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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CHIP!

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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Mediwhat?

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 http://www.ssa.gov/OP_Home/ssact/title19/1941.htm 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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The Interwebz! Studies! Ponies!

A few final miscellania

Section 1561 discusses new standards for health information technology. The Public Health Service Act is modified to require standards to facilitate the enrollment into these various programs. They will do this through creating systems of electronic applications; utilizing current eligibility data, such as employment and tax records; reusing existing documents; providing places for enrollees to fill out these eligibility forms; and so on. It also authorizes grants for this purpose to the states.

Section 1562 authorizes a study into the incidence of both denial of coverage by and enrollment in health insurance plans.

Section 1563 says that any contract with a small business must still follow Part 19 of the Federal Acquisition Regulation and section 15 of the Small Business Act.

Section 1563 (the second apparently) lists a bunch of amendments to various other laws to make them make sense with this one.

Section 1563 (the third) says that the Senate says this Act will reduce the budget deficit between 2010 and 2019 and after, extend the solvency of Medicare, increase the Social Security Surplus, increase the savings for the Community Living Assistance Services and Support, put a chicken in every pot, make ponies come out of rainbows, and create world peace. Ok – maybe not those last three.

The rest of this week we will look at Increased Access to Medicaid – the portion of the PPACA that does include some things struck down by the Supreme Court.

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And a few addemdums, ipso facto…

The last few sections in this part are entitled “Miscellaneous Provisions”, and boy are they that.

Section 1551 says that the Public Health Service Act definitions are the default, unless otherwise stated.

Section 1552 says that there is a website somewhere that says all of this information.

Section 1553 says that no Federal entity can discriminate against an institution that refuses to provide assisted suicide. I wasn’t aware that they would, but there you go.

Section 1554 limits unknown, unstated regulations on the part of the Secretary of Health and Human Services that might limit access to medical care, timely medical care, full discussions of options of medical care, full disclosure on the part of the provider, violates informed consent, practice ethics, or availability of medical care for the full duration of the patient’s needs. It doesn’t say anything about preventing limiting the same in Congress or state Legislatures.

Section 1555 says that no person, company, individual, or health insurance issuer has to participate in a Federal health insurance program. Except, I suppose, the employees of the federal government, who will be opted in automatically, unless some later provision (or in fact this one) prevents them from doing so. I admit – I’m not entirely clear what they meant here, other than prevention of some terrible world in which we were all forced to get Medicare and have our health care paid for by the federal government. Tragedy!

Section 1556 – is entitled “Equity for Certain Eligible Survivors”. The survivors they are discussing are those of Black Lung Disease. The equity is changing two sentences in the original Act that provides benefits for these workers. I’ll include the sentences that were struck here, for posterity:

The first being:

The Secretary may rebut such presumption only by establishing that

(A) such miner does not, or did not, have pneumoconiosis, or that

(B) his respiratory or pulmonary impairment did not arise out of, or in connection with, employment in a coal mine. The provisions of this paragraph shall not apply with respect to claims filed on or after the effective date of the Black Lung Benefits Amendments of 1981.

The second being:

  • In no case shall the eligible survivors of a miner who was determined to be eligible to receive benefits under this subchapter at the time of his or her death be required to file a new claim for benefits, or refile or otherwise revalidate the claim of such miner, except with respect to a claim filed under this part on or after the effective date of the Black Lung Benefits Amendments of 1981,.

Section 1557 reminds you that several pieces of legislation, like the Civil Rights Act of 1964, title IX of the Education Amendments, the Age Discrimination Act of 1975, and the Rehabilitation Act of 1973 prevent you from discriminating against people. So quit it!

Section 1558 says that your employer can’t fire you if you take the credit you were offered, or tell the Feds that your employer violated this Act, or testified to such, or objected to their violations.

Section 1559 give the Inspector General the right of oversight for this Act.

Section 1560 is a grab bag: this Act doesn’t modify or supersede Anti-trust laws, it doesn’t limit Hawaii’s prepaid health care plan (say what?? Perhaps a later post), or student health insurance plans.

Nope, not done with the miscellanea, but I’ll give you a rest for today.

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The day after blues

After all of the excitement of yesterday, with the details of the individual mandate and all, section 1502 is a bit of a letdown. It discusses how to amend the tax code, to alter the tax forms, to make a line for reporting this health coverage status that you are supposed to know and have, or you will get the penalty mentioned in section 1501. Important, but not very interesting to us.

So, we will move on to the next large section – Part II – Employer Responsibilities

Section 1511 sets out a plan for automatically enrolling companies with a large number of employees (>200) into one of the plans they offer.

This is interesting from a scientific point of view. Research has shown that something called the “status quo bias” will lead people to be more likely to enroll in retirement plans if they are opt-out, rather than opt-in. (Eric J. Johnson, and Daniel Goldstein, “Do Defaults Save Lives?” Science, 2003)One can assume, then, that this will probably apply to health insurance as well. Which will automatically avoid any tax penalties for those people who are working for larger firms.

Section 1512 states that the employers have to tell their employees at the time of hire about the health insurance Exchanges, the tax credit premium assistance, and the impact of free choice vouchers on income.

Section 1513 is about legal responsibilities to provide coverage. If a large firm fails to offer any of its full-time employees the chance to enroll in a health insurance plan, while at the same time offering even one full-time employee a health plan, then they must pay a penalty. One assumes this is to prevent executives from being offered health plans that the employees are not. They can still offer then at higher prices, but if they get too expensive, then the employee is eligible for the tax credit. However, if employees take the tax credit, then the businesses are assessed a penalty of $250 per employee per month that this is the case. Large employers, then, cannot just pass all of their costs onto the employee. If you provide free-choice vouchers (explained MUCH later down the road, although included helpfully after section 1515 for information) then that company is NOT subject to this penalty. This is true if the employer has over 50 full-time employees.

