Life Support and Taxes

If the devil is in the details, we got the motherlode this past week as to how the most incendiary part of President Obama’s health reform will actually work when it launches next January.

The Department of Health and Human Services issued lengthy rules on the controversial individual mandate requiring uninsured Americans to purchase a health plan. The IRS followed with nearly as lengthy a set of rules specifying who is eligible for subsidies for those purchases and who pays penalties when they refuse. In what critics will consider an Orwellian flourish, both federal agencies refer to these penalties as “shared responsibility payments” — even though the Supreme Court, in its upholding of the mandate, plainly referred to them as what they are: a tax.

The two sets of rulings represent a sort of good cop, bad cop routine from the Obama administration. The bulk of the HHS rules defines individual outs for the mandate, identifying 11 different types of uninsured Americans who will be exempt from the de facto tax, ranging from sudden financial impairment to genuine religious objection to medical care. The IRS rules are all bright hard lines about who has to pay, when, and how.

The major media, echoing criticism by Obamacare’s agitators from the Left, seized on the stinginess of the IRS rules regarding subsidies and penalties for family members of people covered by their employers, or what they call the “family glitch.” The glitch is technically real, but statistically remote, and will affect almost no one in the real world, but it does make for good inflammatory headlines.

The much bigger story are those 11 classes of exceptions — because they will ultimately affect far greater numbers of people. After all those qualifying for exceptions are counted up, according to government estimates, only 2 percent of the entire population will end up uninsured and exposed to the tax.

If all those exceptions were not the administration trying to do the right thing, then at least they represent an attempt to accommodate critics about the mandate. Flush with political capital from the reelection, the president may be strong-arming Congress on gun control, the debt ceiling, and other matters. But those at HHS working to implement health reform are clearly mindful of, if not outright cowed by, the political rage over the mandate and its near-death experience in the Supreme Court.

Good luck with that. No amount of flexibility, reasonableness or nuance in the implementation of Obamacare will mollify its loudest critics on the right. Their hatred of the mandate is steeped in ideology about government overreach, galvanized by now chronic resentment over the way President Obama and the Democrats rammed the law through Congress in 2010, and burnished by collective unconscious anxiety about a bitter irony of the individual mandate: it’s their idea.

The Obamacare haters may fulminate against the individual mandate as a destruction of liberty and, with its cross-subsidies for the working poor, an expansion of the nanny state. Making people carry health insurance — rather than gambling on their health and then showing up in the emergency room when their luck turns — is a call to personal responsibility. But as I learned after pointing this out in The New York Times before the election, the real fuel for their fury is the consistency of the mandate with their own values. Had I been in the midst of a psychotic break when I noted that the individual mandate was formulated at the Heritage Foundation and championed by Congressional Republicans, I would have been laughed at or ignored. Instead, I hit a raw nerve and was pilloried by my then-colleagues at the American Enterprise Institute and a dozen conservative bloggers, including Senator Jim DeMint (R-SC) who now runs Heritage.

So let’s be plain: making people obtain and maintain health insurance is not the nanny state; it is grow-up time. The nanny state is what we have today, prior to full implementation of Obamacare, and what we have had since the 1986 passage of the Emergency Medical Treatment and Active Labor Act. EMTALA is the reason the emergency room has to take you in, insured or not, flush or broke. The law does not give the uninsured access to the full range of health care in this country, but it does mean the hospital cannot throw them out in the street if they are dying or delivering a baby.

Who pays for it? The rest of us, when we pay our hospital bills, directly through co-pays and indirectly through insurance, and when we or our employers pay for the insurance itself — all of it marked up to cover the cost of those who are too poor, too sick, or too reckless to buy their own insurance. This is why the Supreme Court overwrote the administration’s own sheepish legal defense of Obamacare, upholding the mandate and correctly identifying the “shared responsibility payment” as a tax for uninsured Americans’ 24/7 access to the U.S. emergency health care system.

EMTALA is one of the reasons hospitals famously charge $10 for an aspirin, and one more reason we all pay so much for health insurance. It is the costliest patch on the crazy quilt of our voluntary system, along with countless other patches ranging from public health clinics and bad debt, to physician charity care and drug company patient assistance programs. We are all paying for this nanny state care today — invisibly, mindlessly, and with maximum inefficiency — through cross-subsidies that pervade hospital and doctor bills, and drug prices. Obamacare is an attempt to unwind this subterranean nanny state and enfranchise the uninsured in the system before they become sick.

While the new HHS rules seek to exempt from the mandate people with true hardships or religious objections to medical care, the administration can and should match this flexibility with more muscle and cajole people to obtain health insurance by taking away their single best reason not to: by repealing EMTALA. Obamacare is systematically removing barriers to coverage — by outlawing pre-existing conditions exclusions, enabling enrollment through insurance exchanges, expanding Medicaid (except in states with governors who put ideology ahead of the needs of their poor and uninsured), and subsidizing coverage up to 400 percent of the federal poverty level. These carrots will work best at the end of a stick. As people run out of reasons they cannot carry their own health insurance, the best way to get them to do so is by un-doing the current nanny state as quickly as possible.

