Healthcare - Just Facts

• "Spending" refers to what is spent on healthcare in general. Thus, if people use more healthcare services, this causes spending to increase even if prices remain the same.

• "Prices" refer to what healthcare providers charge for particular services and products.

• "Costs" refer to what healthcare providers spend in order to provide particular healthcare services and products to patients. This is equivalent to prices minus profits or losses.

• from a yearly average of $1,082 per person in inflation-adjusted 2010 dollars to $8,218 (by 7.6 times).

• from 5.2% of the nation's gross domestic product (GDP) to 17.8% (by 3.4 times).[1]

* In 1942, the price for a maternity room at Christ Hospital in Jersey City, NJ was $7.00 per day.[3] Adjusting for inflation, this amounts to $97.29 in 2011 dollars.[4] In 2011, the price for a maternity room at the same hospital was $1,360 per day.[5]

* In 1980, the average price for a typical hospital room in the U.S. was $127 per day.[6] Adjusting for inflation, this amounts to $349 in 2011 dollars.[7]

* In 1988, Mutual of Omaha insurance company paid an average of $270 per day for all types of hospital rooms (such as medical/surgical, intensive care, maternity, etc.). Adjusting for inflation, this amounts to $518 in 2011 dollars.[8] [9] [10]

* In 2002, Mutual of Omaha paid an average of $748 per day for all types of hospital rooms. Adjusting for inflation, this amounts to $943 in 2011 dollars.[11] [12]

* A 2011 survey of eleven hospitals in Ohio (where state law requires hospitals to publish their prices) found that the daily price of a typical hospital room ranged from $688 to $2,425, with the average being $1,393 and the median $1,322.[13]

NOTE: Third-party payments refer to healthcare expenses that are not paid directly by consumers but by other entities such as governments and insurance companies. Such entities are called "third-parties" because they typically do not deliver or receive healthcare (for example, they are not patients or doctors).

* A Rand Corporation study tracked the healthcare spending of 2,756 families over periods of either three or five years during 1974-1982. The families were given insurance plans that covered all healthcare expenses above $1,000 per year or a reduced amount for lower-income families so that health care expenses could never exceed certain percentages of their income. (Accounting for inflation, $1,000 during the timeframe of this study equates to about $3,500 in 2011 dollars.[16])

The families were then randomly assigned to plans that covered their healthcare expenses below $1,000 per year, covering either 5%, 50%, 75%, or 100% of this spending. For example, families with 75% coverage paid 25% of their healthcare spending up to $1,000 per year (a maximum of $250 out-of-pocket), and insurance paid for everything else. The results were as follows:

• Families with 100% coverage spent an average of 16% more on healthcare than families with 75% coverage, 22% more than families with 50% coverage, and 58% more than families with 5% coverage.

• Using mathematical "techniques better suited to such data," families with 100% coverage were predicted to spend 24% more than families with 75% coverage, 49% more than families with 50% coverage, and 45% more than families with 5% coverage.[17]

• The increased spending that occurred under the plans with higher coverage had "little or no" effect on health outcomes except for the poorest 6% of the population.[18]

• In hospital settings (where costs typically exceeded the maximum out-of-pocket costs that the patients had to pay), the plans had no effect on spending. Per the study:

* A study published in the American Journal of Public Health (2001) analyzed insurance coverage levels and health outcomes of "an older, chronically ill population" with conditions such as "diabetes, hypertension, coronary artery disease, congestive heart failure, or depression." The study grouped "individuals into 3 cost-sharing categories: no copay (insurance pays all), low copay (insurance pays more than half but not all), and high copay (insurance pays half or less)." Per the study:

• making employer-provided health insurance generally exempt from federal taxes but not medical expenses paid directly by consumers unless they exceed 7.5% of adjusted gross income.[21]

• providing health insurance for almost all Americans aged 65 and older (roughly 39 million people in 2010) and about 7 million permanently disabled individuals under the age of 65 through the Medicare program.[22]

• paying for healthcare services for more than 68 million people who typically have low incomes (for example, a pregnant woman and children in a family of four with income below $29,725 in 2011) through the Medicaid program.[23] [24]

• subsidizing health insurance for 7.7 million children in families with incomes as high as 400% of the federal poverty level and unlimited financial assets (for example, $89,400 for a family of four in New York that has over $1,000,000 in assets [income and asset eligibility thresholds vary depending upon state of residence]) through the Children's Health Insurance Program (CHIP).[25] [26] [27] [28]

* Starting in 2014, the 2010 Affordable Care Act (a.k.a Obamacare[29]) incentivizes and subsidizes third-party payments by:

• requiring most Americans to carry some form of health insurance or pay a monthly fine.[30] [31]

• expanding Medicaid eligibility to all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines (for example, a family of four with income below $30,843 in 2011) without regard for any assets they have. This expansion, along with other measures in this act, are projected by the U.S. Department of Health and Human Services to increase Medicaid enrollment above previous estimates by about 11.6 million people in 2014 and 20 million people by 2019.[32] [33] [34]

• providing taxpayer subsidies to purchase health insurance for individuals with incomes up to 400% of federal poverty guidelines (for example, $74,120 for a family of three in 2011, $89,400 for a family of four, or $104,680 for a family of five). The U.S. Department of Health and Human Services projects that 25 million people will be receiving these subsidies in 2019.[35] [36] [37]

• increasing the threshold at which medical expenses paid directly by consumers become tax deductible from 7.5% of adjusted gross income to 10%.[38]

* Among developed nations, greater wealth is associated with higher healthcare spending. The graph below shows healthcare spending and income (GDP per capita) in nations that are members of the Organization for Economic Cooperation and Development (OECD), which is an international organization of 34 developed countries such as Australia, Canada, Germany, and Japan.[39] [40] This graph is cropped to improve data visibility, and thus, does not show the U.S. and Luxembourg, both of which are outliers. Click on the footnote to see an uncropped graph including these countries.

* Per the Handbook of Health Economics, "results obtained with international comparisons should be treated with considerable caution," but a "common and extremely robust result of international comparisons is that the effect of per capita GDP (income) on [healthcare] expenditures is clearly positive and significant….."[42] [43]

* Personal health care expenditures consist of monies directly spent to "treat individuals with specific medical conditions."[44]

* In the U.S. during 2004, average annual per capita personal healthcare spending for 65-74 year-olds was more than three times higher than that of 19-44 year-olds:

* In 2010, for every 4.7 Americans aged 20 to 64, there was one American aged 65 or older. As the baby-boom generation ages and projected life expectancy increases,[46] the Congressional Budget office estimates that this ratio will drop from 4.7/1 in 2010 to 3.7/1 by 2020 and to 2.9/1 by 2030.[47]

* Cancer, cardiovascular disease, and diabetes are responsible for the majority of deaths and health care costs in the United States.[48]

* In 2008, the journal of the American Heart Association published a study entitled "The Impact of Prevention on Reducing the Burden of Cardiovascular Disease." The authors found that:

• about 78% of U.S. adults aged 20-80 years are "candidates for at least one prevention activity" that would reduce the risk of cardiovascular disease, such as taking aspirin, drugs that reduce LDL cholesterol, and drugs that decrease blood pressure.

• "aggressive" but "feasible" implementation of such prevention strategies would reduce the number of heart attacks by 36% and the number of strokes by 20%, thereby increasing the average life expectancy of all adults by 1.3 years.

• "if all the recommended prevention activities were applied with 100% success," the costs of implementing these measures would be ten times greater than the savings of not treating the illnesses prevented.[49]

Although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.

That result may seem counterintuitive. For example, many observers point to cases in which a simple medical test, if given early enough, can reveal a condition that is treatable at a fraction of the cost of treating that same illness after it has progressed. In such cases, an ounce of prevention improves health and reduces spending—for that individual. But when analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses.

To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. … Judging the overall effect on medical spending requires analysts to calculate not just the savings from the relatively few individuals who would avoid more expensive treatment later, but also the costs for the many who would make greater use of preventive care.[50]

* In 2008, the journal PLoS Medicine published a study on the healthcare costs of obesity and smoking in the Netherlands. The authors found that:

• "overweight and obese individuals have an increased risk of developing many diseases, such as diabetes, coronary heart disease and stroke…."

• "life expectancy at age 20 was five years less for the obese group, and eight years less for the smoking group, compared to the healthy-living group…."

• "because of differences in life expectancy … lifetime health expenditure was highest among healthy-living people and lowest for smokers."

• healthcare costs from the age of 20 until death were 12% higher for healthy-living people than obese people and 28% higher than smokers.

* In 1998, the British Medical Journal published a study examining the cost effectiveness of preventing fatal diseases in the Netherlands. The study found that

* From March 2010 through June 2011, the average quarterly operating margin (i.e., profit margin before interest expenses and taxes[53]) for all companies in the S&P 500 was 9.0%, while for healthcare companies in the S&P 500, it was 9.3%.[54] [55]

* As of November 17, 2011, the net profit margin (after taxes[56]) for various industries within the healthcare sector are as follows:

* In May 2010, the mean hourly wage for nonfarm workers in the United States was $21.35 (not including benefits), and the mean hourly wage for various healthcare occupations was as follows:

* Per the U.S. Government Accountability Office (GAO), "once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar."[62]

* In fiscal year 2008, the Children's Health Insurance Program made $834 million in improper payments (as estimated by the federal government). This amounts to 14.7% of the program's total outlays.[63] (Data for later years not yet available.[64])

* In fiscal year 2010, the Medicaid program made $22.5 billion in improper payments. This amounts to 9.4% of the program's total outlays.[65]

* In fiscal year 2010, the Medicare program made about $48 billion in improper payments. This is the highest estimated amount of improper payments in a single federal program. These payments amount to:

• 38% of all improper payments reported by 20 federal agencies covering 70 programs.

The GAO reports that this $48 billion figure is "incomplete" because the U.S. Department of Health and Human Services "has yet to report a comprehensive improper payment estimate for the Medicare prescription drug benefit program, which had reported outlays of about $59 billion in fiscal year 2010."[66]

• "About 12 million Americans (age 12 or older) reported nonmedical use of prescription painkillers" in 2010.

• "Prescription painkiller overdoses killed nearly 15,000 people in the US" during 2008.[67] (For comparison, roughly 16,272 murders were committed in the U.S. that year.[68])

* In 2011, the GAO reported the results of an investigation meant to "determine the extent to which Medicare beneficiaries obtained frequently abused drugs from multiple prescribers." This is sometimes called "doctor shopping," and it is one of the primary ways in which people "obtain highly addictive" prescription drugs "for illegitimate use." The investigation found that

* In 2008, the GAO reported that their investigators were able to "easily set up two fictitious" medical supply companies that were "approved for Medicare billing privileges despite having no clients and no inventory."[70]

• a medical supply company billed Medicare for half a million dollars during a month when CBS couldn't find anyone present at the company's address.

• a pharmacy billed Medicare for $300,000 using an address for a public warehouse storage area.

• a 76-year-old woman had been notifying Medicare for six years that her Medicare statements were showing purchases for medical supplies that she never needed or received.[71]

• a family doctor in Florida received about $1.2 million from Medicare in 2008, which is "more than 24 times the Medicare income of the average family doctor."

• a Brooklyn physical therapist received about $1.8 million from Medicare in 2008.

• another Florida doctor received about $8.1 million from Medicare during 2007-2009.

• a Houston doctor received about $7.1 million from Medicare in less than a year.[72]

* In New Jersey, Medicaid and the Children's Health Insurance Program are administered by a program called NJ FamilyCare.[73] In 2007, at least 873 families with gross annual income above $85,000 received benefits from NJ FamilyCare. Three of these families had gross incomes above $700,000.[74]

All health care programs are subject to fraud; however, Medicare and Medicaid programs are the most visible. Estimates of fraudulent billings to health care programs, both public and private, are estimated between three and ten percent of total health care expenditures. The fraud schemes are not specific to any area, but they are found throughout the entire country. The schemes target large health care programs, public and private, as well as beneficiaries. Certain schemes tend to be worked more often in certain geographical areas, and certain ethnic or national groups tend to also employ the same fraud schemes. The fraud schemes have, over time, become more sophisticated and complex and are now being perpetrated by more organized crime groups.[75]

* In 2009, Medicare and Medicaid paid hospitals a combined total of $38 billion dollars less than hospitals' costs of caring for Medicare and Medicaid patients. Medicare paid hospitals an average of 10% below their costs of caring for Medicare patients, and Medicaid paid hospitals an average of 11% below their costs of caring for Medicaid patients.[76]

* As of October 2011, four states limit the number of days that Medicaid will pay for hospital stays: 45 days in Florida, 30 days in Mississippi, 24 days in Arkansas, and 16 days in Alabama. Arizona and Hawaii are planning to limit the number of days to 25 and 10 respectively. Spokesmen for hospital associations in Alabama and Arizona have stated that hospitals generally will care for Medicaid patients beyond these time limits regardless of Medicaid's willingness to pay.[77]

* Federal law requires most hospitals with emergency departments to provide an "examination" and "stabilizing treatment" for anyone who comes to such a facility and requests care for an emergency medical condition or childbirth, regardless of their ability to pay and immigration status. This is mandated under a federal law called the Emergency Medical Treatment and Active Labor Act (EMTALA).[78] [79] [80]

* In 2001, emergency room physicians spent about half of their patient-care time providing treatment mandated under EMTALA.[81]

* In 2000, emergency room physicians incurred an average of $138,300 in bad debt by providing treatment mandated under EMTALA. Bad debt does not include charity care or care for which charges were reduced through negotiations. It only includes care for which payment was owed and not received.[82]

* In 2003, the Federal Reserve reported that approximately 52% of all collection actions by collection agencies and creditors were associated with medical bills.[84]

* In 2009, hospitals provided $39.1 billion of uncompensated care, amounting to 6.0% of hospitals' total costs.[85]

* In 2009, the costs to the U.S. healthcare system of malpractice awards, lawyers' fees, and lawsuit-related administrative costs were about $30 billion or 1.2% of total healthcare spending.[86] [87] (This does not include the costs of defensive medicine.)

* States and localities have varying legal systems and demographics that drive disparities in medical malpractice costs.[88] As examples:

- Los Angeles County, California (the nation's most populous county[89]) charged an average of $49,804 per policy.[90]

- Cook County, Illinois (the nation's second-most populous county[91]) charged an average of $127,083 per policy.[92]

- San Francisco County, California charged an average of $29,635 per policy.[93]

• In 2010, the average payout per medical malpractice claim for MDs [medical doctors] and DOs [doctors of osteopathic medicine] ranged from a low of $109,000 in West Virginia to a high of $1,258,000 in Wisconsin.[96]

* "Defensive medicine" is defined by the American Academy of Orthopaedic Surgeons as "the practice of ordering excessive or unnecessary tests, procedures, visits, or consultations solely for reducing liability risk to the physician, and/or avoidance behavior, the practice of avoiding high-risk patients or procedures."[97]

* A nationwide survey of 462 physicians conducted in 2009/2010 by Gallup and Jackson Healthcare found that 73% of doctors engaged in some form of defensive medicine over the past 12 months. On average, the physicians who practiced defensive medicine estimated that 21% percent of their practice was defensive in nature.[98]

* A 2010 paper in the journal Health Affairs estimated that the costs of defensive medicine in the U.S. during 2008 were $38.8 billion for hospitals and $6.8 billion for physician and clinical services.[99] The authors of this paper arrived at the $38.8 billion estimate for hospitals by:

• extrapolating the results of a study that estimated the cost savings of lawsuit reforms (such as caps on noneconomic damages) for Medicare patients who had heart attacks or heart disease. The authors noted that "two other studies could not replicate these findings for other health conditions."[100]

• assuming that the following unquantified factors "probably serve as counterweights to one another": (1) all costs of defensive medicine that were not eliminated by the legal reforms in the study they extrapolated (2) physicians' perceptions that Medicare patients may be less likely to sue or to receive large payouts because they are older than the general population (3) physicians' perceptions that the threat of liability with cardiac patients may be greater than with other patients. (4) physicians' perceptions that the threat of liability with Medicare patients may be greater "because higher levels of managed care outside of Medicare reduce physicians' discretion."[101]

The authors arrived at the $6.8 billion estimate for physician/clinical services by assuming that the cost of malpractice payments are equivalent to the costs of defensive medicine.[102] (Defensive medicine does not involve the costs of malpractice payments but the costs of medically unnecessary actions that health care providers take to prevent from having to make such payments.[103])

The authors did not account for defensive medicine costs outside of hospitals and physician/clinical services,[104] which accounted for 50% of U.S. healthcare spending in 2008.[105] The costs of defensive medicine for all other categories of healthcare spending such as prescription drugs were not quantified.[106]

Using the above-described methodologies and others, the authors estimated that total "medical liability system costs" in the U.S. during 2008 were $55.6 billion or about 2.4% of total health care spending.[107] These figures have been uncritically cited by Reuters,[108] Bloomberg,[109] CBS,[110] the Chicago Tribune,[111] and U.S. News & World Report.[112]

* As of December 2011, Just Facts has been unable to find a defensible estimate for the system-wide costs of defensive medicine in the U.S.[113]

* Examples of administrative and regulatory dynamics that impact healthcare costs include:

• paperwork and billing procedures required by private insurers and government programs.[114] [115]

• mandates that require insurers to cover the cost of specific treatments and practitioners.[118]

• mandates that prohibit insurers from charging copayments for certain classes of services and drugs.[119]

• a Medicare/Medicaid requirement that requires hospitals to provide translators for patients who don't speak English under certain circumstances.[122] [123]

• mandates that require insurers to pay for health conditions that existed before customers purchased insurance.[124]

• state regulations that prohibit residents from buying health insurance in other states.[125]

• mandates that restrict insurers from setting premiums based upon certain risk factors that drive healthcare spending.[126] [127]

• accreditation, licensure, certification, review, and audit requirements for healthcare facilities and professionals.[128] [129] [130] [131]

* A 2001 study conducted by PricewaterhouseCoopers for the American Hospital Association chronicled more than 40 layers of paperwork associated with caring for a typical Medicare patient who arrives at an emergency room with a broken hip and receives treatment until recuperation.[132] Some of the findings are:

• Roughly 60 minutes of paperwork were performed for every hour of emergency department care, 36 minutes of paperwork for every hour of surgery and acute inpatient care, 30 minutes of paperwork for every hour of skilled nursing care, and 48 minutes of paperwork for every hour of home health care.[133]

• "Each time a physician orders a test or a procedure, the physician documents the order in the patient's record. But the government requires additional documentation to prove the necessity for the test or procedure."[134]

• "Many forms … must be completed daily by clinical staff to submit to the government to justify the care provided to skilled nursing facility patients."[135]

• Medicare and Medicaid "rules and instructions" are more than 130,000 pages (three times larger than the IRS code and its associated regulations), and "medical records must be reviewed by at least four people to ensure compliance" with Medicare program requirements.[136]

• "A Medicare patient arriving at the emergency department is required to review and sign eight different forms—just for Medicare alone."[137]

• "Each time a patient is discharged, even if only from the acute unit of the hospital to the on-site skilled nursing unit, multiple care providers must write a discharge plan for the patient. This documentation, as long as 30 pages, applies to all patients, regardless of the complexity of care received within the hospital or required post-hospital setting."[138]

• In addition to regulation by state and local agencies and private accrediting organizations, hospitals are regulated by nearly 30 federal agencies.[139]

* In 2010, 24% of all federal government outlays (except interest on the national debt) and 37% of all federal revenues were spent on "mandatory" healthcare programs.[140] Mandatory programs are those that can spend taxpayer money without Congress passing annual spending bills. The major mandatory healthcare programs are Medicare, Medicaid, the Children's Health Insurance Program, and beginning in 2014, a new entitlement established under the 2010 Affordable Care Act (details below).[141] [142]

* In 2011, the Congressional Budget Office (CBO) projected how much money the federal government will spend on mandatory healthcare programs over coming years under "current policy" with a sustained economic recovery.[143] This scenario assumes that:

• unemployment gradually declines to its approximate historical average and stays there.[144] [145]

• federal revenues (as a percent of GDP) gradually rise to their approximate historical average and stay there.[146]

• Medicare payments for healthcare services don't undergo reductions scheduled under current law that would cause "severe problems with beneficiary access to care."[147] [148]

Under this scenario, the CBO projects that the share of federal revenues spent on mandatory healthcare programs will increase from 5% in 1970, 14% in 1990, and 37% in 2010—to 50% in 2030, 71% in 2050, and 100% in 2080.

* The Medicare program was founded in 1965 to provide health insurance for people aged 65 and older. It was later expanded to cover younger people who are permanently disabled.[150] [151]

* In 2010, Medicare provided health insurance for almost all Americans aged 65 and over (roughly 39 million people) and about 7 million permanently disabled individuals under the age of 65.[152] In total, these Medicare enrollees represent about 15% of the U.S. population.[153]

• hospital inpatient services, skilled nursing facility care (not custodial care[154]), and hospice care through its "Part A" component.

• physician, hospital outpatient, and other healthcare services through its "Part B" component.

• private health insurance through its "Part C" component (commonly called "Medicare Advantage").

* In 2007 (latest available data), Medicare covered 64% of healthcare expenses for traditional Medicare beneficiaries not living in institutions such as nursing homes. The remainder of beneficiaries' healthcare expenses were paid by private supplemental insurance (17%), direct out-of-pocket spending (14%), and other government programs such as Medicaid and the Department of Veterans Affairs (6%).[158] [159]

Portion[160]	Category	Source
39%	General revenues[161]	Federal income, corporate, excise, and other taxes.[162] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[163]
35%	Payroll taxes	Medicare taxes that amount to 2.9% of workers' wages (1.45% paid by employees and 1.45% paid by employers).[164] [165]
12%	Insurance premiums	Premiums paid by Medicare beneficiaries who receive Part B or Part D benefits. These premiums are indexed so that wealthier beneficiaries pay greater amounts.[166] [167] [168]
10%	Trust fund redemptions[169]	Primarily Medicare payroll taxes that were previously loaned to the general fund of the U.S. Treasury.[170] [171]
3%	Taxes on Social Security benefits	Taxes paid by Social Security beneficiaries whose incomes exceed certain thresholds.[172]
<1%	Transfers	State governments.[173]
<1%	Miscellaneous	Fines, penalties, and gifts.[174]

* Starting in 2013, the Affordable Care Act (a.k.a. Obamacare[175]) imposes an added 0.9% Medicare payroll tax on earnings above $200,00 for singles and $250,000 for couples.[176] [177]

* In 2010, Medicare spent about $523 billion.[178] This amounts to 14% of all federal expenditures and 21% of all federal revenues.[179]

* In 2009, Medicare payment rates for inpatient hospital services were 67% of private health insurance payment rates,[180] and Medicare paid hospitals an average of 10% below their costs of caring for Medicare patients.[181]

* In 1966, for every American aged 65 or older, there were 5.5 Americans aged 20 to 64 (the primary working-age population[182]). By 2010, this ratio declined to 4.6/1. As the baby-boom generation matures and projected life expectancy increases,[183] the Social Security Administration projects that this ratio will decline to 3.6/1 by 2020 and 2.8/1 by 2030.

* When Medicare was established in 1965, the period life expectancy for 65-year-old Americans was 12.9 years for males and 16.3 years for females. By 2010, these figures had risen to 17.5 years for males and 19.9 years for females. This amounts to an increase of 4.6 years for males and 3.6 years for females.[185]

* According to Social Security Administration projections, by 2030 the period life expectancy for 65-year-old Americans will rise to 19.2 years for males and 21.1 years for females. This amounts to an increase since 1965 of 6.3 years for males and 4.8 years for females.[186]

* The 2011 Medicare Trustees Report projects the future finances of the Medicare program based upon high, low, and intermediate-cost assumptions.[187] Per the intermediate assumptions, the Medicare program faces a $24.2 trillion ($24,200,000,000,000) actuarial deficit over the next 75 years (in 2011 dollars). The report states that the resources needed to cover this deficit "would be in addition to the payroll taxes, benefit taxes, and premium payments scheduled under current law."[188]

* This actuarial deficit approximates how much money must be immediately added to the Medicare program to cover the projected shortfall between the program's dedicated funding sources and its costs for the next 75 years.[189] It is equivalent to 46 times the total spending for Medicare in 2010.[190]

* The 2011 Medicare Trustees Report states that measures such as the actuarial deficit can:

• "obscure the underlying year-by-year patterns of the long-range financial deficits."

