The Mainstream Media Rarely Tries to Explain the Congressional Budget Office’s nearly unbelievable claims that the Patient Protect and Affordable Care Act can:
1) Pay for itself
2) Provide coverage for 32 million uninsured Americans
3) Trim this nation’s deficit by some $143 billion over the next ten years
And, that’s not all. Medicare’s Trustees say that the reform legislation puts Medicare on the road to financial solvency–while limiting co-pays and beefing up benefits.
You might well ask: How can this be? How can we provide insurance for an additional 32 million people, improve Medicare, and simultaneously save money?
The media has not been a great help in answering these questions. This is, in large part, because the good news lies in the details—dozens and dozens of details. Fleshing out the myriad ways that the ACA generates new revenues while reining in health care spending would take up far too much time on a cable television show—and way too much space in most newspapers.
This is why the media so often settles for those one-liners that conservatives excel at: “CBO’s Score: Cloudy with a Chance of Bankruptcy,” declares one pundit. “The health-care bill does nothing to lower costs, and in fact, is going to raise costs dramatically,” says a Libertarian candidate running for the Senate from Indiana. This just isn’t true, but reform’s opponents get away with the sound-bites because reporters like pithy quotes—and an adequate rebuttal would require more than two or three sentences.
At this point, I am very tired of people who talk in bumper-stickers. Concise may be nice, but not when brevity serves only to package lies.
In this three-part post, my goal is to get my arms around all of the facts about new revenues and savings, and lay them down, in one place, so that readers can judge CBO’s claims.
Exactly where is the money coming from? Will you be paying? Who is contributing—and how much? Most importantly, are the contributions justified? Is it fair to ask high-income households to contribute so much? Just how high are the penalties for those who decide not to buy insurance? What do they get in return? Are seniors giving up benefits to fund care for younger Americans?
To find the answers to these questions, you have to delve into the details. But first, for the sake of total disclosure, a disclaimer.
Granted, These Are Projections: Savings Could be Less—or Greater
CBO Director Doug Elmensdorf acknowledges that the agency’s estimates of the cost of reform—as well as the savings and new money that the legislation will generate—are just that, estimates. As he told the World Health Organization in April:
“We have concerns in different directions: Subsidies will be more expensive than we project. Medicare reforms will save more money than we project. Our estimates reflect the middle of the distribution of possible outcomes, based on our professional judgment (including consultation with outside experts).”
The CBO estimate is, in fact, “middle of the road. At one end of the spectrum, a Commonwealth Fund report authored by health care economist David Cutler and Commonwealth President Karen Davis is significantly more optimistic than the CBO, forecasting that reform would lead to federal savings of $400 billion over 10 years. “Cutler et. al. believe that the use of Exchanges will reduce average insurer administrative costs by three percent, compared with the CBO’s estimate of just 0.4 percent,” Roger Collier, editor of the Health Reform Update, recently explained. They also are convinced that “system modernization” (i.e., structural reforms that will make care more efficient) “will trim medical costs by one percent a year.” The CBO does not attempt to include these savings in its estimates.
At the other end of the spectrum, Medicare’s Office of the Actuary (OA) predicts that savings and new revenues will fail to cover the full cost of reform, estimating that over the course of a decade, the ACA will cost the federal government $289 billion. This is in part because the OA scores how many Americans will be signed up for insurance by counting people who are eligible for both Medicare and Medicaid– as if they will be covered by both programs–“leading to total insured enrollment appearing to exceed the entire US population,” Collier notes on The Health Care Blog.
Moreover, “OA diverges most from the CBO numbers—by some $330 billion—in projected revenue from drug manufacturer fees, hospital insurance taxes, and other provisions, which might be more within CBO’s budgetary forecasting capabilities,” Collier writes. “Inserting the CBO estimates into the OA forecast would give a net reduction of federal spending of $40 billion—reasonably close to the CBO savings of $89 billion.”
Collier suggests that the Commonwealth Fund may be overly optimistic. But CBO and the Office of the Actuary are not so far apart. In the end, Chief Actuary Richard S. Foster, like CBO’s Elmensdorf, stresses the uncertainty of any estimate that tries to assess total savings: “Many of the provisions, particularly the coverage expansions, are unprecedented . . . Consequently little historical experience is available with which to estimate the potential impacts.” Moreover, “The behavioral responses to changes introduced by national health reform legislation are impossible to predict with certainty. In particular, the responses of individuals, employers, insurance companies, and Exchange administrators to the new coverage mandates . . .”
Laying out the Numbers: Cutting Costs and Raising New Revenues
That said, CBO can project revenues and savings from fees and taxes with a fair amount of certainty. These are not just “hoped-for” savings. Under the Affordable Care Act:
- Medicare will be cutting overpayment to Medicare Advantage insurers by some $132 billion over the next four years. In Congress, both conservatives and progressives agree that these “windfall” payments to insurers are unwarranted. (See discussion of Advantage below.)
- Drug-makers, device-makers, and insurers already have agreed to kick in $107 billion in new fees. Drug companies begin making their contribution next year.
- Because more than 30 million formerly uninsured Americans will have coverage, Medicare will be able to trim subsidies to hospitals that care for the uninsured by $36 billion, or 75%. (The subsidies cannot be totally eliminated because some patients will remain uninsured.)
- Beginning in 2014, individuals who choose not to purchase “minimal essential insurance” will pay penalties that CBO projects will total $17 billion. (Libertarians and others who object to both the individual mandate and the fines should note that households that ignore the mandate are expected to contribute less than one-third of the $60 billion that the insurance industry will be kicking in. In return, those individuals will enjoy the security of knowing that, if, at some point in the future, they or their families become sick and decide to purchase coverage, insurers cannot turn them away, or gouge them by charging them more than healthier customers. This is why those who reject the mandate are asked to help fund reform. They, too, will benefit.)
