A Midterm Report Card for Obamacare

Photo courtesy of iStock

Photo courtesy of iStock

The first half of the Obamacare open enrollment period is over, and yesterday, federal health officials announced sign-up figures from the first three months.

After a disastrous start, HealthCare.gov (which handles enrollment for 36 states) began functioning properly. It, along with state-run insurance exchanges, netted more than 2.1 million signups between Oct. 1 and Dec. 28.

But are sign-ups on pace to meet the Congressional Budget Office’s projection of 7 million this year? And is there an adequate balance between young and old, sick and healthy, to keep costs in line? That’s harder to say.

Here’s what we know:

  • Some states are performing much better than others. Connecticut has already exceeded the target the Centers for Medicare and Medicaid Services (CMS) wanted it to have by the end of March, according to acasignups.net. New York and Rhode Island are also on pace to beat expectations. But other states are lagging. They include Maryland, Oregon and Massachusetts, which run their own exchanges and continue to be plagued by website problems. Also far behind are New Mexico and Mississippi, which rely on HealthCare.gov.
  • Enrollees are skewing older. Currently, 33 percent of enrollees are 55 to 64 years old, compared to only 30 percent who are under 35. In Arkansas, Maine, Ohio, West Virginia and Wisconsin, at least 40 percent of enrollees are over 55. A higher proportion of younger enrollees are going to have to sign up before the end of March in order to help offset the costs of older ones. CMS officials say younger enrollees tend to sign up later in the process, as they did several years ago when Massachusetts implemented its individual mandate.
  • The vast majority of those signing up qualify for financial assistance. About 79 percent of the early sign-ups will receive financial assistance, just a bit less than what the Congressional Budget Office estimated (86 percent – see page 3). That ranges from an implausible low of 9 percent in Washington D.C., to 100 percent in Oregon.

Here’s what we don’t know:

  • How many of those who signed up for coverage previously had plans canceled by insurance companies If the policies are merely replacing coverage that individuals already had, the law won’t make the dent in the uninsured that proponents hoped for. In New York, for example, only 44 percent of the early enrollees had been uninsured.
  • The health status of early enrollees. While some people consider age a proxy for health status, in truth, it isn’t a very effective stand-in. Experts say they need to know more about the health of those who enrolled to know if the insurance risk pool will be balanced, keeping premiums from exploding in the years to come. Health insurer Humana reported last week that the mix of its early enrollees was “more adverse than previously expected,” in part because the Obama administration gave those with canceled policies the ability to stay in them for another year. That assumes those who chose to stay were healthier than others.
  • Whether enrollees have paid their first month’s bill. Coverage does not take effect unless consumers pay their initial bill. There has been plenty of confusion about the deadline to sign up – and confusion about when the first payment is due. Dates have changed and vary from state to state, insurer to insurer. Some insurers set a deadline of Jan. 10; others have set other dates in January for coverage that began Jan. 1. “It’s been pulling teeth,” Shaun Greene, chief operating officer of Utah-based Arches Health Plan, told the Wall Street Journal. The newspaper reported that, as of Thursday, Arches had collected about 60 percent of premiums for people who signed up for coverage that took effect Jan. 1.
  • How many people have signed up for coverage outside of the exchanges. In order to receive a premium tax credit to offset the monthly cost of coverage, individuals have to sign up using one of the health exchanges created under the law. But those who do not qualify or don’t want to bother can sign up directly with an insurance company. Ultimately, those figures will be publicly reported, but that will take months, or even years.
  • Will the open-enrollment period close strong as it did in Massachusetts? Supporters of the Affordable Care Act regularly point to the experience of Massachusetts, which implemented a similar individual mandate in 2007, and saw a late surge of enrollment, particularly among the young. The open enrollment period for Obamacare runs through March 31, leaving plenty of time for folks to sign up.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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The Health Law Takes Effect: A Consumer’s Guide

Photo courtesy of iStock

Photo courtesy of iStock

Starting Jan. 1, central provisions of the Affordable Care Act kick in, allowing many uninsured Americans to afford health insurance. But the landmark law still faces heavy opposition from Republicans and from a public that remains skeptical the law can improve health care coverage while lowering its cost.

The law has already altered the health care industry and established a number of consumer benefits. It will have sweeping ramifications for consumers, state officials, employers and health care providers, including hospitals and doctors.

However, healthcare.gov, the federal website that is managing enrollment in 36 states, has been plagued by electronic problems that botched the Oct. 1 rollout of the health law’s online marketplaces, or exchanges. The problems frustrated potential enrollees and gave Republicans new fodder for their argument that the law was doomed to fail. After hundreds of hardware and software fixes, federal officials have said that the site works for the “vast majority of users,” but some problems remain.

Here’s a primer on where the law stands now and how it might change.

I don’t have health insurance. Under the law, will I have to buy it and what happens if I don’t?

You have until March 31 to enroll in health insurance before you are subject to the law’s tax penalty for not having coverage. For individuals, the penalty would start at $95 or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. For families this year the penalty is $285 or 1 percent of income. That will grow in 2016 to $2,085 or 2.5 percent of household income, whichever is greater. The requirement to have coverage can be waived for several reasons, including financial hardship or religious beliefs.

Last month the administration decided to waive the individual mandate penalty for 2014 for some people in the individual insurance market whose plans were being canceled.  Under the law’s “hardship exemption,” these consumers are also eligible to buy “catastrophic” coverage policies, which have lower premiums and higher deductibles than other plans that comply with the law.

I get my health coverage at work and want to keep my current plan. Will I be able to do that? How will my plan be affected by the health law?

If you get insurance through your job, it is likely to stay that way. But, just as before the law was passed, your employer is not obligated to keep your current plan and may change premiums, deductibles, co-pays and network coverage.

The law has already made several changes to employer-sponsored insurance. For example, plans generally now ban lifetime coverage limits and include a guarantee that an adult child up to age 26 can stay on her parents’ health plan. More than 3 million young adults have been able to stay on their parents’ plan due to this provision, according to administration figures.

What other parts of the law are now in place?

Starting Jan. 1, insurers will not be allowed to deny you coverage based on a pre-existing medical condition or place annual limits on medical coverage of essential health benefits, which include prescription drugs and hospitalization.

You are likely to be eligible for some preventive services such as breast cancer screenings and cholesterol tests, with no out-of-pocket costs.

