Read more about this in my post on Health Insurance Illuminated

The following is from a newspaper in Massachusetts.  I guess what MA has already done is insufficient. A State representative has introduced legislation for a single-payer system. Throwing out a few platitudes about quality and affordability sounds good and gets some people excited, but it is hardly effective management of the health care system. There is no evidence that a single payer system makes health care affordable, improves quality or reduces costs (especially without numerous unintended consequences). With regard to Massachusetts, their current system has yet to prove itself beyond expanding coverage – much like the Affordable Care Act.

As I have said many times, when a politician makes outrageous promises, make sure you ask exactly how they will be met.

Last update Dec 31, 2011 @ 04:51 PM

Touting dramatic reductions in health care costs, improved access to health care for all residents and a boost to local businesses, state Sen. Jamie Eldridge, D-Acton, has filed a bill that would create a single-payer health care system for Massachusetts. The bill, heard by the Joint Committee on Health Care Finance, would establish a universal public insurance plan covering all medically necessary care. This plan would function for residents younger than 65 much the way Medicare does for residents 65 and older, but without premiums or co-payments, according to Eldridge’s office. “If Massachusetts is serious about reducing health care costs for families, businesses and state and local governments, we need to stop tinkering at the edges of a broken system and enact a single-payer healthcare system,” Eldridge said. “It’s the only reform that would truly reduce costs in a substantial way, eliminating medical debt and bankruptcies while guaranteeing access to quality, affordable health care as a right for all residents of the Commonwealth.”

The reality is that while we hear lots of rhetoric about debt and deficits, what really matters is long term liabilities. If you don’t believe me consider what happened with General Motors and it’s liabilities to retirees mostly with regard to health benefits. The latest example is Kodak filing bankruptcy during which the promise of retiree health benefits is likely to disappear along with some pension promises for higher paid workers who are affected by income limits on pension funding. Losing a substantial portion of your pension after you have already retired sounds like more than ones fair share to me ( and we are not talking about CEOs).

If you want more examples of this liability thing causing trouble just look to the various states that have agreed to unrealistic pension and health benefit commitments to state workers. And then you look at the results of all this. In Wisconsin the unions have gotten 1,000,000 signatures to force a recall election of the governor who did the right, albeit painful, thing to correct the State’s problems.

What is the most significant problem affecting the U.S., it is the same as I have just described above; long term liabilities for health care first and pensions second. That means Medicare, Medicaid and Social Security, but mostly Medicare.

So now the question is what will you do for the politician who tells you the truth (assuming you can find one)? Chances are you won’t vote for him because it is far easier to ignore a long term problem than deal with it. It is more abstract to believe foreign aid is the culprit than something that affects you directly. It is less stressful to agree with a politician who claims to have a solution while leaving Medicare and Social Security untouched.

The difficult part is accepting the truth. The U.S. has made open ended, demographic based commitments that it can’t control and can’t pay for. Twenty to thirty years from now there will be hell to pay. The longer it takes to implement corrective action the worse it will be… and that’s the truth like it or not

If you look at the release below you will see a rate cut for Anthem Blue Cross in Connecticut. However, when you go to the HHS link in the press release you find this:

Connecticut Rate Review

The Rate Review program began September 1, 2011. No insurers in Connecticut have proposed rate increases of 10% or more since that time. Check back regularly for updates.

Then we have the following hype.  HHS is incapable of preparing a press release containing just facts, but rather must include more and more spin and unsubstantiated claims.

“The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.”

In fact only rate review has been implemented, the efforts at coordinated care are focused on Medicare, preventive disease programs have been used by employers for many years with no measurable results and the state-based marketplace is two years away.

News Release

Affordable Care Act holding insurers accountable for premium hikes.  Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, HHS Secretary Kathleen Sebelius announced today.

After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming.  The excessive rate hikes would affect nearly 10,000 residents across these five states.

To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (the health care law of 2010) to determine whether premium increases of over 10 percent are reasonable.

“Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability,” said Secretary Kathleen Sebelius.  ”Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases.  It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so.”

In these five states, Trustmark has raised rates by 13 percent.  For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively.  These increases were reviewed by independent experts to determine whether they are reasonable.  In this case, HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.

In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases.  Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets.