- Employers with at least 50 full-time employees who do not offer coverage to their workers will pay roughly $52 billion in fees, beginning in 2014.
- The government will take in as much as $32 billion in taxes on pricey health plans that fetch $27,600 to cover a family, or $10,200 for an individual, beginning in 2018. Admittedly, this is a soft number—no one knows how many plans will cost that much in 2018. In fact, reformers hope that insurers will do their best to make sure that premiums come in under that line. This, in turn, would reduce national expenditures on health care. In its own way, the “Cadillac tax” creates a global budget for health care spending—without cutting benefits or shifting costs to patients. (Under the legislation, all plans must offer comprehensive benefits and there is a cap on how much families can be asked to pay out-of-pocket.)
- Beginning in 2013, reform will raise another $210.2 billion in new Medicare taxes on wages and self-employment income (0.9 percent) and on investment income (3.8 percent) from taxpayers with an adjusted gross income over $200,000 ($250,000 for couples).
(Source: Deloitte., “Prescription for Change Filled,” March 30, 2010. The report relies on estimates from the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO)]
And this is a just a short list. For a complete inventory of the ways the legislation generates savings and new money, see the shaded box at end of part 2 of this post. It includes more esoteric sources of funding including $23 billion that results from cancelling an energy tax credit for “black liquor” (a by-product of paper production), as well as smaller amounts that will flow from dozens of places ($3 billion here, $500 million there.)
These are revenues that reformers can count on, flowing from specific taxes and fees that are now part the law of the land. Could some of these be repealed? Perhaps, but as Collier notes, this “seems close to absurd, given both political parties’ promises to cut the deficit. Almost certainly, there will be some yielding to lobbyists, but a more likely effect will be modest shortfalls in savings . . .”
Should We Expect High-Income Tax-Payers to Contribute So Much?
The biggest item on the list above is the $210 billion that wealthy taxpayers will be contributing. To some, it may seem terribly unfair to force those in the top two percent to take on such a large share of the cost of reform.
But consider this: in recent decades, the wealthiest 10 percent of households saw their share of the nation’s total income climb from 34.6 percent in 1980 to 48.2 percent in 2008. More importantly, the richest one percent (earning over $368,000 in 2008), watched their slice of the income pie more than double, rising from 10 percent 1980 to 21 percent in ’08.
Meanwhile, as the middle line in the chart below illustrates, middle-class incomes remained relatively flat.
One might argue that the rich became richer because they were working hard to innovate, creating businesses that benefit all of us. In many cases this is true. But these households weren’t just earning more; they were paying out a smaller share of their income in the form of taxes. Over the past 30 years, the average marginal income tax rates for those perched on the highest step of the income ladder plunged—from an average of 48.2% during the eight years of the Reagan administration in the early 1980s, to 39% during President Bush Sr.’s administration in the early 1990s.
Today, the top marginal rate stands at 35%–the lowest in 80 years. Even if the Bush tax cuts for wealthier Americans were eliminated, the top marginal rate would revert to just 39.5%. High income households would be laying out roughly what they did in the early 1990s when Bush Sr. was president–and nearly 9% less than they shelled out during the Reagan years.
Granted, if progressives win the current tax debate, the taxes that high-income households pay on long-term capital gains could climb to 20% , up from 15% today—but still well below 28%, the rate they paid on those gains in the late 1980s and early 1990s when income at the top was significantly lower.
To put tax rates for high-income households in a larger historical context, keep in mind that during the Eisenhower and Kennedy administrations of the 1950s and early 1960s, the top marginal rate was 91%. This is one reason why the gaps between the rich and the middle class were so much lower in those decades.
Today, taxes on dividends and capital gains also stand at historic low, and this represents another break for wealthy families because their investment income often exceeds their earned income. As a result, as the Tax Foundation table below reveals, when you combine earned income and investment income, the effective federal tax rate for this group (the percent of total adjusted gross income that the top 1% actually paid) fell from nearly 35% in 1980 to 23% in 1998. (See the fourth column in the table, headlined “Top 1%”)
(Click Table to enlarge)
**** Notes from the Tax Foundation:
(1) All tax returns that have a positive AGI are included, even those that do not have a positive income tax liability.
(2) The only tax analyzed here is the federal individual income tax, which is responsible for about 25 percent of the nation’s taxes paid (at all levels of government). Federal income taxes are much more progressive than payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes (depending upon the economic assumption made about property taxes and corporate income taxes). Thus, if one looked at all taxes, one would find greater inequality
The bottom line: Over the past 30 years, the top 2% have been taking in a far larger share of the nation’s income while paying out a much smaller percentage of their income in taxes. The chart and table above make a compelling argument that high-income Americans are in a position to extend a hand to those who cannot afford health care insurance.
Those earning six figures can do this without changing their lifestyles: According to Deloitte, a single person earning $250,000 annually would owe an extra $450 in taxes, while an individual reporting $500,000 would pay extra taxes of just $2,700. A couple with $250,000 in joint income would pay no additional tax.
Trimming Over-Payments to Medicare Advantage Insurers
Cuts in what many call unwarranted subsidies for private sector Medicare Advantage insurers represent the second-largest source of funding in the Affordable Care Act. Those critics who like to sum up reform in a sentence or two describe the change in headlines like these: “The Healthcare Hatchet is Coming to Medicare Advantage” (Washington Examiner) or “Millions to Lose Advantage Coverage; Benefits Cut in Half” (AHIP press release).