Health plans can’t cancel  your coverage once you get sick – a practice known as “rescission” – unless you committed fraud when you applied for coverage.

The law earlier barred insurers from denying coverage to children with pre-existing conditions.

Insurers have to provide rebates to consumers if the companies spend less than 80 to 85 percent of premium dollars on medical care.

Some existing plans, if they haven’t changed significantly since passage of the law, do not have to abide by certain parts of the law. For example, these “grandfathered” planscan still charge beneficiaries part of the cost of preventive services.

If you’re currently in one of these plans, and your employer makes significant changes, such as raising your out-of-pocket costs, the plan would then lose its grandfathered status and have to abide by all aspects of the health law.

I want health insurance but I can’t afford it. What will I do?

Depending on your income, you might be eligible for Medicaid. Before the health law, in most states nonelderly adults without minor children didn’t qualify for Medicaid. But now, the federal government is offering to pay the cost of an expansion in the programs so that anyone with an income at or lower than 138 percent of the federal poverty level, (about $16,000 for an individual or $32,500 for a family of four based on current guidelines) will be eligible for Medicaid.

The Supreme Court, however, ruled in June 2012 that states cannot be forced to make that change. As of last month, 25 states and the District of Columbia have chosen toexpand Medicaid.

kaiser-health-newsWhat if I make too much money for Medicaid but still can’t afford to buy insurance?

You might be eligible for government subsidies to help you pay for private insurance sold in the state-based insurance marketplaces, also called exchanges.

These premium subsidies will be available for individuals and families with incomes between 100 percent and 400 percent of the poverty level, or about $11,490 to $45,960 for individuals and $23,550 to $94,200 for a family of four (based on current guidelines).

If you earn less than 100 percent of the poverty level and live in a state that does not expand the Medicaid program, you generally cannot qualify for a subsidy to purchase coverage. However, you are also exempted from the penalties for not having insurance.

Will it be easier for me to get coverage even if I have health problems?

Insurers are now barred from rejecting applicants based on health status.

I own a small business. Will I have to buy health insurance for my workers?

No employer is required to provide insurance. But starting in 2015 — a one-year delay from the previous date of 2014 — businesses with 50 or more employees that don’t provide health care coverage and have at least one full-time worker who receives subsidized coverage in the health insurance exchange will have to pay a fee of $2,000 per full-time employee. The firm’s first 30 workers would be excluded from the fee.

However, firms with fewer than 50 people won’t face any penalties.

In addition, if you own a small business, the health law offers a tax credit to help cover the cost. Employers with fewer than 25 full-time workers who earn an average yearly salary of $50,000 or less can get tax credits of up to 50 percent this year.

Citing technical difficulties, in late November the Obama administration announced aone-year delay in the debut of the online marketplace for small businesses, called the Small Business Health Option, or SHOP. Until the SHOP exchange is fully operational in November 2014, small business owners can apply for coverage through the mail, over the phone or with a broker or insurance agent.

I’m over 65. How does the legislation affect seniors?

There is no need for you to enroll in the health law’s exchanges. Medicare is not part of those exchanges.

But the law does make other changes to Medicare.It is narrowing a gap in the Medicare Part D prescription drug plan known as the “doughnut hole.” That’s when seniors who have paid a certain initial amount in prescription costs have to pay for all of their drug costs until they spend a total of $4,550 for the year. Then the plan coverage begins again.

That coverage gap will be closed entirely by 2020. Seniors will still be responsible for 25 percent of their prescription drug costs. As of late November, more than 7.3 million seniors and people with disabilities who hit the doughnut hole have saved $8.9 billion on their prescription drugs, according to the Centers for Medicare & Medicaid Services.

The law also expanded Medicare’s coverage of preventive services, such as screenings for colon, prostate and breast cancer, which are now free to beneficiaries. Medicare will also pay for an annual wellness visit to develop or update a plan to prevent disease or disability.

According to CMS, in 2012 an estimated 34.1 million beneficiaries took advantage of Medicare’s coverage of preventive services with no cost-sharing.

The health law reduced the federal government’s payments to Medicare Advantage plans, run by private insurers as an alternative to the traditional Medicare. Medicare Advantage costs more per beneficiary than traditional Medicare. Critics of those payment cuts say that could mean the private plans may not offer many extra benefits, such as free eyeglasses, hearing aids and gym memberships, that they now provide.

Will I have to pay more for my health care because of the law?

It depends. Younger people who often paid less for health insurance before the health law may pay more for coverage. Older people may pay less because there are tighter rules governing how much more insurers can charge based on age. People who could not afford insurance before may now be eligible for subsidies to cover the cost of premiums – and possibly out-of-pocket costs as well.  Individuals who purchased insurance before may pay more because the law’s “essential health benefits” require that more services be covered.

Opponents say the law’s additional coverage requirements will make health insurance more expensive for individuals and for the government. Even supporters of the law acknowledge its steps to control health costs, such as incentives to coordinate care better, may take a while to show significant savings.

There are also some new taxes and fees. For example, starting last year, individuals with earnings above $200,000 and married couples making more than $250,000 paid a Medicare payroll tax of 2.35 percent, up from 1.45 percent, on income over those thresholds. In addition, higher-income people faced a 3.8 percent tax on unearned income, such as dividends and interest.

Starting in 2018, the law also will impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year and $27,500 for families. The tax has been dubbed a “Cadillac” tax because it hits the most generous plans.

In addition, the law also imposes taxes and fees on several major health industries. Last year, medical device manufacturers and importers began paying a 2.3 percent tax on the sale of any taxable medical device to raise $29 billion over 10 years. An annual fee for health insurers is expected to raise more than $100 billion over 10 years, while a fee for brand name drugs will bring in another $34 billion.

Those fees will likely be passed onto consumers in the form of higher premiums.

Has the law hit some bumps in the road?

Yes. The Oct. 1 launch of healthcare.gov was marred by technical problems that frustrated millions of consumers and gave Republicans on Capitol Hill fresh material for another round of hearings and charges criticizing President Barack Obama’s signature domestic policy achievement. Some Democrats have urged the administration to delaythe law’s individual mandate, citing the website’s woes. After a series of repairs, officials have said that the website is working for the “vast majority of users.”

