By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
Job-based insurance has been on of the most resilient struts of the American healthcare system since the post-World War II years.
This major accomplishment of the postwar activist labor movement in the United States supported the rising prosperity of countless American families. Employer-paid insurance was a major wage concession to workers through the 50s, 60s and 70s along with rising national prosperity. At its height about 60% of workers under 65 received their coverage through their employers.
This began to change during the 1980s and the Reagan presidency.
Several important factors have led to this shift: a rise in corporate mobility and transitoriness, increasing globalization of markets, rising home-based entrepreneurship along with more convenient and accessible technology. All contributed greatly to this significant shift.
So, during the recent healthcare debates, a key point of contention was whether insurance should still be employer-based (owned by employers....) or shifted to individuals through a mandate. The opposing, multiple sides to this debate are fascinating in themselves.
Take two examples. Remember that when Mitt Romney was governor of Massachusetts the healthcare legislation he signed contained an individual mandate along with employer sanctions to provide coverage. This was seen as a concession to conservative pragmatism: people should provide for themselves.
Hillary Clinton adopted this plank during her campaign for president. Her supporters (including economists) saw it as a cold-eyed look at a changing workplace (more working and single women, for example) as well as a sound way to make a larger insurance market function well. Candidate Obama was opposed.
The idea of an individual mandate became caught in a fierce battle between House and Senate members: the House members siding more traditionally with union and liberal sentiments who favored employer-based insurnace. The Senate committee chaired by Senator Max Baucus promoted the mandate at the expense of employer mandates. A strong compromise carried the day which highlighted the individual mandate as a key part of reform.
Second, while there was Congressional agreement that expensive "Cadillac" plans would be taxed, the compromise struck primarily with union and business representatives was to delay this tax until 2018. So, while more expensive plans will be taxed to help those who require subsidies, the impact of this shift will wait.
Even though cost-savings was a key objective of healthcare advocates in Congress, this important savings plank of taxing expensive plans was allowed to be put off for several years.
So, now that healthcare reform has been passed---and we have added coverage mandates and taxed benefit packages, what else can individuals and small businesses expect to see? Here's a quick overview:
1) By July 1 each state had to set up a high risk pool to cover those who were otherwise ineligible for coverage (30 states already had such pools). If states could not or would not do this the Department of Health and Human Services established a national exchange to cover these individuals.
2) The individual mandate will extend to both individuals and to businesses. People with incomes under 400% of the federal poverty level (FPL), those whose lack of coverage is temporary, those in prisoners, Native Americans and some religious groups will not be subject to the mandate. There will be no criminal penalties for not getting insurance.
3) Younger people will have to have insurance, but will most likely be able to purchase a "basic plan". This will be a high deductible, lower benefit plan that is estimated to cost between $136 and $198 per month.
4) Each state will have at least one "exchange" by 2014. This will allow individuals to compare prices and buy coverage; at first businesses with fewer than 50 employees will be able to utilize exchanges. Even employees whose choices are severely limited by their employers who offer coverage will be able to use the exchanges to find better choices. By 2017 businesses with more than 100 employees will be able to utilize the exchanges.
5) Exchange choices will be graded based on amount of financial coverage offered by a plan. This will work so plans will be labelled "bronze", "silver", "gold" and "platinum" to signify that the plan pays for, at a minimum, 60% of the cost of benefits, at most, 90%.
6) Individuals will pay a tax penalty of 1% of income or $95 if they have not gotten insurance coverage by 2014. By 2015 this penalty will increase to 2% and will reach its maximum of 2.5% or $695 (whichever is greater) by 2016.
7) Subsidies will be available (on a sliding scale) for those who make less than 400% of the federal poverty level---or $88,000 for a family of four. Vouchers will be available to those who make less than 400% of the FPL or who must spend more than 9.5% of their incomes on coverage. They will be eligible for the equivalent amount of coverage their employer would have offered to them.
8) Employers will get a tax credit---starting in 2013---for 35% of the premiums paid for employee insurance. To qualify these employers must pay at least 50% of insurance premiums of their workers. The aid will grow to 50% of the premiums paid by 2014 (35% in the case of tax-exempt groups).