Lots more details about how to calculate firm size, and penalty amounts, and full time employees. There is a provision to perform a study to see if this rule has any impact on worker’s wages. A report even!

Section 1514 is like 1502, but for the employers – how to report all of this on their tax forms.

Section 1515 is entitled “Offering of Exchange-Participating Qualified Health Plans Through Cafeteria Plans”. What it boils down to is that if you offer one of these plans, and people enroll in it, even though that makes them eligible for the tax credit, you won’t be charged the tax penalty.

Tomorrow we will move on the Miscellaneous provisions!


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Best laid plans

So, we have come to this at last. The new section of the PPACA we are looking into is Subtitle F – Shared Responsibility for Health Care. Part I addresses individual responsibility. Specifically, the responsibility to maintain a minimum essential coverage of insurance, section 1501.

Section 1501 starts out with a long discussion of why insurance is interstate commerce, talking about how expensive it is, and how this will insure almost all Americans. It notes that in Massachusetts, this same type of requirement actually increased the number of employers who offered employer-based coverage. It doesn’t mention who was governor when that happened – anyone remember? It talks about the economic impact of disease and shortened lifespan, the cost of providing care to those without coverage, and reminds us that the Supreme
Court already said that insurance was subject to regulation under the interstate commerce class.

All of that was, of course, intended to be part of the argument before the Supreme Court (because, again of course, this issue would appear before the Court) that this Act was constitutional because of the interstate commerce clause. Which the Supreme Court promptly said “NOPE” to when it made it there before it was even fully enacted. However, you shouldn’t fear – because Congress chose the IRS to be the people in charge of handling all of the penalties for not following the mandate, the Act, or at least most of it, was declared constitutional under the seemingly endless power of the Federal government to tax and spend. Which, if you think about it, is all they are really supposed to do.

What does the Individual
Mandate actually do? Well, it amends the Tax Code, specifically section 5000A, to say that every person, in every month starting January 1, 2014, has to maintain minimum essential coverage for their health expenditures. If they don’t, they are subject to a penalty on their tax return. I guess this means we get to learn new tax forms. Oh boy. The penalty is either calculated by a formula given in this section, or by the amount they would have had to pay for bronze level coverage (remember the colors!) in an Exchange, whichever is LOWER.

The penalty formula is per month, per person, and can be a flat dollar amount or percentage of income, whichever is GREATER. The flat dollar amount is $695, although there is a phase in period where it is $95 in 2014, and $325 in 2015. The flat amount is capped at 300% of total dollar amount, and is subject to cost-of-living increases. The percentage of income is also phased in – 1% in 2014, 2% in 2015, and 2.5% thereafter.

Let’s do an example.

Assume you are the sole income, and you make $50,000 a year, with 2 adults and 2 kids. If you didn’t have any insurance, then the most you would be required to pay, in 2016, would be $2085. If there were a plan that insured you for less, then you would be charged that amount, instead. But then, if there were a plan that would cover you for that – why didn’t you buy it?

Exemptions:

This doesn’t apply at all to people that are members of a recognized religious sect; a member of a health care sharing ministry (remember those?); the Not Lawfully Present (you know who you are); and people in jail. It also doesn’t apply if you can’t afford coverage, which is defined as being charged more than 8% of your income per month (also alterable with changing conditions) for health insurance, whether offered through an employer, or through the Exchange (after accounting for the credit); people who make so little they don’t have to file taxes at all; members of Indian tribes; any month where you weren’t covered, but the total number of months you weren’t covered was less than 3 consecutive (think changing jobs); or anyone who gets a hardship exemption through HHS.

Minimum Essential Coverage is defined as: Medicare, Medicaid, CHIP, TRICARE, the VA, Peace Corps health insurance, eligible employer-sponsored plans, individual plans, grandfathered plans, and other plans, such as the plan of being outside the US (no really – that counts!). So – that’s a lot of plans.

They can’t criminally charge you for not paying the penalty, and they can’t take your property either. I suppose they will write you sternly worded letters.

I haven’t yet noted that we are now required to purchase broccoli. I always wondered – do they mean we have to consume it too, when we are required to purchase it, or just buy it? Clarity, people, clarity.

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And now, Small Business!

The final section of this part of the PPACA is about the Small Business Tax Credit. One of the concerns of the current health care system is that small businesses don’t have a lot of opportunity or access to provide health care to their employees. While some small business workers can be covered on their spouse’s or partner’s insurance, many can’t, and this is part of the gap in coverage. PPACA to the rescue! Or at least to the something besides doing nothing!

Section 1421 provides a tax credit to small business for their portion of health insurance plans that they provide for their employees. As the number of employees goes up, or their wages do, the tax credit decreases. If you pay your employees $100,000 a year each, even if you only have a few of them, then presumably your business is doing well enough that you can pay for their health insurance as well. This credit is specifically for small business, both in size and value.

There are provisions for calculating full time equivalents from many part time employees, and if you, say, have one employee that you work 60-70 hours per week, you can’t claim them as multiple employees, only the first 2,080 hours count. Seasonal workers are not counted, if you own stock in the company, that doesn’t count, or if the worker is your dependent, that doesn’t count.

The tax credit replaces the tax deduction that currently exists for small business owners who pay for health insurance. In general, credits are better than deductions, so small business owners should have an incentive here to provide more health insurance benefits. We’ll see why this matters next week.

Because, that’s right kids, we’ve made it to the INDIVUDAL MANDATE portion of the PPACA. You’ll just have to wait through the weekend and you too can then decide if it is the best thing since sliced bread, or the work of the devil, or a compromise position intended to please few while placating many. Until then!

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