Wednesday, August 12, 2009
A brief summary of a rather exhaustive analysis of the house health care bill.
| Having just finished Gilbert’s biography of Churchill and The rise and fall of the third Reich I thought I was in position to digest the text of H.R. 3200, also known as America’s Affordable Health Choices Act of 2009. I promised a brief summary, so here it is. I am not a doctor, or health care worker of any kind, so I cannot, and will not attempt to pass any judgment on the particular details of patient care. The proposed health care legislation is a rough read, to say the least. To properly assess a plan of this size and scope you must address it holistically. When you analyze the plan as a plan and not as an amalgam of solutions the gaps in logic become profound. • There is little effort at addressing the change in demand, and consequently supply, once the plan is implemented. • This change in demand will necessarily affect the entire pricing and cost structure of businesses, which is also not addressed. This will logically lead to massive job loss in low profit margin markets like manufacturing. • There is no risk assessment strategy for the plan, and pilot testing exists for relatively few components of the plan • There is no escape hatch. If the plan fails, and ends up costing four or five times the current estimates, we are stuck with it. After reading the plan and studying it in more depth than I think many politicians have, I have come to the conclusion that the opposition to the plan is misguided. The devil is not in the details, it is in the methodology and sadly, basic financial underpinnings of the plan. In short, they do not exist. These omissions are potentially catastrophic. When you factor in the penalties and requirements of businesses, it’s difficult to see how the plan could possibly work. As the price of health care to many individuals falls, more will visit the doctor. How many more we cannot know. As the demand for services rises, the cost must rise. As the cost rises, employers are further pinched. To escape, they must cancel their offering and let employees enter the government plan. This puts further pressure on the taxpayer, and the treasury. As the money continues to dry up, businesses who do not provide insurance, will see the penalties increase, along with the premiums creating a conundrum. Every business will have a different point of failure along the cost curve. As lower profit margin businesses close, tax revenues will dry up, and of course the penalty fees from those businesses, thus further aggravating the problem. As more people enter the government option, and we get closer and closer to a single payer, there becomes less incentive for the customer to conserve cost, and demand further escalates. Any time you attempt to address a complex problem, with a complex solution you must begin with the basics of formulating that solution within a time tested framework, so as not to destroy the organization. In this case, the organization is the United States of America. The plan should thus flow as follows. 1. State your premise 2. Define specific solutions to the problems you are trying to address 3. Define clearly the methodology for implementing the solution 4. Analyze potential costs/benefits 5. Perform risk assessment 6. Create a fall back plan Throughout the entire document, there is very little mention of cost. And worse still, no attention at all given to a fallback plan if disaster strikes. When cost is mentioned, and funds allocated, they are without any substantive support for the dollar amount. When price is not mentioned, but clearly necessary, the bill attempts to defer these difficult decisions to the secretary. Thus we find: _________________________________________ ____________________________________ SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES. (1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224. And from section 224 (1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224. (3) FOR NEW SERVICES- The Secretary shall modify payment rates described in paragraph (2) in order to accommodate payments for services, such as well-child visits, that are not otherwise covered under Medicare. (4) PRESCRIPTION DRUGS- Payment rates under this section for prescription drugs that are not paid for under part A or part B of Medicare shall be at rates negotiated by the Secretary. (c) Encouraging the Use of High Value Services- To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value. d) Non-uniformity Permitted- Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and medical homes) under the public health insurance option for different geographic areas. ________________________________________ _____________________________________ As you can clearly see from this small sampling, no one has any idea how much all of this is going to cost. This is addressed by giving the secretary almost unlimited power to set prices. Of course this is one of the biggest mistakes politicians make when coming up with a big spending plan. It’s easy to set a price, but much more