Examples of how states have used this authority include:

In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

Today’s announcement comes the same week that a report showed that health care spending has grown at remarkably low rates.  According to an analysis done each year by the Centers for Medicare & Medicaid Services, U.S. health care spending experienced historically low rates of growth in 2009 and 2010.  A recent study released by Mercer Consulting also showed a slow-down in the average employee health benefit cost to businesses.

The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.

For more information on the specific determinations made today, please visit http://companyprofiles.healthcare.gov/

Related articles

• Unreasonable Rate Review for Health Insurance (forbes.com)

Some of this trend has to do with the turmoil and misinformation about where health care reform is going and whose ox is going to get gored. In times of uncertainty health care providers hunker down to keep a lower profile.

This time things may be much worse when the cycle changes again. Millions more Americans will have coverage under very comprehensive benefits, most will be heavily subsidized for their premium costs, the mentality of “free” services to consumers is stronger because of the Affordable Care Act. In addition, there is pent-up demand that will be released soon after the start of 2014 and perhaps before.

I'm still not optimistic

In some cases, especially with employer based coverage, more and more expenses will move to employees because of cost shifting. So while the employer premiums and costs are moderated, that is only part of the story. Keep in mind also that the new mandates within the Affordable Care Act have already added 3% + – to insurance costs. 

Finally, there are the hidden new costs imposed by the Affordable Care Act. New taxes and fees on medical equipment manufacturers, pharmaceutical companies, insurers and employers will eventually find their way into premiums and out of consumer’s pockets.  America may have slowed for the curve, but it has not hit the brakes.

There are some signs of serious efforts to fundamentally change the health care system and the way care is provided and paid for. However, how well patients will accept those changes is unknown, even if they are in their best interest.  Nevertheless, significant positive affects of such changes are years in the future. 

There is no joy in Mudville yet; mighty Casey is still looking for his bat.

Related articles

• NEW DATA: Record Slow Growth In Health Care Costs (thinkprogress.org)
• Recession still affects health-care spending (seattletimes.nwsource.com)
• America hits the brakes on health care spending (msnbc.msn.com)

From an Arthur Laffer commentary in the January 11, 2012 Wall Street Journal:

Incidentally, I’m not the first to question Mr. Buffett’s commitment to “shared sacrifice” in balancing the federal budget. In a 2007 CNBC interview, when asked why he shelters his money through tax-free strategies rather than writing big checks to Uncle Sam, Mr. Buffett responded: “I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government.”

Amen, Mr. Buffet, I agree. I think my (and many others) modest monthly contributions to the Link Community School in Newark, NJ does a better job helping inner city minority children get a good education and better chance at the American dream than any government program. Such a program is a combination of the efforts of families who care, children who are motivated, dedicated educators and private contributors who care about effective use of their money .

That’s a lot different from government grants thrown at bureaucrats down the line who are largely unaccountable except perhaps to the politicians who want to be seen as caring for the downtrodden.

Mr. Buffet and the super wealthy like him on the left of our society must find it easy to promote higher taxes when no amount of taxation will impact them. However, it is mind-boggling that these really smart, savvy people think filtering more and more of American’s income through a massive, politically motivated, inefficient government bureaucracy is the most efficient or fairest way to raise the quality of life for us all. “War on poverty you say.”

First target

One of the criticisms of the Affordable Care Act has been that few people actually know what is contained in the Act.  Having spent untold hours reading the Act along with various independent assessments of the Act, I can testify to its immense complexity.   

For example, in order to pay for the expansion of subsidized health insurance to millions of Americans, the Affordable Care Act adds numerous new fees and taxes on individuals’, employers and the health insurance industry.  In 2010, there was a new tax on indoor tanning facilities (ok, so that is not a big deal, anyone who uses one of those deserves to be taxed). In 2014 there are new fees on employers and insurance companies, all of which have the potential of being passed along to consumers.  In 2012 pharmaceutical companies that sell to the federal government are assessed what is called an annual fee (excise tax). 

The various fees and taxes contained in the Act are among the few elements that are reasonably quantifiable.  Other elements of the Act that are to reduce costs rely on assumptions of long-term success for well-meaning, but untried programs generally related to Medicare.  To be successful, hospitals, physicians, other health care providers and Medicare beneficiaries must all work in a coordinated effort under new paradigms for providing health care.

