quinnscommentary

 

The Department of Labor has issued Questions and Answers to help better understand the issues. Here is a link to those Q&As.  

Affordable Care Act Implementation

More rumors abound regarding requirements under PPACA. The latest e-mail circulating is that Muslims are exempt from the requirement effective in 2014 to carry health insurance.

So what’s the answer, do Muslims get an exemption?

Maybe, but highly unlikely. The fact is that PPACA contains the same exemption for all religious groups that currently applies to the Amish who are exempt from participation in Social Security, they neither pay nor do they collect benefits. Neither Muslims nor any other religious group is named in PPACA.  The only specified group exempt is American Indians.

Here is what PPACA actually says, note the reference to the Internal Revenue Code Section 1402(g)(3)(B)

Now two things to consider.  First, there is no single muslim sect that has these tenets even though there is some issue with the use of insurance. Second, in the case of the Amish there is a clear close-knit group that takes care of its own and thus forego Social Security benefits.  It is highly unlikely that any system could be set up to deny health care to millions of American muslims who conscientiously oppose buying health insurance (any more than the system does not provide care to individuals who do not have insurance today).

‘‘(2) RELIGIOUS EXEMPTIONS.—

‘‘(A) RELIGIOUS CONSCIENCE EXEMPTION.—Such term shall not include any individual for any month if such individual has in effect an exemption under section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act which certifies that such individual is a member of a recognized religious sect or division thereof described in section 1402(g)(1) and an adherent of established tenets or teachings of such sect or division as described in such section.

Section 1402(g)(1) of the IRC provides, in part, that –

“Any individual may file an application . . . for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect . . . and is an adherent of established tenets or teachings of such sect . . . by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by . . .

(B) his waiver of all benefits and other payments under titles II and XVIII of the Social Security Act on the basis on his wages and self-employment income. . . .”

Here are some of the terms of the IRC Code provision (this is not a new section and not written as part of PPACA).

Section 1402(g)(3)(B) of the IRC provides that the tax exemption on religious grounds shall end after the time the individual ceases to be a member of a properly recognized tax exempt religious sect, or when he ceases to be an adherent of established tenets or teachings of such sect, or at the time the Secretary of Health and Human Services (HHS) finds that the sect of which the individual is a member ceases to meet the requirements of section 1402(g)(1)(C) or section 1402(g)(1)(D).

Section 1402(g)(1)(C) of the IRC provides that the Secretary of HHS determines whether such sect has the established teachings referred to in the first sentence of section 1402(g)(1).

Section 1402(g)(1)(D) of the IRC provides that the Secretary of HHS determines whether it is the practice of the sect for members to make provision for their dependent members which in his judgment is reasonable in view of their general level of living.

As I have said before, there is a lot to really worry about with PPACA, stop wasting time on uninformed, ignorant people who apparently don’t know how to read.

New Research from EBRI:

Health Reform Does Not Increase Confidence in Health Care System

WASHINGTON—Findings from the 2010 Health Confidence Survey (HCS) demonstrate that, despite the recent passage of health reform, dissatisfaction with the American health care system remains widespread. Furthermore, while confidence regarding various aspects of today’s health care system is not high, it has neither fallen nor increased as a result of the passage of health reform.

The HCS, an annual survey by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, notes that since health reform was enacted just in March of this year, and implementing regulations have yet to be fully issued, the impact of the law—the Patient Protection and Affordable Care Act of 2010 (PPACA)—has yet to be felt.

However, confidence in the future availability of employment-based health benefits may have been affected by the passage of health reform, with fewer individuals confident that employment-based health coverage will be available to them in the future. The survey finds most Americans do not know when the legislation takes full effect.

Full results of the 2010 HCS appear in the September issue of EBRI Notes , online at www.ebri.org

“It is still too early to determine how the new health reform law is being received, but we do know Americans have been and continue to be unhappy with the nation’s health care system,” said Paul Fronstin, director of EBRI’s Health Research and Education Program. “But people do see the law as detrimental to employment-based health coverage, which is where most Americans currently obtain their health insurance coverage.”