difficult to control the cost. Having established that the cost of the care is completely unknown, we now turn to an even bigger problem; the financing of this plan has very little flexibility, and there is no accounting for the change in behavior which will take place after implementation. This next piece of legislation is perhaps the worst. ____________________________________ ____________________________________ (b) Reduction of Employee Premiums Through Minimum Employer Contribution- (1) FULL-TIME EMPLOYEES- The minimum employer contribution described in this subsection for coverage of a full-time employee (and, if any, the employee’s spouse and qualifying children (as defined in section 152(c) of the Internal Revenue Code of 1986) under a qualified health benefits plan (or current employment-based health plan) is equal to (A) in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 4980B(f)(4) of such Code, subject to paragraph (2)) of the lowest cost plan offered by the employer that is a qualified health benefits plan (or is such current employment-based health plan); and (B) in the case of family coverage which includes coverage of such spouse and children, not less 65 percent of such applicable premium of such lowest cost (2) APPLICABLE PREMIUM FOR EXCHANGE COVERAGE- In this subtitle, the amount of the applicable premium of the lowest cost plan with respect to coverage of an employee under an Exchange-participating health benefits plan is the reference premium amount under section 243(c) for individual coverage (or, if elected, family coverage) for the premium rating area in which the individual or family resides. (3) MINIMUM EMPLOYER CONTRIBUTION FOR EMPLOYEES OTHER THAN FULL-TIME EMPLOYEES- In the case of coverage for an employee who is not a full-time employee, the amount of the minimum employer contribution under this subsection shall be a proportion (as determined in accordance with rules of the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable) of the minimum employer contribution under this subsection with respect to a full-time employee that reflects the proportion of-- (A) the average weekly hours of employment of the employee by the employer, to (B) the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee. (4) SALARY REDUCTIONS NOT TREATED AS EMPLOYER CONTRIBUTIONS- For purposes of this section, any contribution on behalf of an employee with respect to which there is a corresponding reduction in the compensation of the employee shall not be treated as an amount paid by the employer. _____________________________________ __________________________ Why is this so bad? Because no two businesses are exactly the same, and a financial consulting firm operates on a wildly different profit margin than a twenty person landscaping business. For the manufacturer operating on a thin profit margin, there is no escape. If you are currently paying more than 35% of the total premium for your dependent care, you will be paying less if the bill is passed. That’s good right? Not if the company you work for is operating on a thin profit margin, and can’t afford to pay you at your current salary level, and provide health insurance at this premium level. He could not legally lower your salary to cover his loss. You are simply out of a job. That is the employer’s only option. Should the employer decide to drop coverage entirely he is faced with the 8 percent tax, if total payroll is above $400,000 __________________________________ _________________________________ SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOYERS. ‘(c) Employers Electing to Not Provide Health Benefits- ‘(1) IN GENERAL- In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the compensation paid during any calendar year by such employer for services rendered to such employer. ‘(2) EXCEPTION FOR SMALL EMPLOYERS- Rules similar to the rules of section 3111(c)(2) shall apply for purposes of this subsection. ___________________________________ _______________________________ Now that you are out of work you are forced in to the government option. Even if you start your own business and wish to purchase your own insurance you legally cannot. __________________________________________ _________________________ (1) LIMITATION ON NEW ENROLLMENT- (A) IN GENERAL- Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1. ___________________________________________ _______________________ Could the plan still work? There is absolutely no way of knowing. I cannot know, President Obama cannot know, and neither the Democrats nor Republicans in congress can tell you if this plan will work or not. Without a detailed financial analysis, a pilot program, analysis of the pilot program results and much more attention to detail on the potential behavioral changes, no one can possibly know. It could work as advertised, but this seems highly unlikely. It could entirely wreck the financial system of the United States, but this is also unlikely, as it would be abandoned long before it reached that point. Or one would hope. The most likely scenario is that the