Saturday, April 3, 2021

The Final 12 States That Refused to Expand Medicaid Now Face Additional Federal Enticements

This hardly comes as a surprise. Medicaid was originally passed to cover the lowest 2% of American earners. It now covers 23%; and 1 in 3 babies is born into the program.  Over the last ten years the federal government is slinging money at states as fast as it can print and borrow it in order to further the addiction to taxpayer funded healthcare.   The fact that there are still 12 holdout states is the real story here.  From the Wall Street Journal:  

Some GOP-led states that previously declined to expand Medicaid are reconsidering that decision now that the $1.9 trillion pandemic-relief package has made billions of dollars available to enlarge the program.

The legislation passed by Congress last month boosts federal funding for two years to states that expand Medicaid, more than covering a state’s cost for increasing eligibility for the program, which is currently used by almost 79 million low-income and disabled people.

The availability of more federal funds is putting pressure on Republican leaders in some of the 12 states that haven’t expanded the program.


Friday, April 2, 2021

Who Will Really Pay for the Proposed Corporate Income Tax Hike?

 From Dr. John Goodman writing at Forbes:   

If there is one thing that virtually all economists are united about, it is this: corporations don’t pay the corporate income tax.  

Why is that? A corporation is not a person. It is a relationship ­– a relationship between workers, managers, stockholders, consumers and others. You can tax relationships. But relationships don’t pay taxes. 

The sales tax, for example, taxes a relationship between buyer and seller. But sales don’t pay taxes. People do. The burden of the sales tax must fall on the buyer, the seller or both. In competitive markets, economists think the full burden falls on the buyer. This conclusion makes sense to most people because they see the tax nominally added to the prices of the goods they buy at the cash register.

But what we see with our own eyes isn’t necessarily good economics. Take the payroll tax. This is a tax on wages. But wages don’t pay taxes. The burden must fall on the buyer (the employer) or the seller (the worker) or both. In practice (and by law), half the tax is deducted from the worker’s wages and the employer sends a check for the whole amount to the government. So, it looks like the worker is paying half and the employer is paying half.

However, careful studies by economists over many years show this is not the case. The burden of the tax is not determined by who writes the check to the government. It is determined by how the market adjusts to the tax. In this case the evidence is quite convincing: the full burden falls on the workers. That means that for every dollar of payroll tax the government collects, workers’ pay will be a dollar lower than it otherwise would be.

Full post here.  

The One Itty-Bitty, Teeny-Weeny Problem with the Plan to Expand Medicare

From Merrill Matthews writing at The Hill:  

It will be very expensive.

All workers have deducted from their paychecks a 2.9 percent Medicare payroll tax - split equally between the employer and employee. But those funds only pay for Medicare Part A, which covers hospital expenses. 

Retirees must pay out of their own pockets Part B and Part D premiums - which cover physicians' fees and prescription drug costs, respectively. But those premiums cover only about 25 percent of the cost of the programs. Taxpayers foot the other 75 percent.

And those costs add up quickly. 

Eugene Steuerle and Erald Kolasi of the Urban Institute track the average amount of money workers at various income levels pay into Social Security and Medicare and how much they can expect on average to receive in benefits. 

A male worker who made the median income his entire working career and retired at age 65 in 2020 can expect to receive from Social Security just about what he paid in. However, while he paid $81,000 in Medicare (Part A) payroll taxes, he is likely to receive $240,000 (net of premiums) in lifetime Medicare benefits. 

Lowering the enrollment age to 60 adds perhaps another $25,000 to $30,000 to that deficit.

And that's just for a single person. Consider a married couple with only one low-wage earner. That worker retiring at age 65 in 2020 paid about $36,000 in Medicare taxes, which qualifies both of them to participate in Medicare. But the couple can expect to receive about $522,000 in Medicare benefits. 