• lead to "legislative solutions" that leave in doubt "the long-range sustainability of the program."

• understate "the magnitude of the long-range unfunded obligations" because they "reflect the full amount of taxes paid by the next two or three generations of workers, but not the full amount of their benefits."[191]

* One way to account for the last of these concerns is to calculate how much money must be immediately added to the Medicare program in order to cover the projected shortfall for all current participants in the program (both taxpayers and beneficiaries).[192] This amounts to $24.4 trillion or an additional $101,000 from every U.S. resident aged 14 or older.[193] [194] [195] This measure approximates the method by which publicly traded companies are required by law to report the finances of their pension and retirement plans.[196] [197] [198] [199]

• "there is a significant likelihood that the projected" Medicare "expenditures are substantially understated as a result of potentially impracticable elements of current law."

• "an almost 30 percent reduction in Medicare payment rates for physician services is assumed to be implemented in 2012 as required under current law, despite the virtual certainty that Congress will override this reduction."

• the Affordable Care Act eventually reduces "Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services" to "less than half of their level under the prior law. …. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. … [This] would lead to far higher costs for Medicare in the long range than those projected under current law."[201]

* In May 2011, U.S. Centers for Medicare and Medicaid Services published an alternative projection to assess the "potential magnitude" of how much "the actual future costs for Medicare are likely to exceed those shown by the current-law projections."[202] Per this estimate, actual Medicare costs will exceed the costs shown in the Trustees Report by 7% per year by 2020, 19% per year by 2040, 31% per year by 2060, and 40% per year by 2080.[203]

* In December 2011, the U.S. Treasury published a financial analysis of the alternative projection described above. These calculations show that Medicare's 75-year open group unfunded obligation is 50% higher under the alternative projection than it is under current law.[204]

* The Medicaid program was founded in 1965 to pay for healthcare services for "certain low-income persons in the United States and its Territories."[205] [206]

* In fiscal year 2010 (October 1, 2009 – September 30, 2010[207]), about 68.2 million people received Medicaid benefits during some point in the year. This figure, which excludes U.S. territories, represents about 22% of the U.S. population and is comprised of:

* In fiscal year 2009, about one million people received Medicaid benefits in five U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands).[211]

* States are not required to participate in the Medicaid program, but all choose to do so. Within certain federal guidelines, states have latitude in setting eligibility criteria, deciding which healthcare services to cover, and regulating payments to doctors and other healthcare providers.[212] [213]

* An example of a federal guideline is that all participating states must provide Medicaid coverage for pregnant women and children in families with income below 133% of the federal poverty level.[214] In 2011, 133% of the federal poverty level for a family of four was $29,725.[215]

* In most states, non-disabled, non-pregnant adults who don't have dependent children are not eligible for Medicaid. For such adults who do have dependent children, the Medicaid eligibility income threshold varies widely across states, but the median was 64% of the federal poverty level in January 2011.[216] For a family of four, this amounts to $14,304.[217]

* Starting in 2014, the 2010 Affordable Care Act (a.k.a. Obamacare[218]) requires all states to expand Medicaid coverage to all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines without regard for any assets they have.[219] [220] In 2011, 138% of the federal poverty level was $30,843 for a family of four.[221]

* The U.S. Department of Health and Human Services projects that the Affordable Care Act will increase Medicaid enrollment above previous estimates by about 20 million people by 2019.[222] [223]

* The portion of the U.S. population receiving Medicaid benefits has increased from 6.5% in 1970 to 16.8% in 2010, and based upon projections from federal actuaries, this figure will rise to 22.9% by 2019:

* Per the Congressional Research Service, "compared to both Medicare and employer-sponsored health care plans," Medicaid "offers the broadest array of medical care and related services available in the United States today."[225]

* Medicaid-covered services vary by state and include items such as ambulance transportation, chiropractic care, dental care, eyeglasses, physician services, hospital services, substance abuse rehabilitation, nonemergency medical transportation, personal care, prescription drugs, and private duty nursing.[226] [227]

* From January 2006 through May 2009, a Medicaid enrollee in Buffalo, NY used an ambulance service 603 times at no cost to him, costing taxpayers at least $118,158.[229]

* Medicaid expenditures are funded by federal and state general revenues.[230] Federal general revenues are comprised of income, corporate, excise, and other taxes.[231] [232] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[233]

* The portion of Medicaid expenditures paid by the federal versus state governments varies by state. The federal government pays a greater share of Medicaid costs for states with lower average income levels.[234]

* There is no dollar limit on the federal funds states may receive for their Medicaid programs. Thus, as states provide more generous Medicaid benefits, they receive more funding from the federal government.[235] [236] [237]

* On the whole, the portion of Medicaid spending paid by the federal versus state governments has varied as of late due to recent legislation. In fiscal years 2005-2008, the federal government paid about 57% of all Medicaid expenditures. Various "stimulus" bills have raised this to about 65% in 2009, 67% in 2010, and 63% in 2011.[238]

* In 2010, Medicaid spent about $405 billion. This amounts to 10% of all federal and state government spending combined and 14% of all federal and state revenues combined.[239]

* Illegal immigrants are not eligible for standard Medicaid coverage but can receive Medicaid coverage for emergency conditions. An emergency condition is defined as "one manifested by acute symptoms of such severity that the absence of immediate medical attention could reasonably be expected to result in (1) placing the patient's health in serious jeopardy, (2) serious impairment to bodily functions, or (3) serious dysfunction of any body part or organ." This does not include organ transplants but does include pregnancy-related care such as prenatal care, childbirths, and postpartum care.[240] [241]

* In 2009, 74% of all babies delivered at Parkland Memorial Hospital in Dallas, Texas were born to women who were noncitizens.[242]

* In 2008, Medicaid paid for 14.7% of all healthcare spending in the U.S., 5.9% of dental spending, 7.3% of spending on physicians, 8.3% of spending on drugs, 17.1% of hospital spending, 34.7% home health spending, and 40.6% of nursing home spending.[243] [244]

* In 2007, 52% of all childbirths in New York City were paid for by Medicaid.[245]

• $758,000 in home equity (or unlimited equity if a spouse or dependent relative lives in the home),

* In 2009, Medicaid payment rates for inpatient hospital services were 66% of private health insurance payment rates,[247] and Medicaid paid hospitals an average of 11% below their costs of caring for Medicaid patients.[248]

* In 2009, Medicaid payment rates for physician services were 58% of private health insurance payment rates. (For comparison, Medicare payment rates for physician services were 80% of private health insurance payment rates.")[249]

* Per the 2011 Medicare Trustees Report, low Medicaid payment rates for health care services "have already led to access problems for Medicaid enrollees."[250]

* For a study published in the New England Journal of Medicine (2011), researchers posing as mothers made calls to 273 specialty clinics in Cook County, Illinois (an urban area containing Chicago) to schedule appointments for "common health conditions requiring outpatient specialty care." The researchers called each clinic twice, once while stating that their children were covered by Medicaid or the Children's Health Insurance Program (CHIP), and the other while stating that their children were covered by private insurance. The study found that "66% of Medicaid–CHIP callers … were denied an appointment as compared with 11% of privately insured callers…." The study also found that among the clinics "that accepted both insurance types, the average wait time for Medicaid–CHIP enrollees was 22 days longer than that for privately insured children…."[251]

* A survey conducted by the Center for Studying Health System Change found that "about half of physicians reported accepting all new Medicaid patients in 2004-05, compared with more than 70 percent for Medicare and privately insured patients."[252]

* The Children's Health Insurance Program (CHIP) was established via federal law in 1997 to help states provide health insurance to uninsured, low-income children living in families with income above Medicaid eligibility limits.[253]

* Like Medicaid, the federal and state governments share in the cost for CHIP, and states have latitude in setting eligibility criteria and deciding which healthcare services to cover. Depending upon the state, the federal government paid between 65% to 83% of CHIP costs in fiscal year 2010 (October 1, 2009 – September 30, 2010[254]).[255] [256]

* In fiscal years 2016-2019, the 2010 Affordable Care Act raises the share of CHIP paid by the federal government by 23 percentage points per state, up to a maximum of 100%.[257]

* The legislation that created CHIP states that the "purpose" of the program is to provide "child health assistance to uninsured, low-income children … under 19 years of age … whose family income is at or below 200 percent" of the federal poverty line.[258] In 2011, 200% of the federal poverty level for a family of four was $44,700.[259]

* By 2007, 13 states had exercised waivers to expand CHIP coverage to various adults,[260] and 15 states used a provision of the law that allows states to disregard certain types of income to raise the effective income limit above 200% of the poverty level. The state of New Jersey effectively raised this limit to 350% by disregarding all income between 200% and 350% of the poverty level.[261] In 2011, 350% of the federal poverty level for a family of four was $78,225.[262]

* In January 2011, states had income eligibility limits for CHIP ranging from 160% of the federal poverty level ($35,760 for a family of four) in North Dakota to 400% of the federal poverty level ($89,400) in New York. The median income limit was 250% of the federal poverty level or $55,875.[263]

* As of January 2011, 47 states have no limit on the assets a family may have and still be eligible for CHIP.[264] [265]

* All sources of household income are not counted when determining eligibility for CHIP. For example, the South Dakota Department of Social Services states the following on its webpage of frequently asked questions about CHIP:

My children are currently on the CHIP program. My boyfriend is moving in with me. Will this affect my children's eligibility for CHIP?

If your boyfriend is not the father of any of your children, his presence in the household will not affect your children's eligibility for CHIP. …

I have recently moved back into my parents' home with my young son due to an impending divorce. Do you count the income of my spouse or parents?

No, if you are an adult child (over 18) your parent's income is not considered. If your spouse is not living in the household, his income is not counted either.[266] [267] [268]

* In fiscal year 2010, 7.7 million children were enrolled in CHIP during some point in the year.[269] [270]

* Laws passed in 2009 and 2010 reauthorize and increase CHIP funding for upcoming years through fiscal year 2015.[271] The 2009 law also made legal immigrants immediately eligible for CHIP, overriding a previous requirement of a five-year waiting period.[272]

* The original CHIP legislation appropriated between $3.1 billion and $5.0 billion of federal funding per fiscal year during 1998-2007.[273] [274]

* The Children's Health Insurance Program Reauthorization Act of 2009 appropriated $10.6 billion of federal funding for CHIP in fiscal year 2009, $12.5 billion in 2010, $13.5 billion in 2011, and $15.0 billion in 2012.[275] [276] [277] [278]

* Medicare payroll taxes (which amount to 2.9% of workers' wages[280] [281]) were previously limited by a wage threshold that generally increased as the national average wage increased. Earnings above this threshold were not subject to the Medicare payroll tax. In 1993, this threshold was $135,000 per year.[282] [283] That year, Congress and Democratic President Bill Clinton passed a law that removed the threshold, thus making all earnings subject to Medicare payroll taxes.[284] The bill passed with 85% of Democrats voting for it and 100% of Republicans voting against it.[285]

* The same 1993 bill imposed a new Medicare tax on Social Security beneficiaries with incomes above certain limits. This tax is levied on the Social Security benefits of individuals if the total of one-half of their benefits and all other income is more than $34,000 per year ($44,000 if married and filing jointly).[286] [287] This threshold is not indexed for inflation or wage growth.[288]

* In 1997, Congress and President Clinton passed a law that created the Children's Health Insurance Program (CHIP). The legislation appropriated between $3.1 billion and $5.0 billion per year for the program during 1998-2007.[289] [290] The bill passed with 84% of Republicans and 78% of Democrats voting for it.[291]

* In 2003, Congress and Republican President George W. Bush passed a law adding a prescription drug benefit to the Medicare program.[292] [293] The bill passed with 88% of Republicans voting for it and 89% of Democrats voting against it.[294] The Congressional Budget Office (CBO) estimated it would add $395 billion to the deficit over the following ten years.[295]

* The Democratic Congressional Campaign Committee later described the Republican-passed Medicare prescription drug benefit as "costly."[296] When this bill was being debated, 86% of House Democrats voted for a competing plan that the CBO estimated would add $969 billion to the deficit over the following ten years, or 2.4 times more than the Republican plan.[297] [298]

• appropriated $10.6 billion of federal funding for CHIP in fiscal year 2009, $12.5 billion in 2010, $13.5 billion in 2011, and $15.0 billion in 2012.[299] [300] [301]

• made legal immigrants immediately eligible for CHIP, overriding a previous requirement of a five-year waiting period.[302]

• financially incentivized states to eliminate or streamline asset tests for CHIP eligibility.[303] [304]

* The bill passed Congress with 99% of Democrats voting for it and 77% of Republicans voting against it.[306]

* In 2010, the 111th Congress and President Obama passed two laws that are collectively known as the Affordable Care Act (ACA). Formally, these bills are called the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act. Informally, these bills are called Obamacare. The bills were passed separately for the political/procedural reasons detailed in this footnote.[307]

* These bills passed Congress with 79-89% of Democrats voting for them and 100% of Republicans voting against them.[308] [309] Together, the bills contain 1,935 pages.[310] [311]

• expands Medicaid eligibility to all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines (for example, a family of four with income below $30,843 in 2011) without regard for any assets they have. This expansion, along with other measures in the act, are projected by the U.S. Department of Health and Human Services to increase Medicaid enrollment above previous estimates by about 11.6 million people in 2014 and 20 million people by 2019. This provision becomes effective in 2014.[312] [313] [314]

• raises Medicaid payment rates for physician services from about 58% of private health insurance payment rates in 2008—to 73% in 2013—and 77% in 2014. Thereafter, Medicaid payment rates drop to 57% of private health insurance payment rates.[315]

• cuts Medicaid payment rates for inpatient hospital services in accord with the Medicare cuts detailed in the next bullet point.

• incrementally cuts Medicare prices "for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services" over the next 75 years to "less than half of their level under the prior law." The U.S. Centers for Medicare and Medicaid Services projects that by 2085, Medicare payment rates for inpatient hospital services will be roughly 33% of private health insurance payment rates. The 2011 Medicare Trustees Report states that these cuts will likely cause "withdrawal of providers from the Medicare market" and "severe problems with beneficiary access to care…."[316] [317]

• establishes a board of 15 Senate-confirmed Presidential appointees that is required to limit Medicare spending for years in which the Medicare chief actuary projects that the program will not meet its cost-savings targets.[318] [319] This board is called the "Independent Payment Advisory Board" (IPAB),[320] and the law states that:

- the board's proposals automatically acquire the force of law unless Congress passes bills to override these proposals, and the president signs the bills.[321] [322] In the case of a presidential veto, Congress can still override these proposals, but this requires a two-thirds majority vote in both houses of Congress.[323]

- the board can function with only one of its 15 seats filled,[324] and if the board does not submit a proposal by the required deadline, the Secretary of Health and Human Services (a presidential appointee[325]) has the power to submit a proposal in its place.[326]

- the board cannot be abolished unless Congress introduces a bill to repeal it in January 2017 and then passes this bill by August 15, 2017 with three-fifths majorities in both houses and the signature of the President.[327]

- the President has the power to remove board members for "neglect of duty or malfeasance in office, but for no other cause."[328]

- the board cannot "ration health care,"[329] [330] [331] but the determination of what constitutes rationing is left to the board's discretion because the board's decisions are not subject to administrative or judicial review.[332] [333]

• expands funding for the Children's Health Insurance Program by $29 billion dollars over 2012-2015.[334]

• provides subsidies to purchase health insurance for individuals with incomes up to 400% of federal poverty guidelines (for example, $74,120 for a family of three in 2011, $89,400 for a family of four, or $104,680 for a family of five). The U.S. Department of Health and Human Services projects that 25 million people will be receiving these subsidies in 2019. The subsidy levels will be based upon income, and the Congressional Budget Office projects that the average subsidy will be $4,610 per enrollee when the program begins in 2014.[335] [336] [337] [338]

• provides subsidies for certain small businesses that pay their employees average annual wages of less than $50,000 and provide them with health insurance.[339]

• imposes fines on large employers that don't provide full time-employees with health insurance that meets certain requirements. This begins in 2014.[340] [341] Per the chief actuary of the Centers for Medicare and Medicaid Services, the fines would generally be "substantially less than the cost of providing health insurance coverage."[342]

• requires most Americans to carry some form of health insurance starting in 2014 or to pay a monthly fine.[343] [344] Per the chief actuary of the Centers for Medicare and Medicaid Services, "for many individuals the applicable penalty would be considerably smaller than the cost of coverage."[345] [346]

• requires health insurers to enroll all applicants regardless of their health status/preexisting conditions and to charge them the same rates as healthy individuals who have been paying insurance premiums for years. The law also requires health insurers to enroll all applicants with no more than a 90-day waiting period. This begins in 2014, except for enrollees under the age of 19, for which it began in 2010.[347] [348]

- premiums based upon any risk factors except for age, tobacco use, the area in which consumers live, and whether the plan covers an individual or family.

- coverage for dependents that doesn't include unmarried children through the age 26.

• gives presidential appointees, such as the Secretary of Health and Human Services,[352] at least 40 regulatory powers that have the force of law.[353] [354] Examples of such include the authority to:

- establish criteria that health insurers must meet in order to sell insurance to consumers who receive the federal subsidies described above (for people with income up to 400% of federal poverty guidelines). Plans that meet these criteria are referred to as "qualified health plans."[355] [356] [357]

- mandate "mechanisms to improve health care quality" that health care providers must implement in order to receive payments through qualified health plans.[360]

- define what constitutes "unreasonable increases in premiums for health insurance coverage" and "establish a process for the annual review" of such increases.[361] [362]

- "develop and impose appropriate penalties" on health insurers companies for non-compliance with certain provisions of the act.[363]

• creates roughly 45 new governmental boards, councils, committees, and commissions in addition to an unknown number of other entities such as trust funds, programs, systems, and risk pools.[365]

• imposes or increases 10 types of taxes, fees, and penalties (not including the fines described above for not having or providing health insurance). Congress's Joint Committee on Taxation projects that these provisions will increase tax collections by $361 billion during fiscal years 2010-2019.[366] The largest of these are:

- a 3.8% tax on investments (such as interest, dividends, and rent) imposed on singles with income above $200,00 and couples with income above $250,000. This begins in 2013.[367] [368]

- an added 0.9% Medicare payroll tax on earnings above $200,00 for singles and $250,00 for couples. This begins in 2013.[369] [370]

- a 40% tax imposed on high-cost health insurance plans. This begins in 2018.[371]

- an annual fee imposed on health insurance providers. This begins in 2014.[372]

- an annual fee imposed on manufacturers and importers of pharmaceuticals. This began in 2010.[373]

- a 2.3% tax imposed on manufacturers and importers of certain medical devices. This begins in 2013.[374]

• eliminates or reduces 6 types of targeted tax deductions and credits starting in 2010-2013. The Joint Committee on Taxation projects that these provisions will increase tax collections by $62 billion during fiscal years 2010-2019.[375]

• adds 3 types of targeted tax deductions and credits starting in 2009-2010. The Joint Committee on Taxation projects that these provisions will decrease tax collections by $2 billion during fiscal years 2010-2019.[376]

* During the debate over the Affordable Care Act, Republicans proposed more than a hundred amendments to the legislation, most of which were rejected by the Democrats, who were in the majority at the time.[377] Examples of rejected amendments include:

• making health insurance tax-deductible for individuals (like it is for businesses) and making other healthcare expenses tax deductible.[378]

• requiring recipients of federally funded healthcare benefits to demonstrate their identity and citizenship.[380]

• repealing the mandate that forces people to purchase health insurance or to pay a fine.[381]

• a provision that states, "Nothing in this Act shall be construed to prevent or limit individuals from keeping their current health coverage."[383]

* Per data from Congress's Joint Committee on Taxation and the U.S. Centers for Medicare and Medicaid Services, the following changes in federal spending and revenues are projected to occur during fiscal years 2010-2019 as a result of the Affordable Care Act. Most of this will occur in the last six years of this period because many provisions of the act do not take effect until 2014.[384]

Projected federal spending changes as a result of the Affordable Care Act during fiscal years 2010-2019
Provision	Increase or Decrease (billions)
Medicare cuts	-$575
Subsidies for individuals with incomes up to 400% of federal poverty guidelines	$507
Medicaid expansion	$410
Subsidies for certain small businesses that provide health insurance for employees	$31
CHIP additional funding	$29
Other provisions impacting Medicaid and CHIP	$28
Miscellaneous	$8
Total	$438

* The totals above net to a $141 billion improvement in the federal government's finances over 2010-2019.[388] This assumes Congress and the President don't override the Medicare cuts, as they are currently doing with the Medicare cuts required under a 1997 law.[389] [390] This improvement in federal finances also assumes the CLASS Act is operational.

* The CLASS Act is a long-term care insurance program that was championed by Democratic Senator Ted Kennedy and included in the Affordable Care Act.[391] The program is voluntary and financed by participant premiums, not federal subsidies.[392]

* Premiums for students and individuals with incomes below the poverty line are initially fixed at $5 per month, and the premiums of other participants are set at levels adequate to cover the cost of the program.[393]

* During the debate over the CLASS Act, Republican Senator Judd Gregg was successful in adding an amendment that required the program to be "actuarially sound."[394] [395]

* In April 2010, the chief actuary of the Centers for Medicare and Medicaid Services issued a report stating that the CLASS Act and programs like it

face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, thereby leading to additional premium increases. This effect has been termed the "classic assessment spiral" or "insurance death spiral." The problem of adverse selection is intensified by requiring participants to subsidize the $5 premiums for students and low-income enrollees. … [T]here is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.[396] [397]

* Because the CLASS Act was projected to collect more money in insurance premiums than it paid in benefits during its early years, the federal government projected it would reduce the budget deficit during fiscal years 2010-109 by $38 billion. However, over the long term, the program was projected to result in more costs than revenues.[398]

* In October 2011, the Obama administration announced it will not be implementing the CLASS Act because there is no viable way to make the program financially sound, as required by Senator Gregg's amendment.[399] [400] [401]

NOTE (1/23/2012): Since the passage of the Affordable Care Act, numerous reports have emerged about changes in healthcare costs, insurance rates, insurance coverage, and other matters relating to Barack Obama's recurring promise that "you will be able to keep your doctor" and "your health care plan."[402] Given that the act passed in 2010, and most healthcare data for 2011 is not yet available, there is not enough data for Just Facts to cover these issues within our mission statement's directive to provide facts "that accurately convey big-picture realities." We plan to provide facts on these issues as such data becomes available, first through our Just Facts Daily initiative and later through a major update of this research.

* From 2007 through 2010, the annual portion of total private health insurance company revenues paid out in healthcare benefits for customers ranged from 86.8% to 88.6%.[403] [404] The remainder went to profits, taxes on premiums, and administrative expenses such as employee salaries and benefits, office space and furniture, computers, utilities, property taxes and insurance, sales commissions, advertising, legal fees, and audit fees.[405] [406] [407]

* From 2007 through 2010, the annual median net profit margin for the ten largest health insurance/managed care companies ranged from 2.1% to 4.4%. Throughout this period, the highest profit margin made by any of these companies in any year was 7.3%.

* In 2009, CNN uncritically reported the following statement about the healthcare debate by Senate Majority Leader Harry Reid:

* In 2008 (later data not available), the health insurance/managed care industry had a 2.2% net profit margin, which ranked 35th out of 53 top industries. The industry with the highest profit margin was network/communications equipment, which had a 20.4% profit margin.[411] [412]

* As of January 2012 (earlier data not available), health insurance companies had a 4.5% quarterly net profit margin, as compared to 6.9% for electric utilities, 8.2% for gas utilities, and 12.0% for water utilities.[414]

* As of January 2012 (earlier data not available) health insurance companies had a 4.5% quarterly net profit margin, as compared to 2.9% for major auto manufacturers, 5.9% for auto parts, 9.9% for restaurants, 20.3% for beverage brewers, and 23.2% for application software.[416]

* As of January 2012 (earlier data not available), health insurance companies had a 4.5% quarterly net profit margin, as compared to 2.9% for the New York Times Company,[418] 5.2% for music & video stores, 9.7% for toys & games, 14.0% for wireless communications, and 53.1% for periodical publishers.[419]

• American Medical News (a publication of the American Medical Association), published an article by Doug Trapp stating:

• the American Public Health Association [APHA] issued the following statement from its interim executive director, Alan Baker:

* None of the above-cited articles or editorials mentioned the following facts, which are contained in the Census Bureau survey they cited:

• "underreporting of health insurance coverage appears to be a larger problem" in this survey "than in other national surveys that ask about insurance."[425]

* A study that cross-checked respondents from the above-referenced survey with data from the Centers for Medicare and Medicaid Services found that in 2005, about 18% of the "uninsured" in this survey actually had insurance through Medicaid.[426] [427]

a) Dataset: "National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2009." U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, January 5, 2011. https://www.cms.gov/...

b) Dataset: "Consumer Price Index, All Urban Consumers (CPI-U), U.S. City Average, All items." U.S. Department of Labor, Bureau of Labor Statistics, September 15, 2011. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

c) Table 1.1.5: "Gross Domestic Product." United States Department of Commerce, Bureau of Economic Analysis. Last revised August 26, 2011. http://www.bea.gov/...