When millions of Americans who buy coverage on the individual market began to learnthat their current health plans would not be offered in 2014 because they did not  comply with the health law’s new requirements, Obama had to apologize for his oft-repeated statement “if you like your health plan you can keep it.”

With some Americans still having difficulty in late December trying to sign up for coverage that starts Jan. 1, administration officials asked insurers to give people more time to pay for coverage beginning Jan. 1.  Insurers said that people who enroll by Dec. 24 can pay as late as Jan. 10.

Problems with healthcare.gov have helped keep early enrollment well below government estimates, but administration officials have said they expect sign-ups to continue to intensify before open enrollment closes March 31.

Are there more changes ahead for the law?

Republicans are expected to continue their efforts to defund or repeal the health law and convene additional oversight hearings to highlight the law’s problems as Congress gears up for the 2014 midterm elections.

It’s also possible that some of the taxes on the health care industry, which help pay for the new benefits in the health law, could be rolled back due to pressure from affected groups. A repeal of the tax on medical devices was part of last fall’s debate over funding the federal government and raising the federal debt ceiling but was not included in the final deal. Medicare’s actuary has predicted that the law’s payment reductions to hospitals and other providers may not withstand heavy political lobbying on Capitol Hill.

Meanwhile, the Independent Payment Advisory Board (IPAB), one of the most contentious provisions of the health law, is also under continued attack by lawmakers. IPAB is a 15-member panel charged with making recommendations to reduce Medicare spending if the amount the government spends grows beyond a target rate. If Congress chooses not to accept the recommendations, lawmakers must pass alternative cuts of the same size.

Some Republicans argue that the board amounts to health care rationing and some Democrats have said that they think the panel would transfer power that belongs on Capitol Hill to the executive branch. In March, the House voted to repeal IPAB. The Senate did not consider the measure.

This article was republished from kaiserhealthnews.org with permission from the Henry J. Kaiser Family FoundationKaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Despite Health Law’s Protections, Many Consumers May Be ‘Underinsured’

Photo courtesy of Michael McCloskey

Photo courtesy of Michael McCloskey

People with chronic conditions will be better protected from crippling medical bills starting in January as the health law’s coverage requirements and spending limits take effect. But a recent analysis by Avalere Health found that many may still find themselves “underinsured,” spending more than 10 percent of their income on medical care, not including premiums, even if they qualify for cost-sharing subsidies on the health insurance marketplaces.

“You have some great protections in place, but these out-of-pocket costs and how plans are structured are going to create some serious problems,” says Marc Boutin, executive vice president at the National Health Council, an advocacy group for people with chronic health conditions.

Potential trouble spots include prescription drugs; specialist care, including that provided by academic medical centers; and services such as physical therapy that typically require a course of treatment over weeks or months, say experts.

The health law prohibits insurers from turning down sick people for coverage and generally eliminates lifetime and annual dollar limits on benefits, including hospitalization and prescription drugs.

It also caps the amount people spend out-of-pocket in 2014 at $6,350 for individuals and $12,700 for families that buy a plan on the individual and small group markets, including the health insurance exchanges. People with incomes below 250 percent of the federal poverty level ($28,725 for an individual or $58,875 for a family of four in 2013) may qualify for cost-sharing subsidies on the marketplaces that reduce those caps as well as their deductibles and copayments.

The Avalere analysis found that many chronically ill people, especially those in Bronze or Silver plans that offer less generous coverage, will likely reach their out-of-pocket maximum every year.

John Earley worries he may be one of them. Earley, 60, has severe plaque psoriasis, a condition that causes painful, itchy red patches on his skin.

After he was diagnosed more than 30 years ago, topical creams and ultraviolet light treatments that slow the growth of skin cells worked for a while. But eventually their effectiveness waned. He finally found relief with Humira, a biologic drug that blocks the production of an immune system protein that causes inflammation. The twice monthly injections cost more than $2,200, but the Texas high-risk pool through which Earley and his wife are insured covers the drug with a $100 copayment. The drug’s manufacturer, AbbVie, covers all but $5 of that amount through its patient assistance program. Their insurance premium is $1,460 per month.

With the Texas high-risk pool set to close early next year, Earley, who works on contract as an architect in Arlington, is checking into plans on the health insurance marketplace. The plan with the best Humira coverage—a $150 copay per refill—is a gold plan with a $1,718 monthly premium for the two of them, says Earley. Plans with lower premiums would require 40 to 50 percent coinsurance for the drug, which is in a high-cost specialty tier.

“What I’m finding with the insurance policies that are available, it’s going to cost you either way,” says Earley.

kaiser-health-newsThe gold plan with the best Humira coverage would cost roughly a quarter of their income, says Earley, who is not eligible for tax credits to subsidize his premium costs.  But that may be their best option, even with financial assistance from the drug’s manufacturer, given the high drug coinsurance charges on the other plans.

Drug costs are perhaps the most often cited coverage concern for people with chronic conditions, but there are others, say experts.

Access to specialists and to academic medical centers with the necessary expertise can be problematic on the marketplaces, where many insurers have opted for a narrow network of doctors and hospitals in order to keep a lid on premiums. A recent McKinsey & Co. study found that 70 percent of the 120 plans it examined offered narrow hospital networks that excluded at least 30 percent of an area’s biggest hospitals. Academic medical centers were generally part of broader plans whose premiums were 10 percent higher than average.

For people who need specialist care, narrow networks can be problematic since the law’s limits on what a patient spends out-of-pocket only apply to in-network care. Dermatologists trained in handling severe psoriasis may not be in network, nor the academic medical centers that some people need for treatment, says Leah Howard, director of government relations and advocacy at the National Psoriasis Foundation.

On the other end of the spectrum, sometimes the out-of-pocket costs for effective treatments such as phototherapy can deter patients who would have to make  a copayment for perhaps dozens of sessions.

“We’ve seen people who would prefer to be on phototherapy, but can’t afford $500 in copays over eight weeks, so they end up stepping up to a systemic treatment,” says Howard.

In addition, although dollar limits on benefits aren’t allowed, plans typically limit the number of sessions for certain treatments such as physical therapy.

Because of the rocky rollout of the exchange websites in many states, many consumers have found it difficult to get basic information about premiums and plan deductibles, say experts. Many don’t know which providers are in the plan networks or what benefits the plans cover.