No surprise, the story is far more complicated than that.
As I have explained in the past, when Congress passed the Medicare Modernization Act in 2003, it agreed to pay private sector Medicare Advantage insurers an average of 13% more than it would cost Medicare to cover the same patients.
In a recent phone interview the Urban Institute’s Robert Berenson (a former Medicare official and astute, long-time observer of Washington politics) explained such Congressional largesse: “Newt Gingrich wanted to privatize Medicare, by turning it over to the insurers.” If legislators could make the program sufficiently lucrative, insurers would advertise broadly, promising seniors “extras” such as free eye-glass frames, lower co-pays, or gym memberships.
And that is just what insurers did. Today, roughly one quarter of Medicare beneficiaries are enrolled in Advantage plans. But more than 75 percent of seniors have stuck with the original Medicare program, and they, along with tax-payers, are footing the bill for the over-payments to insurers. This hardly seems fair.
Moreover, as Martha Gold, a Senior Fellow at Mathematic Policy Research, noted in Health Affairs, while “individual enrollees may gain” [from Medicare Advantage], beneficiaries as a whole may be harmed if higher payments add to the fiscal stress on Medicare making the program less viable in the long run.”
If Medicare continues to spend at the current rate, in seven years its hospital fund will begin to run out of money. At that point, it would have to make deeper cuts in the payments to Advantage insurers. In response, probably most insurers would flee the business just as they did in the late 1990s when insurrers decided that an earlier attempt to outsource Medicare to the private sector just wasn’t adding enough to their bottom lines. Seniors bumped from Advantage plans could return to traditional Medicare, but they would find that they, along with all other Medicare beneficiaries, would have to pay substantially higher co-pays and deductibles as Medicare struggled to stay afloat.
Medicare Advantage seniors need to understand that they are still part of Medicare. Their fate depends on Medicare’s solvency. It’s not worth risking that safety net for a “Silver Sneakers” gym membership that, in fact, many seniors rarely use. Even lower co-pays and annual eye exams do not justify the 13% premium that Medicare is doling out to insurers.
Indeed, even Advantage customers acknowledge that the “extras” that Advantage plans offer just aren’t worth that much to them. A 2009 study published in the International Journal of Health Care Finance and Economics reveals that when Advantage beneficiaries were asked how much they would pay, out of their own pocket, for the benefits provided by their insurer, they estimated the value of those benefits at 14 cents for every extra dollar that Medicare was ponying up. As economist Austin Frakt, a co-author of the report, explains: This relatively poor return of value on taxpayer dollars is why I support reductions in Advantage payments. The administration and congressional Democrats have chosen the right path for Advantage payment policy.”
In part 2 of this post, I will talk about the ultimate effect of Advantage cuts on seniors. Despite shrill predictions (more sound-bites) 99% of those on Advantage will still have access to an Advantage Plan. And thanks to the new authority that the Affordable Care Act grants to the Secretary of the Department of Health and Human Services (HHS), HHS Secretary Kathleen Sebellius has succeeded in protecting Medicare beneficiaries from excessive increases in cost-sharing and premiums in 2011. Next year, the premium on the average Advantage plan will fall by 1 percent. Under the ACA, seniors on traditional Medicare also will enjoy lower co-pays and better benefits.
Part 2 will conclude by explaining how Medicare aims to improve productivity and reduce waste, by trimming annual increases in payments to hospitals, nursing homes and home health agencies while improving care for patients. Ask hospital CEOs, and some will tell you that productivity cannot be improved—hospital systems are as good as they possibly could be. Then ask a hospital nurse about waste, errors, and whether better system support would give her more time with patients. Or talk to a hospital executive like Paul Levy.
In Part 3, I’ll discuss the savings that can flow from deep structural changes in how we pay for care, and how it is delivered. These are the savings that cannot easily be counted, but, in the long run, may well count most.
Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.
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We disagree Maggie. I just dont think we can expect the cozy relationship between the government regulators with the healthcare providers and insurers to change just because we want them to or because a bill passed. Even if it does change for a bit, it will be short lived.
I fully support getting the money out of medicine, I just don’t think pouring more money into healthcare will do that. Getting money out of healthcare would help more!
Peter-
On single-payer . . .
Keep in mind that a great many people are enrolled in plans offered by non-profit insurers, and many are very happy with these plans. I think of Geisinger, Kaiser in Colorada, the Northwest, Colorda, N. California, Hawaii, as well as Geisinger, the Community Cooperative in the State of Washignton . . . I could go on.
AHRQ just came out with a list of the best insurance plans based on patient satisfactoin about 30% of memory serves) and quality of care. Consumer Reports published AHRQ’s findings (and consumer reports really is the gold standard for unbiased comparisons of services and products.)
There were two lists: one for Medicare Advantage insurance plans, one for regular insurance plans.
Non-profits dominated both lists. And in some cases, these plans receive higher ratings than Medicare (our single-payer health care for seniors)
I am very hopeful that, when the insurance industry shake-out has ended, these non-profits will dominate the market. I also would be perfectly happy to see a public option competing with them.
But I would hate to be limited to one plan. Look at what Margaret Thatcher and her conservative governement did to the UK’s single payer system. It is still recovering
Douglas–
That’s a good question.
The answer is that a Commonwealth Fund report by Karen Davis and economist David Cutler does try to take some of these provisions into account and “score’ them. They find even greater savings adn deficit reduction than the CBO.