Taking billions of dollars each year in new taxes impacts these organizations which then must find ways to mitigate this loss.  It is tempting to simply dismiss such taxes as justified on highly profitable organizations.  However, we should never forget that everything we do is connected to something else and every action has its consequences (think housing crisis).  Generating revenue for some means a loss for others, a savings here means less revenue there and in some cases that may mean a loss of jobs, less invested in research or simply passing costs along to another party. When additional costs are imposed on employers, especially related to health benefits, it generally means greater cost sharing for employees and a shift in compensation from cash to employee benefit programs.  Good benefits are valuable, but they don’t buy groceries or pay college tuition.

The following is excerpted from the IRS regulations with regard to the new fees on drug manufacturers (a very small sample of the hundreds of thousands, ultimately millions, of pages of regulations implementing the Affordable Care Act). 

The aggregate fee amount each year for all covered entities (referred to as the applicable amount) is $2.5 billion for fee year 2011; $2.8 billion for fee years 2012 and 2013; $3 billion for fee years 2014 through 2016; $4 billion for fee year 2017; $4.1 billion for fee year 2018; and $2.8 billion for fee year 2019 and thereafter. The applicable amount for each year is allocated, using a specified formula, among covered entities with aggregate branded prescription drug sales of over $5 million to specified government programs or pursuant to coverage under such programs.

The specified government programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount. Sales taken into account means branded prescription drug sales after the application of the percentage adjustment table.

Soooooo, now it’s your turn. Visit Health Insurance Illuminated, read my latest post and add your ideas for controlling health care costs. Who better than patients and consumers to help solve this problem?

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• Does the public really care about health care costs? Survey: “Government shouldn’t interfere.” What would you do to control health care costs? (quinnscommentary.com)

The purpose of insurance

If you have homeowners insurance or auto insurance, I suspect you would be very happy never to have a claim and that goes double for health insurance.  However, that does not stop some people from thinking they may be entitled to a refund if they do not file a health insurance claim.

What does happen to your premiums?  Believe it or not, a relatively few people consume most of the health care and hence incur most of the health care expenses.  Read more about this issue in my blog post on Health Insurance Illuminated

2011 was a record year for Quinnscommentary.  This blog was viewed about 160,000 times (not many by some standards, but pretty good for little old me). If it were an exhibit at the Louvre Museum, it would take about 7 days for that many people to see it.  The busiest day of the year was October 19th with 5,840 views.

While most readers are from the U.S., Quinnscommentary was viewed by people in twenty-five different countries on all continents, including such diverse places as Greece, Romania, Tunisia, Australia, Fiji, Brazil and Nigeria (that guy was probably telling my he had $125 million in a bank account and wanted to share it with me if I would sen him my bank information).

I am keeping at it for 2012 and looking for a new high in people viewing my posts – so far so good. 

In addition, I am writing a new Blog that I also hope you will view regularly.  Health Insurance Illuminated is intended to educate and inform patients, employers and employees about the many issues related to health care.  Please stop by and see what you think.

Thank you for your interest and support.

P.S. Your comments on both blogs are welcome and very important.

If there is one thing that the Affordable Care Act does well it is expanding health insurance coverage, much like what happened in Massachusetts. In the case of PPACA one goal was to expand coverage available to adult children. Some measure of additional coverage has been accomplished as reported below.  Keep in mind that these children do not have to be dependent on the parent (employee) in order to be covered, may be married and cannot be charged an extra premium for the coverage. In addition, beginning in 2014 these children can be employed and have other coverage available and will still be eligible for their parent’s plan.  Prior to that an employer may deny coverage to an employed adult child.

All this is a good thing if you are one of the families affected, but remember this additional cost is carried by employers and all other insured members of a group.

New Health Law Increased Insurance
Coverage of Adult Children

WASHINGTON—The new federal insurance law has increased the health insurance coverage of adult children between 2009 and 2011, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).

The Patient Protection and Affordable Care Act (PPACA) enacted March 23, 2010, requires that group health plans and insurers make dependent coverage available for children until they attain the age of 26, regardless of tax or student status, or dependent status as it relates to financial support. The mandate to offer coverage to adult children ages 19‒25 took effect for policy years that began on or after Sept. 23, 2010, but since January is the beginning of the plan year for many employment-based health plans, many insurers adopted the requirements of the law before the effective date.