NOTE: An Excel file containing the data and calculations is available upon request.

c) Table 1.1.5: "Gross Domestic Product." United States Department of Commerce, Bureau of Economic Analysis. Last revised August 26, 2011. http://www.bea.gov/...

NOTE: An Excel file containing the data and calculations is available upon request.

NOTE: Just Facts has examined the original receipt and scanned a copy of it. We are not publishing this image because it contains personal information.

[5] Email: Christ Hospital, 176 Palisade Avenue, Jersey City, NJ, September 23, 2011.

For a normal vaginal delivery (limit of 2 days) the fee for the hospital service will be $4000.00. Any additional days over the normal 2 day stay will incur a charge of $1360.00 per day.

For a cesarean section delivery (limit of 4 days) the fee for the hospital service will be $5565.00. Any additional days over the normal 4 day stay will incur a charge of $1360.00 per day.

This quoted price is for a standard Vaginal Delivery/Cesarean Section and normal newborn birth barring any unforeseen complications which could add to this billable amount.

* Patient Access staff will flag your account when they obtain your demographic information in order to insure a smooth admission process.

* The above amounts do not include physician fees, anesthesia, or any other professional component.

[6] Article: "70% Rise in Hospital Room Costs Since 1980." Associated Press, November 5, 1986. http://www.nytimes.com/...

"The average daily cost of hospital rooms jumped nearly 70 percent over the last five years, from $127 in 1980, according to statistics published by the Census Bureau. The figures were drawn from data compiled by the Health Insurance Association of America and the American Hospital Association."

NOTE: Just Facts searched the websites of the Census Bureau, Health Insurance Association of America [now America's Health Insurance Plans], and the American Hospital Association for up-to-date data on the average price of hospital rooms, but we were unable to find such information. Just Facts also contacted the American Hospital Association, which was unable to provide any data beyond 2002. This data is cited in footnotes below.

[8] Book: Current Trends in Health Care and Dental Costs Utilization. Mutual of Omaha, 2003.

Page 2: "The data in Current Trends represents Mutual of Omaha's group business, and is not necessarily representative of other population subgroups. The data is based upon the actual experience of our policyholders. The data does not necessarily represent a cross section of all providers. No efforts have been made to adjust for differences in case mix."

Page 3: "The average room and board charges are for all types of rooms (medical/surgical, intensive care, obstetrical, etc.), and they include charges for nursing care for those facilities with separate room and board charges from nursing charges."

[9] Book: Current Trends in Health Care Costs and Utilization. Mutual of Omaha, 1990.

Page 5: "Average Daily Charges for Room and Board … 1988 … National Average [=] $270."

[11] Book: Current Trends in Health Care and Dental Costs Utilization. Mutual of Omaha, 2003.

Page 5: "Average Daily Charges for Room and Board … 2002 … National Average [=] $748."

"In compliance with state law, each Ohio hospital provides a price list containing its charges for room and board, emergency department, operating room, delivery, physical therapy and other procedures. The hospital's charges are the same for all patients, but a patient's responsibility may vary, depending on payment plans negotiated with individual health insurers."

NOTE: Just Facts used a random number generator (http://www.randomizer.org/form.htm) to select 15 of the 168 hospitals listed on this web page. We found price lists for 11 of these 15 hospitals. Many of the links on this webpage were broken, some of these links did not directly point to pricing information, and several hospitals had their price lists located in obscure locations on their websites.

[14] Calculated with the dataset: "National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2009." U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, January 5, 2011. https://www.cms.gov/...

NOTE: An Excel file containing the data and calculations is available upon request.

[15] Article: "Nonprice Competition in Hospitals." By John L. Mariotti. Encyclopedia of Health Care Management. Edited by Michael J. Stahl. Sage Publications, 2004.

Page 391: "In conclusion, because most medical care is delivered with third-party payments, and the purchaser is in dire need of the services, the typical patient has little interest in price. The result is that most medical care is bought on decision criteria other than price. Thus, nonprice competition seems to be the norm, not only in hospitals but also in a wide range of health and medical services."

CALCULATION (to obtain an average of the figures above): ($4,602 + $2,351)/2 = $3,476

Page iii: "[T]he first regular sample [of study participants] was enrolled in late 1974. Most participants have now completed their period of participation, and all will complete it by January 1982."

A total of 7706 participants in six cities have taken part in a controlled experiment related to cost sharing in health insurance polices. …

The families were assigned in an unbiased manner to insurance plans that covered a broad range of medical services but varied the coinsurance rate, i.e., the fraction of its medical bills that the family must pay. This out-of-pocket expenditure was subject to an upper limit of $1000 per year or 5, 10, or 15% of income, whichever was less. …

Expenditure per person responds to variation in cost sharing. It is about 50 percent greater in the plan with no cost sharing [100% coverage] than in the one with 95-percent coinsurance [5% coverage] up to a maximum of $1000 in any one year. ..

As cost sharing declines, the percentage of individuals seeking care rises, as does the number of ambulatory [outpatient] visits per user. The number of adults hospitalized increases, but the number of children hospitalized shows no systematic relationship to plan. Cost per person hospitalized does not appear to be related to plan.

Pages v-vi: "The implications of these findings are that: 1) Cost sharing unambiguously reduces expenditure; it is not "penny-wise and pound-foolish" (with respect to expenditure) as some have argued."

Page 4: "A total of 2756 families, consisting of 7706 persons, have been enrolled in one of several different health insurance plans, 70 percent of them for 3 years and the rest for 5 years. … Families were excluded in which heads were eligible for Medicare at the beginning of the study (or who would become so by virtue of age before the end of the study). Hence, our results do not necessarily apply to the aged population.

Per capita total expenditure (inpatient plus ambulatory [outpatient], excluding dental and outpatient mental health services) rises steadily as coinsurance falls (Table 3). Expenditure per person in the plan with no coinsurance (the most generous plan) is about 60-percent greater than in the plan with 95-percent coinsurance [5% coverage]….

Although the simple arithmetic mean provides acceptable precision for analyzing ambulatory expenditure, it does not do so for plan-related differences in total expenditure…. This lack of precision occurs because a few large medical expenditures account for a substantial portion of all expenditures on a given plan and can therefore affect the average quite dramatically….

Application of techniques better suited to such data yields a somewhat different, but probably more reliable, estimate of what per person expenditure would be if a larger number of families had been enrolled. … Averaged across all sites, predicted expenditure per person in the 95-percent coinsurance plan is 69 percent of that in the free care plan; in other words, free care causes expenditures to increase by nearly 50 percent (Table 5). … In some site-years, the predicted expenditure for the 50-percent coinsurance plan was smaller than that of the 95-percent coinsurance plan, but the difference is statistically insignificant. This misordering appears to be attributable to the sampling error, given the relatively few participants enrolled in the 50-percent coinsurance plan.

Page 13: "Table 3 - Actual Annual Total and Ambulatory Expenditure Per Person, By Plan: Nine Site-Years"

Page 16: "Table 5 – Predicted Total Expenditure Per Person, By Plan, Site, and Year"

Our results clearly show that the use of medical services responds to cost sharing; demand in an insurance plan with full coverage appears to be about 50 percent above that in an income-related catastrophe insurance plan [i.e., 5% coverage]. The fragmentary evidence now in the literature is roughly consistent with this value; e.g., the 25-percent decline in visits observed in a natural experiment among Stanford University employees when their coinsurance rate was changed from zero to 25 percent … is similar to the 20-percent decline in ambulatory expenditures between the zero and 25-eprcent coinsurance plans (Table 3).

[18] Book: Free for All? Lessons from the Rand Health Insurance Experiment. By Joseph P. Newhouse and the Insurance Experiment Group. Rand, 1993. Pages 339-340:

The reduced service use under the cost-sharing plans had little or no net adverse effect on health for the average person (Chapters 6 and 7.) Indeed, restricted activity days fell with more cost sharing.

Health among the sick poor—approximately the most disadvantaged 6 percent of population—was adversely affected, however. In particular, the poor who began the Experiment with elevated blood pressure had their blood pressure lowered more on the free plan than on the cost-sharing plans. The effect on predicted mortality rates—a fall of about 10 percent—was substantial for this group. In addition, free care marginally improved both near and far corrected vision, primarily among the poor, and increased the likelihood that a decayed tooth would be filled—an effect found disproportionately among the less well educated. Health of gums was marginally better for those with free care. And serious symptoms were less prevalent on the free plan, especially for those who began the experiment poor and with serious symptoms. Finally, there appeared to be a beneficial effect on anemia for poor children. Although sample sizes made it impossible to detect any beneficial effects that free care might have had on relatively rare conditions, it is highly improbable that there were beneficial effects (one standard error of the mean changes) that we failed to detect in the physiologic measures of health taken as a group. Moreover, the confidence intervals are tight enough to rule out any beneficial effect of free care on the General Health Index, our best summary measure of health.

Whatever merits or demerits cost sharing may have as an abstract principle, the plans we studied did not greatly affect patients once hospitalized. This absence of effect on cost per hospitalized patient could have occurred because any additional hospital services a physician might have ordered were usually not subject to cost sharing; 70 percent of the hospitalized patients exceeded the Maximum Dollar Expenditure.

Complete or nearly complete coverage for additional inpatient services is common in this country. Moreover, the additional expense that comes from being admitted to a relatively costly hospital is also fully insured, or nearly so. Thus, neither patients nor physicians have much incentive to choose an economically efficient rather than an inefficient hospital, or to economize on services once a patient is admitted—a situation that may partially explain the persistent above-average inflation in the hospital sector (Newhouse, 1978b).

[W]e analyzed data from the Medical Outcomes Study, which prospectively followed chronically ill adults, to determine whether cost sharing deters use of care and leads to subsequent worse health outcomes among a population whose health may be more vulnerable to use disincentives. …

We analyzed data from the 1700 (67%) subjects who completed the 12- and 18-month surveys, which assessed individuals' level of cost sharing and use of medical care.

Page 1890: "[W]e collapsed individuals into 3 cost-sharing categories: no copay (insurance pays all), low copay (insurance pays more than half but not all), and high copay (insurance pays half or less). Using insurance and employment data, we conducted logistic regression analyses to impute missing data on level of cost sharing for 92 (5.4%) subjects."

Previous studies have demonstrated little or no impact of cost sharing on health outcomes, but these studies have not primarily involved individuals who are chronically ill and, thus, particularly vulnerable. In contrast, the Medical Outcomes Study was designed to examine an older, chronically ill population and involved subjects who had diabetes, hypertension, coronary artery disease, congestive heart failure, or depression. In addition, 46% of these subjects were older than 62 years (the upper age cutoff for inclusion in the RAND Health Insurance Experiment). We hypothesized that cost sharing would have a significant negative impact on health status in this sample owing to the subjects' advanced age and greater disease burden.

We found no association between cost sharing and health status at baseline or follow-up. Other studies of cost sharing examining acutely ill individuals have also failed to observe any negative health effect from cost sharing.^9,27 This lack of finding is particularly surprising given that the RAND Health Insurance Experiment involved a comparatively younger and healthier population and revealed a small yet statistically significant effect on health. One explanation may be related to the influence of income on the effect of cost sharing. Health Insurance Experiment subjects who were in the lowest income category suffered the worst health outcomes due to cost sharing. Others have also shown that the health of the poor is particularly sensitive to limitations in access to care.^11,28,29 Therefore, we may have failed to observe an association between cost sharing and worse health because subjects in the Medical Outcomes Study had relatively high incomes.

The time frame of our analysis may not have been optimal to detect a negative impact on health outcomes. The RAND Health Insurance Experiment demonstrated that cost sharing had its greatest impact through lowering use of general health examinations and preventive care.¹ The effect on an individual's health of receiving less preventive care would probably be delayed. Thus, the 1-year follow-up in our analysis may have been too brief. In addition, we observed subjects after they had already been exposed to cost sharing for some time, and thus cost sharing may have already affected their health by the time of our study. Consequently, the study may have been biased owing to a survival effect.

Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.

Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.

Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract.

You can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 7.5% of your AGI (Form 1040, line 38).

In this publication, the term "7.5% limit" is used to refer to 7.5% of your AGI. The phrase "subject to the 7.5% limit" is also used. This phrase means that you must subtract 7.5% (.075) of your AGI from your medical expenses to figure your medical expense deduction.

Your AGI is $40,000, 7.5% of which is $3,000. You paid medical expenses of $2,500. You cannot deduct any of your medical expenses because they are not more than 7.5% of your AGI.

Page 1: "Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, and home health and hospice care. The HI trust fund is mainly funded by a dedicated payroll tax of 2.9% of earnings, shared equally between employers and workers."

Page 1: "Medicare serves approximately one in seven Americans and virtually all of the population aged 65 and over. In 2010, the program will cover an estimated 47 million persons (39 million aged and 8 million disabled)."

Page 4: "Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under age 65 who receive cash disability benefits from Social Security or the Railroad Retirement systems for at least 24 months are also entitled to Part A."

In existence for 45 years, Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care to more than 68 million people in FY2010. …

Each state designs and administers its own version of Medicaid under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered.

Page 1: "Even though Medicaid is an entitlement program in federal budget terms, states choose whether to participate, and all 50 states do so."

The federal Medicaid statute … defines more than 50 distinct population groups as being potentially eligible. Historically, Medicaid eligibility was subject to categorical restrictions that generally limited coverage to the elderly, persons with disabilities … members of families with dependent children, certain other pregnant women and children, certain women with breast or cervical cancer, and uninsured individuals with tuberculosis. Recent changes in law (described below) provide eligibility for nonelderly, childless adults who do not fit into these traditional categories.

In addition, to qualify for Medicaid coverage, applicants' income (e.g., wages, Social Security benefits) and sometimes their resources, or assets (e.g., value of a car, savings accounts), must meet program financial requirements. … In recent years, Medicaid has shifted largely to eligibility based on income, and most enrollees do not receive cash assistance. …

Some eligibility groups are mandatory, meaning that all states with a Medicaid program must cover them; others are optional. Examples of groups that states must provide Medicaid to include: …

• pregnant women and children through age 18 with family income below 133% of the federal poverty level (FPL),⁶ …

⁶ For example, in 2010, the FPL for a family of four is $22,050—133% of FPL for such a family would equal $29,326.50.

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

Page 49: "CHIP provides health care coverage to low-income, uninsured children in families with income above Medicaid income standards. States may also extend CHIP coverage to pregnant women when certain conditions are met. In designing their CHIP programs, states may choose to expand Medicaid, create a stand-alone program, or use a combined approach."

"2010 [=] 7,705,723 … CHIP Data represents children enrolled in Separate Child Health Programs and Medicaid Expansion Programs (Title XXI)"

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[28] Report: "Holding Steady, Looking Ahead: Annual Findings Of A 50-State Survey Of Eligibility Rules, Enrollment and Renewal Procedures, And Cost Sharing Practices in Medicaid and CHIP, 2010-2011." By Martha Heberlein and others. Kaiser Commission on Medicaid and the Uninsured, January 2011. http://www.kff.org/medicaid/upload/8130.pdf

Pages 29-30: "Table 1 - Upper Income Eligibility Limit for Children's Coverage and Program Type - January 2011 … New York … Upper Income Limit² (Percent of the FPL) [=] 400 … ²The income eligibility levels noted may refer to gross or net income depending on the state and reflect the highest income eligibility level in the state using Medicaid/CHIP funds."

Pages 31-32: "Table 7 - Streamlined Application Requirements for Children's Health Coverage - January 2011 … Asset Test NOT Required … CHIP …. New York"

[29] NOTE: The Affordable Care Act is actually comprised of two acts,† which were passed separately for political/procedural reasons.‡

Page ii: "In this report, 'recently enacted health care legislation' refers to the Patient Protection and Affordable Care Act (Public Law 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152)."

[N]egotiations on a ﬁnal bill were stalled when, on January 19 [2010], Republican Scott Brown was elected to the Massachusetts Senate seat vacated by the death of Senator Edward Kennedy. Brown's election effectively took away the Senate Democratic leadership's 60th vote in support of healthcare reform legislation. Without the ﬁlibuster-proof 60 votes in the Senate, Democrats would not have been able to overcome the procedural hurdles to passing a ﬁnal House-Senate compromise bill without Republican votes. …

The White House and House and Senate Democratic leadership agreed on a two-step process in which the House would pass the Senate-approved healthcare reform bill and then vote on a package of changes to the bill negotiated by Democrats in both chambers. Under budget reconciliation, the Senate would be able pass the package of changes with a simple majority vote [i.e., 50 votes instead of 60].

Page 6: "Beginning in 2014, PPACA [the Patient Protection and Affordable Care Act] includes a mandate for most individuals to have health insurance,⁹ or potentially pay a penalty for noncompliance.¹⁰ Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Those who do not meet the mandate will be required to pay a penalty for each month of noncompliance."

[31] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

Page 6: "The penalty amounts for noncovered individuals will be indexed over time by the CPI (or, in certain instances, by growth in income) and would normally increase more slowly than health care costs."

[32] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 2: "Beginning in 2014, the Affordable Care Act expands Medicaid eligibility to all individuals under age 65 in families with income below 138 percent of the Federal Poverty Level (FPL).² … ² … The Affordable Care Act technically specifies an upper income threshold of 133 percent of the FPL but also allows a 5-percent income disregard, making the effective threshold 138 percent."

The effective participation rate of persons who would have been uninsured for a full year, but are newly eligible for Medicaid as a result of the Affordable Care Act, is assumed to be 97 percent. This assumed participation rate is significantly higher than actual Medicaid participation rates to date and is based on the anticipated impacts of sections of the Affordable Care Act intended to make the process of enrolling easier. In particular, the legislation establishes State or federally operated health insurance exchanges that, among other responsibilities, will facilitate the determination of individuals' and families' eligibility for Federal financial assistance for health insurance, either through Medicaid or through the Federal premium and cost-sharing subsidies for private health insurance plans. The exchanges are assumed to perform this role effectively and, for those found to qualify for Medicaid, to assist the application and enrollment process. In this role, the exchanges would also serve as a valuable new resource for health providers who seek assistance in enrolling eligible persons in Medicaid. In addition, we anticipate that the more widespread availability of financial assistance under the Affordable Care Act (for individuals and families with incomes up to 400 percent of FPL) will reduce any stigma associated with receipt of such assistance through Medicaid.

The most significant change to Medicaid is the expansion of Medicaid eligibility beginning in 2014. This expansion, together with greater participation by individuals eligible under current rules, is projected to add 11.6 million people to enrollment in FY [fiscal year] 2014 and almost 20 million people by FY 2019, 21 percent and 34 percent, respectively, compared to pre-Affordable Care Act estimates. These increases reflect both the greater proportion of the population that will be eligible for Medicaid and an assumption that the new State health insurance exchanges will be very effective in assisting enrollment in Medicaid. Of the new enrollees … about 78 percent are projected to be eligible only under the new rules beginning in 2014.

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[34] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

SEC. 2002. INCOME ELIGIBILITY FOR NONELDERLY DETERMINED USING MODIFIED GROSS INCOME. …

(C) NO ASSETS TEST.—A State shall not apply any assets or resources test for purposes of determining eligibility for medical assistance under the State plan or under a waiver of the plan.

Summary: "[The Affordable Care Act] will enable and support states' creation by 2014 of "American Health Benefit Exchanges." … Based on income, certain individuals may qualify for a tax credit toward their [health insurance] premium costs and a subsidy for their cost-sharing; the credits and subsidies will be available only through an exchange."

[36] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

Page 5: "The refundable premium tax credits in … [the Affordable Care Act] would limit the [health insurance] premiums paid by individuals with incomes up to 400 percent of the FPL [Federal Poverty Level] to a range of 2.0 to 9.5 percent of their income and would cost an estimated $451 billion through 2019. An estimated 25 million Exchange enrollees (79 percent) would receive these Federal premium subsidies."

NOTE: Although the statement above does not explicitly designate the year in which 25 million Exchange enrollees receive subsidies, the year can be deduced by data in Table 2 (on page 24 of the pdf file). For the year 2019, this table specifies 31.6 million Exchange enrollees. As explained above, "79 percent" of these would receive subsidies. Since 79% of 31.6 million equals 25.0 million, the year 2019 is implied above.

"Persons in Family [=] 3 … 48 Contiguous States and D.C. [=] $18,530 … Alaska [=] $23,160 … Hawaii [=] $21,320"

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

"Persons in Family [=] 5 … 48 Contiguous States and D.C. [=] $26,170 … Alaska [=] $32,720 … Hawaii [=] $30,100"

[38] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." Deloitte, March 30, 2010. http://www.deloitte.com/...

Page 21: "The Act increases the threshold for claiming an itemized deduction for unreimbursed medical expenses for regular tax purposes from 7.5 percent of the taxpayer's AGI to 10 percent. The Act does not change the current-law 10 percent of AGI threshold that applies under the alternative minimum tax. Effective date – The change generally applies for taxable years beginning after December 31, 2012. For any taxpayer who is age 65 and older or whose spouse is 65 or older, the threshold for regular tax purposes remains at 7.5 percent until 2017."

"Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea [South], Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States"

Developed countries (industrial countries, industrially advanced countries). High-income countries, in which most people have a high standard of living. Sometimes also defined as countries with a large stock of physical capital, in which most people undertake highly specialized activities. According to the World Bank classification, these include all high-income economies except Hong Kong (China), Israel, Kuwait, Singapore, and the United Arab Emirates. Depending on who defines them, developed countries may also include middle-income countries with transition economies, because these countries are highly industrialized. Developed countries contain about 15 percent of the world's population. They are also sometimes referred to as "the North."

Organisation for Economic Cooperation and Development (OECD). An organization that coordinates policy among developed countries. OECD member countries exchange economic data and create unified policies to maximize their countries' economic growth and help nonmember countries develop more rapidly. The OECD arose from the Organisation for European Economic Cooperation (OEEC), which was created in 1948 to administer the Marshall Plan in Europe. In 1960, when the Marshall Plan was completed, Canada, Spain, and the United States joined OEEC members to form the OECD.

[42] Book: Handbook of Health Economics, Volume 1A. Edited by Anthony J. Cuyler & Joseph P. Newhouse. Elsevier, 2000. Chapter 1: "International Comparisons of Health Expenditure." By Ulf-G. Gerdtham, Bengt Jönsson. Pages 11-53.

[R]igorous assessment of the quality (accuracy and reliability) of the cross-national data is difficult. … There is ample scope for imperfect reliability with respect to international comparisons due to differential classification, especially on the borderline of health services such as care for the aged. For example, the care of the mentally retarded in not included in the expenditure for Denmark nor for Sweden after 1985, but it is included in the expenditure for Finland, Iceland and Norway. Another difference is that local nursing homes are not included in the Danish statistics, whereas they were included in Finland, Iceland, Norway and Sweden before 1992…. Thus heterogeneous definitions are present even if one selects apparently similar countries such as the Nordic countries…. Taken together, these problems indicate that results obtained with international comparisons should be treated with considerable caution.[42]

Page 45: "A common and extremely robust result of international comparisons is that the effect of per capita GDP (income) on expenditures is clearly positive and significant and, further, that the estimated income elasticity† is clearly higher than zero and close to unity or even higher than unity. This result appears to be robust to the choice of variables included in the estimated models, data, the choice of conversion factors and methods of estimation."

[43] Book: Health Economics: Theories, Insights, and Industry Studies, Fifth edition. By Rexford E. Santerre and Stephen P. Neun. South-Western, Cenage Learning, 2010.