With EMTALA out-of-the-way, hospitals will be still be free to treat the uninsured — and those who do not qualify for one of the eleven exceptions — for free. More likely, they will enroll them on the spot, as part of the ER triage and admissions process, in an exchange-based health plan — another great way to increase participation. As part of an EMTALA repeal, Congress should enable “lookback” provisions for those health plans stuck with people who do not obtain insurance until their proverbial house is on fire.

The media who skipped over the bigger story in last week’s HHS and IRS rules, and instead went straight to the incendiary story at the long end of the demographic tail, will no doubt report the EMTALA repeal far and wide. And let’s hope they do. Those who still do not want to buy coverage, even when it is finally available to them — with subsidies for many and insurers no longer able to exclude anyone for a prior illness — will be free to die in the street in front of the hospital, unmolested by the nanny state. Don’t tread on me indeed.

Repealing EMTALA would address another criticism of Obamacare from across the political spectrum. The “shared responsibility payments,” i.e., taxes are too low to be effective — far lower than the cost of insurance — which will only embolden the refuseniks. If the political commitment of the “live free or die” crowd does not waver even when the chest pain starts, the hospital will be happy to accept cash, check or credit card. As for Christian Scientists, who take their right to refuse medical care so seriously they have gone to prison for letting their own children die of treatable illness, the repeal of EMTALA will not matter. They and others with religious objections to medical care are included as one of the 11 types of exceptions. The other 10 types suffer from various forms of financial hardship, with one group’s exacerbated by residence in a state with a refusenik Governor. The new HHS rules spell out how to legitimize and document each type; for them, EMTALA should still stand and those red states and its hospitals can continue to operate the classical form of the nanny state.

Obamacare is an enormous work-in-progress, every element of its implementation under immense scrutiny and political pressure. In the horse-trading on Capitol Hill that will accompany any amendments to the law, the Obama administration can and should use the repeal of EMTALA as the best way to call the Republicans’ bluff on the whole thing: we want to increase participation in the plan and you don’t want a nanny state — so let’s accomplish both by repealing EMTALA and let people decide for themselves.

As we implement Obamacare — using subsidies, employer requirements, individual mandates and “shared responsibility payments” to prod people into getting insurance coverage — EMTALA remains an obstacle, a contaminating artifact from a non-system we are trying to rationalize. People have been conditioned for decades to know the ER is there and has to take them in regardless — hence Mitt Romney’s backpedaling, right before losing the election, to EMTALA as a failsafe for his promised repeal of Obamacare.

Governor Romney dared take so absurd a position because he knows, like most Americans, that the pre-Obamacare nanny state allows anyone to free-ride on everyone who participates in the system — not buying insurance, rolling the dice, then running to the ER when something goes wrong. Because eventually, something will go wrong. The architects of health reform in most forms, along with the Supreme Court, recognize that we are all mortal beings and inhabit bodies that will eventually fail.

This is why we attempted decades ago to compensate for a broken insurance system by forcing hospitals to stabilize those who are suddenly ill or about to have a baby — regardless of their libertarian or religious bravado the day before. We are all paying, directly or indirectly, sooner or later, to take care of each other.

In American life, there are two certainties: hospital life support and taxes.

J.D. Kleinke is a medical economist, former health care executive, and author. He has been instrumental in the creation of four health care information organizations, served on the Boards of several public and privately held health care companies, and advised both sides of the political aisle on pragmatic approaches to health policy and legislation. In 2012, he was as a Fellow of the American Enterprise Institute. He has authored three books on the U.S. health care system, Bleeding Edge: The Business of Health Care in the New Century, Oxymorons: The Myth of a US Health Care System, and Catching Babies. His work has appeared in The Wall Street Journal, The New York Times, Barron’s, Health Affairs, JAMA, the British Medical Journal, Modern Healthcare, and Managed Healthcare.

11 replies »

  1. Simply paying insurance premiums does not fund healthcare…. It funds the insurance industry.

    As for the MVC scenario, I will pay it over time, IF it occurs.

    Who is paying for the vistits? No one! That is why EDs are using extenders. My PA’s are excellent, but they are not physicians. But no ED will everhave just physicians ever again. I am ready to shrink to one doc at a time and add more extenders.

  2. Is there not an urgent care center in your city where the frequent flyer could be referred to at $75 a visit? Is he constantly drunk or on drugs?

    In some cities, I totally agree, the ER is the only public health facility around.
    It should not be.

    As citizens we pay for a certain number of fires that are started by carelessness. I think it is a modest price to pay so that all get humane treatment.

  3. That quarter mill you could’ve stashed away wouldn’t put a dent in the bills you would rack up after a catastrophic event such as an MVA with critical injuries requiring multiple surgeries, a prolonged hospital stay, medications, rehab, and a multidisciplinary team of doctors, nurses, and ancillary staff that would work to save your life. But hey, insurance benefits have diminished and premiums have increased and continue to do so. I agree with that. But it’s certainly better to be insured when you need it. It beats losing everything you’ve worked for because you don’t have it.

