Thursday, November 21, 2013

Uh-Oh, New Death Spiral Alert: Hospitals Can Pay Patients Obamacare Premiums

The below article is a little deep inside the weedbeds of healthcare policy but what this means will have profound impact of the future affordability and viability of ObamaCare. Imagine a hospital with a very sick patient on hand who may be waiting for a life saving transplant and is uncovered and can't afford a PPACA Exchange plan (even with subsidies). The below summary of an American Hospital Association legal advisory is saying that the hospital can plunk down a few thousand dollars to ensure that the individual gets Obamacare and thereby the necessary insurance to make the hospital (who used to do this via charity care) financially whole.

On its surface, some people might look at this and may find it to be generous or a good thing to help the poor get coverage.  But it is not how the law is supposed to work and will cause an adverse selection landslide.  Note in the article how hostile the federal regulators are to the concept. They fully understand this is yet another unforeseen consequence of the few "illuminati" in power trying to write 75,000 pages of laws and regulations to foresee every conceivable outcome with one-sixth of our economy.   

As I read this, I pondered how many self-insured companies will travel down the same philosophical path.  A company could identify their worst claimant risks and implement practices to incentivize the sickest amongst their employee population to move into PPACA Exchanges as opposed to stay on the employer dime.  Even if an employer were to pay 100% of an employee's premium and all employee out of pocket expenses that employer might pay $10,000 to $25,000 for that employee as opposed to the $100,000 to $500,00 it could pay otherwise for the high claims under the reinsurance limits.  I'm not saying this would pass discrimination analysis, but when you place incentives and loopholes like this in the system, it will be abused.  There is no way around that. 

Another devastating result of this pondered by my colleague, Dr. Ryan Kennedy, was that a hospital or medical group who was in the position of treating a particularly high cost patient via a capitated arrangement (where the provider is generally just given a flat dollar amount to treat a person irrespective of number of claims or office visits) could provide the financial support to move that patient to a fee-for-service arrangement like a PPO where every single treatment or procedure given to the patient from the doctor results in a payment from the insurer.  The potential for system manipulation has been multiplied tenfold by these Exchanges and their dictates of guaranteed issue with substantial taxpayer price controls and mandated taxpayer bailouts when they inevitably spiral out of control.  

This is Cheryl Clark, for HealthLeaders Media:

In a legal advisory to hospitals, the American Hospital Association asserts that the federal government's own regulations "clearly allow for another person or organization to pay the insurance premium for the enrolling individual." 
The federal government has no legal authority to prohibit hospitals from paying their patients' insurance exchange premiums to encourage their enrollment, despite a Nov. 4 Centers for Medicare & Medicaid Services statement implying that it does, according to a sharply worded legal advisory from the American Hospital Association. 
What's more, there is clearly no prohibition against hospital-affiliated charitable foundations, or unrelated charities, paying these premiums on behalf of patients, the AHA said Wednesday. The financial assistance may be especially helpful to those would-be enrollees whose federal subsidies aren't enough to make coverage affordable. 
The AHA offered hospitals guidance on the issue after CMS issued a vaguely-worded and somewhat threatening Q&A about third-party premium payments. The agency said that if healthcare providers such as hospitals pay premiums for their most expensive patients, "HHS has significant concerns with this practice because it could skew the insurance risk pool and create an un-level field in the marketplaces." 
"HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary." 
In its legal advisory, however, AHA said the opinion expressed by CMS it a Nov. 4 Q&A "appears to have no legal force or effect on hospitals [or insurers] and to be unenforceable. 
"If HHS wanted to try to make this position enforceable, it would have to go through rulemaking. But even then, HHS's authority to adopt the views expressed in the Q&A is highly questionable. By statute, everyone (except incarcerated individuals and undocumented immigrants) is eligible to purchase any QHP [Qualified Health Plan] offered through an exchange so long as the premium is paid." 
The AHA's legal advisory added that the federal government's own regulations implementing the federal premium tax credit "clearly allow for another person or organization to pay the insurance premium for the enrolling individual." 
The advisory was issued by the AHA's deputy general counsel Maureen Mudron and senior vice president/general counsel Mindy Hatton. 
CMS's Q&A surprised many hospital officials because HHS Secretary Kathleen Sebelius had clearly stated in a letter to Rep. Jim McDermott, (D-WA) that qualified health plans are not federal healthcare programs, and thus are not subject to anti-kickback statutes.... 
The AHA legal advisory is clear:
"We believe that existing IRS precedent strongly supports a determination that providing this type of subsidy advances the charitable purpose of hospitals and that any benefit to insurers is incidental to achieving the larger public good of making health care available to those with financial need." 
Providing subsidy support in the name of a charitable contribution, the advisory added, "is especially important for individuals residing in states that have chosen not to expand their Medicaid programs and could help fill the gap in making affordable coverage available to meet the needs in those communities."
Meanwhile, some hospitals have gone ahead and done so through charitable organizations. The University of Wisconsin Hospital and Clinics on Sept. 30 announced that it gave $2 million to United Way of Dane County to help low-income people purchase health plans on the state's exchange. The funds will help some 7,300 people, who now will pay only 2% of their premiums plus some out-of-pocket costs such as deductibles. ... 
Who Gets Help with Premiums? 
How hospitals or their doctors might decide which patients to cover is the tricky part, and up for debate. ... 
Some hospital officials have suggested that hospitals, or county health departments that own hospitals and clinics, or other entities might pre-select patients for subsidies based on their history of receiving uncompensated care, especially if their illnesses suggest the likelihood of repeat hospitalizations. ... 
If large numbers of hospitals take advantage of this, funding hundreds of their most expensive patients, they may reap major financial benefit. Instead of writing off that care, they will now be paid at health plan rates.
The emphasis is mine.

See alsoWill hospitals buy ACA insurance for their uncovered patients? from economist Tyler Cowen.