Tax Fairness: Families at the same income level should get the same help from government when they obtain private health insurance, regardless of where they obtain it. The federal government encourages the purchase of private health insurance through the tax system. Yet the current approach is arbitrary, regressive and unfair. Instead of paying taxable wages, employers are able to purchase health insurance for their employees with untaxed dollars. These employer-paid premiums avoid federal income taxes, federal payroll taxes (FICA), and state and local income taxes as well. This “subsidy” is worth almost half the cost of the insurance for a middle income family. Yet the same family receives virtually no tax relief if it purchases the insurance on its own.
Because of the way we subsidize private health insurance, the higher the family’s tax bracket, the greater the subsidy. A family earning $100,000 gets six times as much tax relief as a family earning $25,000. We are giving the most encouragement to those who need it least.
As an alternative, we should replace the current system of tax and spending subsidies with a system that offers everyone a uniform, fixed-dollar tax credit for the purchase of health insurance. The credit would be refundable, so that it would be available even to those with no tax liability. A reasonable goal, for example, would be a credit of $2,500 per adult and $8,000 for a family of four.
Universality:Unclaimed tax relief should be made available to local safety net institutions to be used in case the uninsured cannot pay their own medical bills. If an individual chooses to be uninsured, the unclaimed tax credit should be sent to a safety net agency in the community where the person lives. These funds would provide a source of finance in case the uninsured are unable to pay their medical bills.
Under this approach, the government pledges a fixed sum of money for every individual and money follows people. If everyone in Dallas County opts to obtain private insurance, there would be no need to fund a safety net and all the government’s support would be in the form of tax credits for health insurance premiums. On the other hand, if everyone in Dallas County opts to be uninsured, all the unclaimed tax credits would go to safety net institutions in Dallas.
This is an easy reform to implement, even if peoples’ insurance status changes often over the course of a year. All the federal government needs to know is how many people live in each community. If the tax credits claimed on income tax returns fall short of their potential for the community as a whole, the balance would be provided in the form of a block grant to be spent at the local level.
The Affordable Care Act envisions a major expansion of health insurance in America, with some 30 million Americans gaining coverage. That figure includes some 17 million people with low incomes who were to get health insurance via an expansion of Medicaid eligibility. With eligibility raised—from 100 percent of the poverty level to 133 percent—many states will enlarge their Medicaid rolls and pay for it with federal funds, at least for a few years.
But the Supreme Court clouded that part of the vision last week, ruling that states cannot be penalized for refusing the federal money—thus leaving in doubt how many of the projected 17 million poor or near poor citizens will actually get coverage.
In short, the Supreme Court allowed the federal carrot to remain, but took away the stick. Matt Salo, the executive director for the National Association of Medicaid Directors, an organization for those who run state programs, summed it up for The Washington Post: “Prior to the court’s decision, failure to implement this expansion meant you [the states] lost all your Medicaid funding. Now you have a political and financial decision to make: Do you do this?”
Thursday, when Chief Justice Roberts explained that the Affordable Care Act (ACA) is constitutional because the “penalty” that some Americans will have to pay is, for all practical purposes, a “tax,” you could hear tea cups shattering from Billings to Boca Raton. In conservative and libertarian circles, the initial reaction was shock, but it didn’t take long for President Obama’s opponents to rally.
The word “tax” might as well have been a pistol shot at a horse race. In the blink of an eye, Obama’s opponents were off and running, megaphones in hand, blasting the president for lying to the American people while hiking taxes under the guise of healthcare reform. Presidential candidate Mitt Romney’s campaign then began providing regular Twitter updates on the campaign contributions it was raking in following the decision. Friday, it announced that it had collected $5.5 million.
Will Republicans suceed in turning defeat into victory?
Sarah Palin is convinced that they will. On her Facebook page, she celebrated: “Thank you, SCOTUS. This Obamacare ruling fires up the troops as America’s eyes are opened.” Palin, like Republican leader Mitch McConnell, believed that the Court’s ruling would galvanize Republic voters, sealing Romney’s victory in November.
This might be true if conservatives were not already so ardently committed to what McConnell has called his party’s “single most important” goal: “for President Obama to be a one-term president.” As Democratic pollster Celinda Lake noted, “Republicans are already as energized as they can get.” It would be hard to turn up the dial on their passion. Opinion surveys have shown that Republican voters alreadyweremore motivated than Democrats to go to the polls this fall. (In November, Obama’s challenge will be to get his supporters out, including those who are disillusioned that the president hasn’t done more to help the poor and the unemployed. )
One of the few health policy issues that receives bipartisan support is the need to dramatically alter the way providers are paid, shifting from “paying for volume” to “paying for value” to alter the trajectory of health care spending while improving health care quality.
To facilitate this shift, the Affordable Care Act equipped the Centers for Medicare & Medicaid Services with a range of cost-cutting and quality-enhancing tools―the most significant of which might be its new Center for Medicare and Medicaid Innovation. In this blog post, we share insights from recent research funded by the Robert Wood Johnson Foundation on the Innovation Center’s new role, organization, and model selection criteria.
Based on interviews with senior leadership, it’s clear the organization sees its role as two-fold: complementing existing efforts to innovate; and delving into new ideas.
Most of the Innovation Center’s efforts to date have focused on the former―implementing congressionally-mandated demonstrations or ideas that Congress or policy experts have already conceived (e.g., accountable care organizations). More recently, the Innovation Center has begun to seek new ideas from innovators across the country and to promote bottom-up innovation―primarily through its Innovation Challenge.