“As more and more people become covered and as people start to use their plans, we’ll see if the cost protections in the plans are sufficient, and directed toward getting people the care they need,” says Sara Collins, a vice president at the Commonwealth Fund.

This article was republished from kaiserhealthnews.org with permission from the Henry J. Kaiser Family FoundationKaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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HealthCare.gov’s Mysterious New Number: ‘834’

healthcare.gov2Now that the front-end of HealthCare.gov appears to be working properly, the media’s focus is quickly shifting to the back-end systems that are supposed to provide insurance companies with accurate information about consumers enrolling in their plans.

The issue is an important one because if insurance companies get incorrect data, their future customers may not be enrolled properly and that could lead to headaches 2014 or worse 2014 come January when patients show up at doctors’ offices or hospitals thinking they are insured but really aren’t.

Sarah Kliff at The Washington Post has been flagging this issue for some time, writing in October how the “834” transactions that the government sends insurers each night could make or break the law.

If people can’t get into the Web site, then they simply have to come back later. But if they believe they’ve signed up for a plan but their 834 is a garbled mess 2014 or, even worse, clear but wrong 2014 it could mean chaos when they actually go to use their health insurance. For that reason, inside the health-care industry, the 834 problems are the glitch that is causing the most concern.

The problems appear to have persisted even as the website itself has gotten much easier to use for consumers. The Post reported earlier this week:

The errors cumulatively have affected roughly one-third of the people who have signed up for health plans since Oct. 1, according to two government and health-care industry officials. The White House disputed the figure but declined to provide its own.

The mistakes include failure to notify insurers about new customers, duplicate enrollments or cancellation notices for the same person, incorrect information about family members, and mistakes involving federal subsidies. The errors have been accumulating since HealthCare.gov opened two months ago, even as the Obama administration has been working to make it easier for consumers to sign up for coverage, the government and industry officials said.

Administration officials say the Post is wrong, but haven’t been willing to provide correct figures.

The New York Times has similarly reported on the problems:

The issues are vexing and complex. Some insurers say they have been deluged with phone calls from people who believe they have signed up for a particular health plan, only to find that the company has no record of the enrollment. Others say information they received about new enrollees was inaccurate or incomplete, so they had to track down additional data 2014 a laborious task that will not be feasible if data is missing for tens of thousands of consumers.

The Times has a graphic showing all the ways enrollment can go wrong.

Late yesterday, the Centers for Medicare and Medicaid Services and two insurance trade groups issued a statement saying they are working on the problem and pledged to report publicly on their progress.

But the issue has proved contentious, dominating daily media calls CMS is holding. Some tweets yesterday conveyed the frustration:

Health reporters still want more 834 data. Three reporters, including myself, made another attempt to get information on errors effecting the 834 transmissions, the files the exchange sends to insurance plans when someone signs up for their plan. We know there have been some problems with these transmissions, but don’t have a great sense of how many problems 2014 or how quickly those problems are getting fixed.

“I can appreciate the frustration,” [CMS spokeswoman Julie] Bataille told Bloomberg’s Alex Wayne when he brought up the issue. “We believe the vast majority of the fixes are now in place.”

Louise Radnofsky from The Wall Street Journal followed up, asking for a reason why the error rate would not be shared. “As I just mentioned, we are actively working with issuers to assess the fixes and validate the numbers,” Bataille said.

“We’ve heard numbers like 80 percent [of the errors were from one bug],” Radnofsky pressed. “There must be a number out there.”

“What we’ve reported on there was that we believed there to be a transaction issue causing those inaccuracies,” Bataille responded. “As we validate the assessment of the fixes, we will report on our progress.”

“So it’s a validation issue?” Radnofsky asked.

Medicare spokesman Richard Olague cut in.

“We’ll have to move on to the next question,” he said.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Medicare Seeks To Curb Spending On Post-Hospital Care

Photo couretsy of Paul Vinten / Fotolia

Photo couretsy of Paul Vinten / Fotolia

After years of trying to clamp down on hospital spending, the federal government wants to get control over what Medicare spends on nursing homes, home health services and other medical care typically provided to patients after they have left the hospital.

Researchers have discovered huge discrepancies in how much is spent on these services in different areas around the country. In Connecticut, Medicare beneficiaries are more than twice as likely to end up in a nursing home as they are in Arizona. Medicare spends $8,800 on each Louisiana patient getting home health care, $5,000 more than it spends on the average New Jersey senior. In Chicago, one out of four Medicare beneficiaries receives additional services after leaving the hospital—three times the rate in Phoenix.

Medicare per capita spending on these services, collectively known as post-acute or post-hospital care, has grown at 5 percent a year or faster in 34 of the nation’s 50 most populous hospital markets in recent years, according to an analysis health care economist Chapin White conducted for Kaiser Health News.

Last year $62 billion — one out of every six dollars Medicare spent in the traditional fee-for-service program — went to nursing and therapy for patients in rehabilitation facilities, nursing homes, long-term care hospitals and in their own homes, according to a congressional advisory panel.

Most of them got those services after coming out of the hospital. Some of these providers earn double-digit profits from Medicare through a hodgepodge of payment methods that health experts say encourages unnecessary and disjointed care, wastes taxpayer money and makes fraud easier. More than a quarter of Medicare spending in Louisiana, Texas, Mississippi, Oklahoma and Massachusetts was for post-acute care in 2011, Medicare records show.

kaiser-health-newsHospitals are often the gatekeepers to this world. But analysts say they do not take costs—or sometimes patients’ best interests—into account when discharging patients. “They have not had to think remotely about costs or quality or anything except where’s a bed available,” said Anne Tumlinson, a consultant at Avalere Health in Washington. “Often doctors have very little to do with the discharge decision. Largely it has to do with the supply of providers and type of providers in the area.”

Now, Medicare is experimenting with new payment methods in which hospitals and post-acute providers would be given a lump sum to take care of a patient, forcing them to become more efficient if they want to make money. In addition, President Barack Obama has proposed reducing payments for some conditions to post-acute providers and beginning to pay the same rates for similar patients.

Stephen Parente, a health care economist at the University of Minnesota, says the changes are likely to upend much of the industry. “It’s going to be a fairly ugly transition to get to a more efficient, streamlined system,” Parente said. “It’s going to be a consultant’s bonanza.”