plan will cost significantly more money than the 1 trillion dollars estimated over the next ten years. But this is just the icing on the cake, and is related only to the changes in behavior. If the fees and penalties for business are excessive, or if they change frequently, the cost will skyrocket as more people lose their private option and are forced in to the public option. Again, without much more detailed financial analysis, and a pilot program, it is impossible to know. Is there a solution? At this point I cannot conceive of any solution without a detailed cost analysis, and the results of a pilot program. There is no effective way to determine the behavioral changes among the people who will now have health insurance, or the businesses who will see a drastic change in cost structure. Business is so restricted under the plan that it is logical to expect many will simply cancel policies for their employees. If the plan were implemented in a single state, which represents a realistic cross section of America, we may have a foundation to build upon. Without this information everything is just a guess. A final note: When I say that we cannot know the outcome I don’t mean “I” cannot know. Or you and I cannot know. I mean there is no logical way for anyone to know with any degree of certainty how much this will cost. If a politician tells you he is sure this will not cost more than X number of dollars, he is lying. We can argue the finer points of the proposed legislation, we cannot argue the cold hard facts. The cold hard facts are that no financial analysis is possible at this time. This is the state of business ventures every day. This is why we create fall back plans, and perform a risk assessment and cost/benefit analysis. But this is not a business venture. This plan affects your health, your life, and the lives of every citizen of the United States of America. The only logical next step is to stop, re-evaluate and at least come up with some benchmarks and a fall back plan. Anything short of this is irresponsible. I have included below some of my notes, and excerpts from the bill which support my positions. We begin our analysis with Division A of the bill referred to as “Affordable Health Choices”. _________________________________ ___________________________________________ (a) Purpose- (1) IN GENERAL- The purpose of this division is to provide affordable, quality health care for all Americans and reduce the growth in health care spending. (2) BUILDING ON CURRENT SYSTEM- This division achieves this purpose by building on what works in today’s health care system, while repairing the aspects that are broken. (3) INSURANCE REFORMS- This division-- (A) enacts strong insurance market reforms; (B) creates a new Health Insurance Exchange, with a public health insurance option alongside private plans; (C) includes sliding scale affordability credits; and (D) initiates shared responsibility among workers, employers, and the government; so that all Americans have coverage of essential health benefits __________________________________ ________________________________________ Now at this point I was expecting to see some summary costs, fees, etc. Alas I was disappointed. I continued reading the document and found by the time I had reached Subtitle B Public health insurance option, still no cost estimates. But I did find this, which is actually good news. _____________________________________ _______________________________________ (b) Offering as an Exchange-participating Health Benefits Plan- (1) EXCLUSIVE TO THE EXCHANGE- The public health insurance option shall only be made available through the Health Insurance Exchange. (2) ENSURING A LEVEL PLAYING FIELD- Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing. (3) PROVISION OF BENEFIT LEVELS- The public health insurance option-- (A) shall offer basic, enhanced, and premium plans; and (B) may offer premium-plus plans. ________________________________________ ____________________________________ Th e public option must adhere to the standards outlined for the private option, and they shall offer basic, enhanced and premium plans, and maybe even premium-plus plans. (The premium-plus plans I’m sure will be provided to members of congress, but that’s another story). And finally just under the above section we arrive at section 222 premiums and financing. Now we are getting somewhere. Well, perhaps not. ______________________________________ _____________________________________ SEC. 222. PREMIUMS AND FINANCING. (a) Establishment of Premiums- (1) IN GENERAL- The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner-- (A) that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; and (B) at a level sufficient to fully finance the costs of-- (i) health benefits provided by the public health insurance option; and (ii) administrative costs related to operating the public health insurance option. (2) CONTINGENCY MARGIN- In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin. What is the appropriate amount for the contingency margin? Isn’t this rather