To determine whether the coverage mandate had an effect, EBRI examined data from two U.S. Census Bureau surveys (the Current Population Survey, CPS, and the Survey of Income and Program Participation, or SIPP), as well as from the National Health Interview Survey (NHIS) by the Centers for Disease Control. The data indicated:

• The percentage of persons ages 19‒25 with employment-based coverage as a dependent increased from 24.7 percent in 2009 to 27.7 percent in 2010, according to the CPS. 
• The percentage of individuals ages 19‒25 with employment-based health coverage as a dependent averaged 26.9 percent during January‒September 2010, and increased to an average 27.1 percent during October and November, per SIPP. 
• The percentage with private insurance increased from 51 percent to 55.8 percent, and the percentage uninsured fell from 33.9 percent during 2010 to 28.8 percent during the first half of 2011 among those ages 19‒25, according to data from the NHIS. 

“Data from these three surveys show that PPACA has had a positive effect on the percentage of young adults with employment-based coverage as a dependent,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report.

Full results of the report are published in the January 2012 EBRI Notes, “The Impact of PPACA on Employment-Based Health Coverage of Adult Children to Age 26,” online at www.ebri.org

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

Related articles

• Taxing the value of employer paid health insurance, how will workers react? (quinnscommentary.com)

During the health care reform debate the President repeatedly said that no one (meaning insurance companies) should come between you and your doctor.  The US public seems to have taken the no interference philosophy to heart.  Most Americans do not believe in a cost benefit analysis as justification for denying payment for health care treatment.  Are we saying that cost does not matter?

This leads to a fundamental question; exactly how does the public expect health care costs to be controlled?  Or better still, does the public want health care costs managed at all as long as their share of premiums is limited?  If the public remains focused on premiums alone, we are headed for serious trouble far beyond our current state.  Remember, these are the same people who we expect to act like consumers when it comes to buying health care.

Survey: Government shouldn’t impose on health treatment decisions

Most Americans are frustrated by decisions that limit the use of high-cost prescriptions and treatments, according to a survey by the Harvard School of Public Health and the Alliance for Aging Research.

A majority say they oppose decisions by the government or health insurance plans where prescription drugs or medical or surgical treatments are not paid for because the payors determine the benefits and do not justify the cost. The exception is if there’s evidence that something else works equally well but costs less. Sixty-four percent believe the government or health insurance plans should not pay for a more expensive prescription drug or medical or surgical treatment if it has not been shown to work better than less expensive ones. Majorities in Italy and Germany share both of these beliefs with the U.S. public. In the United Kingdom, at least a plurality shares these beliefs.

 It is pretty clear what people do not like when it comes to controlling costs, so let’s hear from you.  What exactly would you do to control health care costs?

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An Internet e-mail still circulates that come 2014 the Medicare Part B standard premium will be $247 per person. That’s nonsense for several reasons.

1. The calculation of the premium is set by law and that law has not changed.

2. There is nothing in the Affordable Care Act (Obamacare) that affects the Medicare premium calculation.

3. The President does not, as has been alleged, have the ability to unilaterally change any of this.

4. The standard 2012 premium for Medicare Part B is $99.90 (higher for the 5% higher income beneficiaries). If you used the highest rate of inflation to hit Medicare in the last forty years for both 2012 and 2013 you would get a premium of less than $130.00. The likelihood of that kind of inflation in the next two years is non-existent.

5. There is nothing in the 2011 Medicare Trustees report to indicate other than normal rates of cost increases over the next several years. In fact, the Trustee’s project that by 2020 the Part B premium will be $158.60. Even that is based on a premium for 2012 of $106.60 (not $99.90).

6. Most Medicare beneficiaries (95%) are protected from high increases in Medicare premiums under the Social Security hold harmless provision. This means that an increase in Medicare premiums cannot cause a net reduction in the Social Security payments. So, for example, if you are receiving $1,000 a month in Social Security benefits and you receive a 3% COLA increase, your Part B premium cannot increase my more than $30. Do the math and you will see there would have to be whopping COLA increases in Social Security in the next two years to get most people anywhere near $247 and that ain’t gonna happen.

1965

Are any of these projections 100% accurate? Certainly not, there are too many unknowns. However, before you pass along some outrageous story about Medicare premiums (or a tax on the sale of your home, or that the value of health benefits is now taxable income or that Obama was stopping the 2011 Social Security COLA – all of which were circulated in the last year), get the facts.

Unfortunately too many people out there are so obsessed with opposition to this or that, their judgement is clouded …or they are simply ignorant and that’s scary because they can still vote.

By the way, the story about a brain surgeon being at a meeting in Washington where denying care to Americans 70 and over was discussed is also a lie. There was no such meeting, there is nothing in the Affordable Care Act remotely related to that and the caller to a talk show giving the story was not a brain surgeon.