Many Options For Care

Ironically, the growth of the post-hospital industry can be traced back to actions Medicare took in the 1980s to clamp down on long inpatient hospital stays. Medicare started paying hospitals set sums for each patient stay, giving them a financial impetus to discharge patients as soon as possible. New services sprung up in response around the country to take these patients, often with business models that sought to maximize the money they could earn from Medicare.

The vagueness of the term “post-acute” reflects the wide array of ways Medicare patients can be treated after they leave the hospital. Those robust enough to return home can receive intermittent visits from nurses, physical therapists and aides who monitor their condition and assist in basic tasks. These services are known as home health. Patients needing closer oversight can end up in nursing homes or the more intense inpatient rehabilitation facilities, where people suffering strokes, major joint replacements and fractures often end up. The sickest patients, such as those who need ventilators to breathe for weeks, may be admitted to long-term care hospitals, where the average stay is 26 days.

Medicare pays each type of facility different rates — even when they are treating the same kinds of patients. Medicare’s cost for treating stroke patients, including time in the hospital and three months of subsequent care, averages $40,000 if the patient is discharged to an inpatient rehabilitation facility, according to an analysis by Congress’s Medicare Payment Advisory Commission (MedPAC). Medicare’s cost averages $33,000 for stroke patients discharged instead to a nursing home, and only $13,000 for those cared for at home with the assistance of health aides, the analysis found.

These varying payment rates were created under the assumption that many sicker patients would need to be in facilities that could provide more intensive care. But researchers have found evidence that the same types of patients can end up in different types of facilities for no apparent medical reason.

Jim Prister, president of RLM Specialty Hospital in Chicago and Hinsdale, Ill., said that his long-term care hospitals turn down about half the patients hospitals refer because they do not meet Medicare’s criteria. “We don’t rely on what the [hospital’s] care coordinator says,” Prister said. “We have a pretty large team of RNs that go out and see every patient.”

An Institute of Medicine study released in July concluded that post-hospital services are the primary reason that Medicare spends much more in some parts of the nation than elsewhere. Uneven spending on post-acute care around the country accounts for 73 percent of the variation in Medicare spending. White’s analysis of Medicare records for Kaiser Health News found that home health spending in 2011 accounted for a quarter of the reason that some areas were more costly than others.

In McAllen, Texas, doctors and hospitals have received most of the criticism for the region’s high Medicare spending, which is greater than in any other part of the country except Miami. Medicare records, however, show inpatient hospital use and spending in 2011 was around the national average, and outpatient care was significantly below average. McAllen’s post-acute spending was the true outlier. McAllen beneficiaries were more than 2 1/2 times as likely to use home health services, long-term care hospitals and rehab facilities than were the average Medicare beneficiary in 2011. As a result, Medicare spent $4,752 per capita on post-acute services, while the national per capita spending average was $1,894.

Much post-hospital use is determined by which facilities are around. A third of all home health care cases took place in Florida, Louisiana, Mississippi, Oklahoma and Texas even though only 17 percent of Medicare beneficiaries live in those states, says MedPAC.

Aggressive marketing plays a role in where patients get sent, said Jared Landis, a consultant at The Advisory Board, a consulting company for health care providers. “Anecdotally, it is a market where post-acute discharge is heavily affected by personal relationships, traditional sales and marketing—just building those personal relationships around those small gifts, those cookies,” he said.

Substantial Profits

For many companies, these patients translate into substantial profits. Nursing homes are expected to earn between 12 and 14 percent this year on their Medicare patients,MedPAC estimates. Home health margins are expected to average 12 percent, and intensive rehabilitation facilities margins are around 8.5 percent, MedPAC estimates. Long-term care hospitals, the laggard of the post-acute groups in profits, are earning almost 6 percent.

The post-acute care industry has defended these profit margins by saying that they counterbalance the losses their facilities receive from lower Medicaid payments in many states. “If you start targeting the one healthy aspect of skilled nursing that pays for the services provided, that’s going to pose real jeopardy to the entire profession,” said Greg Crist, a spokesman for the American Health Care Association, which represents nursing homes.

Policy experts say providers tailor their approaches to wring the most money out of Medicare’s payment methods. Nursing homes, for instance, are paid per day, encouraging homes to keep patients for as long as possible up to the 100-day limit Medicare set. Medicare picks up the entire tab for the first 20 days.
MedPAC calculates that even including money-losing Medicaid patients, nursing homes earned profits between 4 to 6 percent in 2011, the most recent year for which they have data.

Home health agencies are paid set sums for 60 days with no regard for how many nursing and aide visits are made. The number of visits in the average 60-day period dropped from 32 in 1998 to 19 in 2011, while the number of patients being enrolled in home health soared, with the majority no longer coming straight from the hospital, according to MedPAC.

“The incentive is to sign up patients who need hardly anything and sign them up for as long as you can get them,” said Judy Feder, a professor at the Georgetown Public Policy Institute.

At times, efforts to game Medicare have veered into outright fraud, particularly in home health.  The Centers for Medicare & Medicaid Services this summer placed a temporary moratorium on new home health agencies in Miami and Chicago. In testimony before a congressional budget writing panel in June, CMS deputy administrator Jonathan Blum said agency auditors had discovered nursing homes billing for services that were never provided and home health agencies billing for people who were well enough to leave their homes. “Some of these improper billing practices point to potential overtreatment of Medicare beneficiaries, with patients receiving more intensive care than is medically warranted,” Blum testified.

Even though the transition out of hospitals can be one of the most perilous times for patients, many hospitals have not forged close relationships with post-acute facilities. Avalere’s Tumlinson analyzed where patients from 10 different Chicago hospitals in 2010 went after discharge. She found that on average the hospitals sent patients to 130 different nursing homes. She said, “How on earth can a hospital ever get a handle on this and have a relationship with the patient post discharge if they’re dealing with this many different skilled nursing facilities?”

Bundling Payments

Experiments authorized by the federal health law and now being conducted by the Center for Medicare & Medicaid Innovation aim to alter the financial calculus for both hospitals and post-acute providers. The center has received proposals for 178 “bundled payment” experiments in which hospitals and post-acute providers will work together to treat Medicare patients for a fixed sum, instead of being paid separately. Another 157 experiments involving only the post-acute providers have also been created, many by private companies that have recruited medical providers.

