Monthly Archives: October 2012

Taking a breather

Ok – I’m wiped out on the PPACA for a while. I’ve done my best to slog through – but I need a break.

In the meantime, there are a set of economic questions that various parties have suggested I write about. One of them came to the forefront today, as part of another conversation I was having on the Interwebz. The issue is the gold standard.

When I first thought about doing a post on the gold standard, which is the idea that our currency needs a commodity of intrinsic value, specifically gold, to ensure its worth, rather than simply being made to worth something because it says so (i.e. fiat money) I thought I would have lots of evidence and complicated points to make.

But I realize that it comes down to this. If you take out the world gold and insert any of the following words (or phrases):






giant stone wheels at the bottom of the sea

or pure-bred Husky puppies

and you are still ok with this as a mechanism for ensuring the stability of our currency, then sure, maybe we can go back to the gold standard. But if you think any one of those is a crazy idea – well – then I have bad news for you. So is the gold standard.

If anyone isn’t convinced, then maybe I will do a follow-up with all the complexities included. But really – a commodity is a commodity. You can’t think one is perfect and the rest are crap. The concept, and the associated problems for an economy of 16 trillion dollars, are the same.

Edited to add: 50 House points to the first person to point out which on that list above HASN’T been used before as money in an economy – at least to my knowledge.



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Title III

So – we are moving into Title III of the PPACA. If you recall, we already did Title IX, and of course Titles I and II. They are not evenly distributed.

Title III is “Improving the Quality and Efficiency of Health Care”.

The first subtitle looks at the delivery system, and the first part of the first subtitle looks at “Linking Payment to Quality Outcomes in Medicare”. Look out olds!

Section 3001 sets up hospital value-based purchasing programs. Even though the name is confusing, it basically gives money to hospitals as an incentive to improve quality in a few key areas, namely acute myocardial infarction (heart attack), heart failure, pneumonia, surgeries, and healthcare-acquired infections. After 2014, these payments will include measures of efficiency, given by the spending per beneficiary.

Section 3002 creates improvements in the physician quality reporting system. The biggest improvement is that it goes from an incentive to participate, to a penalty if you don’t. Which, I suppose, is an improvement from the government’s point of view.

Section 3003 improves the physician feedback system, used to identify issues of quality with physicians. It should be noted that these are physicians that receive money from Medicare and/or Medicaid.

Section 3004 improves quality reporting for long term care facilities.

Section 3005 discusses quality reporting for PPS-exempt cancer hospitals. PPS is the prospective payment system, which reimburses hospitals based on diagnosis codes when the patient enters the hospital. PPS-exempt hospitals, are well, exempt from that – since cancer patients may develop many more diagnoses while in the hospital. There are 11 of these in the US.

Section 3006 sets up a plan similar to 3001, only for skilled nursing facilities and home-health care agencies. You have to remember that when Medicare was set up, most of the health care of the elderly took place in a hospital. So everything is sort of set up around that idea. But that has changed in the 50+ years since Medicare was set up.

Section 3007 establishes payment modifiers for physicians based on the quality of care.

Section 3008 adjusts payments for people who acquire infections in the hospital. It reduces them by 1%. I would be interested in some experimental economics study about whether a 1% reduction was enough incentive to alter behavior.

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More Improvements! Protections! Moms! Kids! Baseball! Pie!

The next large subsection looks at improving the Medicaid and CHIP Payment and Access Commission. Not the actual payments and access, mind you, but the Commission.

Section 2801 calls for an assessment of policies on these issues. Which they did in this section, and changed some things.

That’s it.

I’m not sure that deserved its own subsection.

Moving on!

The next large subsection calls for protection for American Indians and Alaska Natives.

Section 2901 is special rules relating to Indians. It increase the poverty line level below which there is no cost-sharing to 300%, identifies the Indian Health Service as the payer of last resort for health care provided to Indians, and facilitates enrollment by including them in the Express Lane options.