Thursday, April 1, 2021

In the Name of COVID Relief: People Making $350,000 a Year Can Now Claim $20,000 from Taxpayers to Buy a PPACA Exchange Plan (with Armstrong & Getty)

People who make $350k can now get $20k from taxpayers so they can afford a $51k exchange plan. That looks like this:
  • $51,059 is the cost of the benchmark PPACA Premium in Prescott, AZ for a family of 5 with a 60-year-old household head; 
  • $37,874 is the amount of subsidy they qualify for if they make $150,000 a year; 
  • $20,294 is the amount of subsidy of subsidy they qualify for if they make $350,000; 
  • $8,559 is the amount of subsidy they qualify for if they make $500,000; and 
  • $580,876 is the annual income at which this family no longer qualifies for a subsidy. 
Thank you to Brian Blase and Michael Cannon for doing the heavy lifting on most of the above numbers and pointing me to them, respectively.   

This is because, as Shepard Mullen explains
The [American Rescue Plan Act of 2021] provides for premium subsidies for the 2021 and 2022 calendar years. It completely subsidizes health insurance premiums for individuals who earn up to 150% of the federal poverty level for the second cheapest silver plan by area – a change from before where individuals up to 150% were only partially subsidized.... Premium tax credits also apply to, and provide considerable changes in premium contributions by higher earners. For example, individuals making 400% of the federal poverty level previously paid up to $5,017.  Under the Act, such individuals will max out at $4,338 for premiums. Individuals who earn more than 400% above the federal poverty levels will also receive premium subsidies, such that they will pay no more than 8.5% of their annual incomes for their marketplace health insurance premiums in total. These subsidies are retroactive, and thus may be claimed by individuals who have already enrolled....

Lastly, while typically individuals must repay any excess premium tax credits if their annual income exceeds 400% of the federal poverty level, the Act waives this repayment requirement for 2020.
And yes, these newly added subsidies are supposed to phase out after two years, but, as our President might say, "c'mon man."  We all know that will never happen.  These will become permanent as eloquently explained by healthcare expert Bob Laszewski in "The Democrats Are About to Set a Whopper of an Obamacare Political Time Bomb for Republicans."   

Keep in mind that back in 2016 before these latest changes happened, 70% of all healthcare in California (and about 64% nationally) was paid for by taxpayers.

Also keep in mind that folks paying for healthcare privately, such as on an employer plan, pay 240% more than those on government plans for hospital services.

And now, Hospitals Using Computer Coding Tricks to Evade Transparency Rules: WSJ Investigation. Hospitals and insurers are horrified at the thought of people starting to see the true prices are for procedures.  

What this means:
  1. As more are funneled into taxpayer funded plans, fewer care what healthcare actually costs.
  2. As hospitals are further squeezed by taxpayer-funded plans, they will require increasingly higher reimbursement rates from private/employer plans. 
  3. Reference Based Pricing (RBP) will become more popular for large employers wishing to keep health insurance.  Yes, this is a contentious route for employers as hospitals detest RBP, it confuses employees and can result in costly and time-consuming litigation.  Nevertheless, once RBP is in place, employers will only see 1.7% trend numbers as their plans can only inflate at the same pace as Medicare.  In RBP, large, self-funded employer plans eliminate their hospital networks entirely and agree to reimburse for hospital procedures at a fixed percentage above Medicare; for example, 140% of what Medicare pays.  This represents huge savings under the 240% employers pay now.  Often the first year in RBP saves an employer plan 20% to 30% overall.  I've written on this extensively here in "America Will Dramatically Change the Way It Provides Health Care by 2030"  
  4. The practical solution for many employers, especially those with less than 250 to 500 employees, will be to join into that 70%, drop health insurance and push employees to the exchanges. In fact, it will not surprise me if we see members of both political parties craft legislation that will eliminate PPACA's employer mandate paving the way for this to occur.  Democrats could support the concept as it would work to acclimate more people to government subsidies to buy healthcare.  Republicans could support it because they see the writing on the wall and realize that more government spending and greater deficits are a federal inevitability.  Hence, the GOP could see this as a way to, at least, launder those taxpayer funds through the enormous insurance lobby before doling it out to enrollees.  

Tuesday, March 30, 2021

Hospitals Using Computer Coding Tricks to Evade Transparency Rules: WSJ Investigation

A new January 1, 2021 regulation requires hospitals to disclose price information that they have long kept secret as part of a federal effort to increase transparency in health-care pricing. For the first time, the rule should be revealing the prices that insurers negotiate for many hospital services and the substantial differences in those prices. The data will help consumers find better pricing and help doctors and employers select the hospitals where they direct patients for the more cost-effective service. 