Defying predictions that the Obama administration would suffer a landmark political defeat, the US Supreme Court upheld the Affordable Care Act this morning. The implications for healthcare for the 2012 election are obviously nothing less than staggering.
What will the landmark legislation mean for the healthcare industry? For heath IT companies? For hospitals and health insurers?
We’ll be posting reactions from THCB analysts over the course of the day and in the days to come. In the meantime, if you have an opinion on the ruling, post your comments in the thread below.
If you can’t wait, you can download the ruling here in pdf format.
Americans believe in second chances. Mitt Romney will get his if the Supreme Court rules to throw out part, or all, of the president’s federal health insurance law. Should Romney propose replacing it with a federal version of the Massachusetts health law or a federal mega-bill that mandates a one-size-fits-all free-market solution?
The question is now central to the election — the high court has made that certain — and eclipsed in importance only by the debate over jobs and the economy.
President Obama may cite Romney’s Massachusetts reform as an inspiration for his own efforts, but there are profound differences between the laws — the size and reach, financing, the underlying philosophy. Romney sought an open marketplace for individuals to purchase benefit plans ranging from catastrophic to generous. Romney’s successor, Democratic Governor Deval Patrick, has obscured those differences by taking a big-government approach to implementation, drastically limiting choices and mandating minimum coverage levels beyond private-market norms.
Even with weak implementation, the Massachusetts law has yielded some positive results, including broadening insurance coverage, especially for minorities, and decreasing premiums for individual purchasers of insurance.
The Supreme Court’s imminent decision on the Affordable Care Act will trigger a political firestorm whether they accept the legislation in its entirety, throw out every page of the 906-page bill or do something in between, which is the most likely outcome.
If the high court follows the polls, it probably will rule the requirement that individuals purchase insurance – the mandate – is unconstitutional but leave the rest of “Obamacare” intact. A CBS/New York Times poll released earlier this month showed that 41 percent wanted the entire law overturned, 24 percent supported it fully and 27 percent supported it but wanted the mandate eliminated.
Pooling the latter two groups suggests there is majority support for the coverage expansion, insurance protections and delivery system reforms contained in the bill – as long as there is no mandate. It was only the Obama administration’s decision to include the requirement that individuals purchase health coverage – something done to win insurance industry backing for the law – that gave opponents the cudgel they needed to stoke widespread opposition to reform.
The insurance industry, recognizing many of the reforms are popular, is already preparing for a thumbs-down ruling on the mandate. Three major carriers, UnitedHealth, Aetna and Cigna, said last week they would continue to allow young adults to stay on their parents’ plans until age 26, pay for 100 percent of preventive services and eliminate lifetime caps on coverage, reforms from the ACA that are already in place.
It’s one of those clichés peddled at health care industry conferences by consultants who charge by the hour for helping attendees brace their organizations for all those terrifying changes just over the horizon. Not only is this cliche not true, but it is exactly untrue. The only constant in health care is gnawing anxiety about change that never actually occurs.
The Obama Administration’s health care reform plan – we can all call it “ObamaCare” now that the Administration finally owns the label it should have from the outset – is the motherlode of anxiety over change about to storm through the health care system. That is, unless you happen to cover your ears and block out all the partisan screaming, along with the political ideology dressed as legal arguments in the Supreme Court this week, and look at the actual plan and its numbers.
Yes, ObamaCare is expected to cram 30 million uninsured people into the current non-system. Complementary elements of the law make it illegal for health insurers to kick any of us out if we get too sick or stop paying our bills if we get too expensive. And if an insurer makes too much money in the process, it needs to refund a portion. Aside from these four economically intertwined health insurance market reforms, most everything else about ObamaCare is business as usual.
Mitt Romney’s entire career reflects a businesslike approach. On the one hand he has been willing to act boldly to solve problems. On the other hand he has been willing to keep what works and discard what doesn’t. The latest Romney pronouncements on health policy are consistent with that history.
As President Obama has said on many occasions, ObamaCare is based on a health reform Governor Romney spearheaded in Massachusetts. But blindly copying a health reform — while ignoring what’s really worth copying and what’s not — is hardly sensible presidential leadership.
Here is what is good about the Massachusetts health reform: (1) Governor Romney brought both parties together to achieve genuine bipartisan reform (something Barack Obama failed at miserably at the national level); (2) he cut the insurance rate in half by giving substantial tax relief to people who must purchase their own insurance, and (3) he did all this without raising taxes.
With just a couple of weeks to go until we hear from the Supreme Court on the fate of Health Reform, bankers and the investment community are making grand pronouncements that M&A activity is “on hold” until the Court opines.
This is just not true as you will see below.
Here’s an excerpt with an evocative title from PEHub’s coverage of the annual Jeffries Healthcare Conference just this week (emphasis added):
Private equity investing in healthcare is on pause this year, according to executives speaking Wednesday on the panel “Financial Sponsors Perspectives on Healthcare Investing.” The industry is waiting to see whether Mitt Romney succeeds in overtaking President Obama. Also, dealmakers wants some clarity on President Obama’s healthcare reform bill….
Healthcare M&A has slowed this year. So far there have been 1,073 globalannounced M&A deals, valued at $75.3 billion. This compares to 2,729 deals in all of 2011 which totaled roughly $229.6 billion….
“Once we get clarity, and past Obamacare and the presidential election, we will see more deals,” the exec said.
The problem with this is that it might make for good reading or for an “entertaining” panel discussion at an investment banking conference, but it doesn’t reflect reality.