important? (b) Account- (1) ESTABLISHMENT- There is established in the Treasury of the United States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding under paragraph (2). Section 1854(g) of the Social Security Act shall apply to receipts described in the previous sentence in the same manner as such section applies to payments or premiums described in such (2) START-UP FUNDING- (A) IN GENERAL- In order to provide for the establishment of the public health insurance option there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth of claims reserves based on projected enrollment. (B) AMORTIZATION OF START-UP FUNDING- The Secretary shall provide for the repayment of the startup funding provided under subparagraph (A) to the Treasury in an amortized manner over the 10-year period beginning with Y1. (C) LIMITATION ON FUNDING- Nothing in this section shall be construed as authorizing any additional appropriations to the Account, other than such amounts as are otherwise provided with respect to other Exchange-participating health benefits plans. ____________________________________ _______________________________ Two billion dollars is allocated for initial claims, and no further funding is authorized. The obvious question is; If this is not enough money, how do the doctors, nurses, and hospitals get paid? _________________________________________ ____________________________ From Division D Public health and workforce development Development SEC. 2002. PUBLIC HEALTH INVESTMENT FUND. (a) Establishment of Funds (1) IN GENERAL- There is established a fund to be known as the ‘Public Health Investment Fund’ (referred to in this section as the ‘Fund’). (2) FUNDING- (A) There shall be deposited into the Fund-- (i) for fiscal year 2010, $4,600,000,000; (ii) for fiscal year 2011, $5,600,000,000; (iii) for fiscal year 2012, $6,900,000,000; (iv) for fiscal year 2013, $7,800,000,000; (v) for fiscal year 2014, $9,000,000,000; (vi) for fiscal year 2015, $9,400,000,000; (vii) for fiscal year 2016, $10,100,000,000;Comments (viii) for fiscal year 2017, $10,800,000,000;Comments (ix) for fiscal year 2018, $11,800,000,000; and (x) for fiscal year 2019, $12,700,000,000.Comments (B) Amounts deposited into the Fund shall be derived from general revenues of the Treasury. (3) BUDGETARY IMPLICATIONS- Amounts appropriated under this section, and outlays flowing from such appropriations, shall not be taken into account for purposes of any budget enforcement procedures including allocations under section 302(a) and (b) of the Balanced Budget and Emergency Deficit Control Act and budget resolutions for fiscal years during which appropriations are made from the Fund. _________________________________________ ______________________________ Now the above section is critical to the entire health care bill. This is because of course with an increase in coverage; we can expect some corresponding increase in services demanded. With an increase in demand, must come an increase in supply, and this is partially covered under this section. What we find is a well thought out overall strategy, with an absolutely amateurish approach to the funding. For starters, the allocation is completely backwards. When facing an unknown, it is always best to front load your effort. In other words, the money allocated for 2019, should have been allocated for 2010. This is just common sense problem resolution and risk assessment. To be completely fair, I did find one area where an increase in demand is accounted for. __________________________________ ______________________________________ SEC. 1147. PAYMENT FOR IMAGING SERVICES. (a) Adjustment in Practice Expense to Reflect Higher Presumed Utilization- Section 1848 of the Social Security Act (42 U.S.C. 1395w) is amended-- (1) in subsection (b)(4)-- (A) in subparagraph (B), by striking ‘subparagraph (A)’ and inserting ‘this paragraph’; and (B) by adding at the end the following new subparagraph: ‘(C) ADJUSTMENT IN PRACTICE EXPENSE TO REFLECT HIGHER PRESUMED UTILIZATION- In computing the number of practice expense relative value units under subsection (c)(2)(C)(ii) with respect to advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)), the Secretary shall adjust such number of units so it reflects a 75 percent (rather than 50 percent) presumed rate of utilization of imaging equipment _____________________________________ ____________________________________ Because the health insurance plan offers greater access to health care services, and the cost of these services (the price) has changed, we know from years of study that the behavior of the consumers will change. But there is no way to even hazard an educated guess as to how much it will change. As with every single dollar allocated to the program, they are simply haphazard guesses with absolutely zero statistical analysis behind them. We see the problem repeated just below for community health centers and the national health service corps. ________________________________ _________________________________________ TITLE I--COMMUNITY HEALTH CENTERS SEC. 2101. INCREASED FUNDING. Section 