One company is NaviHealth, created by former CMS administrator Tom Scully. NaviHealth evaluates hospitalized patients to determine where they should be discharged afterward, and then birddogs their care along the way. NaviHealth has proposed Medicare bundled payment experiments with hospitals in Tennessee, Oklahoma, New Mexico and New Jersey.

“We catch patients in their second day in the hospital and come up with a very detailed evaluation of their functional status,” Scully said. “Maybe you should be in the rehab hospital for 14 days, or nursing home for 10 days instead of 20 days,” which is the most days before Medicare starts charging patients a co-payment. Otherwise, he said, “the nursing home will keep you for the maximum days they can. It’s nobody’s fault, it’s just the incentives.”

NaviHealth is already managing the post-acute treatment for patients in private Medicare Advantage plans and Medicare supplemental plans. After John Alzapiedi, an 85-year-old retired technical service representative from Clinton, Mass., fractured his ankle, NaviHealth oversaw his care last summer as he moved to a nursing home to recover from surgery and a subsequent infection.

“Once I got home, there were four of them who started visiting, one for physical therapy,” Alzapiedi said. The others were a nurse, a case manager and a coach to help him with his medication. “I’d say overall things are going pretty good,” he said.

Companies such as NaviHealth are betting that similar services will be in high demand. Obama wants to cut payments for post-acute providers, pay rehabilitation facilities and nursing homes the same rates, and penalize nursing homes when their patients end up back in the hospital. He also has proposed making paying lump sums for a patient’s post hospital care, just as Medicare does with hospitals.

But just as the hospital lump payment system led to the explosion in post-acute care, some experts are warning that the ideas now being touted as improvements for this sector could have unintended consequences. “The incentive is to avoid the sick and skimp on services,” Feder said.

This article, produced in collaboration with The Washington Post, was republished from kaiserhealthnews.org with permission from the Henry J. Kaiser Family FoundationKaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Six Questions About the Future of HealthCare.Gov

healthcare.govD-Day for HealthCare.gov is upon us.

The federal health insurance marketplace for 36 states has undergone round-the-clock fixes during the past eight weeks after what could only be characterized as a disastrous launch. Obama administration officials have promised that it will work better by month’s end (read: now) for the “vast majority of users.”

There’s little doubt the site is working better today. Users report that it’s faster and has fewer errors. Practically every day, the Obama administration reports progress.

But it’s unclear whether the improvements are enough to salvage the Affordable Care Act‘s central element and ensure consumers can get coverage before Dec. 23, the deadline to sign up for benefits that begin on New Year’s Day.

Here are six big questions:

  1. Can the website handle the expected crush of traffic? Media reports about problems with HealthCare.gov surely kept some consumers away. But as the deadline for signing up for coverage looms, they are likely to come back. The New York Times reported today that administration officials “have urged their allies to hold back enrollment efforts so the insurance marketplace does not collapse under a crush of new users. At the same time, administration officials said Tuesday that they had decided not to inaugurate a big health care marketing campaign planned for December out of concern that it might drive too many people to the still-fragile HealthCare.gov.” The trepidation is well-founded, and a dose of it could have gone a long way on Oct. 1, when the site debuted.
  2. Are the site’s back-end problems fixed? One of the biggest issues — out of public view — is that information being transmitted from the administration to insurance companies has been riddled with errors, hampering the smooth enrollment of consumers. Sarah Kliff at The Washington Post drew attention to this major problem last month, and while the administration has made fixing the problem a top priority, the error rate remains too high, experts say. Philip Klein of the Washington Examiner reports, “Insurers still haven’t reached the point where they can feel confident that the data is reliable. As a result, though they have been able to process some payments from individuals, they’ve only been able to do so on a piecemeal basis in cases where they are fully confident in the data, often because it’s been verified by hand.”
  3. Can individuals verify their identities so that they can enroll in plans? The New York Times reported Monday that some consumers are getting stuck in “no man’s land” in which they sign up for accounts on HealthCare.gov but are prevented from selecting plans because their identities cannot be verified by an outside contractor. “Many users of the website have had their applications cast into limbo after they uploaded copies of documents like driver’s licenses, Social Security cards and voter registration cards, or sent them to the office of the federal insurance marketplace in London, Ky.  Administration officials said the government had established strict procedures to verify that people applying for insurance were who they said they were, in order to prevent fraud and identity theft. But a breakdown in the process instead is causing concern among some consumers about the handling of their personal information.”
  4. Will the delayed Spanish language sign-up site work? CuidadoDeSalud.gov has been repeatedly delayed because of the issues plaguing its sister site, HealthCare.gov. The administration initially said it would be ready by mid-October, then the end of November. Now Talking Points Memo says it will have a soft launch in early December. That doesn’t give much time at all for Spanish speakers to sign up online before the Dec. 23 deadline for coverage that begins on Jan. 1. Of course, those consumers can fill out paper applications or call the toll-free number for assistance, but the online option cuts it very close. “The administration projects 10.2 million uninsured Latinos will be eligible to sign up for coverage. Federal call centers have so far fielded about 107,000 Spanish-language calls, according to the official, three percent of their total volume. Though national Latino advocacy groups have been generally supportive of the health care reform law, they have begun to voice frustration about the delays to the Spanish-language website,” Dylan Scott reports for TPM.
  5. Will enough people sign up for coverage—and are they the right people? Ultimately the Affordable Care Act’s marketplaces will be judged by how many people enroll in coverage. The Congressional Budget Office projected 7 million people would sign up in 2014 (in the federal and state-run exchanges), but best I can tell that doesn’t really take into account the millions of people canceled by their existing insurance plans who may replace their coverage on the exchange. Beyond that, insurance companies need a balance of old and young, healthy and sick to balance their costs and avoid a “death spiral” in which costs keep going up and only the old and sick who must have coverage choose to stay in. Ezra Klein at The Washington Post says Obamacare enrollment won’t hit 7 million, but that will be OK if the mix of consumers is acceptable. “No one will ever look back on Obamacare’s launch and call it a success. The question is whether they’ll look back and say that Obamacare subsequently became a success. And that’s why the bottom-line goal for the White House is still the ratio of people who sign up for 2014 rather than the raw number of who sign up for 2014,” he writes.
  6. Will all the state-run exchanges get it together? While some states, including California, Kentucky and Washington state, have won praise for a relatively smooth rollout of their marketplaces, other states are still having more trouble. Covered Oregon has been plagued by so many problems that its online sign-up isn’t working yet. Maryland likewise is struggling. And the head of Hawaii’s exchange stepped down last week amid problems there. Even if HealthCare.gov is up and running, residents of these states have to rely on the pathways set up where they live.
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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Why Healthcare.gov Broke: Two Competing Story Lines

healthcare.govThis weekend brought more than a modicum of clarity to what happened behind the scenes in the run-up to the Oct. 1 launch of Healthcare.gov.

