Consumer Power Report #343
At long last, in 2016 we will learn which is more: $4,316 or $2,085.
That first number, $4,316, is the average employee cost for buying an employer-sponsored family health care plan in 2012, up from $2,137 a decade ago. The second number is the cost of the individual mandate tax for a family of four.
For a family of four earning $24,000, and for their employers, the decision process will probably go like this: get out the calculator, add up how much it costs to buy insurance, add up what it costs not to buy insurance … and make a quick decision. And for millions of Americans, the decision is expected to be: Don’t buy insurance until you’re headed to the hospital. The Associated Press reports:
Nearly 6 million Americans – significantly more than first estimated – will face a tax penalty under President Barack Obama’s health overhaul for not getting insurance, congressional analysts said Wednesday. Most would be in the middle class.
The new estimate amounts to an inconvenient fact for the administration, a reminder of what critics see as broken promises.
The numbers from the nonpartisan Congressional Budget Office are 50 percent higher than a previous projection by the same office in 2010, shortly after the law passed. The earlier estimate found 4 million people would be affected in 2016, when the penalty is fully in effect.
That’s still only a sliver of the population, given that more than 150 million people currently are covered by employer plans. Nonetheless, in his first campaign for the White House, Obama pledged not to raise taxes on individuals making less than $200,000 a year and couples making less than $250,000.
And the budget office analysis found that nearly 80 percent of those who’ll face the penalty would be making up to or less than five times the federal poverty level. Currently that would work out to $55,850 or less for an individual and $115,250 or less for a family of four. Average penalty: about $1,200 in 2016.
The CBO report is here. But if anything, it seems far too optimistic about the number of people who will abide by the mandate – or dare to claim they’re abiding by it, despite reality:
Among the uninsured individuals subject to the penalty tax, many are expected to voluntarily report on their tax returns that they are uninsured and pay the amount owed. However, other individuals will try to avoid payments. Therefore, the estimates presented here account for likely compliance rates, as well as the ability of the Internal Revenue Service … to administer and collect the penalty.
What’s more, the mandate tax over time is going to have to be increased if it is going to be at all effective. As Avik Roy notes:
Because Obamacare does so many other things to drive up the cost of insurance, these forecasts are likely to increase over time. More and more people – especially young, healthy people – will choose to pay the $695 fine instead of spending 10 times that on health insurance. As they do, the individual mandate will fail in its central purpose: forcing all Americans into the insurance system, so that premiums don’t increase for the chumps who pay for insurance year-round.
And it’s quite possible that the CBO’s numbers are too optimistic. We know that CBO’s insurance models borrow heavily from the work of Jonathan Gruber, the MIT economist who in 2010 declared “for sure” that Obamacare would reduce insurance premiums, only to reverse his position after the law was passed.
For millions of Americans whose employers don’t drop insurance entirely, this tax is unlikely to be anything more than a nuisance. The real cost they’re going to see is in higher insurance premiums, which will provide a powerful disincentive for new businesses to cover insurance in the first place.
— Benjamin Domenech
IN THIS ISSUE:
A new poll from the Reason Foundation:
The September Reason-Rupe national telephone poll of 1,006 Americans finds Americans may actually prefer Rep. Paul Ryan’s Medicare reform plan over President Obama’s when considering the costs and benefits of each plan.
When respondents are read the likely benefits and costs of both Paul Ryan’s and President Obama’s Medicare reforms, 61 percent of voters think out-of-pocket costs would increase for seniors as a result of Ryan’s plan and 51 percent think Obama’s plan would lead to shortages and less medical innovation.
However, by a margin of 48 to 37 percent, voters prefer Medicare reforms built around giving seniors a credit to purchase health insurance over reforms like President Obama’s, which include a payment board to reduce payments to providers.
These results stand in contrast to typical polls asking about Medicare reform because most polls provide respondents with false choices: would they like Medicare to stay the same or change in some particular fashion. (See August CBS/New York Times poll, page 11.) Not surprisingly, since most Americans say they like Medicare they opt for the status quo over reform. However, without change Medicare is on the path to insolvency; thus, Medicare must change, the question is how. Poll questions failing to provide realistic trade-offs perpetuate the pervasive misunderstanding characterizing the Medicare reform debate.