The empirical estimates for the income elasticity of demand vary widely and merit discussion. Studies using household, or individual, data generally find healthcare to be a normal good with income elasticity below 1.0. These results are in direct contrast to studies that utilize country-level data to look at the relation between income and health care expenditures either over time or across countries. The goal of these studies is to ascertain how economic growth impacts national health care expenditures. Generally, these studies find the aggregate income elasticity to be slightly above 1. …

This difference between the micro and macro estimates is interesting and deserves explanation. According to Newhouse, the difference exists, because, for example, within the United States at any point in time the average consumer pays only a small portion of the price of medical care (approximately 14 percent in 2003), while over time the country as a whole must pay the full price of health care. As the out-of-pocket price of health care are falls to zero, then the average individual is going to consume health care regardless of income. The income elasticity in the extreme equals zero. The country, as a whole, however, must face the entire burden of the cost of health care and, as a result, is going to be much more sensitive to price and income.

National Health Expenditures represents health care spending in the aggregate. The NHEA recognize several types of health care spending within this broad aggregate. "Personal Health Care Expenditures" (PHC) measures the total amount spent to treat individuals with specific medical conditions. "Health Consumption Expenditures" (HCE) represents spending for all medical care rendered during the year, and is the sum of personal health care expenditures, government public health activity, and government administration and the net cost of private health insurance. National Health Expenditures (NHE) equals Health Consumption Expenditures plus Investment, or the sum of medical sector purchases of structures and equipment and expenditures for noncommercial medical research.

Page 6: "Personal health care goods and services comprise all of the medical goods and services that are rendered to treat or prevent a specific disease or condition in a specific person. These include hospital, professional services, other health, residential, and personal care, home health, nursing care facilities and continuing care retirement communities, and the retail outlet sales of medical products (Exhibit 3)."

[45] Dataset: "Personal Health Care Spending by Age Group and Type of Service, Calendar Year 2004." From the paper: "U.S. Health Spending By Age, Selected Years Through 2004." By Micah Hartman and others. Health Affairs, November 2007. https://www.cms.gov/...

[46] Report: "CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

The retirement of the large baby-boom generation born between 1946 and 1964 portends a long-lasting shift in the age profile of the U.S. population. That shift will substantially alter the balance between the working-age and retirement-age segments of the population. During the next decade alone, the number of people over the age of 65 is expected to rise by more than a third. Over the longer term, the share of people age 65 or older is projected to grow from about 13 percent now to 20 percent in 2035, whereas the share of people ages 20 to 64 is expected to fall from 60 percent to 55 percent. In later decades, the aging of the population is expected to continue, though at a slower rate, because of further increases in life expectancy.

[47] Calculated with "Supplemental Data for the CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Figure 4-2: "The Population Age 65 or Older as a Percentage of the Population Ages 20 to 64."

NOTE: An Excel file containing the data and calculations is available upon request.

Page 577: "Three chronic diseases—cancer, cardiovascular disease (CVD), and diabetes—are responsible for a majority of the morbidity, mortality, and health care costs in the United States."

[49] Paper: "The Impact of Prevention on Reducing the Burden of Cardiovascular Disease." By Richard Kahn and others. Circulation (Journal of the American Heart Association), July 7, 2008. Pages 576-585. http://circ.ahajournals.org/content/118/5/576.full.pdf+html

Approximately 78% of adults aged 20-80 years alive today in the United States are candidates for at least one prevention activity. If everyone received the activities for which they are eligible, myocardial infarctions [heart attacks] and strokes would be reduced by 63% and 31%, respectively. If more feasible levels of performance are assumed, myocardial infarctions and strokes would be reduced 36% and 20%, respectively. Implementation of all prevention activities would add ≈221 million life-years and 244 million quality-adjusted life-years to the US adult population over the coming 30 years, or an average of 1.3 years of life expectancy for all adults.

Lower LDL cholesterol to < 130 mg/dL in high-risk individuals … Total Cost/Year [=] $1816 …

For each of these simulated trials, we calculated the outcomes under two sets of assumptions about performance and compliance. In the first case, we analyzed the outcomes that would occur if 100% performance and compliance levels were achieved. This trial was done to estimate the maximum potential of prevention achievable by the recommended activities. In the second case, we applied more realistic, albeit aggressive, assumptions about what might constitute levels of performance that were feasible.

Table 3 also shows the effects on health care costs. The cost of caring for CVD [Cardiovascular Disease], diabetes, and CHD [Coronary Heart Disease] over the coming 30 years will be in the order of $9.5 trillion. If all the recommended prevention activities were applied with 100% success, those costs would be reduced by ≈$904 billion, or almost 10%. However, assuming the costs shown in Table 2, the prevention activities themselves would cost ≈$8.5 trillion, offsetting the savings by a factor of almost 10 and increasing total medical costs by ≈$7.6 trillion (162%).

[50] Letter: Douglas W. Elmendorf (Director, Congressional Budget Office) to Nathan Deal (Ranking Member, Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives). Congressional Budget Office, August 7, 2009. http://www.cbo.gov/ftpdocs/104xx/doc10492/08-07-Prevention.pdf

Compared to people with a healthy weight (a BMI between 18.5 and 25), overweight and obese individuals have an increased risk of developing many diseases, such as diabetes, coronary heart disease and stroke, and tend to die younger. …

… life expectancy at age 20 was 5 years less for the obese group, and 8 years less for the smoking group, compared to the healthy-living group….

Page 0242: "Until age 56 y, annual health expenditure was highest for obese people. At older ages, smokers incurred higher costs. Because of differences in life expectancy, however, lifetime health expenditure was highest among healthy-living people and lowest for smokers."

Page 0245: "Table 1. Life Expectancy (Years) and Expected Lifetime Health-Care Costs per Capita … at 20 Years of Age for the Three Cohorts … Expected remaining lifetime health-care costs (× €1,000) [in thousands of Euros] at age 20 … Obese Cohort [=] 250 [thousand Euros] … 'Healthy-Living' Cohort [=] 281 [thousand Euros] … Smoking Cohort [=] 220 [thousand Euros]"

[52] Paper: "Preventing fatal diseases increases healthcare costs: cause elimination life table approach." By Luc Bonneux and others. British Medical Journal, January 3, 1998.

In a previous study all healthcare costs in the Netherlands in 1988 (… for 14.8 million inhabitants) were allocated to age, sex, health- care sector, and primary diagnosis on the basis of comprehensive data on morbidity, mortality, and direct costs. … To calculate the effect of eradication, a specific disease was eliminated both as cause of death and as cause of costs: the cause elimination life table recalculates life expectancy and life time expected costs as if the eliminated disease had never existed.

Our analysis shows that lengthening life generally will increase healthcare needs, particularly needs for long term nursing care as most life years are added to old age. This is not a bad thing; prevention can hardly be blamed if it reaches its target and lowers mortality. …

Eliminating causes in a life table demonstrates an unquestionable truth: we all have to die. If we eliminate a specific cause of death, we simply die later from another. In the meantime we grow older, become generally more disabled, and need more care.9 In the Netherlands, cardiovascular diseases and cancer were jointly responsible for nearly 70% of all deaths, yet accounted for a mere 17% of all healthcare costs, whereas the largely non-fatal diseases of the brain, joints, and bones, causing under 2% of all deaths, generated 35% of all costs (see 1).

Page 26: " Conclusion: The aim of prevention is to spare people from avoidable misery and death not to save money on the healthcare system. In countries with low mortality, elimination of fatal diseases by successful prevention increases healthcare spending because of the medical expenses during added life years."

[53] Book: The Essentials of Finance and Budgeting. Harvard Business School Publishing, 2005. Page 47:

OPERATING MARGIN Also known as the earnings-before-interest-and-taxes (EBIT) margin, the operating margin is used by many analysts to gauge the profitability of a company's operating activities. The ratio removes from the equation the interest expenses and taxes over which current management may have no control. Thus, operating margin gives a clearer indication of management performance. To calculate the operating margin, use this formula: Operating Margin = EBIT / Net Sales

"The S&P 500® has been widely regarded as the best single gauge of the large cap U.S. equities market since the index was first published in 1957. The index has over US$ 4.83 trillion benchmarked, with index assets comprising approximately US$ 1.1 trillion of this total. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities."

[56] Book: The Essentials of Finance and Budgeting. Harvard Business School Publishing, 2005. Page 33:

An income statement starts by showing the company's revenues: the amount of money that resulted from selling products or services to customers. A company may have other revenues as well. In many cases, these additional revenues derive from investments or interest income from the firm's cash holdings.

Various costs and expenses—from the costs of making and storing a company's goods, to depreciation of plant and equipment, to interest expense and taxes—are then deducted from revenues. The bottom line—what's left over—is the net income, or net profit or net earnings, for the period covered by the income statement.

Pages 47-48: "PROFIT MARGIN The profit margin—sometimes called return on sales, or ROS—indicates a rate of return on sales. It tells us what percentage of every dollar of sales makes it to the bottom line. Calculate the profit margin as follows: Profit Margin = Net Income / Net Sales"

[58] Dataset: "May 2010 National Occupational Employment and Wage Estimates." U.S. Department of Labor, Bureau of Labor Statistics. Last Modified April 6, 2011. http://www.bls.gov/oes/current/oes_nat.htm

[59] Web page: "Technical Notes for May 2010 OES Estimates." U.S. Department of Labor, Bureau of Labor Statistics. Last modified May 17, 2011. http://www.bls.gov/oes/current/oes_tec.htm

The Occupational Employment Statistics (OES) survey is a semiannual mail survey measuring occupational employment and wage rates for wage and salary workers in nonfarm establishments in the United States. …

Wages for the OES survey are straight-time, gross pay, exclusive of premium pay. Base rate; cost-of-living allowances; guaranteed pay; hazardous-duty pay; incentive pay, including commissions and production bonuses; and tips are included. Excluded are overtime pay, severance pay, shift differentials, non-production bonuses, employer cost for supplementary benefits, and tuition reimbursements.

The federal government continues to make progress under the requirements of the Improper Payments Information Act of 2002 (IPIA)³⁹ in reporting on the nature and extent of improper payments.⁴⁰…

³⁹Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002), as amended by the Improper Payments Elimination And Recovery Act of 2010, Pub. L. No. 111-204, 124 Stat. 2224 (July 22, 2010). The IPIA requires federal executive branch entities to review all programs and activities, identify those that may be susceptible to significant improper payments, estimate and report the annual amount of improper payments for those programs, and implement actions to reduce improper payments.

⁴⁰IPIA defines an improper payment as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. It includes any payment to an ineligible recipient, any payment for an ineligible service, any duplicate payment, payments for services not received, and any payment that does not account for credit for applicable discounts.

[62] Report: "Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments." United States Government Accountability Office, June 25, 2010. http://www.gao.gov/new.items/d10444.pdf

Page 44 (General Accounting Office comments on the Social Security Administration's letter dated May 28, 2010):

In the report, we identify those cases where SSA has sent an overpayment notification letter to the individual. However, we do not believe that identifying fraudulent or improper payments after dollars have been disbursed is an effective internal control. Our work across the government has shown that once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar. Preventive controls are the most efficient and effective.

This dataset contains information on improper payment measurements for programs found to be susceptible to significant improper payments under the Improper Payments Information Act of 2002 from FY 2004 – FY 2009. … Amounts included in the dataset are in the millions of dollars (e.g., 500 in the dataset means $500 million).

Information contained in this dataset is also reported individually by agencies in their annual Performance and Accountability Reports and Agency Financial Reports.

NOTE: An Excel file containing the data and calculations is available upon request.

[64] Report: "Status of Fiscal Year 2010 Federal Improper Payments Reporting." United States Government Accountability Office, March 25, 2011. http://www.gao.gov/new.items/d11443r.pdf

In another one of its programs, HHS cited the Children's Health Insurance Program Reauthorization Act of 2009¹¹ as prohibiting HHS from calculating or publishing any national or state-specific payment error rates for the Children's Health Insurance Program (CHIP) until 6 months after the new payment error rate measurement final rule became effective on September 10, 2010. According to its fiscal year 2010 agency financial report, HHS plans to begin estimating improper payment amounts for CHIP in fiscal year 2011 and will report this information in fiscal year 2012.

[65] Report: "Status of Fiscal Year 2010 Federal Improper Payments Reporting." United States Government Accountability Office, March 25, 2011. http://www.gao.gov/new.items/d11443r.pdf

b) Report: "Improper Payments: Reported Medicare Estimates and Key Remediation Strategies." By Kay L. Daly and Kathleen M. King. United States Government Accountability Office, July 28, 2011. http://www.gao.gov/new.items/d11842t.pdf

In 2010, Medicare covered 47 million elderly and disabled beneficiaries and had estimated outlays of $516 billion, making it one of the largest federal programs. …

For fiscal year 2010, federal agencies reported an estimated $125.4 billion in improper payments, of which Medicare accounts for nearly $48 billion—the highest estimated amount of improper payments in a single program. The Medicare improper payment estimates do not reflect all of the program's risk because HHS [the U.S. Department of Health and Human Services] did not report a total improper payment estimated amount for its Medicare prescription drug benefit program (Part D)."

Page 3: "As shown in figure 1, the Medicare program represents about 38 percent of the $125.4 billion improper payment estimated amount reported by 20 federal agencies covering 70 programs. Further, Medicare's estimated improper payment amount is the highest among all federal programs that reported an estimated amount."

Page 4: "HHS's estimated amount of improper payments for Medicare is incomplete because it has yet to report a comprehensive improper payment estimate for the Medicare prescription drug benefit program, which had reported outlays of about $59 billion in fiscal year 2010."

It is important to recognize that the $48 billion in estimated improper payments reported by HHS in fiscal year 2010 is not an estimate of fraud in Medicare.¹¹ Reported improper payment estimates include many types of overpayments, underpayments, and payments that were not adequately documented. In addition, because the improper payment estimation process is not designed to detect or measure the amount of fraud in Medicare, there may be fraud that exists in the Medicare program that is not included in the reported improper payment estimate.

In addition to inadequate documentation, HHS cited a number of other causes for the estimated $48 billion in reported improper payments, including the provision of services that were found not to be medically necessary, coding errors, incorrect interpretation of data, and payment calculation errors. HHS reported that its analysis showed most Medicare fee-for-service improper payments were for medically unnecessary durable medical equipment and inpatient hospital services. For Medicare Advantage, HHS reported that the majority of the improper payment estimate resulted from insufficient documentation to support the diagnoses submitted by private health plans for payment.

¹¹Fraud consists of intentional acts of deception with knowledge that the action or representation could result in an inappropriate gain.

$48 billion in improper payments / $516 billion in Medicare outlays = 9.3% improper payment rate

$48,000,000,000 in improper payments / 117,538,000 households = $408 in improper payments/household

• Prescription painkiller overdoses killed nearly 15,000 people in the US in 2008. This is more than 3 times the 4,000 people killed by these drugs in 1999.

• In 2010, about 12 million Americans (age 12 or older) reported nonmedical use of prescription painkillers in the past year. …

• The quantity of prescription painkillers sold to pharmacies, hospitals, and doctors' offices was 4 times larger in 2010 than in 1999.

[68] Report: "2008 Crime in the United States, Murder." Federal Bureau of Investigation, U.S. Department of Justice, September 2009. http://www2.fbi.gov/...

"The FBI's Uniform Crime Reporting (UCR) Program defines murder and nonnegligent manslaughter as the willful (nonnegligent) killing of one human being by another. … An estimated 16,272 persons were murdered nationwide in 2008."

NOTE: Although the verbiage above could imply that "nonnegligent manslaughter" and "murder" are categorized as separate offenses, this is not the case. As explained in from the U.S. Department of Justice to Just Facts correspondence (January 15, 2010), "These two are counted as one offense, and numbers defining them are not separated." Hence, the 16,272 murders cited above also includes nonnegligent manslaughters.

[69] Report: "Medicare Part D: Instances of Questionable Access to Prescription Drugs." By Gregory D. Kutz. United States Government Accountability Office, October 4, 2011. http://www.gao.gov/new.items/d12104t.pdf

[70] Report: "Covert Testing Exposes Weaknesses in the Durable Medical Equipment Supplier Screening Process." United States Government Accountability Office, July 2008. http://www.gao.gov/new.items/d08955.pdf

Investigators easily set up two fictitious DMEPOS companies using undercover names and bank accounts. GAO's fictitious companies were approved for Medicare billing privileges despite having no clients and no inventory. CMS initially denied GAO's applications in part because of this lack of inventory, but undercover GAO investigators fabricated contracts with nonexistent wholesale suppliers to convince CMS and its contractor, the National Supplier Clearinghouse (NSC), that the companies had access to DMEPOS items. The contact number GAO gave for these phony contracts rang on an unmanned undercover telephone in the GAO building. When NSC left a message looking for further information related to the contracts, a GAO investigator left a vague message in return pretending to be the wholesale supplier. As a result of such simple methods of deception, both fictitious DMEPOS companies obtained Medicare billing numbers. The following figure contains a redacted acceptance letter GAO received from CMS.

- This article is dated to 9/5/10, but it was first published on 10/23/2009, as evidenced by the date in the url and by the dates of reader comments on the article: http://www.cbsnews.com/...

Since 1995, most New Jersey Medicaid, including NJ FamilyCare beneficiaries, have been enrolled in managed care. With managed care, beneficiaries are enrolled in an HMO that manages their health care and provides services in addition to the wide array of Medicaid health benefits to which they are entitled. …

Health insurance for income-eligible families and children is provided through the NJ FamilyCare program, with assistance from the federally funded State Children's Health Insurance Program or SCHIP. NJ FamilyCare helps financially eligible families (usually low-income workers in jobs without health benefits) obtain health insurance to cover the cost of routine physician visits, prescriptions, hospitalizations, lab tests, x-rays, eyeglasses for themselves and for their children and dental care for most children and for some adults.

[74] "Annual Report of the New Jersey Office of Legislative Services, Office of the State Auditor, For the Calendar Year Ended December 31, 2009." By Richard L. Fair. NJ Office of the State Auditor, February 13, 2009. http://www.njleg.state.nj.us/legislativepub/09ann.pdf

NJ FamilyCare (NJFC) is a federal and state funded health insurance program created to help New Jersey's uninsured children and certain low-income parents and guardians have affordable health coverage. NJFC provides no cost or low-cost health insurance through managed care enrollment to uninsured parents and children with incomes up to 350 percent of the federal poverty level. …

Some beneficiaries are underreporting income on their NJ FamilyCare (NJFC) application such as income from self-employment and rentals, interest, and dividends. NJFC applicants are required to list all jobs and employers for each working person in their household as well as other non-work income on their application and are asked to send in proof of all income. The vendor reviews the documentation submitted and screens applicants against the state's wage, disability, and unemployment databases to verify the income reported. These databases do not include income from self-employment and rentals, interest, or dividends. Although beneficiaries authorize the Division of Taxation to release their tax returns to the NJFC program when signing their application, the division does not currently perform a computer match of all beneficiaries with state tax files.

A computer match of all 86,600 cases with eligible participants as of April 2007 with state tax files resulted in 60,800 cases with at least one household member that filed a 2006 state tax return. We identified 6,781 unique cases with $10,000 or more in self-employment income on their 2006 state tax return. A test of 70 of these cases disclosed that 21 failed to indicate that they were self-employed on their NJFC application. Based on the income reported on their tax returns, 18 of these 21 cases appeared ineligible and two appeared to be enrolled in the wrong plan. In three of these cases, participants were determined eligible in 2006 because they failed to report self-employment incomes of $295,000, $186,000, and $177,700 per their 2006 state tax returns.

The same computer match identified 873 cases with $85,000 or more in gross income reported on their 2006 state tax return. A test of 24 of these cases disclosed that five had either self-employment income, rental income, interest income, or dividend income that they failed to report on their application. Based on their tax returns, four of the five cases appeared ineligible and one appeared to be enrolled in the wrong plan. One case had eligible participants throughout 2006 despite unreported dividends of $137,000 and interest of $42,000 per their 2006 state tax return. Eligibility for the case continued despite the beneficiary failing to respond to the vendor's request for tax returns.

The above test of 24 cases also disclosed that 15 had net gains of more than $100,000 on their 2006 state tax return with three having more than $700,000. Additional analysis identified 441 cases with eligible participants as of April 2007 with net gains of $10,000 or more on their 2006 state tax return. Sixty-five of those cases had a net gain of more than $100,000 while the median net gain was $34,000. Without access to a computer match against state tax returns, an unreported net gain would most likely go undetected. In addition, program regulations are unclear and do not provide sufficient guidance on how a net gain should be considered when determining eligibility. Program regulations should be changed to provide the vendor with better guidance on how to consider net gains when determining eligibility.

Although the vendor followed program regulations when verifying income, it appears that regulations that were intended to simplify the application process have made it easier for a beneficiary to underreport income. The addition of a post-enrollment and a periodic computer match of beneficiaries with state tax returns would assist the division in identifying unreported income.

Each year, the American Hospital Association (AHA) collects aggregate information on the payments and costs associated with care delivered to beneficiaries of Medicare and Medicaid by U.S. hospitals. The data used to generate these numbers come from the AHA's Annual Survey of Hospitals, which is the nation's most comprehensive source of hospital financial data. …

Payment rates for Medicare and Medicaid, with the exception of managed care plans, are set by law rather than through a negotiation process as with private insurers. These payment rates are currently set below the costs of providing care resulting in underpayment.

Underpayment is the difference between the costs incurred and the reimbursement received for delivering care to patients. Underpayment occurs when the payment received is less than the costs of providing care, i.e., the amount paid by hospitals for the personnel, technology and other goods and services required to provide hospital care is less than the amount paid to them by Medicare or Medicaid for providing that care. …

In the aggregate, both Medicare and Medicaid payments fall below costs and the shortfall has been growing.

• Combined underpayments rose from $3.8 billion in 2000 to $36 billion in 2009.

• For Medicare, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicare patients in 2009.

• For Medicaid, hospitals received payment of only 89 cents for every dollar spent by hospitals caring for Medicaid patients in 2009.

[77] Article: "More states limiting Medicaid hospital stays." By Phil Galewitz. USA Today. Updated October 31, 2011. http://www.usatoday.com/...

Rosemary Blackmon, executive vice president of the Alabama Hospital Association, said "for the most part hospitals do what they can" to provide care to Medicaid patients despite the limits.

In Arizona, hospitals won't discharge or refuse to admit patients who medically need to be there, said Peter Wertheim, spokesman for the Arizona Hospital and Healthcare Association. "Hospitals will get stuck with the bill," he said.

[78] United States Code Title 42, Chapter 7, Subchapter XVIII, Part E, Section 1395dd: "Examination and treatment for emergency medical conditions and women in labor." Accessed November 26, 2011 at http://www.law.cornell.edu/uscode/42/1395dd.html

In the case of a hospital that has a hospital emergency department, if any individual (whether or not eligible for benefits under this subchapter) comes to the emergency department and a request is made on the individual's behalf for examination or treatment for a medical condition, the hospital must provide for an appropriate medical screening examination within the capability of the hospital's emergency department, including ancillary services routinely available to the emergency department, to determine whether or not an emergency medical condition (within the meaning of subsection (e)(1) of this section) exists.

(b) Necessary stabilizing treatment for emergency medical conditions and labor

If any individual (whether or not eligible for benefits under this subchapter) comes to a hospital and the hospital determines that the individual has an emergency medical condition, the hospital must provide either—

(A) within the staff and facilities available at the hospital, for such further medical examination and such treatment as may be required to stabilize the medical condition, or

(B) for transfer of the individual to another medical facility in accordance with subsection (c) of this section. …

(A) a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in—

(i) placing the health of the individual (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy,

(i) that there is inadequate time to effect a safe transfer to another hospital before delivery, or

(ii) that transfer may pose a threat to the health or safety of the woman or the unborn child.

(2) The term "participating hospital" means a hospital that has entered into a provider agreement under section 1395cc of this title.

(A) The term "to stabilize" means, with respect to an emergency medical condition described in paragraph (1)(A), to provide such medical treatment of the condition as may be necessary to assure, within reasonable medical probability, that no material deterioration of the condition is likely to result from or occur during the transfer of the individual from a facility, or, with respect to an emergency medical condition described in paragraph (1)(B), to deliver (including the placenta).