9) For employers of 50 or more who do not offer coverage---or whose employees seek coverage in the exchange as an alternative to what's offered---the penalty will be $2,000 times the number of full-time employees beyond the first 30. This will also apply to any employer who does not offer at least a "bronze" equivalent plan (60% of benefits paid for) or whose employee spends more than 9.5% of their income on their coverage. The penalties are triggered when the employee goes to the exchange to seek coverage other than that offered by the employer.
10) Finally, employers will be encouraged to retain on their plans employees who are between 55 and 65.
One more note, while this is somewhat complicated and will take over four years to roll out, the changes promise to enroll millions of new people. In addition, the exchanges may, over time, substantially alter how insurance is offered and purchased. It undoubtedly will take five years or so to see the full impact.
Sources: The Washington Post, Kaiser Family Foundation website, The New York Times.
Next time: Politics versus Implementation. And.....Socialism.
Coming Soon: Seminars on the Impacts of Healthcare Reform and Long-Term Care Insurance
To respond to this blog, email steve6schul@yahoo.com
Thursday, July 22, 2010
Monday, July 19, 2010
How Healthcare Reform Will Use Medicaid
By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
Take just a moment to recall part of the high drama around whether there should be a public option as part of final healthcare reform legislation. Then, recalling that the arguments for this item failed, it is sobering to note how two huge government entitlement programs in addition to Medicare---Medicaid and CHIP---will be harnessed into implementing reform.
Medicaid (Medi-Cal in California) is the huge entitlement program traditionally funded by the federal government in large part, but administered by the states. Hence the good and bad news for Medicaid's involvement in reform. Coverage and funding, but within a balkanized system.
Just a few examples will suffice to illustrate problems: varying state levels of funding, varying state benefit packages, differing views of abortion rights, a patchwork of physicians and allied providers who would provide coverage, inequities in service and access, a method of paying for prescription drugs that is different than the rules used by Medicare. On and on.
Most policymakers saluted the passage of Medicaid soon after the passage of Medicare (which in 1965 under the leadership of Lyndon Johnson assisted the elderly--with a few exceptions for specific conditions). However, despite its virtues, Medicaid soon evolved into a "second tier" of care. Many eschewed its benefits even when eligible because it was seen as "healthcare for the poor".
Now, to expand care throughout most of the citizenry over the next few years this giant program---along with CHIP (the Children's Health Insurance Program) will become part of a vast expansion of healthcare coverage (perhaps 33 million new enrollees over time).
While good efforts will be made to ensure equal care nationwide it is easy to predict that in two to five years the fracturing, inefficiencies and unevenness of our current healthcare system will still be all too evident. Part of the way to a single payer system, in other words, with few of the benefits. Some would argue that this is the cost for attempting to maximize state variability and private market heft.
Some details:
The new law expands Medicaid eligibility to 133% of the federal poverty level ($14,404 for an individual; $29,326 for a family of four). This will add about 16 million individuals to the 35 million already enrolled in Medicaid nationwide. The Congressional Budget Office (CBO) estimates that states will have to then pay an additional $20 billion over what they now pay into the program now between 2010 and 2019.
People who are under 65 and not now eligible for Medicare will also be swept up in this expansion. Children currently in CHIP and who are between 100% and 133% of the federal poverty level will be included hereafter in Medicaid as well.
To attempt to capture as many uninsured as possible and to try to build a seamless coverage model, those between 133% of poverty and 400% will be offered subsidies so that they can purchase insurance through the state-based Health Benefit Exchanges. Thus the most sweeping expansion of enrollment through the new healthcare legislation.
As one can quickly see, however, some delivery differentiation still, some breaks in the system still. But this structure avoided a public option and still more intrusion by the federal government into the healthcare market.
It often slips beneath the public radar that private insurers are enlisted to offer products under both Medicaid and Medicare. That is, delivery is usually private (outside community clinics, for example) and reimbursement as well. Again, more fragmentation and differentiation in an already complex coverage system.