The CBO does not try to score these reforms, and for good reason, says Peter Orszag. These reforms which aim to change how we pay for care (moving away from fee-for-service), and how care is delivered (accountable care organizatoins, more collaborative care as a result of “bundled” payments, etc.) are unprecedented.
As Orszag explains, it is very difficult to even estimate how much might be saved by a structural reform that has not been tried on a large scale before. The CMS Actuary agrees, pointing out that the effect of these reforms will depend on psychological responses by many actors. How will doctors and hospitals respond to financial carrots to move away from fee-for-service? How will hospitals respond to financial sticks (Medicare’s refusal to pay for wrong-site or wrong-patient surgeries, Medicare’s refusal to pay for an exessive number of preventable readmissions, Medicare’s insisting that hospitals disclose infection rates? Ultimately, Medicare will be making hospital infection rates public; how will patients respond–will they become wary of hospitals with high infection rates??
We know that some of these reform will save money. What’s impossible to guess is how much money–without reading the minds of how millions of actors will respond over the next 10 years.
In parts 1 and 2 of my post, I talk about the savings and new revenues that Can be scored. (I’ll be positing part 2 on HealthBeat in a couple of days). In part 3,
I will talk about the reforms you are talking about–the ones that cannot be easily scored because we don’t have enough past experience with them to come up with a ballpark estimate. I’ll explain these in some detail, and explain why there is good reason to believe that many will lift quality and reduce costs.
But not all reforms will work in some regions. Some medical cultures resist change.
But there is no doubt that there will be savings, and,most importantly, these structural reforms will have a long term effect on health care spending. These are long-term savings. Over the long term, they will “break the curve” of health care spending as we move away from rewarding volume, and put more emphasis on safety and outcomes.
Finally, on individual “behaviors.” The problem with trying to penalize people for obesity is that it is a disease–like cancer or diabetes. And we have no cure.
Physicians who work with obese patients will tell you that if they diet and exercise religously, under a doctor’s supervision, 98% will put back on any weight that they lose–even though they are still seeing the physician, and completely compliant. Obesity is an extremely complex disease that involves not just genetics and environment, but neurological signals being sent from the brain to the stomach.
In addition, many of the most destructive habits are closely aligned with poverty: smoking, excessive drinking, taking drugs, etc. Being poor, not having a job, not knowing if you will be laid off, knowing that your children are getting a sub-par education in public schools located in inner cities, knowing that your children are in danger on the street; being a working single mother and not having reliable day care–all of this leads to despair, depression and anger.
So, people self-medicate. Today virtually the only adults in the U.S. who still smoke are poor.
And most of these people are trapped. Economic mobility in the U.S. has fallen sharply over the past 2 1/2 decades. If you’re poor,your chances of moving up to the middle-class are much smaller than they were in the past, even if you try to get a good education.
Most physicians and medical ethicists believe that we should not try to penalize people for being poor. (For one thing, if you’re poor and depressed, you’re not going to respond to negative reinforcement.) If we
want them to be healthier, we should make sure that inner-city school have gymns, gymn teachers and safe playgrounds (most don’t); healthy school lunches (school lunches are least healthy in the poorest schools); neighborhood parks and playgrounds where adults and children can exercise safely; roof-top farming that bring fresh vegetables to poor neighborhoods; subsidies for grocery stores in poor areas that sell fresh fish, fruit etc. (Perishable items tend to be very expensive in stores in poor neighborhoods because turnover is slow.)
In addition, the correlation between descructive behaviors and lack of education is extremely high. Many public health experts would say that if we want to improve the nation’s health, the single most important thing we could do would be to invest in public education.
We have the highest level of poverty among children in the developed world. Until we change that, we probably shouldn’t blame the poor for being poor–and depressed.
There is an excellent documentary about the connection between poverty and health titled “Unnatural Causes”–
I’m sure you can rent it on line, via NetFlix, or elsewhere.
Finally, it’s worth noting that the “destructive behaviors” for which some people want to punish others are the behaviors that poorer people engage in.
What about Xtreme sports? Should people who enjoy these sports pay higher premiums? What about workaholics who work 15 hours a day–should they pay higher premiums?
What about workaholics with high blood-pressure and symptoms of stress –should they pay higher premiums?
What about very thin middle-aged women who are medically on the verge of anorexia? What about social drinkers who have an average of 2 (maybe ), martinis or other hard liquor each day?
We tend to be very tolerant of the self-destrutive behaviors that are more commonplace within our own social group—less tolerant of the self-destructive behaviors of those we tend to think of as “them” (the poor, etc.) .
Wow, censored yet again here. I guess this site really needs Ms Mahar to sell this legislation. Well, continue to erase my comments, and in the end, real objective and unbiased readers will see through the agenda.
As I said back at 7:45 or so tonight, while the post is now irrelevant as it is more than 5 days old, the story of Clinton and Meek is relevant here. Democrat agenda trumps public interest and needs.
I just the whistleblower(s) who come forward after the election blow this legislative intent right out of the water and into the rooms of every invested and concerned American.
And where will Ms Mahar run to if and when this happens? What, back to Yale, or Harvard, or some other democrat safe haven? Hey folks, just remember, it is deeds, not words, that define us. Blogging is only so powerful!
WRONG
” .. But, I guess “Owebama” policies are actually good for the country ..”
Wrong, cupcake. OWEbama tells his buddies in Europe and the Middle East that the USA is a lousy place — because the USA is better than he’ll ever be. HE is a zero — WE bailed him out.
And Nov. 2, he’s going to get his. Nov. 7, 2012, he’ll be calling U-Haul for the truck back to Mob-City.