The Emergency Medical Treatment and Active Labor Act (EMTALA) ensures universal access to emergency medical care at all Medicare participating hospitals with emergency departments. Under EMTALA, any person who seeks emergency medical care at a covered facility, regardless of ability to pay, immigration status, or any other characteristic, is guaranteed an appropriate screening exam and stabilization treatment before transfer or discharge. Failure to abide by these requirements can subject hospitals or physicians to civil monetary sanctions or exclusion from Medicare. Hospitals may also be subject to civil liability under the statute for personal injuries resulting from the violation.

Only hospitals that (1) participate in Medicare and (2) maintain an emergency department are required to screen patients under EMTALA.⁷ …

⁷ … Although the screening and stabilization requirements are phrased such that they apply to "hospitals" generally, enforcement of EMTALA is only authorized against hospitals that have entered into a Medicare provider agreement.

Page 1: "[A]s a condition for receiving federal tax exemption for providing health care to the community, not for profit hospitals are required to care for Medicare and Medicaid beneficiaries. Also, Medicare and Medicaid account for 56 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid."

[81] Report: "The Impact of EMTALA on Physician Practices." By Carol K. Kane. American Medical Association, February 2003. http://www.ama-assn.org/...

Page 3: "Emergency medicine physicians averaged 22.9 hours of EMTALA mandated care per week, about half of their total patient care hours, and 16.4% of those who provided such care averaged more than 40 hours per week."

[82] Report: "The Impact of EMTALA on Physician Practices." By Carol K. Kane. American Medical Association, February 2003. http://www.ama-assn.org/...

We measure the financial impact of EMTALA on physicians' practices by the amount of bad debt incurred from the provision of EMTALA mandated care. Bad debt is associated with the provision of services for which payment was expected but not received. It is not associated with the provision of charity care for which either no payment is expected, or only payment at a reduced rate. Moreover, bad debt is not associated with the provision of services for which a reduced fee has been negotiated with an insurer. For example, the difference between a physician's usual charge for a certain service and the fee that a Medicaid HMO pays does not amount to bad debt. If, however, a Medicaid HMO patient was obligated to make a copayment and did not, that portion of the bill would be considered bad debt; that payment was expected but not received. …

… Not surprisingly, these figures were largest among emergency medicine physicians, all of whom reported at least some bad debt associated with EMTALA in 2000, with an average of 61.0% of bad debt attributed to that source, or $138,300.

Emergency medicine physicians attributed 61.0% of the bad debt they incurred in 2000 to EMTALA, or $138,300 per year. Across all specialties EMTALA related bad debt amounted to $12,300 per self-employed physician in 2000, or nearly $4.2 billion dollars in the aggregate.

The $4.2 billion estimate likely overstates of the impact of EMTALA on physician net income. First, looking only at the level of bad debt ignores that EMTALA may have had, in part, a positive revenue impact on physicians. If patient volume is greater under EMTALA than it would have been in its absence, to the extent that physicians are able to collect payment for services covered under the scope of EMTALA, revenue from screening and stabilization will be greater than it otherwise would have been. Second, some of the bad debt attributable to EMTALA would have been incurred even in the absence of this legislation—providing screening and stabilization is, after all, the business of hospital EDs [emergency departments].

Uncompensated care is an overall measure of hospital care provided for which no payment was received from the patient or insurer. It is the sum of a hospital's "bad debt" and the charity care it provides. Charity care is care for which hospitals never expected to be reimbursed. A hospital incurs bad debt when it cannot obtain reimbursement for care provided; this happens when patients are unable to pay their bills, but do not apply for charity care, or are unwilling to pay their bills.

Page 2: "Uncompensated care data are sometimes expressed in terms of hospital charges, but charge data can be misleading, particularly when comparisons are being made among types of hospitals, or hospitals with very different payer mixes. For this reason, AHA data on hospitals' uncompensated care are expressed in terms of costs."

The information gathered by credit reporting companies is vast and seeks to cover virtually all U.S. consumer borrowing.¹ To the extent that this information is complete, comprehensive, and accurate, it represents a potential new source of statistical data for the Federal Reserve on consumer credit markets and behavior. …

… The distribution patterns of items such as account balances, credit utilization, and measures of payment performance by type of account and creditor are broadly described. Key aspects of the data that may be incomplete, duplicative, or ambiguous as they apply to credit evaluation are highlighted in the analysis. The article concludes with a discussion of steps that might be taken to address some of the issues identified.

Collection agency reporting does not represent a full accounting of credit accounts that have gone to collection. Many creditors do their own collections rather than using collection agencies. If these creditors report to the credit reporting companies, such collections will appear as updates to credit account files. However, if the creditor does not report to the credit reporting companies, then these collection actions will not appear in the credit files.

The majority of collection actions (about 52 percent) are associated with medical bills. The high incidence of collections related to medical bills is not surprising given both the large number of individual consumers and families that have partial or no health insurance coverage and the high cost of many medical services.²⁹ The second largest category involved collection actions for unpaid bills for utility services, which by the authors' analysis, account for about 23 percent of all collections.

Page 1: "Each year, the American Hospital Association (AHA) publishes aggregate information on the level of uncompensated care – care provided for which no payment is received – delivered in U.S. hospitals. The data used to generate these numbers come from the AHA's Annual Survey of Hospitals, which is the nation's most comprehensive source of hospital financial data."

Page 4: "National Uncompensated Care Based on Cost*: 1980-2009 (in Billions), Registered Community Hospitals"

The methodology used to develop estimates of tort costs in this study is similar to the methodology used in prior Towers Watson studies of U.S. tort costs. This study incorporates three cost components:

• Benefits paid or expected to be paid to third parties (hereafter referred to as "losses")

Page 17: "Appendix 5 - Medical malpractice tort costs … Total cost … 2009 [=] $ 29,953,137"

[87] Calculated with data from the footnote above and: "National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2009." U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, January 5, 2011. https://www.cms.gov/...

[88] Report: "Medical Malpractice Law in the United States." By Peter P. Budetti and Teresa M. Waters. Henry J. Kaiser Family Foundation, May 2005. http://www.kff.org/...

Page 1: "Medical malpractice law in this country traditionally has been under the authority of the states, not the federal government. And, unlike many other areas of the law, the framework and legal rules governing malpractice actions were, prior to the last thirty years, largely established through decisions in lawsuits in state courts rather than through statutes enacted by state legislatures."

Page 4: State legislatures have responded to a number of issues concerning the malpractice tort claims system and passed statutes that changed a number of different aspects of malpractice law, some of which had dramatic effects. Those statutes are often referred to as "tort reforms." More recently, the United States Congress has also considered legislation that would make federal laws more prominent in medical malpractice cases and would override at least some aspects of state laws."

Page 15: "Even when an insurance company sells malpractice insurance in multiple states, premiums are still based on the expected experience of physicians within a single state or an even smaller geographic area. As a result, the differences in medical malpractice law among the states can lead to substantial differences in the cost of malpractice insurance from one state to another, even for the same specialty, and to wide fluctuations from year to year."

"2009 … The Doctors Company … OB/GYN … Los Angeles, Orange counties [=] $49,804"

"2009 … Medical Protective … OB/GYN … Cook, Madison, St. Clair, Will counties [=] $127,083

"2009 … The Doctors Company … OB/GYN … 2009 … Contra Costa, Madera, Mariposa, Merced, Monterey, San Benito, San Francisco counties [=] $29,635"

"2009 … American Physicians Assurance Corp … OB/GYN … Adams, Knox, Peoria, Rock Island counties … $60,342"

[95] NOTE: On December 8, 2011, Just Facts contacted MyMedicalMalpracticeInsurance.com to determine the most reliable way to make "apples-to-apples" comparisons between states and localities. Based on this information, Just Facts decided to compare California and Illinois, a high-cost and low-cost state with equal malpractice insurance coverage limits ($1 million per incident and $3 million aggregate per year).†

† Article: "Medical Liability Insurance – Factors That Can Affect What You Pay." By Carol Power. CoverMD. Accessed December 8, 2011 at http://www.covermd.com/...

The most common limit of liability option chosen by doctors is $1 million / $3 million. This is the limit of liability required by most hospitals in order to grant a physician hospital privileges.

The $1 million refers to the amount that the insurance company will pay per Occurrence (per claim) for indemnity purposes and the $3 million is the aggregate (total) amount the insurance company will pay out for a year.

Some states have different limits of liability e.g. in New York it is $1.3 million / $3.9 million, Florida allows $250,000 / $ $750,000 while Texas has a $200,000 / $600,000 limit of liability. Also hospitals in some states require $2 million / $6 million limits of liability in order to grant hospital privileges.

[96] Dataset: "Payments on Medical Malpractice Claims, 2010." Statehealthfacts.org, a project of the Henry J. Kaiser Family Foundation. Accessed December 8, 2011 at http://www.statehealthfacts.org/...

Average Claims Payments … West Virginia [=] $108,509 … Wisconsin [=] $1,257,938 …

Data limited to those payments made during 2010 for medical malpractice claims for allopathic physicians (MDs), allopathic interns and residents (MDs), osteopathic physicians (DOs), and osteopathic interns and residents (DOs). Payments are based on physician's work state and home state when work state is unavailable.

Defensive medicine includes assurance behavior, the practice of ordering excessive or unnecessary tests, procedures, visits, or consultations solely for reducing liability risk to the physician, and/or avoidance behavior, the practice of avoiding high-risk patients or procedures.²⁴ With over 120,000 pending liability actions against physicians on any day in the US,²⁵ the threat of frivolous lawsuits places significant pressure on physicians to request or perform unnecessary tests including invasive ones.^27,29

Page 1: "Based upon these findings, and in an effort to validate the scope and impact of defensive medicine, Jackson Healthcare retained Gallup to conduct an independent national physician poll using their world-renowned methodology."

• Physicians attribute 26 percent of overall healthcare costs to the practice of defensive medicine

• Of the physicians surveyed, 73 percent agreed that they had practiced some form of defensive medicine in the past 12 months

• Physicians indicating they had practiced a form of defensive medicine in the last twelve months attribute 21 percent of their practice to be defensive in nature

Page 4: "Gallup Survey Methodology Between December 2009 and January 2010, Gallup conducted telephone interviews with 462 randomly selected practicing physicians from across the U.S."

Page 1573: "In our analysis, we used a value of 5.4 percent for the effects of defensive medicine on hospital spending…. Our 5.4 percent estimate suggests that $38.8 billion of this spending could be reduced through direct tort reforms."

Page 1574: "Thus, our estimate range for the cost of defensive medicine in 2008 for physician and clinical services is $5.4–$8.2 billion. This midpoint of this range is $6.8 billion."

Kessler and McClellan examined the effect of tort reforms that directly reduce expected malpractice awards—such as caps on noneconomic damages—on Medicare hospital spending for acute myocardial infarction and ischemic heart disease from 1984 to 1990.⁷ …

… In a further analysis incorporating information about levels of managed care through 1994, they [Kessler and McClellan] estimated that direct reforms reduced hospital spending by 3.8 percent for myocardial infarction and 7.1 percent for heart disease.³⁰

Two other studies could not replicate these findings for other health conditions.^6,31 Consequently, national extrapolations from Kessler and McClellan's estimates should be interpreted with considerable caution.

This estimate understates the magnitude of defensive medicine under two conditions: first, if the passage of direct tort reforms reduces only a portion of defensive medicine, as we believe it does; and second, if physicians perceive that elderly Americans—recall that Kessler and McClellan's estimates come from a Medicare population—are less likely than other patients to sue or, if they sue, to recover large awards.

However, the estimate overstates the magnitude of defensive medicine if physician responses to liability in the realm of cardiac care are more dramatic than in other clinical areas, or if responses are larger for Medicare patients than for privately insured patients. The latter might be the case because higher levels of managed care outside of Medicare reduce physicians' discretion.

Balancing these competing sources of bias is difficult, but the two sets of concerns probably serve as counterweights to one another.

The above cost estimate relates solely to hospital spending, but defensive medicine also occurs in other settings. Our prior work found that between 1993 and 2001, malpractice payments per physician grew by 11 percent { and were associated with a 1.1 percent increase in Medicare reimbursement for all physician and professional services in Medicare Part B. Similar results were obtained when malpractice premiums were used as a measure of liability.^33,34

We could use these figures to estimate the level of current annual spending that can be attributed to malpractice premium growth. A first step was to estimate the increase in Part B spending that may be attributed to malpractice liability between 1993 and 2001. The total is $2.9 billion, or 1.1 percent of Part B spending in 1993.

However, this calculation ignored the role of malpractice payments made on behalf of physicians before and after that period in contributing to the current level of spending. We estimated the increase in defensive medicine since 2001 by making two assumptions.

First, we assumed that the association between malpractice payments and health spending is the same in the period after 2001 as it was in the 1993–2001 period. That is, we assumed that an 11 percent average annual growth in malpractice payments was associated with 1.1 percent average annual growth in reimbursements. Second, we assumed that malpractice payments grew at the same average annual rate after 2001 that they did in 1993–2001.

With these assumptions, we estimated that a total of $2.5 billion in physician and clinical spending since 2001 was attributable to defensive medicine. Adding this amount to the $2.9 billion spent in the 1993–2001 period resulted in a total of $5.4 billion for the cost of defensive medicine in the area of physician and clinical services since 1993.

As noted earlier, this calculation still ignored the contribution of defensive medicine to the absolute level of health care spending in 1993. This is an extremely difficult parameter to estimate (see the Online Appendix).¹⁶We can provide only a rough estimate.

In 1960, spending on physician and clinical services was $39.3 billion in 2008 dollars. Assuming that malpractice payments per physician grew at an average annual rate of 1.3 percent, we would expect spending on this class of services to be $2.8 billion more in 2008. Thus, our estimate range for the cost of defensive medicine in 2008 for physician and clinical services is $5.4–$8.2 billion. This midpoint of this range is $6.8 billion.

Page 1574: "Combining the amounts for hospital and physician spending, we arrived at an overall estimate of $45.6 billion in defensive medicine costs for 2008."

[105] Calculated with data from: "National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2009." U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, January 5, 2011. https://www.cms.gov/...

Page 7: "Exhibit 4: Assembly and Data Sources in the NHEA, For Types of Services and Goods … Hospital Care … Physician and Clinical Services … Other Professional Services … Dental Services … Other Health, Residential, and Personal Care … Home Health … Nursing Care Facilities and Continuing Care Retirement Communities … Prescription Drugs … Durable Medical Equipment … Other Non-durable Medical Products"

NOTE: See the two footnotes above for the fact that total national health expenditures in 2008 were about $2.4 trillion, and the study only accounted for hospital care and physician/clinical services, which comprised about half of this spending. As shown in the calculation in the footnote below, this study used a figure of $2.3 trillion in the denominator when calculating that medical liability costs were 2.4% of total health care spending in 2008.

CALCULATION: $55.6 billion medical liability costs / .024 portion of total health care spending = $2.3 trillion total health care spending

Page 1569: "Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending."

[108] Article: "Malpractice liability costs U.S. $55.6 billion: study." By Maggie Fox. Reuters, September 7, 2010. http://www.reuters.com/...

Medical malpractice liability costs the U.S. healthcare system more than $55 billion a year, most of it in "defensive" medical practices such as extra tests and scans, according to a report released on Tuesday.

These costs, which also include administrative costs, payments to plaintiffs and lawyer fees, account for 2.4 percent of annual U.S. healthcare spending, Michelle Mello of the Harvard School of Public Health and colleagues reported.

[109] Article: "Medical Liability Costs Make Up 2.4% of U.S. Health Spending." By Pat Wechsler. Bloomberg, September 7, 2010. http://www.bloomberg.com/...

"Medical malpractice and guarding against suits cost the U.S. about $55.6 billion annually, or 2.4 percent of the total health-care bill, according to Harvard University's Atul Gawande and co-authors."

"Even if all of these [legal] reforms were enacted the total savings would be a fraction of a percent of the national debt. The United States spend about $2.4 trillion dollars a year on health care.

[111] Article: "Malpractice costs top $55 billion a year in U.S., Harvard study says." By Bruce Japsen. Chicago Tribune, September 8, 2010. http://articles.chicagotribune.com/...

"A comprehensive analysis by researchers at Harvard University found the annual overall cost of medical liability to be $55.6 billion, or 2.4 percent of total health care spending, according to an article published in the September issue of the journal Health Affairs."

[112] Article: "Cost of Medical Malpractice Tops $55 Billion a Year in U.S." U.S. News & World Report, September 7, 2010. http://health.usnews.com/...

"The cost of medical malpractice in the United States is $55.6 billion a year, which is 2.4 percent of annual health-care spending, a new study shows."

[113] NOTE: Just Facts spent about 70 hours investigating studies that attempt to quantify the costs of defensive medicine in the U.S. All of these studies suffer from one or more of the following methodological shortcomings:

• Arbitrary extrapolations of data from different healthcare sectors to others that have widely different characteristics.

The purpose of this study was to characterize response rates for mail surveys published in medical journals…. The mean response rate among mail surveys published in medical journals is approximately 60%. However, response rates vary according to subject studied and techniques used. Published surveys of physicians have a mean response rate of only 54%, and those of non-physicians have a mean response rate of 68%. … Although several mail survey techniques are associated with higher response rates, response rates to published mail surveys tend to be moderate. However, a survey's response rate is at best an indirect indication of the extent of non-respondent bias. Investigators, journal editors, and readers should devote more attention to assessments of bias, and less to specific response rate thresholds.

The level of art and interpretation in calculating response rates reflects the indirect and therefore limited use of the response rate in evaluating survey results. So long as one has sufficient cases for statistical analyses, non-response to surveys is a problem only because of the possibility that respondents differ in a meaningful way from non-respondents, thus biasing the results [22,23]. Although there are more opportunities for non-response bias when response rates are low than high, there is no necessary relationship between response rates and bias. Surveys with very low response rates may provide a representative sample of the population of interest, and surveys with high response rates may not.

Nevertheless, because it is so easy to measure response rates, and so difficult to identify bias, response rates are a conventional proxy for assessments of bias. In general, investigators do not seem to help editors and readers in this regard. As we report, most published surveys make no mention of attempts to ascertain non-respondent bias. Similarly, some editors and readers may discredit the results of a survey with a low response rate even if specific tests limit the extent or possibility of this bias.

[114] Book: Health Insurance: Current Issues and Background. Edited by William S. Stevens and others. Nova Science Publishers, 2003.

Chapter 2: "The Health Insurance Portability and Accountability Act (HIPPA): Summary of the Administrative Simplification Provisions." By Celinda Franco.

Each year the health care industry generates billions of financial and administrative transactions in both paper and electronic form that result from the delivery of health care services. …

Currently, there are no standardized formats for the electronic or paper transmission of health care information, or standards for identifying providers, health plans, employers, or individuals participating in the health care system. There are approximately 400 formats for electronic health claims used in the United States today. The absence of standardized formats for health care claims means that payers and providers must frequently invest in multiple computer systems or programs, as well as additional human resources in order to process claims with different format requirements. This increases the administrative costs of health care delivery. The lack of standardization limits the efficient flow of information between payers and providers, increases the complexity and costs of processing of health care claims and other financial and administrative transactions, and hinders efforts to direct fraud and abuse.

Page 29: "HIPPA does not, however, provide for the collection of clinical data or the electronic maintenance of patient medical records. As such, HIPPA's overarching goal in this area is to serve as a catalyst for the health care industry to increasingly use electronic transactions and standard formats so that significant administrative savings can be achieved."

NOTE: See the next footnote for information on how the "administrative simplification provisions" in the Health Insurance Portability and Accountability Act are faring in practice.

[115] Letter: Michael D. Maves (Executive Vice President and CEO of the American Medical Association) to Donald Berwick (Administrator, U.S. Centers for Medicare and Medicaid Services), April 13, 2011. http://www.ama-assn.org/...

Page 2: "Drug Plan Authorizations: Despite their ongoing support for Medicare drug coverage, physicians have many complaints about associated burdens, including formulary changes and time-consuming pre-authorization requirements of drug and Medicare Advantage plans. A separate AMA survey found that drug pre-authorizations also delay care with 69 percent of physicians waiting several days for approval and 10 percent waiting more than a week."

In addition, we cannot overemphasize the importance of considering the aggregate impact of the unprecedented scope of changes physicians are being ordered to absorb over a very short period of time. Provisions of one law have not even been implemented before additional requirements are mandated in the next one. Along with the ACA [Affordable Care Act] provisions, physicians are coping with earlier mandates, including most notably the upcoming Health Insurance Portability and Accountability (HIPAA) deadlines for 5010 on January 1, 2012 and ICD-10 on October 1, 2013. To date, there has never been a return on investment for physicians for the implementation of any HIPAA administrative simplification requirement. The human and technological investments needed to participate in quality incentives are competing for physician time and resources needed to move to an enormous new set of diagnosis codes in ICD-10. The struggle to keep up leaves little time to get engaged in the practice redesign and payment and delivery reforms envisioned in the ACA and detracts from patient care just as the ACA is promising access to millions of uninsured Americans. We strongly urge the Administration and CMS to carefully consider the impact the collision of these compliance deadlines will have on physicians, patients and the ACA's promise of better care for more people.

[116] Letter: Michael D. Maves (Executive Vice President and CEO of the American Medical Association) to Donald Berwick (Administrator, U.S. Centers for Medicare and Medicaid Services), April 13, 2011. http://www.ama-assn.org/...

Over the past few years, physicians have experienced tremendous problems with CMS' [Centers for Medicare and Medicaid Services'] enrollment program. These difficulties have led to serious cash flow disruptions for many practices. Some 12 percent of our administrative burden survey respondents found this to have been a problem and one physician told us it "took me eight months to get a Medicare number. I still haven't been paid and will have to take bankruptcy soon." In fact, according to CMS' own Provider Contractor Satisfaction Survey, physicians' experience with the Medicare enrollment process has ranked at the bottom and essentially amounts to a score of "C-." Enrollment has perennially been an area where CMS contractors have struggled to implement agency changes with limited resources and within artificially short deadlines.

In our significant experience with educating physicians about federal policies, the AMA has found that it usually takes at least six months to adequately reach out and inform physicians about new requirements. Lawmakers' growing propensity for cramming hundreds of program changes into massive legislative vehicles with retroactive effective dates and inadequate lead time has greatly complicated things for both CMS and physicians and we sympathize with the agency's struggle to provide adequate notice and education in the current environment. Nonetheless, the critical mass of regulatory change in any given year has become so great that something has to give. Keeping up with the swelling number of Medicare rules has become a full time job that is an enormous challenge even for large practices and can be almost impossible for smaller practitioners. The problem is compounded when, as has happened with increasing frequency, they are confronted with a host of new rules contained in a voluminous physician fee schedule rule published in November and effective on January 1 of the next year. A large number of physicians thus are completely unaware of the requirements because there has been so little opportunity to educate them before the requirement begins. Moreover, in many instances, details needed to implement the policy are lacking until well into the new year and in some cases new information comes out in a corrective regulation that never becomes widely available.

[117] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Generally the information to be reported with respect to insured individuals includes identifying information, dates of coverage, and any premium tax credit or cost sharing subsidy received by the individual with respect to such coverage, and any other information required by the Treasury Secretary. For insurance provided through an employer's group health plan, the insurer must report the name, address, and EIN of the employer maintaining the plan, the portion of the premium required to be paid by the employer, and any information the Secretary may require to administer the new tax credit for qualified small employers. Failure to comply with the requirement would trigger existing penalties associated with the filing of information returns.

Reporting by large employers – Any large employer subject to rules for maintaining minimum essential coverage, must file a return that identifies the employer; certifies whether it offers to its full-time employees the option to enroll in a minimum essential coverage plan; and provides the number of full-time employees during each month of the calendar year and information identifying each full-time employee covered under the employer-provided health plan.

Effective date – These new reporting requirements apply for calendar years beginning after 2013.

The Act also authorizes the Treasury to disclose to the Secretary of Health and Human Services relevant individual income tax return information used for determining eligibility for premium tax credits; cost-sharing reduction; and participation in a State Medicaid program, a State children's health insurance program, or a basic health program under the Act. The Health and Human Services agency could in turn provide the information to an exchange created by the Act.

These new reporting requirements will significantly increase the amount of information that must be reported to the IRS as well as the number of information returns that businesses must file. Employers will need to implement the appropriate record keeping and data collection processes to meet the reporting requirements, including, where necessary, processes to effectively communicate the required information to third parties providing payroll administration or managing other reporting obligations.

Information reporting requirements bring with them the necessity of obtaining appropriate taxpayer identification numbers from payees to avoid backup withholding obligations. Businesses will need to implement additional procedures to collect the data necessary to meet these new obligations.