In a devastating story, Amy Goldstein and Juliet Eilperin of The Washington Post dissected how politics trumped policy when it came to the Affordable Care Act. In two key paragraphs, they wrote:

Based on interviews with more than two dozen current and former administration officials and outsiders who worked alongside them, the project was hampered by the White House’s political sensitivity to Republican hatred of the law — sensitivity so intense that the president’s aides ordered that some work be slowed down or remain secret for fear of feeding the opposition. Inside the Department of Health and Human Services’ Centers for Medicare and Medicaid, the main agency responsible for the exchanges, there was no single administrator whose full-time job was to manage the project. Republicans also made clear they would block funding, while some outside IT companies that were hired to build the Web site, HealthCare.gov, performed poorly.

These interwoven strands ultimately caused the exchange not to be ready by its Oct. 1 start date. It was not ready even though, on the balmy Sunday evening of March 21, 2010, hours after the bill had been enacted, the president had stood on the Truman Balcony for a champagne toast with his weary staff and put them on notice: They needed to get started on carrying out the law the very next morning. It was not ready even though, for months beginning last spring, the president emphasized the exchange’s central importance during regular staff meetings to monitor progress. No matter which aspects of the sprawling law had been that day’s focus, the official said, Obama invariably ended the meeting the same way: “All of that is well and good, but if the Web site doesn’t work, nothing else matters.”

The Post also posted online a May 2010 letter written by David Cutler, a Harvard professor and health adviser to Obama’s 2008 campaign, to Larry Summers, director of the White House’s National Economic Council. In it, Cutler wrote:

My general view is that the early implementation efforts are far short of what it will take to implement reform successfully. For health reform to be successful, the relevant people need a vision about health system transformation and the managerial ability to carry out that vision. The President has sketched out such a vision. However, I do not believe the relevant members of the Administration understand the President’s vision or have the capability to carry it out.

Another piece worth a read: “What’s Really Obstructing Obamacare? GOP Resisters,” by Michael Tomasky of Newsweek/Daily Beast. Tomasky writes that while media reports have focused on the problems of Healthcare.gov, not enough attention has been paid to the efforts by Republicans to obstruct the law. He wrote:

All across the country, Republican governors and insurance commissioners have actively and directly blocked efforts to make the law work. In August, the Obama administration announced that it had awarded contracts to 105 “navigators” to help guide people through their new predicaments and options. There were local health-care providers, community groups, Planned Parenthood outposts, and even business groups. Again—people and groups given the job, under an existing federal law, to help people understand that law.

What has happened, predictably, is that in at least 17 states where Republicans are in charge, a variety of roadblocks has been thrown in front of these folks. In Indiana, they were required to pay fees of $175. In Florida, which under Governor Rick Scott (who knows a thing or two about how to game the health-care system, you may recall) has been probably the most aggressive state of all here, the health department ruled that local public-health offices can’t have navigators on their premises (interesting, because local public health offices tend to be where uninsured people hang out). In West Virginia, Utah, Pennsylvania, and other states, grantees have said no thanks and returned the dough after statewide GOP elected officials started getting in their faces and asking lots of questions about how they operate and what they planned to do. Tennessee issued “emergency rules” requiring their employees to be fingerprinted and undergo background checks.

America, 2013: No background checks to buy assault weapons. But you damn well better not try to enroll someone in health care.

I suspect in the weeks ahead, we will see more reporting on both story lines: how the administration mismanaged the rollout of the law and how Republicans have tried to ensure its failure. But let’s not lose sight of consumers, whose lives will be directly affected by the act and what’s happening now.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Study: At Least 2 Million Texans Qualify for Tax Credit

Photo courtesy of iStock

Photo courtesy of iStock

More than 2 million Texans are eligible for tax credits to purchase health coverage in the federal insurance marketplace, according to a new report released Tuesday by the Henry J. Kaiser Family Foundation.

Texas is one of 26 states that chose not to establish a state-run health insurance marketplace under the Affordable Care Act, and to instead rely on a federal one. Texas now has more people eligible for federal premium tax credits next year than any other state, according to the report. The credits are available to those with incomes between 100 and 400 percent of the federal poverty line who meet some other criteria.

Cynthia Cox, a policy analyst for Kaiser, said the average Texas family would receive a tax credit of $2,700 per year if they purchased coverage in the federal marketplace. How much they would pay for insurance depends largely on where they live and what policy they select.

Cox said along with being a large state, Texas has the most people who would qualify for tax credits because the state did not expand Medicaid to poor adults under federal health reform – an optional provision of the law — and has the highest rate of people without health insurance in the nation. Nearly a quarter of the state population is uninsured.

“A lot of those people that would have gone into Medicaid if Texas had expanded the program are going to be getting tax credits,” Cox said.

The Affordable Care Act requires most Texans to carry health insurance by March 31, though adults below the poverty line aren’t required to carry health insurance and are not eligible for tax credits, meaning they will likely remain uninsured.

While the Kaiser report argues that tax credits will go a long way in making coverage affordable for many Texans with low incomes, John Davidson, a health care policy analyst for the conservative Texas Public Policy Foundation, said many people would receive a subsidy that wouldn’t substantially affect their premium costs — especially young people and people making more than 250 percent of the federal poverty level.

“The Affordable Care Act makes insurance more expensive for more Texans, and the law creates winners and losers, the losers being young people with jobs,” Davidson said.

Lucy Nashed, a spokeswoman for Republican Gov. Rick Perry, said of the study: “It’s impossible to accurately estimate anything given the abject failure of Obamacare and its rollout.”

“Obamacare is supposed to reduce the number of people without health insurance, and we are seeing the exact opposite happen,” she said in a statement. “Not only is the cost of health insurance skyrocketing, but people across income levels are seeing their coverage canceled. A small subsidy to buy a higher-priced product is small consolation.”