All my friends in Asia are laughing at OweBama as weak, dithering, mendacious, and two-faced. Wish I had the time to join them in the laughter.
Bart, you need to read your whole link, which I won’t re-post here. In part:
“From the perspective of the taxpayers getting their money back, TARP has been a great success,” said Todd Petzel, chief investment officer at New York-based Offit Capital Advisors LLC, which has more than $5 billion of assets under management. “But there are other costs as the government made it possible for the banks to pay back TARP. Those costs can turn out to be larger, and their legacy could last longer.”
But, I guess “Owebama” policies are actually good for the country then – according to you and Bloomberg.
WRONG
” .. Nate, propping up Wall Street ..”
.. has returned a HUGE profit to U.S. taxpayers ..
http://www.bloomberg.com/news/2010-10-20/bailout-of-wall-street-returns-8-2-profit-to-taxpayers-beating-treasuries.html
Yeah, I know — OweBama and the Chicago THUG-mob don’t do math. That’s plainly (and painfully) obvious.
Sorry, the above comment is a bit of a duplicate. I couldn’t find the original and re-posted.
Nate, propping up Wall Street, the banks and a failed auto industry wasn’t considered “communism”, especially by the financial workers who had their bonuses preserved. We don’t
consider public education, police services, fire protection, water/sewage communism, do you?
“one major problem with single payer is that if you wind up with a bad government –foolish or corrupt people in office–they are now in charge of your health care system, and you have no alternative to that single-payer system.”
Maggie, seems with 50 years of insurance/provider control of the present system we don’t have much choice either. What type of alternative would you have in mind waiting in the wings – just in case? People vote for governments, don’t like what they do with your healthcare, vote them out. There is no social solidarity in this country to make the European system work here. Keeping the present provider/political controlled system in place coupled with our political finance system will only prevent true cost controls and will continue this multi-tiered system where good care depends on good income, or at least good subsidies.
“One ingredient necessary for any system to work is a communal commitment”
really and that is why communism has worked so well?
“Let me add– one major problem with single payer is that if you wind up with a bad government –foolish or corrupt people in office–they are now in charge of your health care system, and you have no alternative to that single-payer system.”
Maggie, seems we’ve had several “governments” in charge of our healthcare system over the past few decades and look how it’s turned out. Where do you propose we realistically go in this system for choices – to India? One ingredient necessary for any system to work is a communal commitment (social solidarity) for it to work, certainly more present in Europe. Right now there’s too many “it’s all about me” attitudes for any system in the U.S. to work, except the present failing “system”.
“Secondly, are there provisions within HC reform legislation to begin holding the patient accountable through financial incentive/penalties for his/her lifestyle behaviors”
Sadly just the opposite, with annual, lifetime, out of pocket, and other restrictions eliminated they have tied the hands of payors even worse. The new appeal laws almost force everything to be paid at 100%
Ms. Mahar,
I appreciate your attempt to objectively take a complex issue and break it down into bite size chunks. Has the CBO or any one else attempted to score the financial impact of payment reform? In other words, assuming accountable care organization-like delivery models become the prevailing mechanism for the payment of services, what impact will coordination of care, reduction of duplicative services, reduction of mistakes associated with incorrect or incomplete information, etc have on the system over the next 10 years? Secondly, are there provisions within HC reform legislation to begin holding the patient accountable through financial incentive/penalties for his/her lifestyle behaviors (smoking, obesity, non-compliance, etc.) much the way commercial insurance carriers have begun to do? If so, have those too been scored?
UTTERLY LAUGHABLE & WEIRD
If there was an iota of reality about OWE-bama’s health care LIES — why doesn’t Barb Boxer and Patty Murray promote them?
Answer: BOXER AND MURRAY are NOT FOOLS.
CBO? Those FOOLS said Medicare was only going to be a few billion — NOT $300 billion/year.
(Hey — they got their GUM-MINT pensions, quit bugging them! Just like Soros bought NPR!)
Notice how NO ONE is willing to be PERSONALLY ACCOUNTABLE for any potential FAILURES of OWE-bama Monster.
“Trust us,” they say. Sure — just like Mary Jo Kopecne did.
Sick, disgusting, and worthy of Congressional INVESTIGATIONS next year.
OK — play the gender card. Then the race card. Because you ain’t got nothing attached to reality.
Keep taking the shots about trolls, just shows that the defenders of this illogical defense of this legislation are not interested in it’s harms, just it’s shallow benefits.
Here is a very simple fact that will play out if the government thinks it can nickel and dime physicians: those with integrity and concern will not participate, or set very firm limits how many patients they will see.
Hey, don’t believe me, the troll MD, just stay focused that your alleged facts and expectations will not only prevail, but endure. 2012 will hopefully not be the end of the world, but 2014? What will all you defenders then demand if what I propose comes to fruition? Jail us all?
Hey, don’t dismiss that last comment, I have heard plenty of idiots who wrap this legislation around them like the flag suggest just that option!
And, I am not a conservative, if you have read some of the content of mine in past posts. I equally despise the left and the right. Rigidity and inflexibility in just towing the party line needs towing all right: OUT TO SEA!!!