“Hospitals are evading the spirit of new price transparency regulations while technically following the letter of the law, a ‘Wall Street Journal’ investigation has found.

Hospitals that have published their previously confidential prices also have blocked that information from web searches with special coding embedded on their websites. The information must be disclosed under a federal rule aimed at making the $1 trillion sector more consumer-friendly. However, hundreds of hospitals embedded code in their websites that prevented Google and other search engines from displaying pages with the price lists, according to an examination of more than 3,100 sites.”

Source: BenefitsPro

By February, a different study illustrated that 65 of the top 100 hospitals hadn’t complied with the regulation. (Modern Healthcare).  

Thursday, November 19, 2020

Nevermind the GOP, Hospitals Set to Be Biggest Opposition to Biden's Desire to Reduce Medicare's Age to 60 Years

From California Healthline:  

Of his many plans to expand insurance coverage, President-elect Joe Biden’s simplest strategy is lowering the eligibility age for Medicare from 65 to 60.

But the plan is sure to face long odds, even if the Democrats can snag control of the Senate in January by winning two runoff elections in Georgia.

Republicans, who fought the creation of Medicare in the 1960s and typically oppose expanding government entitlement programs, are not the biggest obstacle. Instead, the nation’s hospitals, a powerful political force, are poised to derail any effort. Hospitals fear adding millions of people to Medicare will cost them billions of dollars in revenue.

“Hospitals certainly are not going to be happy with it,” said Jonathan Oberlander, professor of health policy and management at the University of North Carolina-Chapel Hill.

Medicare reimbursement rates for patients admitted to hospitals average half what commercial or employer-sponsored insurance plans pay.

“It will be a huge lift [in Congress] as the realities of lower Medicare reimbursement rates will activate some powerful interests against this,” said Josh Archambault, a senior fellow with the conservative Foundation for Government Accountability.

Biden, who turns 78 this month, said his plan will help Americans who retire early and those who are unemployed or can’t find jobs with health benefits.

“It reflects the reality that, even after the current crisis ends, older Americans are likely to find it difficult to secure jobs,” Biden wrote in April.

Lowering the Medicare eligibility age is popular. About 85% of Democrats and 69% of Republicans favor allowing those as young as 50 to buy into Medicare, according to a KFF tracking poll from January 2019. (KHN is an editorially independent program of KFF.)

Although opposition from the hospital industry is expected to be fierce, that is not the only obstacle to Biden’s plan. ...

Emphasis added. Full story.   


Friday, October 30, 2020

Three CalPERS Healthplans Are in a 'Death Spiral.’ Prices About to Skyrocket

 This is from the Sacramento Bee:  

Three of the best health plans California state workers and retirees can buy are speeding toward collapse, according to CalPERS insurance experts. ...

PERSCare, a broad-network PPO that covers about 93,000 people, will cost $1,112 per month next year for a single state worker. Projections show the plan would cost $1,841 per month by 2026.

Anthem Traditional HMO, with about 18,000 policyholders, will cost $1,200 per month next year. It would cost $2,202 by 2026 without changes, according to the projections.

Blue Shield Access+, a broad-network HMO covering about 89,000 people, would jump from $939 to $1,302 per month.

State workers don’t pay those totals. They pay a portion spelled out in union agreements. For the 2021 plans, the state is contributing $607 to $645 per month for most workers. Workers are responsible for the rest. SEIU Local 1000 members and state attorneys receive another $260 per month.

CalPERS is the second largest purchaser of health insurance after the federal government. 

2021 Benefit Plan Limits


Wednesday, September 23, 2020

U.S. Supreme Court Will Hear Challenge to PPACA on November 10th With or Without a New Justice - On Armstrong and Getty

   "But without an individual mandate, the law cannot fiscally balance."  
    - Okay Boomer.

In March 2020, the United States Supreme Court agreed to hear a legal challenge to the Patient Protection and Affordable Care Act (PPACA). The case involved is Texas v. Azar, a lawsuit challenging the constitutionality of PPACA after earlier elimination of the law's individual mandate - the portion of the law requiring all Americans to have health insurance or pay a tax penalty for failing to maintain such coverage.