[118] Memo: "State Health Insurance Mandates and the ACA [Affordable Care Act] Essential Benefits Provisions." Compiled by Richard Cauchi. National Conference of State Legislatures. Updated December 16, 2011.

Mandated benefits (also known as "mandated health insurance benefits" and "mandates") are benefits that are required to cover the treatment of specific health conditions, certain types of healthcare providers, and some categories of dependents, such as children placed for adoption. A number of health care benefits are mandated by either state law, federal law — or in some cases — both. Between the federal government and the states there are upwards of 2000 health insurance mandates.

Although mandates continue to be added as health insurance requirements, they are controversial. Patient advocates claim that mandates help to ensure adequate health insurance protection while others (especially health insurance companies) complain that mandates increase the cost of healthcare and health insurance.

Mandated health insurance laws passed at either the federal or state level usually fall into one of three categories:

• Health care services or treatments that must be covered, such as substance abuse treatment, contraception, in vitro fertilization, maternity services, prescription drugs, and smoking cessation.

• Healthcare providers other than physicians, such as acupuncturists, chiropractors, nurse midwives, occupational therapists, and social workers.

• Dependents and other related individuals, such as adopted children, dependent students, grandchildren, and domestic partners.

The mandated benefit laws most often apply to health insurance coverage offered by employers and private health insurance purchased directly by an individual.

Most people – whether for or against mandates – agree that mandated health benefits increase health insurance premiums. Depending on the mandated benefit and how that benefit is defined, the increase cost of a monthly premium can increase from less than 1% to more than 5%.

Trying to figure out how a mandated benefit will impact an insurance premium is very complicated. The mandate laws differ from state to state and even for the same mandate, the rules and regulations may vary.

For example: Most states mandate coverage for chiropractors, but the number of allowed visits may vary from state to state. One state may limit the number of chiropractor visits to four each year, while another state may allow up to 12 chiropractor visits each year. Since chiropractor services can be expensive, the impact on health insurance premiums may be greater in the state with the more generous benefit.

Additionally, the lack of mandates could also increase the cost of healthcare and health insurance premiums. If someone who has a medical problem goes without necessary health care because it is not covered by his or her insurance, he or she may become sicker and need more expensive services in the future.

[119] Article: "Obama Reaffirms Insurers Must Cover Contraception." By Robert Pear. New York Times, January 20, 2012. http://www.nytimes.com/...

The Obama administration said Friday that most health insurance plans must cover contraceptives for women free of charge, and it rejected a broad exemption sought by the Roman Catholic Church for insurance provided to employees of Catholic hospitals, colleges and charities.

Federal officials said they would give such church-affiliated organizations one additional year — until Aug. 1, 2013 — to comply with the requirement. Most other employers and insurers must comply by this Aug. 1. …

The 2010 health care law says insurers must cover “preventive health services” and cannot charge for them.

The new rule interprets this mandate. It requires coverage of the full range of contraceptive methods approved by the Food and Drug Administration. Among the drugs and devices that must be covered are emergency contraceptives including pills known as ella and Plan B. The rule also requires coverage of sterilization procedures for women without co-payments or deductibles.

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is US$ 403 million (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of US$ 802 million (2000 dollars).

Page 156: "In the United States, manufacturers submit a new drug application (NDA) or a biological license application (BLA) to the FDA for review and approval."

The time between the start of clinical testing and submission of an NDA or BLA with the FDA was estimated to be 72.1 months, which is 3.5 months longer than the same period estimated in the previous study. However, the time from the start of clinical testing to marketing approval in our timeline for a representative drug averaged 90.3 months for the current study, compared to 98.9 months for the earlier study. The difference is accounted for by the much shorter FDA approval times in the mid to late 1990s that were associated with the implementation of the Prescription Drug Use Fee Act of 1992. While the approval phase averaged 30.3 months for the earlier paper's study period, that phase averaged only 18.2 months for drugs covered by the current study.

Late last year, Biosensors International, a medical device company, shut down its operation in Southern California, which had once housed 90 people, including the company's top executives and researchers.

The reason, executives say, was that it would take too long to get its new cardiac stent approved by the Food and Drug Administration.

"It's available all over the world, including Mexico and Canada, but not in the United States," said the chief executive, Jeffrey B. Jump, an American who runs the company from Switzerland. "We decided, let's spend our money in China, Brazil, India, Europe."

[122] Report: " A Physician's Guide to Language Interpreter Services." Minnesota Medical Association, 2004. https://www.mnmed.org/...

The legal requirements for physicians and clinics to provide interpreter services are not newly enacted but instead stem from Title VI of the Civil Rights Act of 1964.

Title VI of the Civil Rights Act of 1964 states, "No person in the United States shall, on grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance." Title VI applies to all recipients of federal funds, without regard to the amount of federal funds that they have received. It covers physicians who treat Medicaid or Medicare patients.

Under federal law, providers are prohibited from singling out patients based on race or national origin, and cannot employ practices that have a discriminatory impact on individuals based upon their race or national origin. Federal regulations that implement Title VI provide that:

A recipient . . . may not . . . utilize criteria or methods of administration which have the effect of subjecting individuals to discrimination because of their race, color or national origin, or have the effect of defeating or substantially impairing accomplishment of the objectives of the program [with] respect [to] individuals of a particular race, color or national origin. [42 C.F.R. 80.3(b)(2)]

The federal law covers all entities that receive federal financial assistance, including funds from the Department of Health and Human Services, either directly or indirectly. These entities include physicians, clinics, and hospitals that operate, provide, or engage in health programs and activities that receive federal financial assistance.

This means that physicians who receive financial reimbursement or payments under the Medicaid and/or Medicare programs are required to comply with Title VI. If a clinic is participating in either or both programs, it is obligated under federal law to ensure that all of its patients, including all LEP patients, are able to receive effective communication in the course of the office visit. The federal law requires clinics to provide access to health care services, including language interpreting services, when needed, for all patients who have limited English proficiency, not only those patients who are actually enrolled in a public financial health program.

Under the law, physicians and other health care providers need to notify LEP patients regarding their right to language assistance services when needed. Physicians and clinics have a responsibility to ensure that their policies and procedures do not deny their patients access to health care services because of a language barrier. The key to providing access to health care services for LEP persons is to ensure that the language assistance provided results in accurate and effective communication between the provider and the LEP patient. The U.S. Department of Health and Human Services' Office for Civil Rights recommends doing the following to ensure compliance with the law:

2. Developing a written policy regarding language access that will ensure meaningful communication;

3. Training staff members so they understand the policy and are capable of carrying it out; and

Failure to implement one or more of these procedures does not necessarily mean noncompliance with Title VI. In case of a complaint or an investigation, the Office for Civil Rights will review the circumstances involved and determine compliance on a case-by-case basis. The assessment will take into account a number of factors, including the size of the clinic, the size of the LEP population, the nature of the services provided, the resources available, the frequency of different languages encountered, and the frequency with which LEP persons come into contact with the services.

[123] "Guidance to Federal Financial Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient Persons." U.S. Department of Health and Human Services, August 4, 2003. http://www.hhs.gov/ocr/civilrights/resources/laws/revisedlep.html

Department of Health and Human Services [HHS] regulations, 45 CFR 80.3(b)(2), require all recipients of federal financial assistance from HHS to provide meaningful access to LEP [limited English proficient] persons.(3) Federal financial assistance includes grants, training, use of equipment, donations of surplus property, and other assistance.

(3) Pursuant to Executive Order 13166, the meaningful access requirement of the Title VI regulations and the four-factor analysis set forth in the DOJ LEP Guidance are to apply additionally to the programs and activities of federal agencies, including HHS.

• Hospitals, nursing homes, home health agencies, and managed care organizations.

• Universities and other entities with health or social service research programs.

• Physicians and other providers who receive Federal financial assistance from HHS.

Recipients of HHS assistance do not include, for example, providers who only receive Medicare Part B payments.(4)

In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses. …

Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the "adverse selection death spiral." …

At the same time, New York has the highest average annual premiums for individual policies: $6,630 for single people and $13,296 for families in mid-2009, more than double the nationwide average, according to America's Health Insurance Plans, an industry group.

[125] FAQ: "Selling Health Insurance Across State Lines." By Phil Galewitz and Lexie Verdon. Kaiser Health News, January 25, 2011. http://www.kaiserhealthnews.org/...

What currently restricts insurers from selling policies outside of their home states?

Insurers are allowed to sell policies only in states where they are licensed to do business. Most insurers obtain licenses in multiple states. States have different laws regulating benefits, consumer protections and financial and solvency requirements.

[126] Issue brief: "Rate Regulation." National Association of Insurance Commissioners. Accessed January 12, 2012 at http://www.naic.org/...

Concerns over the fairness and equity of insurer rating practices that attempt to charge higher premiums to those with higher actual and expected claims costs have increased as insurers have identified case characteristics that allow them to pinpoint with increasing accuracy those individuals who will incur high costs. While these practices may have the effect of accurately assigning actuarially appropriate premiums to higher risks, they also tend to reduce the pooling of risk between low-cost and high-cost individuals, the core function of insurance.

In response to these concerns, states have developed a number of ways to regulate the characteristics that insurers use to vary premiums charged to different individuals and businesses in the marketplace. In developing rate regulations, policymakers must be aware that any decisions regarding the variation of premiums will create winners and losers in the marketplace. Loose restrictions will be generally favorable to low-cost individuals and businesses, resulting in higher premiums for older, sicker individuals. Tighter restrictions, on the other hand, result in higher premiums for young, healthy individuals and businesses to offset lower premiums for older, sicker individuals and businesses. The desire for equity must also be balanced with the need to avoid the adverse selection that can arise when low-cost individuals decide that the higher premiums they pay are not worthwhile given their expected needs and drop out of the market, resulting in a sicker risk pool and higher premiums.

[127] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE I—QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS … Subtitle C—Quality Health Insurance Coverage for All Americans … PART I—HEALTH INSURANCE MARKET REFORMS … SUBPART I—GENERAL REFORM …

(1) IN GENERAL.—With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group market—

(A) such rate shall vary with respect to the particular plan or coverage involved only by—

(iii) age, except that such rate shall not vary by more than 3 to 1 for adults (consistent with section 2707(c)); and

(iv) tobacco use, except that such rate shall not vary by more than 1.5 to 1; and

(B) such rate shall not vary with respect to the particular plan or coverage involved by any other factor not described in subparagraph (A).

(A) IN GENERAL.—Each State shall establish 1 or more rating areas within that State for purposes of applying the requirements of this title.

(B) SECRETarial REVIEW.—The Secretary shall review the rating areas established by each State under subparagraph (A) to ensure the adequacy of such areas for purposes of carrying out the requirements of this title. If the Secretary determines a State's rating areas are not adequate, or that a State does not establish such areas, the Secretary may establish rating areas for that State.

[128] Book: Basics of the U.S. Health Care System. By Nancy J. Niles. Jones and Bartlett, 2011.

State governments oversee the licensure of healthcare facilities including hospitals. States set their own standards. It is important to note that all facilities must be licensed but do not have to be accredited. State licensure focuses on building codes, sanitation, equipment, and personnel. Hospitals must be licensed to operate with a certain number of beds.

Certification of hospitals enables them to obtain Medicare and Medicaid enrollment. This type of certification is mandated by the Department of Health and Human Services (HHS). All hospitals that receive Medicare and Medicaid reimbursement must adhere to conditions of participation that emphasize patient health and safety. Accreditation is a private standard developed by accepted organizations as a way to meet certain standards. For example, accreditation of a hospital by The Joint Commission (TJC) means that hospitals have met Medicare and Medicaid standards and do not have to be certified.

Page 12: "But this is only federal-level regulation. Hospitals also are regulated by local and state agencies, as well as other private accrediting organizations. Figure 3 shows how many agencies are involved in regulating hospitals—almost 30 at the federal level alone. Almost no coordination exists among various federal agencies or between similar agencies at local and state levels, and private-sector accreditation."

[130] Letter: Michael D. Maves (Executive Vice President and CEO of the American Medical Association) to Donald Berwick (Administrator, U.S. Centers for Medicare and Medicaid Services), April 13, 2011. http://www.ama-assn.org/...

We ask CMS to consider that physicians are already subject to claims review by multiple contractors including Medicare Parts A and B (FFS) RAC Medicare Administrative Contractors (MAC), Medicaid Integrity Contractors (MIC), Comprehensive Error Rate Testing Contractors (CERT), and Zone Program Integrity Contractors (ZPIC). In addition, physicians will soon be subject to Medicaid RAC audits. These audits, identified as a problem by 19 percent of our survey respondents, present a paramount example of the redundant, inconsistent or overlapping administrative burdens that President Obama's recent executive order asked CMS to identify, streamline, and, if appropriate, repeal. At the very least, the regulations that control these programs should be coordinated to maximize net benefits. CMS recently issued a proposed rule on Medicaid RAC audits. During the RAC Medicare pilots, the AMA worked extensively with CMS to reduce the burden and to ensure that the RAC program was equitable. CMS' proposed rule on Medicaid RAC did not reflect these improvements.

Also, in the event that CMS requires Medicare Parts C and D RAC to conduct claims review similar to the model already employed by the Medicare FFS RAC program, we urge the agency to establish clear criteria and require Medicare Parts C and D plans to compensate physicians for the office staff time required to pull, review, copy, and re-file medical records, as well as photocopying and postage charges. Further, we ask CMS to utilize notices that ensure that physicians can identify the entity that is requesting information, the reason for the request, and the reason for any deadline that is given for responding to the request. Lastly, we urge CMS to implement policies in the Medicaid RAC program which are consistent with the Medicare RAC audits.

[131] Web page: "Physician Licensure: An Update of Trends." American Medical Association. Accessed January 18, 2012 at http://www.ama-assn.org/...

Each of the 50 states, the District of Columbia, and the United States territories and their respective boards of medical licensure have rules that govern the ability of health care practitioners, including allopathic and osteopathic physicians, to practice medicine. These laws were enacted under the police power reserved to the states by the U.S. Constitution to adopt laws to protect the health, safety and general welfare of their citizens. This gives the states the ability to effectively monitor the quality of persons wishing to practice medicine in that area. In addition, most state statutes delegate authority for enforcing licensure laws to the state Boards of Medical Examiners. Osteopathic physicians are licensed for the full practice of medicine and surgery in all 50 states. Each state determines the tests and procedures for licensing its physicians. In some states, the same tests are given to DO's and MD's; other states administer separate licensing exams. …

Until recently, a physician could provide an opinion or interpretation to a physician in another state who had primary patient care responsibility, and this practice was not regarded as practicing out of his/her state. Today, however, the out-of-state practice of medicine without a license is prohibited, whether the physician is treating the patient in person or from a distant location. In this day and age, a physician is considered to be practicing medicine in the state where the patient is located and is subject to that state's laws regarding medical practice, which typically means a license in that particular state is necessary. Thus, state boards have denied requests from out-of-state psychiatrists, for example, to conduct therapy with their patients located in another state via telephone or videoconferencing. Imprecise definitions regarding just what is "out-of-state" medicine (e.g, phone calls from patients who live in one state, but who seek care from an adjacent state, across a state line for care) also abound. Some states consider all out-of-state practice to be telemedicine, whether it utilizes phone calls, e-mail or online discussions. Even definitions from organizations such as the American Medical Informatics Association, the United States Department of Commerce, and various state and specialty medical societies vary considerably. …

A physician who seeks multiple state licenses for whatever reason may find the current system burdensome in terms of the time, expenses and varying licensure requirements. A patchwork of medical record, patient confidentiality, continuing medical education requirements, and mandatory reporting laws, along with differing medical practice acts, complicate the process. Difficulties are further exacerbated for physicians who practice telemedicine.

Licensure "by endorsement" is the process by which a physician licensed in one state seeks a license from a second state. A physician who physically practices in his/her home state but provides consultative or telemedicine services to patients in five other states, even adjacent states, must complete one in-state and five out-of-state applications for licensure, with six sets of accompanying documentation, and pay six registration fees. Each state has an independent application process with separate requirements. Fees for licenses by endorsement, including processing, application, and administrative fees, range from $1,108 in California to $20 in Pennsylvania; the average is $339. Moreover, most states require a physical appearance for some applicants before the local licensing board, which contributes to the time and expense.

Also, many states require the current licensing exam to be taken and passed if it has been more than 7 to 10 years since the applicant passed the then-current exam. There can be considerable expenses in terms of time and cost associated with preparing and taking the exam, particularly for specialists, who have limited the scope of their practice and who may have had no recent exposure to some areas covered in the general exam. For physicians who have only one or two years of postgraduate training, or who are international medical graduates, the application requirements in some states are more prohibitive.

Page 2: "Because hospitals, health systems and their caregivers are increasingly frustrated with regulatory red tape, the American Hospital Association (AHA) asked PricewaterhouseCoopers (PwC) to survey hospitals and assess the significance of the paperwork burden. The study illustrates a typical episode of care—an elderly woman who falls and fractures her hip—and the resulting patient care—and paperwork—which ensues (see appendix for details)."

The summary of the number of patient care and paperwork minutes reported by the hospitals for each setting within "Ida Smith's" episode of care were converted to ratios and averaged for all respondents. The resulting ratios, shown below, present the proportion of paperwork time for each unit (e.g. hour) of patient care time. …

Page 4: "Each time a physician orders a test or a procedure, the physician documents the order in the patient's record. But the government requires additional documentation to prove the necessity for the test or procedure. Although the physician made a clinical judgment, the decision-making process— which resulted in the medical order—must be documented using an established diagnosis assignment process mandated by the government."

Page 11: "Many forms, such as the 'Activities of Daily Living,' must be completed daily by clinical staff to submit to the government to justify the care provided to skilled nursing facility patients."

Page 5: "Because of the complexity and continuous changes in Medicare program requirements, medical records must be reviewed by at least four people to ensure compliance."

Page 12: "Even within the Department of Health and Human Services (HHS)—the major federal regulator of hospitals—there is little coordination among its different divisions. HCFA [predecessor agency to the Centers for Medicare and Medicaid Services], for example, has trouble coordinating its Medicare and Medicaid rules and instructions—more than 130,000 pages. (That's three times the size of the Internal Revenue Service Code and its federal tax regulations.)"

Page 4: "A Medicare patient arriving at the emergency department is required to review and sign eight different forms—just for Medicare alone."

Page 5: "Each time a patient is discharged, even if only from the acute unit of the hospital to the on-site skilled nursing unit, multiple care providers must write a discharge plan for the patient. This documentation, as long as 30 pages, applies to all patients, regardless of the complexity of care received within the hospital or required post-hospital setting."

[140] Calculated with: "Supplemental Data for the CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Figure B-1: "Primary Spending and Revenues, by Category, Under CBO's Long-Term Budget Scenarios Through 2085."

NOTE: An Excel file containing the data and calculations is available upon request.

[141] Report: "CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Page 4: "Mandatory programs are programs that do not require annual appropriations by the Congress; the funding available for them is generally not limited. Most mandatory spending is for entitlement programs, in which the federal government is required to make payments to any person or entity that meets the eligibility criteria set in law. Discretionary spending, by contrast, is controlled by annual appropriation acts."

Page ix: "[T]he major mandatory health care programs consist of Medicare, Medicaid, the Children's Health Insurance Program,† and health insurance subsidies that will be provided through the exchanges established by the March 2010 health care legislation [i.e., the Affordable Care Act, a.k.a. Obamacare]."

NOTE: † CHIP could also considered a discretionary program (as opposed to mandatory) because it requires ongoing appropriations, although Congress has thus far appropriated funding for the program in 10-year, 3-year, and 2-year increments. More details about CHIP follow below.

[143] Report: "CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

This report presents CBO's estimates of the long-term budget outlook under both sets of assumptions—an extended-baseline scenario, reflecting the assumption that current laws do not change, and an alternative fiscal scenario, which incorporates several changes to current law that are widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period, thus maintaining what some analysts might consider "current policy" as opposed to current law.

[144] Calculated with data from: "Unemployment Rate, Civilian Labor Force, LNS14000000." U.S. Department of Labor, Bureau of Labor Statistics. Accessed December 14, 2011. http://data.bls.gov/cgi-bin/surveymost?ln

[145] "Supplemental Data for the CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

NOTE: Average unemployment from 1970-2010 was 6.3%.† The current policy scenario projects a return to this level by 2015, a drop to 5.2% by 2020, and stabilization at 5.0% from 2030 onward.

† Calculated with data from: "Unemployment Rate, Civilian Labor Force, LNS14000000." U.S. Department of Labor, Bureau of Labor Statistics. Accessed December 14, 2011. http://data.bls.gov/cgi-bin/surveymost?ln

[146] Calculated with "Supplemental Data for the CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Figure B-1: "Primary Spending and Revenues, by Category, Under CBO's Long-Term Budget Scenarios Through 2085."

[147] Report: "CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Under CBO's alternative fiscal scenario, primary spending would be 1.1 percentage points higher as a share of GDP in 2021 than under the extended-baseline scenario…. That difference would grow in later years. The higher primary spending stems from several assumptions of the alternative scenario: that through 2021 lawmakers will act to prevent Medicare's payment rates for physicians from declining; that lawmakers will not allow various restraints on the growth of Medicare costs and health insurance subsidies to have their full effect after the first decade of the projections; and that, as a percentage of GDP, federal spending for things other than Social Security, major mandatory health programs, and interest payments will be close to the level experienced during much of the past decade (rather than falling below that level over the next decade, as under the extended-baseline scenario).⁸

On the revenue side, the alternative fiscal scenario incorporates the assumption that almost all expiring tax provisions will be extended through 2021 (the end of CBO's 10-year baseline projection period). Most important, CBO assumes for that scenario that the cuts in individual income taxes enacted since 2001 and most recently extended in 2010, which are now scheduled to expire in 2012 or 2013, will be extended through 2021; that relief from the AMT, which is scheduled to expire at the end of 2011, will continue through 2021; and that the 2012 parameters of the estate tax (adjusted for inflation) will apply through 2021. Thereafter, revenues are assumed to remain at their 2021 level of 18.4 percent of GDP, just above the average of the past 40 years.

[148] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

While the Part B projections in this report are reasonable in their portrayal of future costs under current law, they are not reasonable as an indication of actual future costs. Current law would require a physician fee reduction of an estimated 29.4 percent on January 1, 2012—an implausible expectation.

Further, while the Affordable Care Act makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.

Without major changes in health care delivery systems, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result. Overriding the productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law.

[149] Calculated with: "Supplemental Data for the CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

Figure B-1: "Primary Spending and Revenues, by Category, Under CBO's Long-Term Budget Scenarios Through 2085."

NOTE: An Excel file containing the data and calculations is available upon request.

Medicare was enacted in 1965 (P.L. 89-97) in response to the concern that only about half of the nation's seniors had health insurance, and most of those had coverage only for inpatient hospital costs. The new program, which became effective July 1, 1966, included Part A coverage for hospital and post-hospital services and Part B coverage for doctors and other medical services. As is the case for the Social Security program, Part A is financed by payroll taxes levied on current workers and their employers; persons must pay into the system for 40 calendar quarters to become entitled to premium-free benefits. Medicare Part B is voluntary, with a monthly premium required of beneficiaries who choose to enroll.

Page 1: "Medicare is a federal insurance program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal entitlement program to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65."

[153] Calculated with data from the footnote above and "Intercensal Estimates of the Resident Population by Sex and Age for the United States: April 1, 2000 to July 1, 2010." U.S. Census Bureau. Accessed December 21, 2011 at http://www.census.gov/popest/data/intercensal/national/nat2010.html

Skilled care is health care given when you need skilled nursing or rehabilitation staff to manage, observe, and evaluate your care. Examples of skilled care include intravenous injections and physical therapy. Medicare will only cover skilled care when you meet certain conditions (see page 13).

A Skilled Nursing Facility could be part of a nursing home or hospital. Medicare certifies these facilities if they have the staff and equipment to give skilled nursing care and/or skilled rehabilitation services, and other related health services.

Medicare doesn't cover custodial care if it is the only kind of care you need. Custodial care is care that helps you with usual daily activities like getting in and out of bed, eating, bathing, dressing, and using the bathroom. It may also include care that most people do themselves, like using eye drops, oxygen, and taking care of colostomy or bladder catheters. Custodial care is often given in a nursing facility. See page 20 for ways to get help paying for custodial care.