Section 2902 eliminates the sunset of the clause that allowed reimbursement for Medicare Part B services furnished by certain Indian hospitals and health clinics. You get that? They were going to take that reimbursement away, and now they aren’t.

The next large subsection (which really, if you think about it, is quite the misnomer. The subsections play like they are large, but when you actually read them, they are pretty small.) is about Maternal and Child Health Services

Section 2951 creates the funding and authority for statewide needs assessments that identifies communities with higher rates of premature and low-birth weight infants, infant mortality, poverty, crime, domestic violence, high-school drop-out rates, substance abuse, unemployment, or child maltreatment. (Unfortunately, these are probably going to have a high overlap with each other). It will also look at the programs for home visitation, early childhood programs (which, btw, have been shown to make significant impact in the long run in reducing these things). It will also provide grants for increasing the number of these programs.

Section 2952 provides funds for studying, and hopefully reducing, postpartum depression. There will be studies!

Section 2953 gives the states more money for Personal Responsibility Education. This apparently discusses both abstinence and contraception’s role in reducing unintended pregnancy and sexually transmitted diseases. It does say that the information has to be medically accurate and complete.

Section 2954 restores funding for abstinence-only sex education at least through the year 2014. $50,000,000 a year.

Section 2955 is important, but relevant only to a small portion of the population. The title pretty much says it all – “Inclusion of information about the importance of having a health care power of attorney in transition planning for children aging out of foster care and independent living programs“.

Ok – so there was no baseball, and there was no pie. But we did manage to make it 1/3rd through the PPACA! That’s right. 1/3rd. I’ll keep pressing on, you keep reading!

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Back on Track

We are back on track, discussing the improvement of Medicaid for both patients and providers.

Section 2701 sets up an adult health quality measurement process, complete with reports! The details of the quality measurements are not set forth here, but will be the first task undertaken by these people.

Section 2702 is a little weird. It identifies states that prohibit payments under Medicaid for health-care acquired conditions and then doesn’t pay the states for those conditions as well. So if you get sick, and whatever care you get leads to preventable condition, your provider won’t be paid for your initial care. The incentives there are a little weird – enough doctors don’t take Medicaid patients as it is and this seems like it would increase that number. I guess we will have to see.

Section 2703 allows the state to create “care homes” for chronic conditions. These aren’t physical homes, but rather designated care teams that can coordinate between multiple providers, and potentially improve health.

Section 2704 provides money to test out the use of bundled payments for hospitalization. That is, if you go into the hospital, they would get a single payment, no matter how much that “care episode” cost. Presumably this would create an incentive to improve quality of care.

Section 2705 tests out another type of payment system – a global capitated system, rather than fee-for-service – specifically for large safety-net type hospitals.

Section 2706 introduces the accountable care organization, similar to the care homes in section 2703, for pediatric care.

Section 2707 is another demonstration project, such as 2703, 2704, 2705, and 2706. This one is for private hospitals for psychiatric care.

Tomorrow – more improvements!

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Skipping Ahead 2

Ok – so now that you have given your brain a break, we can finish up.

Section 9009 was originally something else, and given the dynamic nature of these bills, I don’t know what it used to be. But now it is a fee of the producers of Medical Devices. Eyeglasses, Contact Lenses, Hearing Aids, and other retail goods are exempt. So your pacemaker, your artificial heart, your bionic knee, etc, is included. The fee, which is actually a tax, is 2.3%.

Any student of economics will tell you that while this tax was placed on the producer, the fact that these are goods that are highly inelastic, possibly even perfectly elastic, means that you can expect that most, if not all, of that tax will be passed on to you, the consumer.

Section 9010 puts a fee on health insurance providers. It’s that crazy kind of fee in the previous post, although with different numbers. Here, you could expect that not all the cost will be passed onto you, because there is some choice in health insurance plans, although not that much.

Section 9011 calls for a report on the effect of all this on the cost of Veteran health care, especially with regards to the medical devices and prescription drugs that they just taxed.