Maggie I have to disagree with your statement: “I’m afraid your comment is filled with statements which are simply false. The cuts to physicians’ fees was never part of reform legislation–it was part of legislation passed in the late 1990s.” I think you meant to say was that the SGR formula was implemented in the 1990s. The SGR fix (“doc fix”) was originally part of the health care reform bill. The SGR fix was removed from the bill to keep the costs of the health bill below a targeted level, for fear that it would otherwise have little chance of passing. Here is one of many sources commenting on this issue from: http://www.nationalreview.com/agenda/230114/doc-fix-and-blame-game/reihan-salam
“Proponents then tried what can only be described as a cynical gimmick: they simply split the bills into two parts: a “docfix” bill that would add to the deficit, and a separate health care bill that would be advertised as lowering the deficit. Taken together, it was always the case that the bills would worsen the fiscal outlook. But by pointing only to the “deficit-reducing” bill and ignoring the companion “docfix” bill moving through the Congress, disingenuous claims that health care reform would reduce the deficit continued to be made on both ends of Pennsylvania Avenue.” Should we citizens not grow skeptical with this chicanery, or the “Cornhusker Kickback” provision and the “Louisiana Purchase” that were used in the process of getting this bill approved?
I appreciate your in depth analysis of the bill, but many of your assumptions are simply that…assumptions. There will be many unintended consequences that result from this bill, that even the most gifted academic pundits will not foresee. I agree with Barry Carol, we can learn a lot by observing what happens in Massachusetts.
Greg, Peter & Barry
Greg– Thanks much for the moral support. It’s so good to be reminded that there are many readers out there who may not comment but are actually interested in the issues.
Peter–
No European country has a single-payer system, yet they manage to regulate their markets so that health care spending is not excessive.
Do you believe that the market in the U.S. (or those who sell health care products and services in the U.S.) are so much more corrupt and greedy than those in European countries?
If not, then why can’t we manage to do what all of Western Europe has done?
Let me add– one major problem with single payer is that if you wind up with a bad government –foolish or corrupt people in office–they are now in charge of your health care system, and you have no alternative to that single-payer system. I don’t know how you feel about the Tea Party candidates, but let’s say that, like many Americans you find them a little frightening. And, let’s say one of them manages to win the White House(Palin?), while the Tea Party takes over at least the House. How would you feel about having them run a single-payer system? If you look back, U.S. voters have, from time to time, voted in some pretty bad governments . . .
Barry —Let me respond to your points in reverse order, beginning with #7
7–I don’t think this provision could or would be repealed for several reasons: a) legislators voting against it would be saying “we don’t care about the deficit” b) there won’t be enough votes in the Senate to repeal any significant part of the legislation c) if those who oppose reform did manage to gather enough votes in the Senate, President Obama would veto.
6–Paul Levy runs a large hospital and so is in a better position than any single doctor to explain a trend. His hospital analyzed what’s going on with imaging, and he talks to many other CEOs.
That said, as I indicated in my reply to Tony on HealthBeat, no doubt many factors are involved in less imaging including: the recession, a growing awareness among doctors that we are over-testing; a growing awareness among patients of the dangers of excess radiation; insurance companie changing financial incentives to encourage less testing. Medicare has already slashed payments for tests done by docs who own or lease the equipment (research shows they order twice as many testd) and private insurers have declared that they plan to reduce payments for testing. Past experience shows that when you do this, doctors don’t just order more tests. When testing is less lucrative, it just isn’t worth the effort. (The CBO has a good report on this.)
So when this recession finally ends, I think you will find that the medical culture has changed– less testing, and probably fewer resident slots for radiologists.
5–As you know, I agree with you on your proposals for malpractice reform. And the legislation calls for pilot project trying these very ideas. Moreover, if pilots are successful the legislation gives HHS the power to roll this out nationwide. (In the past, those who are obsesssed with capping awards have blocked other proposals, as have lobbyists representing physician groups who don’t like the idea of evidence-based guidelines.This is a major reason why they couldn’t make your proposals part of the law under the legislatoin. Too many in Congress are swayed by those who feel that caps on awards are the only answer. For them, this is all about crippling the plaintiff’s bar, and has little to do with healthcare.)
4 –Agreed. CMS is already beefing up efforts to weed out fraud. See all of the publicity surrounding the recent Medicaid fraud case. That publicity wasn’t accidental. Washington was sending a message: New Rules.
3– Yes, as I indicated in the post, this is a soft number. No one knows how many employers will decide to pay penalties. I suspect many small employers who couldn’t afford insurance in the past will take the tax credits and offer insurance, even if it costs them more than they are spending on benefits now. They know they will attract better employees.
2– You’re right–at present some brand name hospitals and physicians’ groups have more clout than insurers in quite a few markets.
But everyone agrees that under reform, there will be a shake-up in the insurance industry–and consolidation.
Only insurers that enjoy economies of scale will be able to make money under new rules saying that they can spend no more than 15% (large groups) to 20% (small groups) on administration. Other regulations regarding pre-existing conditions and essential benefits etc. will drive many small insurers that depended on underwriting and selling “Swiss Cheese” policies out of the market.
We’ll wind up with a market of fewer, much larger insurers that will have real market clout. Meanwhile, state regulators will be refusing to let them raise premiums without a very good reason. Simply saying “Hospital X is gouging us and we have to pay them 3 times as much for the same services as we pay hospital Y” will not go over very well with regulators. Very likely, the news about hospital X gouging will be leaked to newspapers, producing stories like the excellent series done by the Boston Globe. Those brand-name hospitals will have to become more efficient–reducing errors, improving teamwork, re-designing systems and reigning in docs with big egos who refuse to use checklists or collaborate with nurses. (See Wachter’s post right above this one.)
MedPAC has very good evidence that hospitals do not have to over-charge private insurers because Medicare payments are too low. Most hospitals turn a profit on most Medicare patients. I’ll be laying out the MedPAC evidence in part 2 of this post.