[155] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

The Medicare program has two components. Hospital Insurance (HI), or Medicare Part A, helps pay for hospital, home health, skilled nursing facility, and hospice care for the aged and disabled. Supplementary Medical Insurance (SMI) consists of Medicare Part B and Part D. Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who have voluntarily enrolled. Part D provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries and premium and cost-sharing subsidies for low-income enrollees. Medicare also has a Part C, which serves as an alternative to traditional Part A and Part B coverage. Under this option, beneficiaries can choose to enroll in and receive care from private "Medicare Advantage" and certain other health insurance plans that contract with Medicare. The costs for such beneficiaries are generally paid on a prospective, capitated basis from the HI and SMI Part B trust fund accounts.

[Under Medicare Part C] Most beneficiaries have the option to enroll in private health insurance plans that contract with Medicare to provide Part A and Part B medical services. The share of Medicare beneficiaries in such plans has risen rapidly in recent years, reaching 25.0 percent in 2010 from 12.4 percent in 2004. Plan costs for the standard benefit package can be significantly lower or higher than the corresponding cost for beneficiaries in the "traditional" or "fee-for-service" Medicare program, but prior to the Affordable Care Act [ACA, a.k.a. Obamacare], private plans were generally paid a higher average amount, and the additional payments were used to reduce enrollee cost-sharing requirements, provide extra benefits, and/or reduce Part B and Part D premiums. These benefit enhancements were valuable to enrollees but also resulted in higher Medicare costs overall and higher premiums for all Part B beneficiaries, not just those who were enrolled in MA plans. Under the ACA, payments to plans will be based on "benchmarks" in a range of 95 to 115 percent of fee-for-service Medicare costs, with bonus amounts payable for plans meeting high quality-of-care standards. (Prior to the ACA, the benchmark range was generally 100 to 140 percent of fee-for-service costs.) As these changes phase in during 2012-2017, the overall participation rate for private health plans is expected to decline from 25 percent in 2010 to about 15 percent in 2020.

• Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, and home health and hospice care. The HI trust fund is mainly funded by a dedicated payroll tax of 2.9% of earnings, shared equally between employers and workers.

• Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services. The SMI trust fund is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%).

• Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Part A and B services, except hospice. Individuals choosing to enroll in Part C must also enroll in Part B. Part C is funded through the HI and SMI trust funds.

• Part D covers prescription drug benefits. Funding is included in the SMI trust fund and is financed through beneficiary premiums (about 25.5%) and general revenues (about 74.5%).

Page 3: "In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173),³which included a major benefit expansion and placed increasing emphasis on the private sector to deliver and manage benefits. The MMA included provisions that (1) created a new voluntary outpatient prescription drug benefit to be administered by private entities…."

Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under age 65 who receive cash disability benefits from Social Security or the Railroad Retirement systems for at least 24 months are also entitled to Part A. …

Persons over age 65 who are not automatically entitled to Part A may obtain coverage by paying a monthly premium ($461 in 2010) or, for persons with at least 30 quarters of covered employment, a reduced monthly premium ($254 in 2010). In addition, disabled persons who lose their cash benefits solely because of higher earnings, and subsequently lose their extended Medicare coverage, may continue their Medicare enrollment by paying a premium, subject to limitations. Generally, enrollment in Medicare Part B is voluntary. All persons entitled to Part A (and persons over 65 not entitled to premium-free Part A) may enroll in Part B by paying a monthly premium. For established Part B enrollees, the 2010 monthly premium remains at $96.40.⁹ Beginning in 2007, some higher-income individuals started to pay higher premiums. (See the "Part B" section, below.) …

Finally, each individual enrolled in either Part A or Part B is also entitled to obtain qualified prescription drug coverage through enrollment in a Part D prescription drug plan. Similar to Part B, enrollment in Part D is voluntary and the beneficiary pays a monthly premium. Beginning in 2011, some higher-income enrollees will pay higher premiums, similar to enrollees in Part B. Generally, beneficiaries enrolled in an MA plan providing qualified prescription drug coverage (MA-PD plan) must obtain their prescription drug coverage through that plan.¹¹

[157] Brief: "Spending Patterns for Prescription Drugs Under Medicare Part D." By Tamara Hayford. Congressional Budget Office, December 1st, 2011. http://cboblog.cbo.gov/?p=3033

The centerpiece of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act) was the creation of Medicare Part D, a subsidized pharmaceutical benefit that went into effect in 2006. That additional coverage constituted the most substantial expansion of the Medicare program since its inception in 1965. In 2010, the federal government spent $62 billion on Part D, representing 12 percent of total federal spending for Medicare that year.

Chart 5-3. Total Spending on health care services for noninstitutionalized FFS† Medicare beneficiaries, by source of payment, 2007

Per capita total spending = $13,001 … Medicare - 64% … Public supplements - 6% … Private supplements - 17% … Beneficiaries' direct spending - 14% …

Private supplements include employer-sponsored plans and individually purchased coverage. Public supplements include Medicaid, Department of Veterans Affairs, and other public coverage. Analysis includes only FFS beneficiaries not living in institutions such as nursing homes.

NOTE: † FFS (Fee-for-service) refers to the "traditional Medicare program, under which a fee generally is paid each time a service is used, with Medicare paying a share and the beneficiary paying the portion of the bill Medicare does not pay. … This contrasts with managed care and other health plan options offered through Medicare Advantage." [Webpage: "Medicare Part D Glossary." Omnicare. Accessed December 21, 2011 at http://www.omnicare.com/mma-gloss.asp]

[159] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 57: "About 9 million Medicare beneficiaries receive supplemental coverage through the Medicaid program; Medicaid costs for these "dual beneficiaries" are not reflected in the growth rates for either Medicare or private health insurance."

[160] Calculated with data from the "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 53: "Dedicated Medicare financing sources include HI [Hospital Insurance, a.k.a. Part A] payroll taxes; income from taxation of Social Security benefits; State transfers for the prescription drug benefit; premiums paid under Parts A, B, and D; fees on brand-name prescription drugs paid to Part B; fines and penalties collected as a result of program integrity efforts; and any gifts received by the Medicare trust funds."

NOTE: An Excel file containing the data and calculations is available upon request.

Part 1, Chapter 34, Section 1 (http://www.irs.gov/irm/part1/irm_01-034-001.html): "The main financing component of the Federal funds group is referred to as the General Fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program and consists of all collections not earmarked by law to finance other funds."

Page 469: "Spending from the general fund is financed by general revenues, which include the individual and corporation income taxes, some excise taxes, estate and gift taxes, tariffs, and miscellaneous receipts."

[163] The values in the table below approximate general revenue taxes. They are calculated with data from the report: "Average Federal Tax Rates in 2007." Congressional Budget Office, June 2010. http://www.cbo.gov/...

^b "In its analysis, CBO estimates effective tax rates for the four largest sources of federal revenues—individual income taxes, social insurance (payroll) taxes, corporate income taxes, and excise taxes—as well as the total effective rate for the four taxes combined. Those taxes account for over 95 percent of total federal revenues. The analysis does not include federal estate and gift taxes, customs duties, and other miscellaneous receipts. Nor does it include state and local taxes." [Article: "Effective Tax Rates." Congressional Budget Office Director's Blog, December 11, 2007. http://cboblog.cbo.gov/?p=40]

^c Social insurance taxes are principally comprised of payroll taxes for Social Security and Medicare. ["Testimony of the Staff of the Joint Committee on Taxation Before the Joint Select Committee on Deficit Reduction." United States Congress, Joint Committee on Taxation, September 22, 2011. http://www.jct.gov/publications.html?func=download&id=4363&chk=4363&no_html=1. Page 2: "The principal social insurance (employment) taxes are the Federal Insurance Contributions Act (FICA) and Self-Employment Contributions Act (SECA) taxes that fund the Social Security and Medicare systems."]

^d "Comprehensive household income equals pretax cash income plus income from other sources. Pretax cash income is the sum of wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer payments, and retirement benefits plus taxes paid by businesses (corporate income taxes and the employer's share of Social Security, Medicare, and federal unemployment insurance payroll taxes) and employees' contributions to 401(k) retirement plans. Other sources of income include all in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school lunches and breakfasts, housing assistance, and energy assistance)." [Report: "Average Federal Tax Rates in 2007." Congressional Budget Office, June 2010. http://www.cbo.gov/.... Page 6.]

^e Values calculated by Just Facts. An Excel file containing the data and calculations is available upon request.

^f "In 2007, the bottom quintile's average rate for the individual income tax was -6.8 percent, which means that refundable earned income and child tax credits exceeded the income tax owed by that group." [Report: "Average Federal Tax Rates in 2007." Congressional Budget Office, June 2010. http://www.cbo.gov/.... Page 2.]

[164] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 9: "For HI [Hospital Insurance, a.k.a Medicare Part A], the primary source of financing is the payroll tax on covered earnings. Employers and employees each pay 1.45 percent of wages, while self-employed workers pay 2.9 percent of their net income."

Page 133: "Households generally bear the economic cost, or burden, of the taxes that they pay themselves, such as individual income taxes and employees' share of payroll taxes. But households also bear the burden of the taxes paid by businesses. In the judgment of CBO and most economists, the employers' share of payroll taxes is passed on to employees in the form of lower wages."

NOTE: For more detail about the economic incidence of payroll taxes, see Just Facts' research on tax distribution.

[166] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

The value of SMI [Supplementary Medical Insurance, i.e., Medicare Parts B and D], benefits to individual enrollees, and their cost-sharing payments, varies … depending on their income, assets, and use of covered health services in a given year. In particular, Part B premiums and cost-sharing amounts for beneficiaries with very low incomes are paid by Medicaid, and (except for nominal copayments) the corresponding Part D amounts are paid through the Medicare low-income drug subsidy. Moreover, Part B beneficiaries with high incomes pay a higher income-related premium beginning in 2007, and, similarly, Part D enrollees pay an income-related premium beginning in 2011.

Page 3: "In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173),³which … introduced the concept of income testing into Medicare, with higher-income persons paying larger Part B premiums beginning in 2007…."

[168] Brief: "Spending Patterns for Prescription Drugs Under Medicare Part D." By Tamara Hayford. Congressional Budget Office, December 1st, 2011. http://cboblog.cbo.gov/?p=3033

Under Medicare Part D, all enrollees receive a subsidy for prescription drug insurance. For enrollees with sufficiently low income and assets, an additional low-income subsidy (LIS) is available (enrollees who receive the LIS benefit are referred to here as LIS enrollees). …

• The federal government paid for approximately 95 percent of spending for LIS beneficiaries, by covering nearly all of LIS beneficiaries' premiums for the basic benefit and by subsidizing most of LIS beneficiaries' out-of-pocket spending. (In fact, 75 percent of federal spending on Part D is for LIS beneficiaries.)

• The federal government covered roughly 40 percent of spending for non-LIS beneficiaries through premium subsidies. Beneficiaries covered most of the remainder through premiums and out-of-pocket spending.

[169] Report: "Effects of the Patient Protection and Affordable Care Act on the Federal Budget and the Balance in the Hospital Insurance Trust Fund." Congressional Budget Office, December 23, 2009. http://www.cbo.gov/...

The HI [Hospital Insurance or Medicare Part A] trust fund, like other federal trust funds, is essentially an accounting mechanism. In a given year, the sum of specified HI receipts and the interest that is credited on the previous trust fund balance, less spending for Medicare Part A benefits, represents the surplus (or deficit, if the latter is greater) in the trust fund for that year. Any cash generated when there is an excess of receipts over spending is not retained by the trust fund; rather, it is turned over to the Treasury, which provides government bonds to the trust fund in exchange and uses the cash to finance the government's ongoing activities. This same description applies to the Social Security trust funds; those funds have run cash surpluses for many years, and those surpluses have reduced the government's need to borrow to fund other federal activities. The HI trust fund is not currently running an annual surplus.

The HI trust fund is part of the federal government, so transactions between the trust fund and the Treasury are intragovernmental and leave no imprint on the unified budget. From a unified budget perspective, any increase in revenues or decrease in outlays in the HI trust fund represents cash that can be used to finance other government activities without requiring new government borrowing from the public. Similarly, any increase in outlays or decrease in revenues in the HI trust fund in some future year represents a draw on the government's cash in that year. Thus, the resources to redeem government bonds in the HI trust fund and thereby pay for Medicare benefits in some future year will have to be generated from taxes, other government income, or government borrowing in that year.

Reports on HI trust fund balances from the Medicare trustees and others show the extent of prefunding of benefits that theoretically is occurring in the trust fund. However, because the government has used the cash from the trust fund surpluses to finance other current activities rather than saving the cash by running unified budget surpluses, the government as a whole has not been truly prefunding Medicare benefits. The nature of trust fund accounting within a unified budget framework implies that trust fund balances convey little information about the extent to which the federal government has prepared for future financial burdens, and therefore that trust funds have important legal meaning but little economic meaning.

[171] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 259: "For the HI [Hospital Insurance, i.e., Part A] and SMI [Supplementary Medical Insurance, i.e., Parts B and D] trust funds, monies not withdrawn for current benefit payments and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds."

Pages 4-5: "In 2010, $32.3 billion in [Hospital Insurance, i.e., Part A] trust fund assets were redeemed to cover the shortfall of income relative to expenditures. … The SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to match expected costs."

[172] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 61: "Up to 85 percent of an individual's or couple's … [Social Security] benefits may be subject to Federal income taxation if their income exceeds certain thresholds.† The income tax revenue attributable to the first 50 percent of … [Social Security] benefits is allocated to the … [Social Security] trust funds. The revenue associated with the amount between 50 and 85 percent of benefits is allocated to the HI [Hospital Insurance, a.k.a. Medicare Part A] trust fund."

NOTE: † These thresholds are exceeded if the "total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly)." [Publication No. 915: "Social Security and Equivalent Railroad Retirement Benefits for Use in Preparing 2010 Returns." United States Department of the Treasury, Internal Revenue Service, Nov 16, 2010. http://www.irs.gov/pub/irs-pdf/p915.pdf]

[173] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 53: "Dedicated Medicare financing sources include … State transfers for the prescription drug benefit…."

[174] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 53: "Dedicated Medicare financing sources include … fines and penalties collected as a result of program integrity efforts; and any gifts received by the Medicare trust funds."

[175] NOTE: The Affordable Care Act is actually comprised of two acts,† which were passed separately for political/procedural reasons.‡

For remuneration received in taxable years beginning after December 31, 2012, the employee portion of the HI tax is increased by an additional tax of 0.9 percent on wages received in excess of a specific threshold amount.²² However, unlike the general 1.45 percent HI tax on wages, this additional tax is on the combined wages of the employee and the employee's spouse, in the case of a joint return. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case (unmarred individual or head of household).

The same additional HI tax applies to the HI portion of SECA tax on self-employment income in excess of the threshold amount. Thus, an additional tax of 0.9 percent is imposed on every self-employed individual on self-employment income in excess of the threshold amount.²³ 22 Sec, 3101(b), as amended by the Patient Protection and Affordable Care Act ("PPACA"), Pub. L. No. 111-148. 23 Sec.

²² Sec, 3101(b), as amended by the Patient Protection and Affordable Care Act ("PPACA"), Pub. L. No. 111-148.

[177] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 9: "Starting in 2013, high-income workers will pay an additional 0.9 percent tax on their earnings above an unindexed threshold ($200,000 for single taxpayers and $250,000 for married couples)."

[178] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 7: "Total Medicare expenditures were $523 billion in 2010 and are projected under current law to increase in future years at a somewhat faster pace than either workers' earnings or the economy overall."

a) Table 3.12: "Government Social Benefits." United States Department of Commerce, Bureau of Economic Analysis. Last Revised August 08, 2011. http://www.bea.gov/...

b) Table 3.2: "Federal Government Current Receipts and Expenditures." United States Department of Commerce, Bureau of Economic Analysis. Last Revised November 22, 2011. http://www.bea.gov/...

$518.4 billion Medicare expenditures / $2,429.6 billion current receipts = 21.3%

[180] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

Page 6: "For inpatient hospital services, Medicare payment rates in 2009 were about 67 percent and Medicaid payment rates were about 66 percent of private health insurance payment rates (including Medicaid disproportionate share hospital, or DSH, payments)."

In the aggregate, both Medicare and Medicaid payments fall below costs and the shortfall has been growing.

• Combined underpayments rose from $3.8 billion in 2000 to $36 billion in 2009.

• For Medicare, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicare patients in 2009.

• For Medicaid, hospitals received payment of only 89 cents for every dollar spent by hospitals caring for Medicaid patients in 2009.

[182] Paper: "The New Workforce: Age and Ethnic Changes." By Judi L. McClellan and Richard Holden. U.S. Department of Labor, Employment and Training Administration, Biennial National Research Conference, 2003. http://wdr.doleta.gov/conference/pdf/holden.pdf

Abstract: "California's primary working age population (20 – 64 years of age) will shrink as a share of the state population after 2010."

[183] Report: "CBO's 2011 Long-Term Budget Outlook." Congressional Budget Office, June 2011. http://www.cbo.gov/...

[184] Calculated with data from Table V.A2: "Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2086." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified May 13, 2011. http://www.ssa.gov/OACT/TR/2011/lr5a2.html

NOTE: An Excel file containing the data and calculations is available upon request.

[185] Table V.A3: "Period Life Expectancy." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified May 13, 2011. http://www.ssa.gov/OACT/TR/2011/lr5a3.html

"The period life expectancy at a given age for a given year represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for that year over the course of their remaining lives."

NOTE: Data from 2010 is estimated but is within 0.1 years (for both males and females) of the latest year for which the data is not estimated (2007).

[186] Table V.A3: "Period Life Expectancy." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified May 13, 2011. http://www.ssa.gov/OACT/TR/2011/lr5a3.html

NOTE: Data from 2010 is estimated but is within 0.1 years (for both males and females) of the latest year for which the data is not estimated (2007).

[187] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 11: "To illustrate the uncertainty and sensitivity inherent in estimates of future Medicare trust fund operations, projections have been prepared under a "low-cost" and a "high-cost" set of economic and demographic assumptions as well as under an intermediate set."

[188] Calculated with data from the "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

From the 75-year budget perspective, the present value of the additional resources that would be needed to meet projected expenditures, at current-law levels for the three programs combined [Medicare Hospital Insurance (HI or Part A), Medicare Supplementary Medical Insurance (SMI or Parts B and D), and Social Security] is $33.8 trillion.⁹⁴ To put this very large figure in perspective, it would represent 3.8 percent of the present value of projected GDP over the same period ($884 trillion). The components of the $33.8-trillion total are as follows:

These resource needs would be in addition to the payroll taxes, benefit taxes, and premium payments scheduled under current law. As noted, the asset redemptions and SMI general revenue transfers represent formal budget commitments under current law, but no provision exists for covering the HI and OASDI trust fund deficits once assets are exhausted.

⁹⁴As noted previously, the long-range HI and OASDI financial imbalances could instead be partially addressed by expenditure reductions, thereby reducing the need for additional revenues. Similarly, SMI expenditure reductions would reduce the need for general fund transfers.

⁹⁵Additional revenues and/or expenditure reductions totaling $9.5 trillion, together with $3.0 trillion in asset redemptions, would cover the projected financial imbalance but would leave the HI and OASDI trust funds exhausted at the end of the 75-year period. The long-range actuarial deficit for HI and OASDI includes a cost factor to allow for a normal level of fund assets. See section III.B3 in this report, and section IV.B4 in the OASDI Trustees Report, for the numerical relationship between the actuarial deficit and the "unfunded obligations" of each program.

Pages 84-85: "As noted previously, over the full 75-year period, the [HI trust] fund has a projected present value unfunded obligation of $3.0 trillion. This unfunded obligation indicates that if $3.0 trillion were added to the trust fund at the beginning of 2011, the program would meet the projected cost of current-law expenditures over the next 75 years."

Page 1: "Medicare also has a Part C, which serves as an alternative to traditional Part A and Part B coverage. Under this option, beneficiaries can choose to enroll in and receive care from private “Medicare Advantage” and certain other health insurance plans that contract with Medicare. The costs for such beneficiaries are generally paid on a prospective, capitated basis from the HI and SMI Part B trust fund accounts."

CALCULATION: $3.0 trillion in unfunded obligations for the HI Trust Fund (Part A) + $21.2 trillion in general revenue financing needed to fund SMI (Parts B and D) = $24.2 trillion

CALCULATION: $523 billion in Medicare spending during 2010 / $24,200 billion in unfunded obligations and general revenue financing = 46.3

[191] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Some experts, however, have expressed concern that overemphasis on summary measures (such as the actuarial balance and open-group unfunded obligations) can obscure the underlying year-by-year patterns of the long-range financial deficits. If legislative solutions were designed only to eliminate the overall actuarial deficit, without consideration of such year-by-year patterns, then under some scenarios a substantial financial imbalance could still remain at the end of the period, and the long-range sustainability of the program could still be in doubt. …

Concern has also been expressed that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations for HI because summary measures reflect the full amount of taxes paid by the next two or three generations of workers, but not the full amount of their benefits.

Page 171: "[W]hen calculating unfunded obligations, a 75-year horizon includes revenue from some future workers but only a fraction of their future benefits."

Page 172: "The shorter [75-year open group] horizon understates financial needs by capturing relatively more of the revenues from current and future workers and not capturing all of the benefits that are scheduled to be paid to them."

Page 127: "Current participants in the Social Security and Medicare programs form the 'closed group' of taxpayers and/or beneficiaries who are at least age 15 at the start of the projection period. … Since the projection period … consists of 75 years, the period covers virtually all of the current participants' working and retirement years, a period that could be greater than 75 years in a relatively small number of instances."

[193] Calculated with data from the "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

NOTES (the following information is needed to understand the forthcoming calculation):
- Federal general revenues are "used to carry out the general purposes of Government rather than being restricted by law to a specific program…." ["Internal Revenue Manual." Internal Revenue Service. Accessed January 11, 2011 at http://www.irs.gov/irm/index.html. Part 1, Chapter 34, Section 1 (http://www.irs.gov/irm/part1/irm_01-034-001.html)]
- Medicare Part A is funded by dedicated revenues (not general revenues), and the law does allow for the transfer of general revenues to cover projected shortfalls. [Page 55: "There is no provision under current law to cover the shortfall [of Medicare Part A]. In particular, transfers from the general fund of the Treasury could not be made for the purpose of avoiding asset exhaustion without new legislation."]
- Medicare Parts B and D are automatically funded with general revenues to cover any shortfalls between dedicated revenues and expenses. [Page 38: "Both the Part B and Part D accounts of the SMI [Supplementary Medical Insurance] trust fund are projected to remain in financial balance for all future years, because beneficiary premiums and general revenue transfers will be set to meet expected costs each year."]
- "Medicare also has a Part C, which serves as an alternative to traditional Part A and Part B coverage. Under this option, beneficiaries can choose to enroll in and receive care from private “Medicare Advantage” and certain other health insurance plans that contract with Medicare. The costs for such beneficiaries are generally paid on a prospective, capitated basis from the HI [Part A] and SMI Part B trust fund accounts." [Page 1.]

Page 87: "The first line of table III.B11 shows the present value of future expenditures less future taxes for current participants, including both beneficiaries and covered workers [i.e., taxpayers]. Subtracting the current value of the HI [Hospital Insurance or Part A] trust fund (the accumulated value of past HI taxes less outlays) results in a "closed group" unfunded obligation of $7.7 trillion."

Page 131: "Table III.C16.—Unfunded Part B Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2011; dollar amounts in trillions] … obligations for past and current participants … General revenue contributions [=] 11.4"

Page 147: "Table III.C24.—Unfunded Part D Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2011; dollar amounts in trillions] … obligations for past and current participants … General revenue contributions [=] 5.3"

Page 299: "These resource needs would be in addition to the payroll taxes, benefit taxes, and premium payments scheduled under current law."

Page 243: "Closed-group population. Includes all persons currently participating in the program as either taxpayers or beneficiaries, or both."

CALCULATION: $7.7 trillion in unfunded obligations for Medicare Part A + $11.4 trillion in general revenue financing to fund Medicare Part B + $5.3 trillion in general revenue financing to fund Medicare Part D = $24.4 trillion in obligations for the Medicare program

[194] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." Board of Trustees of the Federal OASDI Trust Funds, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 65: "[The] closed group unfunded obligation … represents the shortfall of lifetime contributions for all past and current participants relative to the cost of benefits for them."