The 2010 HCS represents the 13th wave of an annual survey to assess the attitudes of the American public regarding the health care system in the United States. Among its key findings:

· The HCS was conducted two months after the passage of health reform, and finds that dissatisfaction with the American health care system remains widespread. A majority of Americans rate the health care system as poor (27 percent) or fair (31 percent).

· Confidence about various aspects of today’s health care system has remained fairly level despite the passage of health reform. More than one-half of survey respondents report being extremely or very confident that they are able to get the treatments they need. Confidence in having enough choice about who provides medical care is largely unchanged from 2009 levels. The percentage of individuals who say they are extremely confident that they are able to afford health care without financial hardship increased from 11 percent to 16 percent between 2009 and 2010. The increase came at the expense of decreases in the percentage reporting that they were very or somewhat confident.

· Americans’ ratings of their own health plan are generally favorable. Fifty-eight percent of those with health insurance coverage are extremely or very satisfied with their current plan, and 30 per-cent are somewhat satisfied.

· Satisfaction with health care quality continues to remain fairly high, with 59 percent of Americans saying they are extremely or very satisfied with the quality of the medical care they have received in the past two years. This is the highest level of satisfaction reported since the HCS was started in 1998. In contrast, just 22 percent are extremely or very satisfied with the cost of their health insurance, and only 19 percent are satisfied with the cost of health care services not covered by insurance.

· Confidence in the future availability of employment-based health benefits fell. In 2010, 52 per-cent of individuals with employment-based coverage reported that they were extremely or very confident that their (or their spouse’s) employer or union would continue to offer health insurance, down from 59 percent in 2009. The decline may be due to passage of health reform, the continuing weak economy, or both.

· Many Americans see themselves as good consumers of the health care system. Three-quarters report that they always or often have their doctor or medical professional explain to them why a test was needed, and two-thirds say they ask their doctor about the risks of treatment or side effects of medications. Slightly more than one-half indicate they ask about the success rate of the treatment option. Fewer say they always or often bring a list of medications, bring a list of symptoms, ask about less costly treatment options or medications, or ask for less invasive or easier treatment options.

· Many Americans have tried to find objective information about various aspects of health care. Nearly one-half tried to find information on the advantages and disadvantages of different treatment options, whereas 1 in 3 tried to find information about a doctor’s training and the costs of different treatments. Fewer had sought information on costs of doctors and hospitals, the number and success rate of hospital-based procedures, or disciplinary actions. Among those seeking information, between 17 percent and 35 percent found all of the information they sought, whereas between 54 percent and 72 percent found some of the information being sought.

· Many Americans may not be ready to use rating systems to make decisions about providers. Only about 1 in 3 indicates they would be extremely or very comfortable using such a rating system to find a doctor or hospital. Individuals rank the importance of information about the effectiveness of different types of treatments much more highly than a rating system based on cost. One-half think information about the effectiveness of different types of treatments would be extremely important if they were trying to choose a treatment, and 31 percent think it would be very important.

EBRI is a nonpartisan 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. www.ebri.org

One of the valid criticisms of the health care reform effort is that there is little to manage health care costs, the fundamental cause of high premiums.  Of course, controlling health care costs is easier said than done and a real effort will upset a great number of people.  However, management of prescription drugs is one area where a win-win is possible.  In the private section pharmacy benefit managers (PBMs) promote the use of generic drugs, and alternative brand drugs in the same therapeutic class (formulary drugs).  They are often criticized for such action and accused of either arbitrarily changing a prescriptions (false) or interfering between the patient and doctor (also false). 

Nevertheless, managing prescription drugs is a valid way to manage health care costs and one area with minimal impact on the patient and virtually no impact on the physician, the both important in obtaining cooperation.  In addition, many plans both public and private provide financial incentives for the use of generic drugs and alternative brand drugs.  This may include higher co-pays and coinsurance if the generic or formulary drug is not used.  Patients always have an alternative, but at higher costs.  Of course, drug makers are not happy with these efforts and directly promote their drugs to both patients and providers.