Section 9012 eliminates the ability to deduct expenses allocable to the Medicare Part D (prescription drug) benefit.

Section 9013 increases the percentage of income above which your medical expenses must be to deduct them from 7.5% to 10%, starting after 2012.

Section 9014 eliminates the deductibility of remuneration paid by health insurance providers to employees over $500,000. That was a terrible sentence, but that means if they pay their CEO $650,000, the $150,000 above $500,000 isn’t deductible. Why that is limited to just health insurers, I don’t know.

Section 9015 increases taxes by 0.9% for wages over $250,000 (joint return) in the FICA portion of your taxes. For those of you who don’t know, FICA is what funds Medicare and Social Security. This applies only to wages.

Section 9016 applies specifically to Blue Cross and Blue Shield organizations, and says that the special deductions that are applied in section 833 of Internal Revenue Code of 1986 doesn’t apply if said organization spends less than 85% of its revenue on clinical care.

Section 9017 was going to be a 10% excise tax on cosmetic surgery, but due to a later amendment, now applies only to tanning.

Ok – so there you go – that’s the Revenue offsets for the PPACA. I hope you feel super informed now! Back to our regularly scheduled Section 2701 tomorrow.

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Skipping Ahead

Ok, I know I said I didn’t want to skip around, but there is also no way I am finishing this before the election. So, I’m going to skip ahead to sections 9001 through 9017, which are the Revenue Offset Provisions. As in, how are we going to pay for this thing? Then I’ll go back and get back on track with Section 2701 and so on.

Section 9001 places an excise tax on any employer that provides an excess benefit, and therefore higher cost, insurance. In general, this is defined as $10,200 for an individual, or $27,500 for a family. This isn’t to say that if you happen to cost your employer more than that a year, that they will be taxed, but rather if the plan in general provides that much general, on average, to every employee. (Disclosure: I was covered under one of these types of benefit plans, so I can tell you some personal anecdotes about this. We changed to a plan that required more cost-sharing, as required by this change. The other one was nice, but my economist soul always balked at the high level of benefit.)

An interesting note on this is that if you were employed in high-risk profession, or as a person who repaired or installed telephone lines, the amounts are $1650 and $3450 higher respectively. High risk employees are defined as law-enforcement, firepeople, paramedics, long-shorepeople, construction, mining, agriculture, forestry and fishing. Me thinks the telephone line people were a bit of an afterthought (especially since that particular line was modified).

I have mixed personal feelings about this section, and not just because my insurance changed. On the one hand, if employers feel that they can recruit higher quality workers by offering insurance with essentially no cost-sharing (which is how mainly get this type of increased benefit), then they should. On the other hand, a lack of cost-sharing can lead to making poor choices, by both the patient, and the provider, who knows that the patient isn’t paying for any of it, so might order expensive testing that may not be necessary, driving up the cost of insurance for everyone. Realistically, most employers will just reduce their benefits, and this will not be much of a source of revenue.

Section 9002 provides that the information about how much health insurance costs will be placed on the W-2. It doesn’t indicate that it will be taxed, but this information will be used in the previous sections to determine eligibility for Exchanges.

Section 9003 removes the ability to pay for drugs that are not prescribed drugs or insulin with your health savings account. So anyone that had been using it to pay for vitamins, and witch hazel, and hydrogen peroxide, will no longer be able to. But it does seem that you could still buy over the counter Prilosec and have that reimbursed.

Section 9004 increases the tax for people who use their HSA monies for non-medical reasons from 10% or 15% (depending on which kind you have) to 20%.

Section 9005 limits the type of benefits you can receive from a cafeteria plan if the plan allows you to put more than $2500 in per year.

Section 9006 increases some information that corporations have to give the IRS.

Section 9007 increases the requirements to qualify as a charitable hospital. Although it seems to be less increasing them as it is adding any at all. And adds a tax if the hospital doesn’t meet these requirements.

