Tag Archives: Medicare Part D

2012 is the start of new fees and taxes on health care organizations…what are the possible consequences? First up, a new excise tax on pharmaceutical companies

18 Jan
English: Novamoxin Prescription Drug - Amoxici...

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.

Employers planning cutbacks in retiree coverage in response to health care reform. Shifting retirees to Medicare Part D and to the insurance exchanges are part of the strategy

10 May

If you are thinking about retiring early, you must factor health benefits into your plans. There is a good chance your employer-provided benefits will not be there. Many employers have been looking for a way out of retiree medical and the Patient Protection Act gives it to them on a silver platter.

Several provision of PPACA provide a greater incentive for employers to eliminate or cut back on retiree coverage. The retiree drug subsidy designed to encourage employers to keep prescription benefits for age 65 and older retirees was made taxable to employers. The Early Retiree Reimbursement Program not only highlighted the concern of elimination of this benefit, but also the expiration of the fund will again cause employers to re-think this coverage. Also, the establishment of the health insurance exchanges in 2014 provides a safety net for early retirees thereby making it easier for employers to drop coverage and possibly provide a fixed dollar subsidy for this private coverage.

A new survey from AonHewitt relates where employers stand on these issues.

As for companies in the survey that pay a portion of health coverage for their retirees age 65 or older, three-quarters currently collect the Retiree Drug Subsidy (RDS).  Of those, 73 percent said they are altering their retiree drug benefits strategy, as health reform eliminates the RDS tax advantages for 2013, and creates enhancements to the Medicare Part D program for retiree drug benefits beginning in 2011.  In fact, 61 percent anticipate announcing these changes by the end of 2011 in order to begin recognizing accounting savings quickly, while 86 percent expect to actually implement these changes

In addition, Aon Hewitt’s survey found that 36 percent of respondents plan to make changes to their pre-65 retiree benefits strategy to directly leverage the health insurance exchanges that states, or the federal government, are required to create in 2014.  What’s more, 21 percent prefer moving to a pure defined contribution approach, where retirees could use an account established by the employer to purchase coverage through the exchanges.  The balance of these employers anticipate eliminating pre-65 coverage in response to the creation of exchanges.

The ongoing debate over health care reform focuses largely on its impact on the federal government budget and deficit.  What we hear too little about are the tens of millions of Americans with good employer based coverage who are feeling the impact of PPACA .  PPACA requirements cause employers to re-think how and if they should provide these benefits.  PPACA does nothing to control the costs reflected in these plans, but in fact increases costs.  Virtually all cost containment strategies being employed result in direct or indirect cost shifting to employees and retirees.

If those who advocate patients having more “skin in the game” or think patients can be made to act like informed objective consumers and thereby control costs are right, by the time this is all over health care inflation should be negative 5%.

The DNC tells me of the accomplishments of health reform legislation (and wants $5.00), let’s hope you like the ones affecting you

26 Mar

 

Hey, you have an extra five bucks, your health care is affordable now

I received this e-mail recently; I thought you would like to see it. Perhaps you have $5.00 or more you would like to donate. I on the other hand, have decided to save my $5.00 because I may need it if I lose my retiree prescription coverage or to help someone else pay off his mortgage.

Isn’t it comforting to know that after all this time dealing with the health care issue one of the major accomplishments is:

“we beat the insurance companies”

 

Richard –

We knew that power concedes nothing. So did President Obama. So did the members of Congress who courageously voted for reform, knowing that the special interests and the extreme right wing would retaliate swiftly.

The attacks are fierce. Deceptive ads are hitting the airwaves in swing districts. GOP lawmakers are pushing to repeal reform — and preventing the Senate from performing basic functions.

A few Republican attorneys general have launched a baseless attack to overturn the legislation. But that’s not even the worst of it.

A conservative blogger posted the home address of Congressman Tom Perriello, urging tea partiers to “drop by.” Other members have had death threats. Democratic offices have been vandalized.

Please chip in $5 or more to defend health reform — and those in Congress who fought to make it possible.

Showing support for reform and those who fought for it is our number one priority right now. We’re going all-out, organizing grassroots events around the country, running supportive ads on the air, and making sure that every American knows the truth about the historic legislation that representatives voted into law.

Members of Congress know that reform would not have passed without all of your incredible work. But we also know that it would not have passed without their courage.

Together, along with President Obama, we beat the insurance companies and brought affordable coverage to 32 million without it, reduced costs for families and small businesses, and created the toughest patient protections in history.