Read other articles related to Medicare under the “Medicare” and “Healthcare” categories on this Blog. 

I have no doubt there is significant opportunity to wring savings from the Defense Department as there is from virtually all government departments. For example, health costs for retired career military are out of control and their premiums have not been raised in over fifteen years … those folks are no different from any other retiree. It is also true there must be a balance in cost management between the three largest expenditures, Medicare, Defense and Social Security.

Having said all that, in the world we live in today do cuts that make it impossible to fight two ground wars simultaneously make sense, does cutting back on development for new weapon systems make sense?  Don’t get me wrong I am not for war or starting a new war, but in the face of a military build up by China, North Korea‘s ongoing threat, ongoing instability in the Middle East, and spreading terrorism especially in Africa, announcing to the world that we are reducing our capability is risky business at best.

In an ideal world, perhaps the world of progressives, a defense force would only be needed to help with natural disasters but that is not our world and never has been. America is in decline as the worlds economic power and even our once dominate influence is diminished, there is no need to send signals that we will become ripe for picking. By all means, seek out waste and duplication, close domestic bases and facilities that are not needed, strengthen the procurement process to get more for our money.

However, cutting our military to avoid changes to Social Security and Medicare is a bad deal and potentially a long-term debacle. If we don’t have the best security possible, that monthly check won’t mean much.

Spend now, worry later!

Through 2005 the Medicare Part B deductible was set by statute. Thereafter it reflects the per capita cost for Medicare beneficiaries. In 1967 the Part B deductible was $50.00. Today after decreasing for 2012 it is only $ 140.00.  

However, if the deductible had been allowed to increase at the rate of general inflation (not even medical inflation) it would be $338.00.         

As a result of the Medicare Modernization Act, the Part B deductible was increased to $110 in 2005 and is indexed thereafter by the annual percentage increase in the Part B actuarial rate for aged beneficiaries.  In 2012, the Part B deductible will be $140, a decrease of $22 from 2011.  (The actuarial rate is set by law at one-half of the total estimated per-enrollee cost of Part B benefits and administrative expenses, adjusted as necessary to maintain an adequate contingency reserve.)

This seems to mean that the per-enrollee cost of Part B is expected to decrease by 13.5%, is that really a likely occurrence?   Did the contingency reserve used in calculating the Part B deductible consider the likely reversal of cuts to physician payments as was apparently the case with the Part B premium?  Regardless, a deductible that should by simple math be $338, should not be decreased under any circumstances, that is simply poor long-term planning.   

Medicare Part B covers a portion of the cost of physicians’ services, outpatient hospital services, certain home health services, durable medical equipment, and other items. By law, the standard premium is set to cover one-fourth of the average cost of Part B services incurred by beneficiaries aged 65 and over, plus a contingency margin. The contingency margin is an amount to ensure that Part B has sufficient assets and income to (i) cover Part B expenditures during the year, (ii) cover incurred-but-unpaid claims costs at the end of the year, (iii) provide for possible variation between actual and projected costs, and (iv) amortize any surplus assets.  Most of the remaining Part B costs are financed by Federal general revenues.  (In 2012, about $2.9 billion in Part B expenditures will be financed by the fees on manufacturers and importers of brand-name prescription drugs under the Affordable Care Act.) 

The largest factor affecting the contingency margin for 2012 is the current law formula for physician fees, which will result in a payment reduction of about 29 percent in 2012.  For each year from 2003 through 2011, Congress has acted to prevent smaller physician fee reductions from occurring. The 2012 reduction is almost certain to be overridden by legislation enacted after Part B financing has been set for 2012. In recognition of the strong possibility of increases in Part B expenditures that would result from similar legislation to override the decrease in physician fees in 2012, it is appropriate to maintain a significantly larger Part B contingency reserve than would otherwise be necessary.  The asset level projected for the end of 2012 is adequate to accommodate this contingency.  

In summary, benefits have increased, the deductible is lower, the premium increase is extremely modest, nothing related to the Affordable Care Act has been implemented that would measurably lower Medicare costs or future trends, the planned cut in physician payments will not happen and all is right with the world.  In many ways CMS has little discretion in administering Medicare because most provisions are set by law, but that is the point.   Setting something as massive as Medicare on automatic pilot is not the best way to administer such a program.  It replaces prudent budget decisions with political decisions.