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.
In the aftermath of the recent election, virtually all commentators were quick to conclude that ObamaCare has been saved. The health reform law can now go forward and Republicans are powerless to stop it.
The trouble is: ObamaCare is a deeply flawed piece of legislation. Its defects are so huge that Democrats are going to want to perform major surgery on it in the near future, even if the Republicans stand by and twiddle their thumbs.
That raises this question: What changes need to be made in the legislation to turn it into a health reform that solves existing problems without creating even more serious new problems? Here are six essential short term fixes:
Subsidize all insurance the same way. The way the government subsidizes health insurance under the current system is arbitrary and unfair. Employees with employer-provided insurance get that benefit tax free — a subsidy that is worth almost half the cost of the insurance for middle-income families. However, there is almost no subsidy available for people who must purchase insurance on their own. They must pay taxes on their income and then buy the insurance with what’s left over.
Under ObamaCare the subsidies become even more arbitrary. Although the new law creates generous tax credits for low and moderate income families who must buy their own insurance in newly created health insurance exchanges, the subsidy in an exchange can be as much as $12,000 higher than the same family will get if the same insurance is obtained through an employer!
The morning after Tuesday’s vote, there is one thing every commentator agreed on. The election of Barack Obama guaranteed that his signature piece of legislation — health reform — can now go forward. Republicans are powerless to stop it.
Yet there is something all these commentators are overlooking. There are six major flaws in ObamaCare. They are so serious that the Democrats are going to have to perform major surgery on the legislation in the next few years, even if all the Republicans do is stand by and twiddle their thumbs.
Here is a brief overview.
ObamaCare is not paid for. At least it’s not paid for in any politically realistic way. As is by now well known, the legislation will lower Medicare spending over the next 10 years by $716 billion in order to fund health insurance for young people. This reduction will primarily consist of lower payments to physicians, hospitals and other providers — reductions that are so severe that they will seriously impair access to care for senior citizens.
While all eyes focused on the presidential race, the ultimate fate of the Affordable Care Act (ACA) could depend on the Senate contests in the states.
Even if Mitt Romney were elected, he alone could not overturn major provisions of healthcare reform. Only Congress can pass the legislation needed to change the ACA.
Republicans are expected to maintain control of the House, but if Democrats hold the Senate, they will be able to block House bills aimed at eviscerating “Obamacare.”
What is at stake
If Republicans take the Senate, the two chambers could pass legislation that would:
· eliminate the premium subsidies designed to make health insurance affordable for middle-income and low-income families
· bring an end to Medicaid expansion, and
· rescind the individual mandate that everyone buy insurance or pay a tax.
Under “budget reconciliation,” Republicans would need only a simple majority to pass such legislation. In the Senate, 51 votes would do it. Today, Republicans hold 47 seats.
Now that the Supreme Court has decided that ObamaCare’s mandate to buy health insurance is a tax, will the IRS be able to collect it?
Generally speaking, if you owe the IRS, it will get the money from you—with the possible exception of the ObamaCare tax. Though ObamaCare’s individual mandate imposes a tax on people who do not purchase government-approved health insurance, the law explicitly neuters the IRS’s ability to collect the tax.
Bizarre? Yes. And it matters. If policymakers expect uninsured young people to buy health insurance when it is even more expensive than it is today, the threat of serious consequences for not doing so must be real. Yes, the threat that the IRS might come after you if you do not do what you are told looks real at first glance. But Democratic politicians, fearing public backlash for making the mandate too intrusive, pulled its teeth.
First, the tax (nee penalty) is too small to matter to the people who are its target. In 2014, the tax will be the larger of $95 or 1 percent of taxable income for an individual. By 2016 it rises to $695 or 2.5 percent of income. Young people would not want to pay a dollar if they could avoid it, but avoiding the tax means signing up for insurance that many do not think they need. That insurance is not free. Even with subsidies, they will pay at least 3 percent of their incomes for premiums and up to 6 percent of the cost of the insurance in deductibles and copayments. That adds up to a lot more than 95 bucks.
Since the Supreme Court upheld the ACA/Obamacare, there has been a renewed interest in the Massachusetts healthcare law. I have blogged many times before to caution readers and the media not to assume the two laws will lead to the same results, because they won’t, mostly as Massachusetts is not the same patient with the same ailments as New Mexico, or Michigan, or even Florida.
I know I am fighting against the conventional wisdom, but this issue warrants discussion as Congress passed a national program and modeled the behavior and cost estimates (incorrectly in my opinion) partially on our experience here in the Bay State.
As a result of the national interest, I assume we will see more local reports on Romneycare. On cue, WBUR’s CommonHealth Blog put up:
Now that the Supreme Court has spoken and upheld the Affordable Care Act (ACA), how exactly does this impact state governments?
One of the biggest ramifications of this decision revolves around the ACA’s individual mandate requiring citizens to purchase some form of health insurance or face a penalty, and the subsequent requirement for each state to establish a health insurance exchange (HIX).
While many states have spent the last two years preparing themselves in some capacity to set up an exchange, the amount of progress made varies greatly from state to state. Some have taken measureable strides to ensure their exchange is up and running to meet the October 2013 enrollments and January 2014 coverage effective deadlines set forth by the ACA, while others have been waiting on the final decision from the Court. Now that it’s been made, we’re going to see these states in a scramble to build their HIXs in accordance with the ACA’s mandates and timeline.
What we’re hearing from our clients indicates the majority want to make health reform as state-specific as possible. In other words, they want to maintain control over their HIX rather than defaulting to the federal solution. But as the certification deadline looms, it’s increasingly important for states to consider a comprehensive solution that doesn’t require building a product and allows time for customization.
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.
“I think the vote will be 6:3 in favor with Kennedy and Roberts voting for.” There is “No doubt it is constitutional,” he declared. “Legally, this is an open and shut case.”
Emanuel, now chair of the Department of Medical Ethics and Vice Provost for Global Initiatives at the University of Pennsylvania, also revealed that he recently had dinner with Supreme Court Justice Antonin Scalia. Emanuel says Scalia will not vote for the reform bill. (No surprise there.)
For reasons I have explained in earlier posts here and here, I tend to share Emanuel’s optimism. Nevertheless, I could easily be wrong.
Like waiting outside the Vatican for the puff of white smoke, the nation sits on edge awaiting the Supreme Court’s ruling on the Affordable Care Act. The ruling, which is likely to be announced next week, could toss out the entire healthcare reform bill, chop off one of its limbs (probably the so-called individual mandate), or leave the ACA intact. Whatever the ruling, it will be chum for the blogosophere, particularly in the heat of presidential silly season.
The two fundamental challenges to American healthcare today are how to improve value (quality divided by cost) and how to improve access (primarily by insuring the tens of millions of uninsured people). The bill sought to address these twin challenges in ways that were complex and intertwined. I’ll argue that a decision by the Court to throw out all or part of the ACA will have a profoundly negative effect on the access agenda, but surprisingly little impact on the value agenda. To understand why requires that we focus less on the bewildering details (mandates, insurance exchanges, PCORI, CMMI, IPAB, etc.) and more on some big picture truths and tradeoffs.
The job of any healthcare system is to deliver high quality, safe, satisfying care to patients at the lowest possible cost. Although America certainly does specialty and high tech care like nobody’s business, on all of the key dimensions of value we aren’t very good. The numbers tell the sorry tale: we provide evidence-based care about half the time, there are huge variations in how care is delivered, we kill 44,000-98,000 patients per year from medical errors, and we spend 18% of our gross domestic product on medical care, far more than any other country.