Monday, March 23, 2015

Doc Fix Deal on Tap This Week and Blue Shield Tax Status Overview with Audio from Armstrong and Getty Show

Doc Fix

Nancy Pelosi and John Boner are rumored to have brokered a deal to permanently solve the "doc fix." Congress is expected to vote this week.  If a deal is not struck by March 31st, the amounts paid to doctors treating seniors in Medicare would drop by about 20% immediately, thereby making it very hard for seniors to make appointments and get treatment.

17 times in 11 years, Congress and the President have delayed mandated Medicare reimbursement cuts as part of the so called ‘doc fix’. Those cuts have been required by law since 1997 and neither party has had the gumption nor the wherewithal to implement them, or more prudently, enact an honest solution. However, in passing PPACA, the Congressional Budget Office (CBO) scored the law as if the Medicare cuts would, in fact, occur. This despite the fact that not one congressman, senator or member of the executive branch truly believed such a cut would happen. 

Because many of the 17 band-aided fixes have taken the form of freezing doctor payments, the current payment rate is 17% below the 2001 rate, adjusted for increases in the cost of providing services. This rumored deal is slated to cost $210 billion over 10 years.  Fiscal conservatives are quick to point out that it will be $400 billion over 20 years as there will not likely be any long term savings from the legislation.  

Roughly two-thirds ($140 billion) of this proposed legislation is not paid for and will be tacked onto our deficit.  There are some nominal cuts to doctors, who will effectively see a 0.5% increase in Medicare reimbursements each year for the next five years.  Seniors making more than $133,500 will pay for $35 billion of the deal by paying 10% to 15% more in Medicare Part  B and D.  Seniors who currently pay 50% of those premiums will now pay 65% and those that paid 65% will now pay 75%.  

In order to get Democratic lawmakers to go along with this deal, the GOP has reportedly agreed to: 
  • $7 billion for community health centers; 
  • two more years of funding for the Children's Health Insurance Program (CHIP).  CHIP is a safety net for low income kids, in addition to Medicaid, covering about 10 million kids; and 
  • not offset the legislation by insisting on $140 billion in more cuts to pay for it. 
Some Democrats in the Senate, however, may thwart the deal as it is rumored they would like to hold out for additional funding for community health centers and two more years (for a total of four) for CHIP. 

Blue Shield of California

Last week the State of California made it known that it has revoked Blue Shield's nonprofit status and seeks tens of millions each year in back taxes extending back to 2013.  Blue Shield has paid federal taxes all along.  The California insurer has 3.4 million customers and reported $13.6 billion in revenue last year.

Its year-end $4.2-billion surplus is four times more than the amount the Blue Cross-Blue Shield Association says is required to cover future claims.  In 1996, California similarly removed tax exempt status from Blue Cross of California — now Anthem Blue Cross. It paid $3 billion in a settlement with the state at that time.

This news cannot be comforting to Kaiser.  Kaiser Permanente, also a nonprofit, has $21.7 billion in cash reserves, more than 1,600 times the amount required by state regulations and five times the reserve held by Blue Shield.  Kaiser argues that because it is a healthcare delivery system and an insurer, unlike Blue Shield which is solely an insurer, it needs more cash on hand.  I suspect, however, that argument will fall on deaf ears.

Here is my audio this morning from the Armstrong and Getty Radio Show:

You can hear all Armstrong and Getty podcasts here and live radio from 6 AM to 10 AM PST here.

You can hear all of my radio appearances on A&G and elsewhere in 2015 here.