A few weeks ago, we made a simple promise to these representatives: You fight for health reform, we’ll fight for you. It’s time to hold up our end of the deal.

Please donate $5 or more:

https://donate.barackobama.com/Defend

Thanks,

Mitch

Mitch Stewart
Director
Organizing for America

Paid for by Organizing for America, a project of the Democratic National Committee — 430 South Capitol Street SE, Washington, D.C. 20003. This communication is not authorized by any candidate or candidate’s committee.

Contributions or gifts to the Democratic National Committee are not deductible as charitable contributions for income tax purposes.

Putting five million retirees at risk for higher health care costs – why changing the status of the Medicare Part D rebate to employers is a bad idea

26 Mar

 

As companies take the accounting charge related to the loss of the tax deduction for prescriptions drugs under the Medicare Part D rebate, the Administration is spinning the issue as no big deal. Well, yes it is a big deal because five million retirees may lose their company prescription benefits or see them reduced. If they are forced into Medicare Part D drug coverage these retiree’s out of pocket costs for prescription drugs will rise and they will lose the safety net of having their former employer manage their benefits and provide assistance when necessary.

This rebate was crafted not as a windfall for corporations as some in Washington now claim, but to encourage them to keep the coverage and to save the federal government money on Part D subsidies.

The White House press secretary recently said they were just closing a loophole. What nonsense, it is a pure revenue raiser for health care reform. However, keep in mind that the cost of this rebate is less than half of the governments cost per person for Part D. In a joint letter to Sen Harry Reid in December 2009, the American Benefits Council and the AFL-CIO pointed out: 

 

Independent calculations show that if as few as 24 percent of retirees are dropped from employer plans and obtain coverage through Medicare Part D, then Section 9012 will be a net revenue losing provision. 

 

This alert was dismissed out of hand as were many others pointing out the likely unintended consequences of reform as then conceived and now the law of the land.

During the Fall of 2009 I and several colleagues from other companies  met with dozens of House and Senate staffers on this issue trying to explain the impact of the change, it’s implications for retirees and the potential increase in government costs. Not one person we talked to knew about the issue or was aware it was even in the legislation. Several expressed shock, some asked that we talk to other staffers and to budget staff members.

As you can see, the result was simply ignoring all they were told.  Today the White House and others in Washington blame employers for overreacting, who will they blame when retirees lose their prescription coverage…as if we had to ask.

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Walking through the pages and creating history

15 Oct

 

Let’s take a walk through today’s newspaper and see what there is to see.

debt_text_grinding_up_wages_to_pennies_lg_clrFirst I see an article about the US deficit dilemma. We see that the deficit this fiscal year is about $1.4 trillion dollars or 9.9% of GDP, bigger than any year since 1945. Of course the current administration blames the previous administration, things like cutting taxes, the wars and the Medicare drug benefit (a benefit by the way that is being significantly improved in one of the pending health care “reform” bills before Congress). Check out the current status of the US debt  for yourself.

Moving on we find an article about the earmarks Congress has placed in the budget under the guise of stimulus and anything else it can think of. What’s a million here or a million there? New Jersey Congressman for example, have added $1.5 million for new air conditioning for the Newark Museum, their logic being that it will be a model for energy efficiency and that it will continue to make the museum’s collection available to the American public. Have you been to the Newark museum lately (or ever heard of it)? I live within five miles of the museum and have for over 65 years and have never been there. Rationalization is easy…and expensive…for you.

Then we find that CAlpers the California pension fund is under scrutiny for the high investment fees paid to one of its own board members. This is but one example of the questionable management of pension funds at the state level. Keep in mind that under health care reform the states will operate large segments of the program and continue to regulate health insurance companies.

Next up is a report that President Obama is pushing for a $250 payment to all those receiving Social Security because the legal formula will not provide an increase (because there is no inflation). But hey, its economic stimulus and if they get the $250 they won’t be able to get another $250 if they install a new water heater through another stimulus plan next year. No plans yet where the $13 billion is coming from. It would be far easier for us seniors to just ask our grandchildren for the $250. OMG is this a bribe to us seniors so we don’t rise up when we lose our Medicare Part C option?