330 of the Public Health Service Act (42 U.S.C. 254b) is amended-- (1) in subsection (r)(1)-- (A) in subparagraph (D), by striking ‘and’ at the end; (B) in subparagraph (E), by striking the period at the end and inserting ‘; and’; and (C) by inserting at the end the following: ‘(F) Such sums as may be necessary for each of fiscal years 2013 and 2019.’; and (2) by inserting after subsection (r) the following: ‘(s) Additional Funding- For the purpose of carrying out this section, in addition to any other amounts authorized to be appropriated for such purpose, there are authorized to be appropriated, out of any monies in the Public Health Investment Fund, the following: ‘(1) For fiscal year 2010, $1,000,000,000. ‘(2) For fiscal year 2011, $1,500,000,000. ‘(3) For fiscal year 2012, $2,500,000,000. ‘(4) For fiscal year 2013, $3,000,000,000. ‘(5) For fiscal year 2014, $4,000,000,000. ‘(6) For fiscal year 2015, $4,400,000,000. ‘(7) For fiscal year 2016, $4,800,000,000. ‘(8) For fiscal year 2017, $5,300,000,000. ‘(9) For fiscal year 2018, $5,900,000,000. ‘(10) For fiscal year 2019, $6,400,000,000.’. TITLE II--WORKFORCE Subtitle A--Primary Care Workforce PART 1--NATIONAL HEALTH SERVICE CORPS SEC. 2201. NATIONAL HEALTH SERVICE CORPS. (a) Fulfillment of Obligated Service Requirement Through Half-Time Service- (1) WAIVERS- Subsection (i) of section 331 (42 U.S.C. 254d) is amended-- (A) in paragraph (1), by striking ‘In carrying out subpart III’ and all that follows through the period and inserting ‘In carrying out subpart III, the Secretary may, in accordance with this subsection, issue waivers to individuals who have entered into a contract for obligated service under the Scholarship Program or the Loan Repayment Program under which the individuals are authorized to satisfy the requirement of obligated service through providing clinical practice that is half-time.’; (B) in paragraph (2)-- (i) in subparagraphs (A)(ii) and (B), by striking ‘less than full time’ each place it appears and inserting ‘half time’; (ii) in subparagraphs (C) and (F), by striking ‘less than full-time service’ each place it appears and inserting ‘half-time service’; and (iii) by amending subparagraphs (D) and (E) to read as follows: ‘(D) the entity and the Corps member agree in writing that the Corps member will perform half-time clinical practice; ‘(E) the Corps member agrees in writing to fulfill all of the service obligations under section 338C through half-time clinical practice and either-- ‘(i) double the period of obligated service; or ‘(ii) in the case of contracts entered into under section 338B, accept a minimum service obligation of 2 years with an award amount equal to 50 percent of the amount that would otherwise be payable for full-time service; and’; and (C) in paragraph (3), by striking ‘In evaluating a demonstration project described in paragraph (1)’ and inserting ‘In evaluating waivers issued under paragraph (1)’. (2) DEFINITIONS- Subsection (j) of section 331 (42 U.S.C. 254d) is amended by adding at the end the following: ‘(5) The terms ‘full time’ and ‘full-time’ mean a minimum of 40 hours per week in a clinical practice, for a minimum of 45 weeks per year. ‘(6) The terms ‘half time’ and ‘half-time’ mean a minimum of 20 hours per week (not to exceed 39 hours per week) in a clinical practice, for a minimum of 45 weeks per year.’. (b) Reappointment to National Advisory Council- Section 337(b)(1) (42 U.S.C. 254j(b)(1)) is amended by striking ‘Members may not be reappointed to the Council.’. (c) Loan Repayment Amount- Section 338B(g)(2)(A) is amended (42 U.S.C. 254l-1(g)(2)(A)) by striking ‘$35,000’ and inserting ‘$50,000, plus, beginning with fiscal year 2012, an amount determined by the Secretary on an annual basis to reflect inflation,’. (d) Treatment of Teaching as Obligated Service- Subsection (a) of section 338C (42 U.S.C. 254m) is amended by adding at the end the following: ‘The Secretary may treat teaching as clinical practice for up to 20 percent of such period of obligated service.’. SEC. 2202. AUTHORIZATIONS OF APPROPRIATIONS. (a) National Health Service Corps Program- Section 338 (42 U.S.C. 254k) is amended-- (1) in subsection (a), by striking ‘2012’ and inserting ‘2019’; and (2) by adding at the end the following: ‘(c) For the purpose of carrying out this subpart, in addition to any other amounts authorized to be appropriated for such purpose, there are authorized to be appropriated, out of any monies in the Public Health Investment Fund, the following: ‘(1) $63,000,000 for fiscal year 2010. ‘(2) $66,000,000 for fiscal year 2011. ‘(3) $70,000,000 for fiscal year 2012. ‘(4) $73,000,000 for fiscal year 2013. ‘(5) $77,000,000 for fiscal year 2014. ‘(6) $81,000,000 for fiscal year 2015. ‘(7) $85,000,000 for fiscal year 2016. ‘(8) $89,000,000 for fiscal year 2017. ‘(9) $94,000,000 for fiscal year 2018. ‘(10) $98,000,000 for fiscal year 2019.’. _______________________________________ ___________________________________ Eric Gurr is the founder and operator of U4prez.com. He can be reached at gurreric@gmail.com |
| |
<< Home