That said, obviously hospitals and physicians will need some protectiona against big insurers that have too much market clout. But the legislation spells out, in detail, what insurance must cover. And it provides funding for people to protest decisions by insurers. So insurers will not be able to deny payment for effective care as they did, too often, in the 1990s.
1) Yes, they’ll cut some of those EXTRA benefits, but as I explained in the post, people on Medicare Advantage say those extras aren’t worth much– maybe 11 cents on the dollar.
Moreover, there is no evidence that most of the Extras in any way improve health. Eye glass frames, gym memberships that people rarely use (or when they do go to the gym, they go to the sauna and chat with other seniors.) Few actually get a trainer and learn to work out in a way that might improve their health.
The one “extra” of value is lower co-pays. And, as you sayk, the cap on out of pocket spending also is very valuable.
But seniors can get those extras through MediGap–and it is not too expensive for the vast majority of seniors.
89% of seniors have either MediGap or Medicare Advantage. That means 64% have Medigap. Prices vary widely, as do benefits, but benefits are regulated in ways that makes them transparent.
A fairly small number of low-income seniors now on Medicare Advantage may lose low co-pays and caps and may not be able to find an equally good deal in MediGAp. (Though the best MA plans will keep the low co-pays while cutting other less important “freebies.)
Meanwhile, private sector insurers such as Blue Cross in Michigan are addrssesing the problem by restructuring MediGAp premiums, charging low-income seniors less, higher income seniors more. State regulators like the idea.
Finally, under reform 99.7% of seniors on MA will find that they still have access to a MA plan next year. More importantly, Medicare Advantage insurers expect that their market will continue to grow under reform. This suggests that the best believe that they can still offer low-co-pays, caps, and quality care that will attract customers. Meanwhile, under reform, the MA HMOS that do manage to improve health will receive bonuses.
Bottom line: the best MA plans will stay in business, and seniors will, I predict, be better off.
Alex–
Let me answer your question– if COLAs were reduced or eliminated, would I call that a “cut”. Probably not. Let me put it this way, COLA increases for Social Security were eliminated both this year and last year, but you didn’t see many headlines saying Social Security Cut– though in effect,this was a small cut (small because inflation is so low at this point)
Yes, you’re right Congress is saying we can’t resist the lobbyists. But voting these legislators out and replacing them with another set wouldn’t solve the problem: we now have a compaign financing system which all but guarantees that the vast majority of Congresspeople will be beholden to lobbyists. This is why we have a health care bubble (too much money chasing too few goods, many of which are over-priced.)
If legislators were able to stand up to lobbyists, they would have reigned in Medicare inflation long ago rather than letting Medicare get to a point where it looked like it might run out of money.
The only solution: campaign finance reform with teeth. Ideally, we would begin by limiting national elections to two months. Our extraordinarily long election cost a fortune in TV advertising, etc. (Unfortunately, broadcasters and cable stations would immediately try to block this provision. They count on the dollars from endless campaigns.) Next, we would put a cap how much corporations can contribute. (This would mean overturning a recent Supreme Court decision.) We would also cap contributions from other organizations, and finally we would put a cap on how much any candidate can spend in an election.
But none of this is going to happen in the foreseeable future. So the best we can hope for is that Congress will do what it has in this case–tie its own hands and cede power to what it hopes are fair-minded
honest health care experts in the administration.
This is far from an ideal solution. While I may be convinced of Sebelius’ and Don Berwick’s integrity (and I am) I might not be nearly as confident about the integrity of the Secretary of HHS and the head of CMS
in another administration. Ultimately, we need a body of elected representatives who are not unduly influenced by lobbyists’ money.
But I have followed U.S. politics for decades, and lobbyists have always had too much power.
In our money-driven society, over the past few decades, the problem has gotten worse, not better. Perhaps, given our system of “checks and balances,” we need a Supreme Court that steps in and rules in ways that create genuine campaign finance reform. But that is not going to happen with this court . .
Finally, thanks for a civil response to my comment.
Wow! The “divide and confuse” tactic by the small but very vocal group of right-wing trolls sure makes for a messy protrait. One-liners are all that conservatives do excell at. Their followers cannot go beyond one-liners. Educating those who have the ears to listen is not always an easy task Maggie. But keep up the good work! Some are so slow to change, it ends up taking creative and independent individuals, like yourself, to start the real changes. One needs to start somewhere, helping others to conceptualize more accurately, so they can better understand what is being done on a macro-basis.
Maggie do you really not know basic economics?
“including investment income– that meant income from assets.”
When you plan for retirement the intent is you spend down your assets, its not persumed you die with the amount of assets you retired with. Are you arguing younger gernations should pay more in taxes so retirees can have greater benefits so they can die with huge estates that the government can then tax at 50%?
I’m not worried about you confusing people its the out right lies and indoctorination.
“The average amount of financial assets was $101,518, and the average amount of nonfinancial assets was $250,590. Forty-four percent claimed that they had spent less than their income in the previous year, while 19 percent indicated that they had spent more than their income, and 37 percent reported that they had spent an amount equal to their income.”
Life expectancy is 78ish, so you have 13 years of retirement. That is roughly another 27,000 a year to spend.
“I guess you don’t know many seniors, or you would realize that very, very few have $500,000 in assets–or anything close to that.”
I guess you can’t be called a liar on this one as you can just claim many means 10 million. Apparently you never heard of CA, NV, AZ, or FL. All those retirees that move their and pay cash for houses, most of them have over $500,000 in assets. I also know numerous financial planners who make their living setting up plans for retirees with assets over $500,000.