The pluses: rapid enrollment, use of already-in-place payment rules, fairly easy creation of "basic coverage" models, swift implementation of new, higher payment levels for pedicatricians and primary care physicians and a platform to reduce overall program costs---including reducing payments that now go to hospitals which treat large numbers of the very sick and indigent (Disproportionate Share or DSH hospitals).
But, in the long view: could we have done better with a public option?
This concludes my coverage of how Medicare, Medicaid and CHIP will be used in expanding U.S. healthcare coverage. Next I will turn to individual and employer changes.
Resources: Kaiser Family Foundation website and reports; the New York Times; the Washington Post series; Medicare.gov
Coming Soon: Seminars on the Impact of Healthcare Reform, Long-term Care Insurance, Medicare
To respond to this blog, email steve6schul@yahoo.com
Health Advocate Solutions
(213) 999-1227
Take just a moment to recall part of the high drama around whether there should be a public option as part of final healthcare reform legislation. Then, recalling that the arguments for this item failed, it is sobering to note how two huge government entitlement programs in addition to Medicare---Medicaid and CHIP---will be harnessed into implementing reform.
Medicaid (Medi-Cal in California) is the huge entitlement program traditionally funded by the federal government in large part, but administered by the states. Hence the good and bad news for Medicaid's involvement in reform. Coverage and funding, but within a balkanized system.
Just a few examples will suffice to illustrate problems: varying state levels of funding, varying state benefit packages, differing views of abortion rights, a patchwork of physicians and allied providers who would provide coverage, inequities in service and access, a method of paying for prescription drugs that is different than the rules used by Medicare. On and on.
Most policymakers saluted the passage of Medicaid soon after the passage of Medicare (which in 1965 under the leadership of Lyndon Johnson assisted the elderly--with a few exceptions for specific conditions). However, despite its virtues, Medicaid soon evolved into a "second tier" of care. Many eschewed its benefits even when eligible because it was seen as "healthcare for the poor".
Now, to expand care throughout most of the citizenry over the next few years this giant program---along with CHIP (the Children's Health Insurance Program) will become part of a vast expansion of healthcare coverage (perhaps 33 million new enrollees over time).
While good efforts will be made to ensure equal care nationwide it is easy to predict that in two to five years the fracturing, inefficiencies and unevenness of our current healthcare system will still be all too evident. Part of the way to a single payer system, in other words, with few of the benefits. Some would argue that this is the cost for attempting to maximize state variability and private market heft.
Some details:
The new law expands Medicaid eligibility to 133% of the federal poverty level ($14,404 for an individual; $29,326 for a family of four). This will add about 16 million individuals to the 35 million already enrolled in Medicaid nationwide. The Congressional Budget Office (CBO) estimates that states will have to then pay an additional $20 billion over what they now pay into the program now between 2010 and 2019.
People who are under 65 and not now eligible for Medicare will also be swept up in this expansion. Children currently in CHIP and who are between 100% and 133% of the federal poverty level will be included hereafter in Medicaid as well.
To attempt to capture as many uninsured as possible and to try to build a seamless coverage model, those between 133% of poverty and 400% will be offered subsidies so that they can purchase insurance through the state-based Health Benefit Exchanges. Thus the most sweeping expansion of enrollment through the new healthcare legislation.
As one can quickly see, however, some delivery differentiation still, some breaks in the system still. But this structure avoided a public option and still more intrusion by the federal government into the healthcare market.
It often slips beneath the public radar that private insurers are enlisted to offer products under both Medicaid and Medicare. That is, delivery is usually private (outside community clinics, for example) and reimbursement as well. Again, more fragmentation and differentiation in an already complex coverage system.
The pluses: rapid enrollment, use of already-in-place payment rules, fairly easy creation of "basic coverage" models, swift implementation of new, higher payment levels for pedicatricians and primary care physicians and a platform to reduce overall program costs---including reducing payments that now go to hospitals which treat large numbers of the very sick and indigent (Disproportionate Share or DSH hospitals).