The questions were:
(One proposal/another proposal) would create a board to identify what it views as non cost-effective medical treatments and would reduce or eliminate payments to doctors and health insurance companies for these services. Supporters say this would lower Medicare’s costs and ensure that seniors don’t have to pay more money out of pocket. Opponents say it would result in shortages and fewer medical innovations.
(One proposal/another proposal) would introduce competition among health insurance companies by giving seniors a credit to purchase the health insurance plan of their choice from private companies or the government. Supporters say this would lower Medicare’s costs and ensure that seniors have more health care choices. Opponents say it would result in seniors paying more money out-of-pocket for their own health care.
People went for Ryan’s plan over Obama’s by 48 to 37 percent.
More on the new challenge to the IRS’s enforcement of Obamacare from Oklahoma:
Oklahoma’s attorney general on Wednesday filed a fresh legal challenge to the federal health-overhaul law, zeroing in on penalties that employers in the state would face if they didn’t offer affordable health coverage to their workers.
The lawsuit puts a new twist on opponents’ legal fight against the overhaul. Oklahoma and 25 other states had previously argued that the 2010 law, known officially as the Patient Protection and Affordable Care Act, was unconstitutional because of its requirement that individuals purchase insurance or pay a fee. But the Supreme Court upheld the constitutionality in June.
The new complaint filed by Oklahoma faces long odds. It focuses on the law’s distribution of tax credits for low-income Americans to purchase insurance.
The health law was designed to have state-run exchanges set up where consumers could compare insurance plans and apply for federal subsidies to be used toward the cost of premiums. The law also penalizes employers that don’t offer affordable coverage to workers if those workers receive a federal subsidy.
Many states, including Oklahoma, have indicated they don’t plan to run their own exchanges, and the law allows for the federal Department of Health and Human Services to step in and run them instead. Conservative opponents of the overhaul believe the law’s wording suggests that only state-run programs can offer the insurance tax credits. They are arguing that the Internal Revenue Service didn’t have the power to issue a regulation in May that made clear that credits would go to people in a federally run exchange starting in 2014.
“Employers in Oklahoma should not be subject to the employer mandate,” said the complaint, brought by Republican Attorney General Scott Pruitt.
SOURCE: Wall Street Journal
The Tampa Bay Times editorializes:
It’s an understandable confusion. People think that since Medicare covers medical services for people over 65, it also pays for nursing home care for elderly people. Medicaid is thought of as a poverty program that provides medical coverage to poor families. But Medicaid is the program that provides long-term care to the elderly and disabled, which accounts for 31 percent of the program’s $400 billion annual federal and state spending. Most of the nation’s 1.8 million nursing home residents, including more than 77,000 Floridians, rely on Medicaid to pay their bills.
Medicaid’s nursing home beneficiaries are not necessarily poor people. During their working years they may have lived productive middle-class lives until becoming infirm and quickly exhausting their assets. No matter how assiduously families save for retirement, there aren’t many who could long afford the steep costs of a residential nursing home that can run an average of $80,000 a year. Without Medicaid’s essential safety net, members of this vulnerable population would be on their own or might be forced to live with relatives ill equipped to care for their intensive needs.
This ignores the success states like Rhode Island have had with long term care reform thanks to waivers from Washington. As Gary Alexander notes in this presentation:
In 2011, the Lewin Group performed an independent study to test the RI reforms: The study found that the Ocean State’s reform with a federal waiver had been “highly effective in controlling Medicaid costs” and improving “access to more appropriate services.” Lewin examined the state’s shift to home and community-based care from nursing homes for long-term care patients. Lewin found the reform helped save $35.7 million, $15 million in 2010 alone. The Lewin study also “found evidence of lower emergency room utilization and improved access to physician services” from “care management programs” for Medicaid patients with asthma, diabetes, heart problems and mental health disorders. Emergency room care is a major driver of Medicaid costs.