Section 9008 adds a yearly fee to branded drug importers or manufacturers. There is a sliding scale of how much of the sales are included in the fee calculation, ranging from 0% if the entity sells less than $5,000,000 a year, up to 100% if the entity sells more than $400,000,000 a year. The fee itself is the ratio of your branded drug sales to the total amount of branded drug sales. A little example:

So – if you sold between $125,000,000 and $225,000,000 of branded drugs in a given year, then 40% of those sales would be included in the fee calculation. Let’s assume the higher number. 40% of $225,000,000 is $90,000,000. This year, the PPACA defines the amount of branded drugs sales as $2,800,000,000. So your fee would be $90,000,000/$2,800,000,000 of your sales. Which is .032 * $225,000,000 or $7,232,142.86. Given that the US pharma companies made $64.5 billion dollars in profit last year, this is a pretty good source of revenue.

Sales from orphan drugs, or those intended to treat specific rare diseases, are not included.

The fees go to Medicare.

Ok – there are a few more of these. But in an effort to save your sanity for driving home after all that math I’ll put those in a separate post for today.

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Druggles! Hospitals! Dual Eligibility!

The next subsection (F) deals with Medicaid Prescription Drug coverage.

Section 2501 discusses rebates for prescription drugs. They increased the percentage rate for that.

Section 2502 eliminates the exclusion of coverage for certain drugs. Specifically these are smoking cessation drugs, barbituates, and benzodiazepenes. Party at their house!

Section 2503 increases the reimbursement to pharmacies for providing discounts to the community. You didn’t really think WalMart gave those $4 drugs from the goodness of their heart, did you?

Subtitle G is about Medicaid Disproportionate Share Hospital Payments.

Section 2551 states that these payments are going down. The payments are going down $500,000,000 in fiscal year 2014, all the way up to $4,000,000,000 in year 2020. These payments are going down because they are intended to compensate hospitals for treating the indigent. But, with the PPACA, these people should have health insurance, or Medicaid, and therefore will not be such a cost burden to the hospitals. The total cost savings will be $17.1 billion.

Dual Eligible people are those that are eligible for both Medicare and Medicaid. So, they are both elderly and poor.

Section 2601 sets up funding for demonstration projects to improve the coordination of benefits for this group of people.

Section 2602 sets up a federal office to coordinate care for the dual eligible.

Next time – Improving Medicaid for patients and providers. What a great idea!

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New Options!

Subtitle E of this section says that it provides new options for states to provide Long-Term Services and Support. You know, in case your state is in to that kind of thing.

Section 2401 allows the states to pay for home care or a home-like community care place in situations where they might previously be required to send a person to a nursing home or hospital.

Section 2402 removes more barriers to providing this kind of option. Given what they are doing, the barriers seem to have a lot to do with a lack of coordination on the part of the various entities responsible for such care. Also, there were apparently rules about the level of benefits these people could receive, and for how long, and etc. So these are eliminated by this section.

Section 2403 is called “Money Follows the Person” reduces the waiting period for payment for people who have been admitted to long-term care.

Section 2404 protects these people from spousal impoverishment. It doesn’t actually describe what the process of spousal impoverishment is, but it will protect you from it if you are in a long-term home care situation being paid for by Medicaid.

Section 2405 gives $10,000,000 a year until 2014 to increase aging and disability resources in the states.

Section 2406 is another “Sense of the Senate” section. It says that even though we said as a country we should improve the way we handle elder care in this country, we didn’t. These provisions should help improve this possibility, mostly by not requiring that we shove our sick and old into institutions rather than trying to care for them in their homes and their communities.

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I love that show! No, wait, that’s not it. Not plural.

So crunchy! Dang, that’s not it either.

Children’s Health Insurance Program. In 1997 people decided that children not having health insurance in America, a country that spends 15% of the world’s largest GDP on health care, was a bad thing. Since people can always rally around “the children” they created the State Children’s Health Insurance Program, funding matching grants to the states to provide health insurance to the children who weren’t eligible for Medicaid due to income, but didn’t have health insurance through a parental employer.