PPACA Litigation

18 states filed Texas v. Azar after the elimination of PPACA's individual mandate.  In December 2017, Congress passed the Tax Cuts and Jobs Act, which effectively eliminated the individual mandate penalty, effective January 1, 2019, by making the tax penalty for a violation of that mandate $0. 

In December 2019, a federal appeals court ruled in the case that the individual mandate is unconstitutional and directed the lower court to determine whether the rest of PPACA can remain in place.  Specifically the federal appeals court held that, "the individual mandate is unconstitutional because it can no longer be read as a tax" since the Tax Cuts and Jobs Act reduced the individual mandate penalty to $0.  Once the tax was federally prescribed to be $0, the appeals court held that there is no longer any such "tax."  In 2012 PPACA was saved at the Supreme Court when the Obama Administration successfully argued that the individual mandate was valid as a tax and that the mandate was essential to the very essence of the law.  All people (healthy or ill) must be compelled to purchase health insurance, the argument went, if the law were to have any hope of remaining under its original $1 trillion price tag.

This latest argument by PPACA's opponents picks up on that thread by pointing out that if the individual mandate was absolutely essential to the law (as held by the Supreme Court in 2012) then the law now must be dead since there is no more individual mandate after congress reduced the individual mandate tax penalty to zero. 

The Supreme Court previously denied a request from the U.S. House of Representatives and several Democratic-controlled states to review the case on an expedited basis. The Supreme Court has now agreed to hear the case on its regular schedule, based on the argument that the lower court rulings create uncertainty about PPACA’s future. Oral arguments are scheduled for November 10, 2020 and a decision will be issued in the late spring or early summer of 2021.

This is the third time the Supreme Court has reviewed PPACA’s constitutionality. In addition to the 2012 case, in 2015, the Supreme Court upheld the constitutionality of PPACA’s health insurance Exchange subsidies.

Impact on PPACA

While this legal challenge is pending, all existing PPACA provisions will continue to be applicable and enforced. This challenge does not impact Exchange enrollment, PPACA’s employer shared responsibility (pay or play) penalties and related reporting requirements, or any other applicable PPACA requirement.

Supreme Court Vacancy

On Sept. 18, 2020, U.S. Supreme Court Justice Ruth Bader Ginsburg passed away at the age of 87. Whether the Court vacancy created by Justice Ginsburg’s death should be filled prior to the November election is the media's controversy de jour.  

Under federal law, the President is responsible for nominating a new Supreme Court Justice and the nominee must be confirmed by the U.S. Senate.

President Donald Trump indicates that he plans to nominate a woman to fill the vacancy on Saturday September 26th, and the Senate plans to hold a vote on the nomination. However, a number of Democrats in Congress believe that the nomination process should not take place until after the November election.  

Long Term Impact in the States 

If confirmed before the election, a new Supreme Court Justice could greatly impact the outcome of Texas v. Azar. It is widely expected that President Trump’s nominee will have a more conservative viewpoint and would be more likely to invalidate PPACA. In contrast, a Supreme Court Justice nominated by Joe Biden would be more likely to uphold the law.  

Until a nominee is confirmed, the practical impact of this decision remains to be seen. As a result, employers will want to closely monitor developments related to the Supreme Court nomination, keeping in mind that many states have already passed legislation mirroring PPACA.  

California, for example, has passed all of the statutes necessary to mandate employer sponsored coverage, individuals maintaining coverage, prohibitions against pre-existing condition limits, and an insurance exchange.  Much of the funding for PPACA, however, comes from the federal government.  So a repeal of PPACA would create a whole new plethora of nightmares for states that wish to continue insurance exchanges with subsidies.  Massachusetts, New Jersey, the District of Columbia and Vermont have all enacted individual mandates at the state level.   

Who Wins? 

There are compelling arguments on either side.  In a purely legal sense, the law's opponents have the better argument.  As stated earlier, this argument underscores that PPACA is only alive today because the Obama Administration argued and the Supreme Court agreed in 2012 that the individual mandate was absolutely essential to the law to PPACA's core operation.  To wit, without the mandate, only sick folks will buy coverage, premiums will spiral out of control and the insurance systems undergirding PPACA will crumble.  Now that the mandate is dead, the argument goes, the law must also die as contemplated by PPACA supporters and the Supreme Court's prior ruling.