The Kaiser study considered factors including how many people in each state lack insurance, their income levels and whether or not a state is expanding Medicaid. The report says almost two-thirds of Texas’ estimated market for insurance under federal health reform would qualify for the credit. According to the report, only two other states, Florida and Colorado, had more than a million people that would qualify for the credit. Nationally, roughly 60 percent of the 28.6 million people in the estimated market would qualify for the credit, according to the report.

Kaiser also released a zip code-specific health insurance subsidy calculator that can be used to estimate premiums and tax subsidies in the insurance marketplace. It considers factors such as age, family size and income. 

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.  

Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.

This article originally appeared in The Texas Tribune at http://www.texastribune.org/2013/11/05/study-2-million-plus-texans-would-qualify-healthca/.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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Explaining the Health Insurance Marketplace in Texas

The online health insurance marketplace that the federal government launched on Oct. 1 offers dozens of health plans and tax credits. Some consumers have found the application process confusing and technically frustrating. This animation explains how the marketplace works, and whom it’s designed to help.

Todd Wiseman provided the graphics and animation for this article.

This article originally appeared in The Texas Tribune at http://www.texastribune.org/2013/10/30/animation-explaining-health-insurance-marketplace/. Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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FAQ: What’s At Stake If Congress Repeals The Medical Device Tax

Photo courtesy of Thirteen of Clubs / Flickr

Photo courtesy of Thirteen of Clubs / Flickr

As Republicans and Democrats have battled over reopening the federal government and raising the federal debt ceiling, one idea that keeps coming up is a repeal of the 2010 health law’s tax on medical devices.

While the idea has drawn support from members of both parties, experts say it’s still a heavy lift for the repeal’s proponents. For starters, repealing the tax would create about a $30 billion revenue hole over the next decade.  And supporters of the law fear that making such a change could start a stampede of demands  for similar rollbacks from insurers and health care providers, who are also subject to new taxes and fees to help finance the health law.

With that in mind, here are some frequently asked questions about the tax.

Q: What is the medical device tax?

A: Since the beginning of this year, medical device manufacturers and importers have paid a 2.3 percent tax on the sale of any taxable medical device. The tax applies to devices like artificial hips or pacemakers, not to devices sold over-the-the counter, like eyeglasses or contact lenses.

Q: Why did Congress put the tax into the health law?

A: The law created a package of new taxes and fees to finance the cost of the health law’s subsidies to help purchase coverage on the online marketplaces, or exchanges, and the law’s Medicaid expansion.

In addition to the tax on medical devices, an annual fee for health insurers is expected to raise more than $100 billion over 10 years, while a fee for brand name drugs will bring in another $34 billion. In 2018, the law also will impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year and $27,500 for families. That has been dubbed a “Cadillac” tax because it hits the most generous plans.

kaiser-health-newsQ: Why do proponents of the repeal suggest the medical device manufacturers should get a break over those other industries?  

A: Medical device makers say the tax will cost 43,000 jobs over the next decade and will increase health care costs. In a September letter to lawmakers, device manufacturers said if the tax were not repealed, “it will continue to force affected companies to cut manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax.”

The device makers also assert that, unlike other health industry groups that are being taxed through the health law, they will not see increased sales because of the millions of people who will be getting insurance through the overhaul.  “Unlike other industries that may benefit from expanded coverage, the majority of device-intensive medical procedures are performed on patients that are older and already have private insurance or Medicare coverage. Where states have dramatically extended health coverage, such as in Massachusetts where they added 400,000 new covered lives, there is no evidence of a device ‘windfall,'” the group’s letter to Congress stated.

The left-leaning Center for Budget and Policy Priorities has challenged industry assertions that the tax will lead medical device manufacturers to shift operations overseas and that it will reduce industry innovation. Since the tax applies to imported and as well as domestically produced devices, sales of medical devices in the U.S. will be subject to the tax whether they are produced here or abroad, the center’s analysis notes.  Innovation in the medical device industry has slowed for reasons unrelated to the tax, the center said, noting that the health law may spur medical-device innovation by promoting more cost-effective ways to deliver care.

Q: Who else is pushing for a repeal?

A: Republicans and Democrats in both chambers – in particular those who hail from states with many device manufactures, such as Minnesota, Massachusetts and New York — have sought to repeal the medical device tax.  Most recently, Sen. Susan Collins, R-Maine, has pushed for a repeal as part of larger legislation to lift the debt ceiling and reopen the government.

The Republican-controlled House has twice passed legislation to scrap the tax, including a recent measure that would have also delayed implementation of the health law by a year. In the Senate, 33 Democrats and Maine Independent Angus King voted earlier this year to repeal the tax, although the vote was a symbolic one, taken as part of a non-binding budget resolution.

Q. Who opposes the repeal?

The White House in the past has said the president would not support such a measure, although it has not commented about the issue in the current negotiations.  In a statement issued last year about a congressional effort to get rid of the tax, the White House said, “The medical device industry, like others, will benefit from an additional 30 million potential consumers who will gain health coverage under the Affordable Care Act starting in 2014. This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion.”

Senate Majority Leader Harry Reid, D-Nev., has said that the Senate will reject any attempts by Republicans to delay implementation of the law or to repeal the medical device tax as part of reopening the government or lifting the federal debt ceiling. But it is unclear if he would still oppose the effort if it was part of a major bipartisan compromise on the health law and budget issues.

Meanwhile, other health care providers are watching closely. In a recent blog post, Chip Kahn, president and chief executive officer of the Federation of American Hospitals, an association of for-profit institutions, wrote that if Congress reopens the heath law “to reconsider the contributions of any one health care sector that benefits from ACA’s coverage expansion, it should simultaneously address the changed circumstances of hospitals and provide similar relief.”

This article was republished from kaiserhealthnews.org with permission from the Henry J. Kaiser Family FoundationKaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

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Chuck Briese, Oak Ridge Now

[avatar user="cbriese" size="thumbnail" align="left"] Chuck Briese has been a resident of South Montgomery County since 1988. He and his lovely and patient wife, Leslie, have six sons, with only one left to finish high school. Chuck has been a Cub Scout leader, a Little League baseball coach, a church youth leader, and a general troublemaker over the course of the past 25 years. He is obsessed with his lawn, and likes restaurants that serve food that fills up the plate. He has a tendency to tilt at windmills, which may explain why he started Oak Ridge Now.

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