But, in the long view: could we have done better with a public option?
This concludes my coverage of how Medicare, Medicaid and CHIP will be used in expanding U.S. healthcare coverage. Next I will turn to individual and employer changes.
Resources: Kaiser Family Foundation website and reports; the New York Times; the Washington Post series; Medicare.gov
Coming Soon: Seminars on the Impact of Healthcare Reform, Long-term Care Insurance, Medicare
To respond to this blog, email steve6schul@yahoo.com
Friday, July 9, 2010
How Medicare Will Work With Healthcare Reform
By Steve Schulte of
Health Advocate Solutions
(213) 999-1227
One often hears charges---expressed fears, really---of "big government" hurled as an uncomplimentary epithet.
Yet few Americans truly understand the concept as it applies to our national health (apply both meanings here...).
How many, for example, understand that, of the entire federal budget, 20% is spent on defense ($715 B), 21% on health-related expenses (Medicare, Medicaid and CHIP; $753B) and 20% on social security alone ($708B)? The latter two percentages will grow dramatically in the next decade as Baby Boomers (born 1946 to 1964) age and become eligible for social entitlement program benefits.
Medicare provides healthcare coverage today for about 39 million Americans; Medicaid for about 33 million----many of them children and low-income working people. Medicare alone is expected to enroll up to 77 million people by 2030.
These few facts alone indicate why massive healthcare reform was so necessary. Set aside for a minute whether one thinks such reform is wise, whether it went far enough, whether it was done right, whether it will work.
Social entitlement programs and defense account for a total of 61% of the nation's expenditures. Put simply: reform was necessary to keep our huge economy from sinking. And our invaluable human capital from falling further behind in the world economic race since bankruptcies from health costs had risen to 1 in 4.
On the other hand, one can fairly argue that these huge (and growing) social programs alone should be cut. But, in fairness, one then has to lay out how a wealthy and powerful industrialized nation takes care of its elderly, sick and dependent in other ways.
It is not at all surprising that the large, well-established government vehicles of Medicare and Medicaid would be harnessed into helping with the implementation of healthcare reform.
Due to their size and the complexity of their involvement in healthcare reform I will devote two separate blog postings to Medicare and Medicaid. Let me begin with Medicare.
At one point, remember, Medicare expansion was considered as a viable form of the "public option". In fact, historically, back to 1965, many hoped that Medicare would become the basis of universal coverage. Instead it became a social entitlement program that sought to remove the scourge of end-of-life poverty for all older Americans. The results have been astounding.
Medicare is a hugely successful program---redtape, fraud, variations in benefits and service notwithstanding. It is rare indeed to hear that someone has refused to accept Medicare when they became eligible. (I do know of one case....). For the most part, if someone has Medicare they have great health coverage.
Therefore, it would have been immensely sensible---and no doubt more efficient in the long-run---to have tied Medicare to an expansion of healthcare coverage. Say, make it available to those 55 to 64 as was proposed.
This, of course, did not happen. There were fears that Medicare as it now exists would be trimmed per benefits and increased per cost. The truth is more complex and quite different.
There will be NO direct cuts in benefits. In fact, benefits overall will be INCREASED. There will be cost changes, but these need to be carefully understood before one asserts---incorrectly, I would argue---that Medicare will become more costly (as opposed to being a more expensive program overall as the numbers of clients grow).
In fact, Medicare costs, like healthcare costs, like the deficit will be CUT both in this decade and more over the next. Too bad: the cuts could have been---and may still turn out to be---even greater.
So let's look specifically at the changes the law will bring to Medicare:
2010: Those who have Part D prescription drug plans AND who enter the 100% cost responsibility area ("donut hole") will get a $250 rebate. Federal market basket benchmarks for inpatient/home health/skilled nursing/hospice care will be refigured. A Federal Coordinated Health Care Office will be set up to improve care for Medicare/Medicaid patients (dual eligibles).