PPACA as passed was projected by the CBO to come in at just under $1 trillion.  However, immediately after passage, federal administrative agencies began creating exceptions to PPACA's individual mandate.  This was done at the behest of PPACA's supporters in congress and the White House because those politicians realized it was going to be unbelievably unpopular to been seen as the party fining people who could not afford health insurance.  At peak political cynicism, there were 32 different "exemptions" to the individual mandate meaning that anyone with a reasonable degree of intelligence could exempt themselves from the mandate.  In fact, as it turned out, the mandate only ended up applying to two percent of Americans.  I've written about this here and here.

The better practical argument lies with PPACA's proponents.  And oddly enough it is exactly their political cynicism and America's complete fiscal dysfunction that supports this notion.  In the early stages of 2012, many honestly believed that the individual mandate was essential to PPACA's functional existence.  The whole concept of insurance is that we all buy it because some of us will really need it.  If we only allowed those who truly need it to purchase it and then compel insurers to sell it to them we end up with the disastrous phenomenon of adverse selection, whereby, the persons who insurers most want to sell to are the last ones to show up to purchase and vice versa. 

From 2012 to 2015 something else happened.  Federal bureaucrats sitting in administrative agencies like HHS, the IRS and CMS crafted these 30+ exemptions to the individual mandate.  At peak lunacy, we had exemptions that eliminated your need to buy health insurance if you received a shutoff notice from a utility company in the last six months (not that your power was actually shut off, just that you received a warning).  There was also an exemption in the early years that allowed you to opt out of PPACA's mandate if you tried to log into and the site was not functional.  And my favorite exemption of all was that you didn't have to buy insurance if you "felt" that it was too expensive for you and you had better options elsewhere.   Ah, the "feelings" exemption - a rigorous legal test if there ever was one. 

All throughout this time, there have been reinsurance mechanisms built into PPACA.  Without getting too wonky with insurance terminology this basically means that if the risk moving into PPACA's Exchanges ends up being worse than insurers anticipated, the federal government steps in and shares in those losses.  A cynic might call these "baked in bailouts."  And these very payments have come under scrutiny as well - but we'll save that for another day.

Beyond these reinsurance payments from taxpayers to insurers, insurance companies are also given fairly liberal leeway to set premiums as high as necessary in order to cover future bad risk.  And since 80% of PPACA Exchange buyers are making that "purchase" with taxpayer subsidies, the "buyers" don't care all that much about premium anyway.

So, in a practical sense, why do you need a mandate to make this program fiscally feasible if the federal government is ultimately going to make insurers whole and pay any form of required bloated premiums to keep the system afloat?  Therefore we now end up with a PPACA whose 10-year price tag looks more like $2 trillion as opposed to its original $1 trillion.  Eleven years ago, when PPACA was born, taxpayers and politicians at least pretended to care about a trillion dollar price tag.  That was seen as an incomprehensible sum of money.  Now, in the midst of a global pandemic and the worst economic depression in 100 years the $2 trillion of healthcare reform looks like a pittance.  Today, half of our country argues for Medicare-for-All at a thirty trillion dollar price tag.  And our Treasury Department in conjunction with the federal reserve digitally create and spread out $6 to $9 trillion in pandemic bailouts in the blink of an eye with a few strokes on their keyboards. 

So when we circle back to these arguments for and against the validity of the law, those arguing that PPACA must fall because without the individual mandate the law could balloon to twice as much as originally contemplated appear antiquated and well outside of the nation's spendthrift zeitgeist.  In a practical sense, we never had an individual mandate.  It was an IQ test that 98% of Americans passed with flying colors.  And while some thought it may have been necessary for PPACA's function in 2012, 2013-2020 have proven that it is clearly not necessary - all we have to do is throw another trillion at the problem.  And then maybe another trillion.  Chump change in the fiscal imprudence of today's politician.