    Please explain how the people who pay insurance are not paying for the EMTALA crowd? I’m quite sure that if you have insurance these days, then you’re paying taxes. The EMTALA crowd is comprised of self-payers who generally don’t self pay and the Medicaid crowd who are too busy getting their nails done and blinging out their iPhone to see their PMD, so they come to the ER on their own sweet time. There are a few true emergencies thrown in here and there, but that’s certainly the minority. Who is paying for their visits? Oh yeah, that would be you, me, and the rest of working America.

  4. That would be one helluva ER you would have to build, my friend. Consider this: Approximately 15% (conservative estimate) of the people who present to the ER are there for actual emergencies. The other 85% of our patient population come to the ER for the great pain meds, the sandwich trays, heat in the winter, a/c in the summer, work excuses, school excuses, psych holds, ‘I dropped my Lortab down the sink and need a refill’ syndrome, pregnancy tests (because it’s free when you have Medicaid), and my personal favorite ‘my baby got a fever and no I don’t have no thermometer or Tylenol at home – that’s what you here for.’ Saying we can run an ER on taxes set aside for it just like setting aside taxes for a fire department is not a feasible solution at all. It works for the fire department because they don’t extinguish 152 fires in a day. In our 21 bed ER, we see 140-150 patients a day. Yeah. You want to have a government run ER and collect my hard earned money to pay for ‘everyone to have a free ride?’ That’s ridiculous. I’m already paying taxes to fund 85% of the patient population’s free ride. I would love to go ahead and up that to paying for 100% free rides in the ER. Guess what would happen if EMTALA was rescinded? No. More. Free. Rides. In. The. ER. For. Bullcrap. Complaints. ERs that aren’t perpetually backed up. We would have time and staff to treat your emergency when you really have one.

    The other flaw in your argument is this. I am 36 years old. I have been an ER patient exactly FOUR times in my lifetime. That’s it. We have a regular in our ER that has racked up THIRTY-SEVEN visits already for this year. That’s the year 2013. It’s only March 2013. I’ll let that sink in for a minute.

  5. Mr. Kleinke is a perceptive writer and the bloggers here are all good, but I think that EMTALA is the wrong villain.

    When our homes have an “emergency” such as a fire, we call the fire department. The fire department gets an annual budget. The accounting cost of a serious fire can easily be $10,000, when you add in overhead, but no fire department has to collect this from the victims of the fire.

    We do not pay for fires one fire at a time, and we tax the entire community to pay for a service that some will need once every decade, and many will never need in their lifetime.

    We do have fire insurance companies, but that is to replace property. We do not expect the insurance companies to pay the salaries of firemen or the cost of their equipment.

    This is truly a little ‘sloppy.’, in that some citizens pay very little for fire protection (because they are poor), yet in any give year a few citizens get a stupendous benefit.

    And no one cares. This is the beauty of public goods.

    It would not be easy to figure out just how to pay each emergency rooms with taxes, given the many types of hospital organization.

    But it is hardly impossible.

    So in summary, the issue is not that some people get a free ride in EMTALA.
    Support ER’s like fire departments, and everybody gets a free ride because everyone pays taxes.

  6. Quite an entertaining piece….right up to the point where yousaid the rest of you were paying the hospital bill for those who are treated without paying due to EMTALA.

    It sounded quite good and you will have most people nodding thier approval.

    Only it is BS.

    None of you when you go for care are paying cash, so none of you are paying your OWN bill, much less paying for the EMTALA crowd. Your private insurance, led by the gang of 536 (counting the President at any given time) have stolen far more than they have paid. It is why the list price of everything is so high for the cash patient. The extortionists have done just that, declared they will pay less than list or take their patients to another hospital.

    The insured who are never sick are not paying for anyone’s care. I personally have claimed a whopping $150 in 30 years of coverage. That is a quarter million I could have saved and invested and had available for my care when I needed it. They scare people into thinking they cannot live without insurance. You could if the gov’t had not hijacked healthcare with MediCare.

    Your average Emergency Deparrtment is collecting about 35% AFTER contractual adjustments. In 1982 it was 80%.

    If the relationship between list and paid were to close, no one would need the type of coverage now purveyed. You would not need ObamanaCare. and it would never pass. Imagine that.

  7. JD-

    1. Where in your analysis do you note that liberals- starting with the Unions and the Calfornia Nurses Association (supported by then-Senator Obama) were the biggest opponents of the mandate (surely you are aware of who led the opposition to Romney in MA and Arnold in CA)?

    The left’s conversion is noble, but conservatives are hypocrites?

    2. EMTALA, as you know, was legislation in response to tragedy — never a recipe for good policy.
    Due to the burdens of EMTALA, arguably many more die due to lack of specialist coverage at emergency rooms than ever did due to transport to county or city hospitals.

    Threatening to repeal EMTALA, paired with an ability to restore a functioning city/ county hospital system, ‘grown up’ behavior to fix the SGR — now, that is a recipe you might get some buy in for…

    But taunting political opponents (not with a small amount of bitterness in your tone) with a long winded half-story is not very convincing.