Now the CBO reports on use of generic drugs and the savings that result for Medicare.

Four years ago, Medicare began providing outpatient prescription drug benefits for senior citizens and people with disabilities. Known as Part D, the program uses private plans to provide coverage for prescription drugs to enrollees. Those plans negotiate payment rates with pharmacies and rebates from drug manufacturers while competing for enrollees. Such competition provides incentives for plans to control their costs; one important way in which plans seek to control costs is by encouraging the use of generic drugs. A CBO study released today assesses how successful plans have been in encouraging the use of generic drugs and the potential for savings from the additional use of such drugs.

In 2007, total payments to plans and pharmacies from the Part D program and its enrollees were about $60 billion. The total  number of prescriptions filled was about 1 billion, of which 65 percent were filled with generic drugs, 5 percent were filled with multiple-source brand-name drugs (brand-name drugs that are also available in generic versions), and 30 percent were filled with single-source brand-name drugs (brand-name drugs for which no chemically equivalent generic versions are available). Even though a majority of prescriptions were filled with generic drugs, their lower prices meant that those prescriptions accounted for only 25 percent of total prescription drug costs.

Potential Savings from Generic Substitution. To control their costs, plans encourage enrollees to switch from brand-name drugs to their less expensive generic equivalents, a practice known as generic substitution. CBO estimates that:

Dispensing generic drugs rather than their brand-name counterparts reduced total prescription drug costs in 2007 by about $33 billion, meaning that total payments to plans and pharmacies from the Part D program and its enrollees would have been about $93 billion—or 55 percent higher—if no generics had been available.
The potential for additional savings from increased generic substitution is comparatively small, totaling less than $1 billion.

Potential Savings from Therapeutic Substitution. In one form of a practice known as therapeutic substitution, plans can also encourage enrollees to switch from a brand-name drug to the generic form of a different drug that is in the same therapeutic class (that is, a drug designed to treat the same medical condition). To assess the potential for such savings, CBO examined seven therapeutic classes identified by the Medicare program as providing opportunities for such substitution. CBO finds that:

If all of the single-source brand-name prescriptions in those seven classes had been switched to generic drugs from the same class, prescription drug costs would have been reduced by $4 billion in 2007. Savings from therapeutic substitution to generic drugs could have been much higher than $4 billion to the extent that other classes of drugs also would have presented options for substitution. The seven classes that CBO evaluated represented only about 15 percent of the cost of single-source brand-name drugs under Part D. However, the potential savings could have been lower than $4 billion because in many cases it would have been medically inappropriate to switch to a generic form of a therapeutically similar drug.
 

Policymakers would face several challenges in developing tools to achieve any additional savings from the expanded use of generic drugs—particularly in the case of therapeutic substitution. About half of Part D spending is on behalf of enrollees who have lower incomes and thus qualify for additional subsidies. Policies that used financial incentives to steer enrollees toward certain drugs might not be effective for that population because Medicare pays nearly all of their costs.

This study was prepared by Julie Somers of CBO’s Microeconomic Studies Division.

Controlling health care costs is on everyone’s mind these days.  Actually, we don’t care about health care costs just health insurance premiums but that is a whole other story.  

The trouble is you can’t separate the two despite what the politicians may say. 

There is something else you can’t leave out of the equation and that’s you and me. The next time you hear someone say they are going to focus on controlling health care costs listen carefully. 

 

If you don’t hear that controlling health care costs means you must change the way you live, use health care services and the way you receive health care, they are either lying or they don’t know what they are talking about. 

Here is an example of the relationship to health care costs and the people who use health care. 

How does obesity affect health care costs? 

Also consider this September 14 AP story by Tom Murphy: 

Many factors contribute to the rising cost of providing insurance, including expensive medical treatment, health issues related to obesity and an aging population, the number of unemployed taking advantage of short-term benefits and the effect of the new health care law. In a survey of about 60 health organizations around the country earlier in the year, Aon Consulting, a subsidiary of insurance broker Aon Corp., found that insurers expect to pay out 10.7 percent more in claims for preferred provider organization, or PPO, managed care.