2011: The federal coordinating body for Medicare/Medicaid (CMS) will set up an important new agency: the Center for Medicare and Medicaid Innovation. Reduce annual Part D premiums for those making less that $85,000/$170,000 (couples); freeze the income threshold at these income levels also for Part B premiums. Change (even out) the reimbursement for disadvantaged-area/population hospitals that take Medicare.Require pharmaceutical companies to give a 50% reduction of the cost of brand drugs within the "donut hole".
Also: prohibit Medicare Advantage plans (HMO/PPO and private)from changing cost-sharing ratios that differ from Original Medicare PLUS start reducing federal subsidies for these plans. Start a 10% subsidy for primary care physicians and surgeons that practice in disadvantaged areas. Start phasing in Part D subsidies for the "donut hole" share which will be cut to 25% by 2020 for generics. Eliminate cost-sharing for many preventive services.
2012: reduce Medicare payments to hospitals that exceed readmission goals. Create the new Medicare Independence at Home demonstration programs to reduce institutionalization. Continue reducing Medicare Advantage payments; begin bonus payments to high-quality Advantage plans.
2013: Begin phasing in subsidies to Part D patients for brand drugs in the "donut hole" (reduce cost-sharing to 25% by 2020). Begin pilots for "bundling" payments for acute/inpatient/physician/outpatient/post-acute costs---moving towards set payments for entire episodes of care (potentially huge cost savings...).
Begin increasing the Part A tax rate on wages by .9% (to 2.35%) on earnings over $200,000 or over $250,000 for couples filing jointly. Eliminate the Part D tax deduction for employers who subsidize those payments for retirees (was a double deduction...).
2014: require Advantage plans to have an 85% delivery efficiency ratio. The Medicare Independent Advisory Board (15 members) starts submitting cost-reduction and efficiency improvement plans to Congress annually.
2015: Reduce by 1% payments to certain hospitals for hospital-acquired conditions (MRSA, etc.).
So, much complexity, lots of detail. However, there are REAL changes here---improved benefits, reduced cost, a more even playing field overall. Again, no loss of benefits while providing a net reduction in Medicare spending of $428 billion between 2010 and 2019.
Sources: New York Times; CMS website; Kaiser Family Foundation Website; Center on Budget and Policy Priorities website; Washington Post series.
Next time: Medicaid and Healthcare Reform
Coming Soon: Public Seminars
To respond to this blog, email steve6schul@yahoo.com
Health Advocate Solutions
(213) 999-1227
One often hears charges---expressed fears, really---of "big government" hurled as an uncomplimentary epithet.
Yet few Americans truly understand the concept as it applies to our national health (apply both meanings here...).
How many, for example, understand that, of the entire federal budget, 20% is spent on defense ($715 B), 21% on health-related expenses (Medicare, Medicaid and CHIP; $753B) and 20% on social security alone ($708B)? The latter two percentages will grow dramatically in the next decade as Baby Boomers (born 1946 to 1964) age and become eligible for social entitlement program benefits.
Medicare provides healthcare coverage today for about 39 million Americans; Medicaid for about 33 million----many of them children and low-income working people. Medicare alone is expected to enroll up to 77 million people by 2030.
These few facts alone indicate why massive healthcare reform was so necessary. Set aside for a minute whether one thinks such reform is wise, whether it went far enough, whether it was done right, whether it will work.
Social entitlement programs and defense account for a total of 61% of the nation's expenditures. Put simply: reform was necessary to keep our huge economy from sinking. And our invaluable human capital from falling further behind in the world economic race since bankruptcies from health costs had risen to 1 in 4.
On the other hand, one can fairly argue that these huge (and growing) social programs alone should be cut. But, in fairness, one then has to lay out how a wealthy and powerful industrialized nation takes care of its elderly, sick and dependent in other ways.
It is not at all surprising that the large, well-established government vehicles of Medicare and Medicaid would be harnessed into helping with the implementation of healthcare reform.
Due to their size and the complexity of their involvement in healthcare reform I will devote two separate blog postings to Medicare and Medicaid. Let me begin with Medicare.
