"Municipal entities, including cities, school districts and other affiliated organizations will be treated the same as other businesses
Comments [Add Comment]
by the health care reform legislation recently passed," commented Rusty Rice, President of the Texas Association of Health Underwriters (TAHU).
While the legislation does include subsidies for companies (think municipality when we say company), this is not the entire picture. These tax incentives are the buildup to 2014, when state and /or national insurance exchanges will be in place to provide insurance options for companies and individuals, however the subsidies will only apply to employers with 25 or fewer employees and average wages under $50,000 per year. The amount of the subsidy will depend on the employers profits, the higher the profits the lower the subsidy.
In 2014, insurance exchanges will be established which will offer plans to businesses and individuals. For a business or municipality with 50 employees or less, the exchanges will offer policies, which they must participate in. Individuals not participating in the employer plan may "opt out" by completing an opt out certificate. If they do not obtain credible coverage they will pay a fine starting at $325 or 1% off their household income. (the fine increases every year) If the employee elects to enroll in the exchange and takes advantage of tax credits the employer will face a fine of either $3,000 per opt out employee or $750 per full time employee
Employers with 51 employees or more will be required to offer insurance through the exchanges or through their existing policies if they have them in place. The subsidies to employers will continue for two more years and then end.
As President Obama has been promoting, there are some more immediate provisions which include:
* Elimination of disqualification of pre-existing conditions provision in policies starting in 2014
* Parents will be able to keep their adult children on their policies until they are 26
* Insurance carriers will not be able to cancel policies for pre-existing condition
* Caps on total expenditures on a policy will be eliminated
It seems reasonable to do away with disqualification for pre-existing conditions when you hear horror stories of a young child being denied coverage for seemingly only economic considerations as well as the ability to keep children on their policies until they are 26, with the job market for young adults so dismal.
The other side to this, according to Rice is these changes will drive up costs. "These provisions will allow people who want to play the system to wait for a knee replacement or other surgeries without coverage or pay the minimal fines and then add themselves to a policy right before the surgery and cancel it soon after. The net effect will be that others’ premiums will have to pay for this expense. We are also anticipating that the policies that will be offered through the exchange will cover much less than policies currently being offered. You will be paying more for less coverage."
"Personal services or white glove services such as home visits to the elderly, discounts on eyeglasses and dental plans and 24 hour information hotlines will likely not be included," Rice continued. There are a host of additional imbedded benefits insurance companies offer that will not be available through the exchanges.
One of the provisions that people seem to misunderstand is what this legislation will do to alter the Medicare and Medicaid programs. Medicare is the national health care plan, established in 1965 as the counter-part to social security. Medicaid is the federally mandated program, paid for by the states to provide health care for those unable to pay for insurance themselves, the poor and indigent. This was its original intent.
To pay for the subsidies to employers and to establish the health exchanges, the legislation will lower payments to doctors and hospitals for Medicare patients and to lower federal subsidies to the states for Medicaid patients.
According to James C. Capella, Senior Fellow at the Center for Ethics and Policy, "The bill would also cut Medicare and Medicaid spending by about $450 billion on a net basis, excluding the payment increases for physicians. The biggest cut would occur in Medicare Advantage, the private insurance part of Medicare. CBO estimates the House bill would reduce Medicare Advantage payments by about $160 billion over a decade. That's likely to force some five million enrollees out of their current coverage and back into traditional fee-for-service Medicare, with all of its incentives for fragmentation and volume." Mr. Capella also was the Associate Director at White House Office of Management and Budget from 2001 to 2004.
To pay for these business incentives over the next six years, according to Mr. Capella, "there is the income tax surcharge for households with incomes above $350,000 per year. That provision would increase taxes by $543 billion through 2019. There are also other, smaller tax hikes in the bill which would raise an additional $43 billion over 10 years. Together with the employer "pay or play" taxes and payments to the exchanges, the bill's total 10-year tax increase is about $800 billion."
The net effect for state and municipalities is that there will indeed be more people having access to health care or included in the system, but little has been done to reduce the costs of healthcare, which are rising so rapidly, that healthcare is now seeming the driving cost in the economy that is sputtering to recover its balance.
When we asked Mr. Rice what drives costs up at rates much higher than inflation, he gave several answers.
* Prescription drug coverage
* Hospitals and Physicians taking on more Medicare and Medicaid patients
* Lower reimbursements for Medicare patients to doctors
* High cost of malpractice insurance
* Protective tests-those that are ordered to prevent possible lawsuits
* The cost of living varies a lot geographically, which also contributes to costs
A factor that Mr. Rice also indicated would drive up costs in the future even more is the tax on existing employer policies. If you've listened to the Sunday news show 60 Minutes and heard the stories they did on fraud and abuse of the Medicare and Medicaid systems where literally hundreds of millions of dollar in fraudulent fees were paid out, you have to think that fixing these two existing national health care systems should have been done first.
To quote Mr. Capella again. "All in all, the bill will increase the federal budget deficit by $239 billion over the coming decade – that's on top of the $11 trillion in deficits projected by CBO for the Obama budget plan over the period from 2009 to 2019. House Democrats argue that they should not have to pay for the costs of the physician fee change, which explains why the bill is not budget neutral. But that doesn't mean there won't be additional federal borrowing to pay doctors more through Medicare. There's no getting around that economic reality."
"In sum, then, the House bill would increase spending by $1.5 trillion, not $1 trillion, and partially offset that spending with $450 billion or so in Medicare and Medicaid cuts and $800 billion in new taxes. Even in Washington, those are big numbers."
As a quality and process improvement professional as well as a publisher and journalist, I know that most processes include 50%-80% waste and inefficiencies. The administrative cost of health care is estimated to be 15%-20% of the overall cost. If this number could be cut in half, which should be possible if quality improvement principles and tools were applied to this sector as it has in manufacturing, services and other sectors of the economy.
States and municipalities, unlike the federal government do not have the ability create money through fiscal and monetary policy. They have to balance their budgets that are already under stress.
By Rusty Rice
and Robert Sayre
For More Information about Rusty or TAHU, contact Laura Day at 859-291-4302