Some facts for you since you seem unaware of any;
” the percentage of lump-sum recipients whose most recent distribution went entirely for consumption was 9.2 percent for distributions received through 2006, compared with 22.7 percent for those who received distributions through 1993.”
http://www.newamerica.net/publications/policy/facing_an_american_retirement_security_crisis
The first and second Quartile depend on SS for 20% and 55% of their retirement.
According to the Pew Research Center, the graying of the baby boomer generation will create an 18-year surge of retirees. Beginning in 2006, economists anticipate about 4 million people will retire each year. They project at least 400,000 a year will move to another state, bringing on average $320,000 to purchase a retirement home.
400,000 a year is not many Maggie? That is just their budget for buying a home, you once again have no idea what your talking about and just making things up to support your narrtive knowing most of your readers are to lasy to think or look anything up fot themselves.
“As Matthew H. has pointed out in the past, you are usually wrong. So why do you continue to comment on this blog?”
There is a differene between a liberal with an agenda saying I am wrong and you even once proving that I am wrong. On the other hand I have proven you wrone dozens of times. I comment for many reasons, one of which is correcting all your factual slayings. When not wasting my time correcting your errors I have plenty of productive conversations with other readers that know how to have a conversation without making things up.
The question is why do you continue to come on her with easily disproven propoganda knowing I will correct you?
Which misleading statements are you claimning to respond to by defining two ways of measuring average? Unless I misdefined average somewhere I don’t remember I don’t see how you have addressed anything.
You still ignore the spending down of assets as part of retiree’s “income”. Thje fact remains retirees don’t live on $20,000, they live on $20,000 plus 1/13th of their assets.
2004 MEDIAN household income for those 55-64 is $153,000 not including primary residence. Even by your terms you are wrong.
Barry, Medicare also doesn’t have caps for Part A, once to deplete your limit of hospital days your out for life, they also cap units of blood and other benefits.
“Regarding recent comments by Paul Levy at BIDMC about the decline in imaging at his hospital”
How does Paul know there is savings versus redirection? I am implemtning a MRI and CATscan Pre Cert for some of my groups, we activly are going to move imaging out of the hospital into free standing clinics. The test is still getting done just at a different facility. Pratice patterns don’t change at all.
“Further proof I think that we will continue the loosing chase of this cost/coverage monster until a single-pay system is established.”
Peter Medicare is single pay and it has the most problems with cost/coverage, why would expaning Medicare solve it’s failures.
“Nate, since you quoted the highest possible wage for garbage collectors, please allow me to quote the lowest, which is $8.93 per hour, with a national median of $15.42.”
I would like to see how they define for the national avergae. Your publicly employeed union trash collector does not make $8.93.
“I suspect you know very well that this statement is not entirely true.”
Actually Margalit know I am 100% correct, you link to a progoganda site that starts out with a bold misrepresentation of the facts then sinks from there.
“has found that Medicare pays private plans 14 percent more than it costs to treat the same beneficiaries in the traditional Medicare program.”
To make this statement and not mention the added benefits and reduced premium is rank dishonesty.
For starters I find it humerous the writer in your link doesn’t even know where the codes come from and how they are accumulated. She is aledging rampant provider fraud perpatrated in conjuntion with the healthplans, I would love to hear how she thinks this manifest.
One more thing Nate:
“MA delivers Medicare benefits cheaper then Medicare does.”
I suspect you know very well that this statement is not entirely true. MA payments are risk adjusted and for some peculiar reason MA folks seem to be getting sicker much faster than traditional Medicare folks. The HCC games (alternatively known as upcoding) are what allows private insurers to make rather large profits from their MA plans. I bet that if CMS took a serious stab at this issue, as they are supposed to be doing now, there will be less private payers interested in running MA plans.
For a gentle summary of the problem:
http://www.cbpp.org/cms/index.cfm?fa=view&id=2712
Nate, since you quoted the highest possible wage for garbage collectors, please allow me to quote the lowest, which is $8.93 per hour, with a national median of $15.42.
For preschool teachers, the lowest is $7.90 per hour with a median of $11.80.
http://bls.gov/
Working hard doesn’t necessarily mean one is wallowing in riches, and vice versa.
“I’m going to respond only tothe simplest misstatement in your comment Reducing increases by 1% does not mean “holding payments level.” Annual Increases are usually more than 1%.”
Thank you. I’m aware. Hyperbole sure, but under your definition of “cut” holding payments level would not be a cut, which is why I used that example. If someone were to propose improving SS finances by reducing or eliminating COLAs, you would describe this as a cut, right? PPACA cuts Medicare. You refer to all of the cuts as elimination of waste which is far from clear.
Referring to IPAB, you write: “This provision, alone, guarantees that the legislation puts a cap on Medicare spending.”
I think IPAB is a travesty as far as good government, but reasonable people can disagree over that I suppose. They are probably correct to realize they are too irresponsible as a body to actually address Medicare, but that seems a better argument for voting them out rather than handing off their duties to a star chamber. In any event, the IPAB is no more a guarantee than SGR was/is.
Hmmm, tried to post a comment and it would not go through. The beginning of being censored?
Rationalize and deny the less than genuine points you claim are facts and realities, then, project the disingenuous efforts onto the dissenters. Well, I am paying attention to the defenses being practiced here, and hope so will the readers who’s agenda is accessing fair and responsible insurance and health care.
Remember people, it took this congress 2500 pages to allegedly formulate this legislation, the supporters have admitted they did not read it, and now leave it to these spin doctors to manipulate and misrepresent what will be the truths.
I’ll go out on a limb and guess Ms Mahar will not be affected by this legislation as well, like, the people in Congress who voted for it!?
Come on, Ms Mahar, be honest on that point at least.