At one point, remember, Medicare expansion was considered as a viable form of the "public option". In fact, historically, back to 1965, many hoped that Medicare would become the basis of universal coverage. Instead it became a social entitlement program that sought to remove the scourge of end-of-life poverty for all older Americans. The results have been astounding.
Medicare is a hugely successful program---redtape, fraud, variations in benefits and service notwithstanding. It is rare indeed to hear that someone has refused to accept Medicare when they became eligible. (I do know of one case....). For the most part, if someone has Medicare they have great health coverage.
Therefore, it would have been immensely sensible---and no doubt more efficient in the long-run---to have tied Medicare to an expansion of healthcare coverage. Say, make it available to those 55 to 64 as was proposed.
This, of course, did not happen. There were fears that Medicare as it now exists would be trimmed per benefits and increased per cost. The truth is more complex and quite different.
There will be NO direct cuts in benefits. In fact, benefits overall will be INCREASED. There will be cost changes, but these need to be carefully understood before one asserts---incorrectly, I would argue---that Medicare will become more costly (as opposed to being a more expensive program overall as the numbers of clients grow).
In fact, Medicare costs, like healthcare costs, like the deficit will be CUT both in this decade and more over the next. Too bad: the cuts could have been---and may still turn out to be---even greater.
So let's look specifically at the changes the law will bring to Medicare:
2010: Those who have Part D prescription drug plans AND who enter the 100% cost responsibility area ("donut hole") will get a $250 rebate. Federal market basket benchmarks for inpatient/home health/skilled nursing/hospice care will be refigured. A Federal Coordinated Health Care Office will be set up to improve care for Medicare/Medicaid patients (dual eligibles).
2011: The federal coordinating body for Medicare/Medicaid (CMS) will set up an important new agency: the Center for Medicare and Medicaid Innovation. Reduce annual Part D premiums for those making less that $85,000/$170,000 (couples); freeze the income threshold at these income levels also for Part B premiums. Change (even out) the reimbursement for disadvantaged-area/population hospitals that take Medicare.Require pharmaceutical companies to give a 50% reduction of the cost of brand drugs within the "donut hole".
Also: prohibit Medicare Advantage plans (HMO/PPO and private)from changing cost-sharing ratios that differ from Original Medicare PLUS start reducing federal subsidies for these plans. Start a 10% subsidy for primary care physicians and surgeons that practice in disadvantaged areas. Start phasing in Part D subsidies for the "donut hole" share which will be cut to 25% by 2020 for generics. Eliminate cost-sharing for many preventive services.
2012: reduce Medicare payments to hospitals that exceed readmission goals. Create the new Medicare Independence at Home demonstration programs to reduce institutionalization. Continue reducing Medicare Advantage payments; begin bonus payments to high-quality Advantage plans.
2013: Begin phasing in subsidies to Part D patients for brand drugs in the "donut hole" (reduce cost-sharing to 25% by 2020). Begin pilots for "bundling" payments for acute/inpatient/physician/outpatient/post-acute costs---moving towards set payments for entire episodes of care (potentially huge cost savings...).
Begin increasing the Part A tax rate on wages by .9% (to 2.35%) on earnings over $200,000 or over $250,000 for couples filing jointly. Eliminate the Part D tax deduction for employers who subsidize those payments for retirees (was a double deduction...).
2014: require Advantage plans to have an 85% delivery efficiency ratio. The Medicare Independent Advisory Board (15 members) starts submitting cost-reduction and efficiency improvement plans to Congress annually.
2015: Reduce by 1% payments to certain hospitals for hospital-acquired conditions (MRSA, etc.).
So, much complexity, lots of detail. However, there are REAL changes here---improved benefits, reduced cost, a more even playing field overall. Again, no loss of benefits while providing a net reduction in Medicare spending of $428 billion between 2010 and 2019.
Sources: New York Times; CMS website; Kaiser Family Foundation Website; Center on Budget and Policy Priorities website; Washington Post series.
Next time: Medicaid and Healthcare Reform
Coming Soon: Public Seminars
To respond to this blog, email steve6schul@yahoo.com
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