or access care through the government exchanges.

Employer-sponsored retiree medical plans may be dropped due to repeal of the Medicare part D pharmacy subsidy. Although the subsidy isn’t cancelled until 2013, the SEC requires accounting recognition of any changes as soon as they are known. This provision is what triggered the earnings impact announcements by Caterpillar, Deere, and AT&T within a week of ObamaCare being signed into law. Over 43% of employers with retiree plans indicated they would likely eliminate retiree medical programs due to the additional requirements under ObamaCare.[20]

Employers’ Decision to Keep or End Retiree Medical Plans

It isn’t going to be easy or cheap to be ObamaCare-compliant.

All of us will be affected in numerous ways by ObamaCare. Below is a listing of major groups that will be impacted. Overall Economy[21]

Some 670,000 jobs could be eliminated due to the additional $760 billion in taxes, penalties, and fees on investors and businesses.

The federal deficit will be increased up to an additional $115 billion over original projections.[22]

By 2020, ObamaCare will:

Increase the interest on the national debt by $23.1 billion per year

Raise the national debt by more than $753 billion

Increase annual budget deficits by an average of $75 billion.[23]

Employers

Short-term: Costs are increasing for employer-sponsored plans. Health-care premiums for 2011 are being increased by an average of 8.8%, and a 1-2% increase is due to the mandated 2011 changes of covering all dependents to age 26 and eliminating certain lifetime and annual limits.[24]

Starting in 2014: Employers who provide health-care plans for their employees will be required to ensure that the level of health-care benefits they provide their employees meet new government standards or face fines and penalties equal to $2,000 per year for each full-time employee. Even then, if their employees would have to pay more than 9.5% of their adjusted gross income for the health plan, or if the employee chooses to purchase from a government exchange, the employer will still have to pay a $2,000 penalty.[25]

Employers who provide health coverage will be required to provide an annual report to HHS that lists each individual eligible to enroll in “minimum essential coverage,” the length of waiting period, number of months that coverage was available, monthly premium for lowest-cost option, plan’s share of covered health-care expenses, number of full-time employees, number of months covered, and any other requirements that may be identified by HHS.[26]

If an employer doesn’t provide a health-care plan for employees and has more than 50 full-time employees (who work more than 30 hours per week), the employer must pay a penalty equal to $2,000 per full-time employee per year. [27]

Individuals

Starting in 2014 you are required to have coverage, either from your employer or from a government-sponsored health-care exchange. If you don’t purchase it, the IRS will assess you with tax of $695 per year per family member (capped at three) or 2.5% of your income, whichever is greater.[28]

Doctors[29]

With the increase of covered patients, there will be a shortage of 150,000 doctors.[30] Doctors are already overworked. Patients will have to wait longer to can get an appointment to see the doctor.

Starting in 2011, Medicare reimbursements will be reduced. Medicare already reimburses doctors at an amount equal to only 81% of private payments.

Between 18 to 20 million new Medicaid patients will flow to doctors. Medicaid coverage pays doctors 56% of the private payment amounts. Federal funding will pay for parity to Medicare for 2013 and 2014, and then it is up to the states to figure out how to pay the Medicaid doctors.

Doctors will face more federal agencies, boards, and commissions, including the Independent Payment Advisory Board in 2012, a nonprofit Outcomes Research Institute, and the Physician Quality Reporting Initiative.

59% of doctors think the quality of medicine will decline in the next five years and 79% are less optimistic about the future of medicine. 69% are thinking about dropping out of government health programs, 53% would consider opting out of treating insurance-covered patients, and 45% have considered leaving the profession altogether. [31]

States[32]

ObamaCare mandates the increase of Medicaid participation by 18-20 million more people, but provides states with limited support funding.

States are required to establish exchanges by 2013, and if they decline to establish exchanges, the Secretary of HHS runs the exchanges. Here’s a question for you: if HHS runs a state’s exchange, for whom do the state insurance commissioners work, the people who elected them or the federal government?

The states will first have to figure out how much money is required to pay for this – and guess what, it won’t be cheap. Texas’ Medicaid costs would increase by $4.5 Billion for 2014-2019 alone.[33]

These new state mandates explain why over 21 states have filed suit in federal court to declare parts of ObamaCare unconstitutional, as infringing on the Tenth Amendment rights afforded to states.[34]

Retirees[36]

Medicare Advantage plans, which cover nearly 25% of Medicare seniors, will be cut in half over the next ten years due to ObamaCare freezing payment to the plans.

Some $416.5 billion in “savings” from Medicare (actually, cuts in Medicare payments to doctors and hospitals) is being shifted from shoring up Medicare funding to paying for ObamaCare.[37]

The donut hole in Medicare Part D is being reduced with a $250 payment in 2010 and drug companies being required to provide a 50% discount on brand-name prescriptions filled in the hole.

The Medicare program will be adding 77 million baby boomers starting in 2011. Finding a doctor will become even more difficult with the already existing doctor shortage and another 18-20 million individuals receiving Medicaid coverage in 2014.

Medicare Part A providers – hospitals • will receive reduced funding. By 2020 15% are slated to become unprofitable, according to the Center for Medicare and Medicaid Services Actuary.

Seniors will pay higher taxes as well.

Taxpayers[38]

Three major tax increases:

• New 40% excise tax on health insurance plans, known as the “Cadillac Tax” if a health plan is valued in excess of $10,200 for employee-only coverage [Can someone show me where the hell I can get a policy for less than $10,200?? Seriously. – JM] and $27,500 for family coverage. 43% of all plans are expected to incur this tax by 2018, when it becomes effective.[39]
• Increase in hospital insurance portion of payroll tax: Medicare tax will be increased from 1.45% to 2.35% for families making more than $250,000. The new rate will be 3.8%, effective in 2013. Note: the health insurance rate increase is not being used to fund Social Security and Medicare, but rather a separate entitlement.[40]
• Payroll taxes on investment. A new 3.8% health insurance tax applies to investment income, including capital gains, dividends, rents, royalties, and yes, even the sale of your home.[41]

Numerous additional taxes:[42]

• Limit on itemized deductions for health care
• Increased taxes on prescription drugs
• Increased medical device taxes
• Additional taxes on insurers

What’s Next?

Regulatory interpretations are piling up, along with regulatory burdens. Since ObamaCare and the Reconciliation Act were signed into law in March, there have been no fewer than twelve sets of additional regulations, guidelines, or notices that have been issued to lend clarification and at the same time add additional regulatory requirements. ObamaCare establishes more than 159 boards, panels, and programs, all of which will add to bureaucratic red tape.

Employers face immediate plan changes that must be implemented for the upcoming plan year. All plans (except retiree-only plans) have to allow children of covered employees to be added up to age 26. Additionally, the lifetime maximum benefit levels have to be eliminated. These costs alone will add 1-2% to 2011 health-care costs for employers.[44]

Longer-term, employers will need to consider whether they will cancel health-care plans in 2014, when exchanges become effective. Also, employers will need to determine whether they will eliminate retiree medical coverage due to elimination of the pharmacy subsidy in 2013.

Published on  Tue, Nov 9 2010, 08:20 GMT