SOURCE: Tampa Bay Times
By the end of the month, states have to decide what health care benefits are absolutely essential … or the feds will decide for them.
California legislators say acupuncture makes the cut. Michigan regulators would include chiropractic services. Oregon officials would leave both of those benefits on the cutting-room floor. Colorado has deemed pre-vacation visits to travel clinics necessary, while leaving costly fertility treatments out of its preliminary package.
Policy experts expected the Affordable Care Act to establish a basic set of health benefits for the nation, but the Obama administration instead empowered each state to devise its own list. When all Americans are required to purchase health insurance in 2014 or pay a penalty, they will find that the plans reflect the social and political priorities of wherever they live.
That nationwide patchwork highlights the difficulty of agreeing on what constitutes good basic health care, as well as the tricky balances that states face in weighing coverage vs. cost … If insurance plans cover too much, premiums could become prohibitively expensive. But if they skimp on coverage, the states could fail to deliver on the health law’s basic promise: extending quality health coverage to 30 million Americans.
What about states that aren’t implementing?
Some states are still debating whether they even want to set a benchmark package at all. If they do not, the federal government will default to the benefits of the largest insurance plan in the state’s small-group market.
Kansas Gov. Sam Brownback has decided against defining his state benefit package as his administration has decided not to “make any decisions regarding the implementation of the Obamacare until after the November elections,” according to spokeswoman Sherriene Jones-Sontag.
It is less clear what happens if a state passes a benefit package that does not provide adequate coverage of the 10 categories outlined in federal law.
Utah has alarmed some advocacy groups by approving a plan that does not appear to specify a substance abuse benefit, even though the federal law requires one.
SOURCE: Washington Post
Idaho’s Medicaid analysis, from the Leavitt Group:
The report was released Thursday just in time to be distributed to Gov. C.L. “Butch” Otter’s Medicaid expansion workgroup before it meets later this month. The 15-member workgroup has been tasked with evaluating the impact of expanding Medicaid and must submit their recommendations to the governor by Nov. 1.
According to the report, close to 111,500 additional Idahoans would qualify for Medicaid if the state expanded its eligibility. Close to 10,000 of those newly eligible would be from the Magic Valley, primarily from Twin Falls County.
Idaho’s Medicaid federal-state partnership offers medical insurance to almost 235,000 low-income people. Close to 70 percent of those enrolled are children from low-income families but also covers people with disabilities, low-income women who are pregnant and low-income elderly.
The U.S. may soon lose its status as a center for medical device innovation:
Even as the new health care law adds millions of insured customers to the paying pool, medical device manufacturers say a tax on their product could cost them billions.
The tax came as the government looked for ways to fund the new law. Insurers agreed to pay a tax beginning in 2013 because they would gain new customers.
Hospitals agreed to lower Medicare payments because they would have fewer uninsured customers and therefore, would not be left with the bill.
And the government looked to higher-earning citizens – those who make more than $200,000 a year – to also contribute. In industry, the government focused on the $130 billion-a-year medical device manufacturing industry.
But the manufacturers say the tax will force money away from research, send jobs overseas and stop them from expanding in the U.S.
Analysts say the industry will easily make the money back in profits from overseas sales – where there’s a growing market of individuals with diabetes and heart disease – and that more insured customers mean more devices.
SOURCE: USA Today
Some members of Congress want to change the way CBO evaluates programs:
Reps. Michael Burgess (R-Texas), a physician, and Donna Christensen (D-Virgin Islands) introduced legislation that would change how the Congressional Budget Office looks at budget savings from wellness programs.
The Preventive Health Savings Act, which was introduced Friday, calls for the CBO to analyze scientific data to gather information on budget savings achieved through disease prevention and wellness programs beyond the 10-year budget-scoring period.
The legislation will encourage more federal investment in prevention of chronic diseases, according to a statement made by Healthcare Leadership Council President Mary Grealy.