The Flexible Spending Account (FSA) was created in 1978, when Section 125 was added to the Internal Revenue Code.  This section allows individuals to elect tax-free benefits in lieu of taxable cash in their pay. Over the years, many employers (about 26 percent) added this option to their employee benefits program.  Both the employer and the employee save money, albeit at taxpayers’ expense. Approximately 35 percent of eligible employees use the FSA when available. According to a Mercer Consulting study, the average employee contribution to an FSA is $1,235 (2005).    

In 2003, the IRS issued a revenue ruling stating that over-the counter medication may be reimbursable through a health FSA. The action was prompted because some medications previously requiring a prescription became available over-the counter, Claritin for example. The reasoning was that the drug was still a reimbursable medical expense.    

    

Hey pal, we did it again.  Do you think anyone will ever check the numbers?    

In the quest to make it appear that the Patient Protection Affordable Care Act PPACA was being paid for, Congress changed the rules for the FSA.    

Under the law, effective beginning in 2011, the cost of over-the-counter medicines may not be reimbursed with funds through an HSA, FSA, HRA, or Archer MSA, unless a physician prescribes the medicine (or unless it is insulin). The provision is estimated to raise $5 billion in revenue over 10 years.  

2010-59 and Revenue Ruling 2010-23. Employers should read these carefully. -Notice FSAs changes to PPACAOn September 3, 2010, the Internal Revenue Service (“IRS”) issued two pieces of guidance to implement the

  

 

 

• Even if the OTC expense is incurred during the permissible 2 ½ month grace period for FSAs, it may not be reimbursed from the FSA 
• OTC expenses may be reimbursed on or after January 1, 2011, so long as the expenses subject to reimbursement were incurred prior to January 1, 2011 
• The IRS makes it clear that prescription” means “a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.” 
• The January 1, 2011 effective date applies regardless of whether the applicable plan is a calendar year plan. 

Let’s think about this.  The IRS’s logic of 2003 is still valid and more medications once prescription only are now available over the counter so logically there was no reason to change the law. Further, to continue to have an over-the counter medication eligible for an FSA or similar arraignment, all one has to do is get his doctor to write a script, i.e. “take an aspirin every day, take Claritin for your allergy.”  I hope that this is done on the phone otherwise; we may be adding office visit costs to health insurance simply to have an over-the counter medication continue eligible for the FSA.    

However, there is even more faulty logic in all this.  For the government to save money, the total amount placed into the FSA must be decreased.  Assume an employee places $1,000 into an FSA each year.  Typically, at the end of the year if there is money left the employee will use the funds on miscellaneous expense, like a pair of glasses or over-the counter medicine for the following year.  Of course, in some cases OTC medication is used regularly will be purchased throughout the year.    

Nevertheless, since the pre-tax money in the FSA is forfeited if not used by year-end and thus remains free from taxes, for there to be a tax savings for the government, the employee will have to reduce that $1,000 contribution before the start of the year.  Since medical expenses are unpredictable and employee out-of-pocket costs are rising, is it logical to assume that the average person will look at that $1,000 and say, “gee, I can’t use that money for my cough medicine or aspirin, I’m going to change the $1,000 to $978 next year?”  Don’t count on it.    

Therefore, if the employee leaves the $1,000 election in place, the government loses the taxes on that amount regardless of whether the employee is reimbursed the full amount or forfeits the $22.00 he would have spent on OTC medication.    

Beginning in 2013, the law limits pre-tax contributions to an FSA to $2,500 annually. The limit is indexed to inflation after 2014. Given the average contribution is far below $2,500, the average person is not affected.  On the other hand, the family trying to pay for orthodontics for a couple of children or the person with a high deductible and large medical expenses or the family with everyone wearing glasses will find their out-of-pocket costs going up as a result of this change. Given the new limit and the average contribution one has to wonder how the Joint Committee on Taxation (JCT) estimates the provision will raise $13 billion over 10 years.    

We should be wondering (and worrying) about the consequences of a number of provisions of the PPACA.