Last up on our journey is an opinion piece on health care reform pointing out (correctly) that the math and budget maneuvering to make it “affordable” is (as I have said repeatedly) smoke and mirrors. Judge for yourself. The cost is figured on a ten year basis, tax hikes and benefit cuts (mostly lower payments to providers under Medicare) go into effect in 2010, but the additional spending is not effective for another three to five years. The CBO also assumes that employers who shift workers to the new insurance exchanges will replace that cost by raising the workers pay and thus generating additional income taxes. Then we have the assumption that the tax on so called Cadillac health insurance plans will raise additional man_laughing_at_you_lg_clrmoney and grow in the future, an assumption that requires insurance companies and employers to continue to offer such plans and pay a 40% excise tax. Don’t forget to send in your voluntary additional income tax payment next April.  Finally we have the cuts in Medicare payments, cuts that Congress in the past has blocked but now we have the assumption they will go into effect and stay in effect for the next ten years. At the same time there is already talk of legislation to prevent them from going into effect in 2010 because of the growing number of doctors who will not take Medicare patients.

I remember something called the new math and as I recall I was never good at it. I’m still one of those 2+2 = 4 guys. Somehow we elect people who are expert in Congressional math which calls for 2+2 to equal -1. If this wasn’t so serious for future generations if not our country, it would be funny, but it is not funny, not funny at all and we all participated in electing these boobs and more often than not reelecting them too.

 

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The Consequences of health care “reform”

22 Sep

 

President Obama, from his speech to Congress, September 9, 2009

“…for decades, the driving idea behind reform has been to end insurance company abuses and make coverage available for those without it…”  

And there you have the basis for why we cannot have true reform in health care.  He is right of course in what he says, that has been the driving force.  

The problem is that the so-called insurance company abuses are not the problem.  The problem is the cost of health care and the inefficiency in delivering it.  Yes, there is a lot behind each of those factors, some of it caused by governments both state and federal, but the essence of the problem is not the insurance companies or even the uninsured. 

To illustrate why even today we are not looking at any real solution I have taken a high level look at some of the provisions in the proposed legislation and the probable consequences.   Despite what politicians think, everything is connected.  Are these unintended consequences?

blogsurfer.us

Provision of Legislation Probable Impact
   
Remove Medicare donut hole Increases Medicare costs
Require insurance companies to accept anyone regardless of health status Increases costs to insurer and likely to already insured Americans
Require payment for health and wellness and preventive services at 100% Increases costs for all individuals covered under the insurance or employer plan
Remove annual or lifetime limit on coverage Increases costs to all insured
Reduce  Medicare payments to physicians and hospitals Higher costs passed on to non Medicare population
Reduce Medicare payments to Medicare Advantage Plans Increase premium costs to Medicare beneficiaries, possibly reduce number of plans available and thereby increase out of pocket costs to enrolled beneficiaries
Require minimum level of benefits for health plans Eliminates choice for employees who have a lower value option through their employer
Tax insurers and self insured employers on health plans cost above a set limit Higher costs passed on to insured, benefits reduced and higher out of pocket costs result for insured
Tax on insurers, clinical labs, and manufacturers of prescriptions and medical devices Higher costs to consumers
   
Tax employer reimbursement under Medicare Part D Employers drop coverage resulting in higher costs for retirees
Expand coverage for additional 40 million Americans Increase demand for health care services, increase overall health care spending (and increasing federal subsidies)
Prohibit employers from reducing retiree health benefits unless same reductions are made to active employee coverage Accelerate the demise of retiree health benefits
Limit FSA contributions to $2,000 Higher out of pocket costs to employees, especially younger families using such programs for things like orthodontics
Report value of health benefits on each employees W-2, including FSA elections Higher administrative cost and complexity for employers, possible decline in availability of the FSA
Government to negotiate Part D drug costs Higher costs for non Medicare consumers and for employers
Over the counter drugs eliminated from FSA Higher out of pocket costs for employees

Another slap at retiree coverage

10 Sep

Did you notice these words in Sen Baucus’s framework for health care reform?

“require employers to include retiree prescription drug subsidies for corporate income tax purposes;”

Sure they are going to find a way to “pay” for reform, but as I have said many times, if the givernment is not paying someone else will. In this case we have yet another nail in the retiree employer based benefits coffin. Many employers who decided to keep retiree Rx coverage will have another cost excuse to push them to Medicare with the additional costs to retirees associated with that coverage.

On one hand Congress is removing the Medicare donut hole and on the other driving up costs for millions of those on Medicare while shifting more to Medicare as the primary coverage driving those costs further over the brink.

Do you see how all this works? Makes you wonder if the politicians are stupid or just think the rest of us are.

“require employers to include retiree prescription drug subsidies for corporate income tax purposes;”

 

 

 

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