Perhaps on November 10th when Justice Thomas points out that PPACA will have no chance of sustaining itself at its original projected price tag without an individual mandate, Justice Kagan will, under her breath, utter, "okay boomer."

Thursday, September 17, 2020

California Exempts Additional Occupations from Independent Contractor Classification Test (AB 5)

On Sept. 4, 2020, California amended the list of occupations exempted from using the state’s employee classification test, also known as “the ABC test” (AB 5). When the ABC test is not required, including when an exemption applies, employers may need to revert to previous methods to determine whether a worker is an employee or an independent contractor.

Modified List of Exempt Occupations

The amendments modified the business-to-business, referral agency and freelance writer exemptions. The amendments also added the following new exemptions (see full text for details):
  • Recording artists, songwriters, lyricists, composers and related occupations;
  • Musicians (for single-engagement live performance event);
  • Individual performance artists;
  • Licensed landscape architects;
  • Freelance translators;
  • Registered professional foresters;
  • Home inspectors and persons who provide underwriting inspections, premium audits, risk management or loss-control work for the insurance industry;
  • Manufactured housing salespersons;
  • Persons engaged in conducting international and cultural exchange visitor programs;
  • Competition judges with specialized skill sets;
  • Digital content aggregators who serve as licensing intermediaries for digital content;
  • Specialized performers hired to teach a master class for no more than one week; and
  • Feedback aggregators.
For companies like Uber, Lyft and DoorDash, Californians will vote on the issue this fall in Proposition 22.  
Establishes different criteria for determining whether app-based transportation (rideshare) and delivery drivers are “employees” or “independent contractors.” Independent contractors are not entitled to certain state-law protections afforded employees—including minimum wage, overtime, unemployment insurance, and workers’ compensation. Instead, companies with independent-contractor drivers will be required to provide specified alternative benefits, including: minimum compensation and healthcare subsidies based on engaged driving time, vehicle insurance, safety training, and sexual harassment policies. Restricts local regulation of app-based drivers; criminalizes impersonation of such drivers; requires background checks. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Increase in state personal income tax revenue of an unknown amount. 

Should Self-Interest Have A Role In Health Care? - Short History of How We Got Where We Are In U.S. Healthcare

From Dr. John Goodman, writing at Forbes:   
By the mid-1980s it was clear to almost everyone that something was amiss. Costs were not only rising at an unaffordable rate, they were getting increasingly out of line with what other countries were paying. So, the concerns of the doctors were pushed aside and, much to the doctors’ future regret, public policy began to encourage the emergence of for-profit hospitals, for-profit clinics and for-profit insurance plans. 
Unlike the stodgy non-profits, which tended to be wasteful and inefficient, the new entities competed aggressively. They literally changed the entire nature of their industries in a short amount of time. 
And that produced a new set of problems. 
Remember, year after year, decade after decade, we suppressed normal market forces in health care. So much so that no one ever sees a real price for anything. No doctor. No patient. No employer. No employee. 
When people face artificial prices that are significantly different from real prices, they invariably face perverse incentives. And aggressive competition in the face of perverse incentives can produce outcomes that are even more perverse.

Wednesday, September 16, 2020

COVID-19 Supplemental Paid Sick Leave Expanded in California

On September 9, 2020, California Governor Gavin Newsom signed legislation (AB 1867) codifying Executive Order N-51-20 which:
  • Mandates that a food employee working in any food facility must be permitted to wash their hands every 30 minutes as needed; and
  • Makes the COVID-19 food sector supplemental paid sick leave effective until December 31, 2020, or when any federal extension of the Emergency Paid Sick Leave Act (EPSLA) established by the Families First Coronavirus Response Act (FFCRA) expires, whichever occurs later.
The law also creates a new entitlement to COVID-19 supplemental paid sick leave for persons employed as health care providers or emergency responders. This new entitlement is also effective until December 31, 2020, or when any extension of the EPSLA expires, whichever occurs later. 

According to the Governor’s message, the law closes the gaps between paid sick days provided in federal law and the Governor's Executive Order. The law now includes employers with over 500 employees as well as all employers of first responders and health care employees who opted not to offer coverage under federal law. 

The Labor Commissioner can cite workplaces for a lack of paid sick days under the expanded law.