Section 2101 of the PPACA expands this program by offering more money to the states (23%!) to increase enrollment. If there isn’t enough money, then those children will be eligible for the Exchanges. The plans offered must meet be comparable to pediatric care available through qualified health plans. If a child is made ineligible for Medicaid because of changes to the eligibility of that program, that child will be eligible for CHIP.

Section 2102 is called Technical Corrections. They are very technical.

Section 2201 discusses how to simplify enrollment in Medicaid and CHIP, and how those programs can be coordinated with the Health Insurance Exchanges. Short answer – the Internet!

Section 2202 gives authority to the hospitals to make presumptive declarations about who is eligible for Medicaid.

The next subpart discusses improvements to Medicaid services.

Section 2301 allows coverage for freestanding birth centers for pregnancy, assuming it is licensed as such.

Section 2302 is really depressing. It says that you can pay for both hospice care and treatment for sick children at once. I told you it was depressing.

Section 2303 provides for family planning services for women who are not pregnant.

Section 2304 is a clarification of the definition of medical assistance. It’s not the world’s most interesting definition, but important, I supposed.

I think I could have come up with more than 4 improvements to Medicaid, but I guess you have to start somewhere.


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For those of you who don’t know – Medicaid is joint program between the federal government and the state to assist specific lower income populations pay for medical care. It was established in 1965 along with Medicare (a social insurance program for those over 65, fully funded by the federal government).

During the debate over the details of the PPACA in Congress, there was some suggestion of creating a national, single-payer, health care system by expanding Medicaid coverage to all people in the U.S. This was immediately denounced as “socialism” and therefore anathema. Instead, the PPACA expanded the coverage for some people.

Up until the passage of the Act, Medicaid eligibility was incomes at or below the poverty line. Section 2001 expands this coverage, starting in 2014, to those with incomes up to 133% of the poverty line. Additionally, whereas before childless or non-pregnant adults under 65 were not eligible unless they were disabled, those restrictions will be removed. The Congressional Budget Office estimates that this will be 16 million additional people. This increase is fully funded by the federal government for 3 years, decreasing each year after that until its final funding level of 90% starting in 20201.

You can’t enroll yourself, if you don’t enroll your children, or have them covered in some other way.

The states can’t limit enrollment until they have operating Exchanges.

Medicaid must offer the minimum essential coverage that is required by the PPACA in general.

Mental health services must be offered in the same manner as other medical services – known as mental health parity.

Reports shall be made!

Section 2002 says that adjusted gross income will be used, and you can’t leave out any income, but you can’t have an asset test. This doesn’t apply if you are getting other aid that makes you eligible, you are over 65, you are blind, or disabled. Current enrollees are grandfathered in.

Section 2003 says that if you are eligible for Medicaid, you, and your children, don’t lose that eligibility if you don’t apply for insurance through an employer.

Section 2004 increases the age limit for eligibility for Medicaid for former foster children, who wouldn’t have the opportunity, then, to be on a parent’s insurance.

Section 2005 gives more money to the US territories. Quick! Who can name them?? Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Island and American Samoa.

Section 2006 gives more money, for two years, to areas hit by natural disasters.

Section 2007 rescinds money due to the Medicaid Improvement Fund for years 2014 through 2018, if it isn’t spent. On a fascinating side note, go to this page and read the foot notes about all the changes that have taken place in just this one section. Oh Congress.

1 it should be noted that Texas, or rather its governor, among other states, has already stated that it will not enact this portion of the PPACA. While we haven’t gotten to the portion that is the stick to this carrot, the Supreme Court struck down the portion of the PPACA that stated that if a state didn’t increase eligibility, that ALL of its Medicaid funding would be rescinded. Instead, only the portion for the increase will not be given. I leave it to the Legislatures of the various states to explain why they aren’t insuring their citizens.

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