NOTE: The past participants wash out of the shortfall calculation because their benefits have already been paid.

Page 209: "Closed group unfunded obligation. This measure is computed like the open group unfunded obligation except that individuals under the age of 15 (or not yet born) are excluded. In other words, only persons who attain age 15 or older during the first year of the projection period are included in the calculations."

[195] Calculated with data from the previous two footnotes and "Intercensal Estimates of the Resident Population by Sex and Age for the United States: April 1, 2000 to July 1, 2010." U.S. Census Bureau. Accessed December 21, 2011 at http://www.census.gov/popest/data/intercensal/national/nat2010.html

CALCULATION: $24,400,000,000,000 closed group deficit / 240,549,592 Americans aged 15 or older = $101,434

[196] Report: "Enron: Selected Securities, Accounting, and Pension Laws Possibly Implicated in its Collapse." By Michael V. Seitzinger, Marie B. Morris, and Mark Jickling. Congressional Research Service, Library of Congress, January 16, 2002. http://fpc.state.gov/documents/organization/7960.pdf

Among the disclosures of publicly traded companies are accounting statements. Since financial information is of little use to investors unless all firms use comparable accounting methods, the securities laws give the Securities and Exchange Commission broad authority to establish standards for financial reporting. The SEC has delegated the task of writing accounting standards to private sector bodies, and since 1973 the Financial Accounting Standards Board has been charged with formulating accounting and financial reporting standards.

[197] Summary of Statement No. 106: "Employers' Accounting for Postretirement Benefits Other Than Pensions." Financial Accounting Standards Board, December 1990. http://www.fasb.org/st/summary/stsum106.shtml

This Statement establishes accounting standards for employers' accounting for postretirement benefits other than pensions…. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee's beneficiaries and covered dependents. …

… The Board believes that measurement of the obligation and accrual of the cost based on best estimates are superior to implying, by a failure to accrue, that no obligation exists prior to the payment of benefits. The Board believes that failure to recognize an obligation prior to its payment impairs the usefulness and integrity of the employer's financial statements. …

The provisions of this Statement are similar, in many respects, to those in FASB Statements No. 87, Employers' Accounting for Pensions, and No. 88, Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. …

This Statement relies on a basic premise of generally accepted accounting principles that accrual accounting provides more relevant and useful information than does cash basis accounting. …

[L]ike accounting for other deferred compensation agreements, accounting for postretirement benefits should reflect the explicit or implicit contract between the employer and its employees.

[198] Book: Finance for Managers. By Richard Luecke and Samuel L. Hayes. Harvard Business School Press, 2002. Page 39:

In contrast to cash-basis accounting, accrual accounting records transactions as they are made, whether or not the cash has actually changed hands. Most companies of any size use accrual accounting. This system provides a better matching between revenues and their associated cost, which helps companies understand the true causes and effect of business activities. Accordingly, revenues are recognized during the period in which the sales activities occur, whereas expenses are recognized in the same period as their associated revenues.

Similar to a corporation's annual report, the Financial Report [i.e., the Treasury Department's annual "Financial Report of the United States Government"] is the federal government's annual general-purpose report of its finances. …

Accrual measures are useful for understanding the government's annual operating cost, including costs incurred today but not payable for years to come. Accrual measures add a longer-term focus to the federal government's financial picture by providing more information on longer-term consequences of today's policy decisions and operations.

[200] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

[T]he annual report to Congress on the financial status of Medicare must be based on current law. In this report, the various cost-reduction measures—most importantly the reductions in the payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—are assumed to occur in all future years, as required by the Affordable Care Act. In addition, an almost 30 percent reduction in Medicare payment rates for physician services is assumed to be implemented in 2012 as required under current law, despite the virtual certainty that Congress will override this reduction.

Page 98: "The annual report to Congress on the financial status of Medicare is necessarily based on current law, including the substantial reduction in physician payments that would be required and the permanently slower price updates for most other health services, absent any legislative change."

[201] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

As discussed elsewhere in this report, there is a significant likelihood that the projected HI and SMI expenditures are substantially understated as a result of potentially impracticable elements of current law. Although this issue does not affect the nature of the budget and trust fund perspectives described in this appendix, it is important to note that actual long-range present values for HI expenditures and SMI expenditures and revenues are likely to exceed the amounts shown in table V.D2 by a substantial margin.

[202] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

As noted earlier, the actual future costs for Medicare are likely to exceed those shown by the current-law projections. For this reason, an illustrative alternative projection has been prepared to assess the potential magnitude of this understatement. This projection makes two significant changes to the assumptions used for the current-law projection. Specifically, Medicare payments to physicians under the alternative scenario are assumed to be updated annually by the increase in the Medicare Economic Index in all future years, in effect eliminating the SGR [Sustainable Growth Rate] system.²¹ Additionally, it assumes that the productivity adjustments would be applied fully through 2019 but then phased out over the 15 years beginning in 2020. In 2034 and later, Medicare Part A and Part B per capita cost growth rates are assumed to equal the pre-ACA [Affordable Care Act] "baseline" growth rates, as determined by the CGE [computable general equilibrium] growth model. …

This paper is also an attempt to promote awareness of these issues, to illustrate and quantify the amount by which the Medicare projections are potentially understated, and to help inform discussions of possible policy reactions to the situation. The results are shown for Parts A and B and for Medicare in total. (As noted previously, the Part D projections under current law are not affected by the payment-update issues.)

[203] Calculated with data from "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

Page 19: "Table 5. Projected total Medicare expenditures as a percentage of Gross Domestic Product (GDP) under the Illustrative Alternative Scenario compared to the 2011 Trustees Report, selected years 2009-2080"

NOTE: An Excel file containing the data and calculations is available upon request.

Page 21: " 'Open Group' totals reflect all current and projected program participants during the 75-year projection period."

A common way to present future cashflows is in terms of their present value. This approach recognizes that a dollar paid or collected next year is worth less than a dollar today, because a dollar today could be saved and earn a year's worth of interest.

Table 5 shows the magnitudes of the primary expenditures and sources of financing for the three trust funds [Social Security and Medicare HI (Part A) and SMI (Parts B and D)] computed on an open-group basis for the next 75 years and expressed in present values. … For HI, revenues from the public are projected to fall short of total expenditures by $3,252 billion in present value terms which is the additional amount needed in order to pay scheduled benefits over the next 75 years.⁶ From the trust fund perspective, the amount needed is $2,980 billion in present value after subtracting the value of the existing trust fund balances (an asset to the trust fund account but an intragovernmental transfer to the overall budget). For SMI, revenues from the public for Parts B and D combined are estimated to be $21,320 billion less than total expenditures for the two accounts, an amount that, from a budget perspective, will be needed to keep the SMI program solvent for the next 75 years. …

⁶ Interest income is not a factor in this table as dollar amounts are in present value terms.

The SOSI [Statement of Social Insurance] projections are based on current law. Therefore, the productivity adjustments are assumed to occur in all future years, as required by the Affordable Care Act. In addition, an almost 30 percent reduction in Medicare payment rates for physician services in January 2012 is assumed to be implemented as required under current law, despite the virtual certainty that Congress will continue to override this reduction. Therefore, it is important to note that the actual future costs for Medicare are likely to exceed those shown by these current-law projections.

The extent to which actual future Part A and Part B costs exceed the projected current-law amounts due to changes to the productivity adjustments and physician payments depends on both the specific changes that might be legislated and on whether Congress would pass further provisions to help offset such costs. As noted, these examples only reflect hypothetical changes to provider payment rates.

It is likely that in the coming years Congress will consider, and pass, numerous other legislative proposals affecting Medicare. Many of these will likely be designed to reduce costs in an effort to make the program more affordable. In practice, it is not possible to anticipate what actions Congress might take, either in the near term or over longer periods.

The Medicare Board of Trustees, in their annual report to Congress, references an alternative scenario to illustrate the potential understatement of costs under current law. This alternative scenario assumes that the productivity adjustments are gradually phased out over the 16 years starting in 2020 and that the physician fee reductions are overridden. These examples were developed by management for illustrative purposes only; the calculations have not been audited; and the examples do not attempt to portray likely or recommended future outcomes. Thus, the illustrations are useful only as general indicators of the substantial impacts that could result from future legislation affecting the productivity adjustments and physician payments under Medicare and of the broad range of uncertainty associated with such impacts. The table below contains a comparison of the Medicare 75-year present values of income and expenditures under current law with those under the alternative scenario illustration.

Page 134: "Medicare Present Values (in billions) (Unaudited) … Excess of Expenditures over Income … 2011 Consolidated SOSI [=] $24,572 … Illustrative Alternative Scenario [=] $37,006"

[205] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 1: "Medicaid is a cooperative program between the Federal and State governments to pay for health care and medical services for certain low-income persons in the United States and its Territories."

Page 2: "Authorized by Title XIX of the Social Security Act, Medicaid was signed into law in 1965 and is an optional program for the States. Currently all States, the District of Columbia, and all of the Territories have Medicaid programs."

Page 1: "Medicaid was enacted in 1965 in the same legislation that created the Medicare program (i.e., the Social Security Amendments of 1965; P.L. 89-97). It grew out of and replaced two earlier programs of federal grants to states that provided medical care to welfare recipients and the elderly."

[207] United States Code Title 31, Subtitle II, Chapter 11, Section 1102: "Fiscal year." Accessed December 22, 2011 at http://www.law.cornell.edu/...

"The fiscal year of the Treasury begins on October 1 of each year and ends on September 30 of the following year."

Page 13: "In FY2010, a total of 68.2 million people were estimated to be enrolled in Medicaid at some time during the year (excluding the territories). Nearly one-half of these beneficiaries (33.9 million) were children, and 18.2 million were adults in families with dependent children. There were also 10.3 million individuals with disabilities and 5.8 million people over the age of 65 enrolled in Medicaid that year."

Page 13: "Different groups under Medicaid have very different service utilization patterns. These patterns result in large differences in the proportion of total benefit expenditures by group."

CALCULATIONS: 33.9 / 68.2 = 50% ; 18.2 / 68.2 = 27% ; 10.3 / 68.2 = 15% ; 5.8 / 68.2 = 9%

[209] Calculated with data from the footnote above and "Intercensal Estimates of the Resident Population by Sex and Age for the United States: April 1, 2000 to July 1, 2010." U.S. Census Bureau. Accessed December 21, 2011 at http://www.census.gov/popest/data/intercensal/national/nat2010.html

[210] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 14: "Figure 1—Medicaid Enrollment and Expenditures, by Enrollment Group, FY 2009¹ … Actual Expenditures as a Share of Total … Aged [=] 22% … Blind/Disabled [=] 44% … Adults [=] 14% … Children 20% … ¹ Totals and components exclude DSH [Disproportionate Share Hospital] expenditures, territorial enrollees and expenditures, and adjustments."

[211] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Pages 12-13: "Table 2 shows estimated enrollment by eligibility group for FY 2009. Another 1 million enrollees were projected for the five U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands)."

[212] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Authorized by Title XIX of the Social Security Act, Medicaid was signed into law in 1965 and is an optional program for the States. Currently all States, the District of Columbia, and all of the Territories have Medicaid programs.¹

The Federal government establishes certain requirements for each State's Medicaid program. The States then administer their own programs, determining the eligibility of applicants, deciding which health services to cover, setting provider reimbursement rates, paying for a portion of the total program, and processing claims.

Eligibility for enrollment in Medicaid is determined by both Federal and State law. Title XIX specifies which groups of people must be eligible, and States have considerable flexibility to extend coverage to additional groups. In addition to income, eligibility is typically based on several other factors, including financial resources (or assets), age, disability status, other government assistance, and other health or medical conditions such as pregnancy. Beginning in 2014, the Affordable Care Act expands Medicaid eligibility to all individuals under age 65 in families with income below 138 percent of the Federal Poverty Level (FPL).² …

² … The Affordable Care Act technically specifies an upper income threshold of 133 percent of the FPL but also allows a 5-percent income disregard, making the effective threshold 138 percent.

Page 1: "Even though Medicaid is an entitlement program in federal budget terms, states choose whether to participate, and all 50 states do so."

In addition, to qualify for Medicaid coverage, applicants' income (e.g., wages, Social Security benefits) and sometimes their resources, or assets (e.g., value of a car, savings accounts), must meet program financial requirements. … In recent years, Medicaid has shifted largely to eligibility based on income, and most enrollees do not receive cash assistance. …

Some eligibility groups are mandatory, meaning that all states with a Medicaid program must cover them; others are optional. Examples of groups that states must provide Medicaid to include: …

• pregnant women and children through age 18 with family income below 133% of the federal poverty level (FPL),⁶ …

⁶ For example, in 2010, the FPL for a family of four is $22,050—133% of FPL for such a family would equal $29,326.50.

In addition, to qualify for Medicaid coverage, applicants' income (e.g., wages, Social Security benefits) and sometimes their resources, or assets (e.g., value of a car, savings accounts), must meet program financial requirements. Medicaid began with eligibility based on receipt of cash assistance under other programs such as Aid to Families with Dependent Children (AFDC), or the SSI program, as noted above. In recent years, Medicaid has shifted largely to eligibility based on income, and most enrollees do not receive cash assistance. However, states are still required to apply rules used by their former AFDC programs⁴or the federal SSI program when determining countable income for Medicaid. Generally, SSI rules are applicable to the elderly and those with disabilities, while AFDC rules are applicable to other groups. These programs differ on what counts as income and how much is disregarded (ignored) for determining financial eligibility for Medicaid. States have the option to apply additional disregards in order to reduce countable income.

Some eligibility groups are mandatory, meaning that all states with a Medicaid program must cover them; others are optional. Examples of groups that states must provide Medicaid to include:

• poor families that meet the financial requirements (based on family size) of the former AFDC [Aid to Families with Dependent Children] cash assistance program,⁵ [⁵ AFDC income standards are well below the federal poverty level, but states can modify (liberalize or potentially further restrict) these criteria. Although TANF [Temporary Assistance for Needy Families] recipients are not automatically eligible for Medicaid, some states have aligned income rules for TANF and Medicaid, thus facilitating Medicaid coverage for some TANF recipients.]

• families losing Medicaid eligibility due to increased earnings from work who receive up to 12 months of Medicaid coverage,

• pregnant women and children through age 18 with family income below 133% of the federal poverty level (FPL),⁶ [⁶ For example, in 2010, the FPL for a family of four is $22,050—133% of FPL for such a family would equal $29,326.50. See http://aspe.hhs.gov/poverty/09extension.shtml.]

• poor individuals with disabilities or poor individuals over age 64 who qualify for cash assistance under the SSI [Supplemental Security Income] program,⁷ [⁷ Some states use income, resource and disability standards that differ from current SSI standards.]

• certain groups of legal permanent resident immigrants (e.g., refugees for the first seven years after entry into the U.S.; asylees for the first seven years after asylum is granted; lawful permanent aliens with 40 quarters of creditable coverage under Social Security; immigrants who are honorably discharged U.S. military veterans) who meet all other financial and categorical Medicaid eligibility requirements….

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[216] Report: "Holding Steady, Looking Ahead: Annual Findings of a 50-State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost Sharing Practices in Medicaid and CHIP, 2010-2011." By Martha Heberlein and others. Kaiser Commission on Medicaid and the Uninsured, January 2011. http://www.kff.org/medicaid/upload/8130.pdf

While states have made significant progress in expanding coverage for children, eligibility for their parents continues to lag far behind. In 2010, only one state (CO) expanded Medicaid coverage for parents. As of January 1, 2011, 33 states do not cover parents up to 100 percent of the federal poverty level ($18,310 for a family of three in 2010). The median eligibility threshold for parents remains at 64 percent of the federal poverty level and 16 states limit eligibility to below 50 percent of the federal poverty level ($9,155 for a family of three in 2010). …

Low-income adults without dependent children remain ineligible for Medicaid in the vast majority of states. Under the ACA [Affordable Care Act, a.k.a, Obamacare], Medicaid eligibility will be expanded to a minimum of 133 percent of the federal poverty level, ending the historic exclusion of non-disabled, non-pregnant adults without dependent children from the program. While this change is not required to be in effect until January 1, 2014, states have the option of moving early to cover these adults. In 2010, Connecticut and the District of Columbia took advantage of this option and moved low-income adults they had previously served through state-funded programs to Medicaid. Further, California received approval in 2010 for a waiver to continue and expand county coverage initiatives serving low-income adults. However, even with these expansions, as of January 1, 2011, only seven states (AZ, CT, DE, DC, HI, NY, and VT) provide Medicaid or Medicaid-equivalent benefits to adults without dependent children. Additional states offer more limited coverage to these adults, but in most states, low-income adults without children do not have access to public coverage regardless of their income.

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[218] NOTE: The Affordable Care Act is actually comprised of two acts,† which were passed separately for political/procedural reasons.‡

[219] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

[220] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

SEC. 2002. INCOME ELIGIBILITY FOR NONELDERLY DETERMINED USING MODIFIED GROSS INCOME. …

(C) NO ASSETS TEST.—A State shall not apply any assets or resources test for purposes of determining eligibility for medical assistance under the State plan or under a waiver of the plan.

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[222] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

[223] Report: "Holding Steady, Looking Ahead: Annual Findings of a 50-State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost Sharing Practices in Medicaid and CHIP, 2010-2011." By Martha Heberlein and others. Kaiser Commission on Medicaid and the Uninsured, January 2011. http://www.kff.org/medicaid/upload/8130.pdf

Page 3: "As part of creating a seamless enrollment system, the ACA [Affordable Care Act] makes significant changes in Medicaid rules for many beneficiaries, including eliminating the asset test and evaluating eligibility using an IRS-based definition of income (i.e., "Modified Adjusted Gross Income" or "MAGI"), which will also be used to determine eligibility for Exchange subsidies."

a) Table V.A2: "Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2086." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified May 13, 2011. http://www.ssa.gov/OACT/TR/2011/lr5a2.html

b) "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

NOTE: An Excel file containing the data and calculations is available upon request.

Page 13: "[T]raditional Medicaid … compared to both Medicare and employer-sponsored health care plans, offers the broadest array of medical care and related services available in the United States today."

[226] Report: "American Recovery and Reinvestment Act: Development of a Medicaid/CHIP Environmental Scanning and Program Characteristics (ESPC) Database." Submitted by IMPAQ International and RTI International. Department of Health and Human Services, Centers for Medicare and Medicaid Services, March 31, 2011.

Appendix E: Medicaid-covered services in the Environmental Scanning and Program Characteristics database

• Inpatient hospital services, other than in an IMD [institution for mental diseases]

Summary: "Each state designs and administers its own version of Medicaid under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. The new health reform law makes both mandatory and optional changes along these dimensions for the Medicaid program."

[228] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 3: "Beneficiary cost sharing, such as deductibles or co-payments, and beneficiary premiums are very limited in Medicaid and do not represent a significant share of the total cost of health care services for Medicaid enrollees."

Page 14: "In particular, Medicaid pays almost all health care costs for enrolled children and non-disabled non-aged adults. However, many aged or disabled beneficiaries are also enrolled in Medicare, which is the primary payer of benefits before Medicaid; thus,¹⁵: these per enrollee Medicaid estimates are less than the total cost of such beneficiaries' annual health care across all payers."

Graham doesn't have a job, insurance or car. So, when he feels bad, he doesn't call a cab. He calls 911 to have an ambulance drive him to the hospital.

A 2 On Your Side investigation found that from January 2006 to May of this year, Rural Metro Ambulance picked him up 603 times.

[230] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 3: "Medicaid costs are met by Federal and State general revenues, on an as-needed basis. The Federal financing is authorized through an annual appropriation by Congress."

[232] The Encyclopedia of Taxation & Tax Policy. Edited by Joseph J. Cordes and others. Urban Institute Press, 2005.

[233] The values in the table below approximate general revenue taxes. They are calculated with data from the report: "Average Federal Tax Rates in 2007." Congressional Budget Office, June 2010. http://www.cbo.gov/...

^e Values calculated by Just Facts. An Excel file containing the data and calculations is available upon request.

The state-specific federal share for benefit costs is determined by a formula set in law that establishes higher federal shares for states with per capita personal income levels lower than the national average (and vice versa for states with per capita personal income levels that are higher than the national average).¹⁷The federal share, called the federal medical assistance percentage (FMAP), is at least 50% and can be as high as 83% (statutory maximum). For FY2011 (excluding the temporary increase in FMAP currently in effect through December 2010) [via the American Recovery and Reinvestment Act of 2009, a.k.a. the "Obama stimulus"], the federal share for benefit costs ranges from 50% (in 13 states) up to 74.73% (in one state, Mississippi).

The federal and state governments share the cost of Medicaid. States are reimbursed by the federal government for a portion (the "federal share") of a state's Medicaid program costs. Because Medicaid is an open-ended entitlement, there is no upper limit or cap on the amount of federal funds a state may receive. Medicaid costs in a given state and year are primarily determined by the expansiveness of eligibility rules and beneficiary participation, the breadth of benefits offered, the generosity of provider reimbursement rates, and other supplemental payments.

[236] Paper: "States' Use of Medicaid Maximization Strategies to Tap Federal Revenues: Program Implications and Consequences." By Teresa A. Coughlin and Stephen Zuckerman. Urban Institute, June 1, 2002. http://www.urban.org/UploadedPDF/310525_DP0209.pdf

Page 1: "Medicaid financing rules require states to spend their own funds to receive a federal financial match for Medicaid services, but there are no federal limits on program spending. This open-ended commitment of federal resources invites states to be generous in designing their programs. At the same time, because states share in the costs, it encourages states to use federal Medicaid dollars judiciously."

For instance, New York spends more than $18,000 on Medicaid for each person in poverty.

In Georgia, Medicaid spending per person in poverty is less than $6,000, which is a more sustainable and fiscally responsible amount. Only 18 percent of Georgians are enrolled in Medicaid as opposed to 26 percent in New York, with its more generous eligibility rules.

[238] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 18: The more notable effect of ARRA [2009 American Recovery & Reinvestment Act; a.k.a. the "Obama stimulus"], however, was that it provided for a higher temporary FMAP [federal medical assistance percentage] for all States retroactive to the beginning of FY 2009. This change resulted in an average effective Federal share for FY 2009 of about 65 percent (benefits and administration costs)…."

Page 20: "From FY 2005 through FY 2008, the average Federal share was about 57 percent. For FYs 2009, 2010, and 2011, the ARRA provided for temporary FMAP increases, in part based on changes in each State's unemployment rate. This act led to a higher Federal share in FY 2009 of about 65 percent and is projected to result in a slightly higher share in FY 2010 of about 67 percent. As a result of an extension of the temporary FMAP increase through June 30, 2011, as provided for in the Education, Jobs, and Medicaid Assistance Act of 2010, the Federal share for FY 2011 is projected to be about 63 percent."

a) Table 3.12: "Government Social Benefits." United States Department of Commerce, Bureau of Economic Analysis. Last Revised August 08, 2011. http://www.bea.gov/...

b) Table 3.2: "Federal Government Current Receipts and Expenditures." United States Department of Commerce, Bureau of Economic Analysis. Last Revised November 22, 2011. http://www.bea.gov/...

c) Table 3.20: "State Government Current Receipts and Expenditures." United States Department of Commerce, Bureau of Economic Analysis. Last Revised October 06, 2011. http://www.bea.gov/...

$518.4 Medicare expenditures / ($2,429.6 federal current receipts + $1,393.5 state current receipts = 13.6%

Page 6: "Unauthorized aliens (i.e., illegal aliens, foreign nationals who are not lawfully present in the United States) are ineligible for Medicaid. Such individuals who meet the eligibility requirements for Medicaid, but are ineligible due to immigration status, may receive Medicaid coverage for emergency conditions (i.e., emergency Medicaid) only, which includes costs associated with emergency labor and delivery for pregnant women and excludes costs for organ transplants."

[241] Report: "Review of Medicaid Funding for Emergency Services Provided to Nonqualified Aliens." By Daniel R. Levinson. U.S. Department of Health & Human Services, Office of Inspector General, September 2010. http://oig.hhs.gov/oas/reports/region4/40707032.pdf

Pursuant to Title XIX of the Social Security Act (the Act), the Medicaid program provides medical assistance to low-income individuals and low income individuals with disabilities. …

Section 1903(v) of the Act states that Federal Medicaid funding is available to States for medical services provided to aliens who are not lawfully admitted for permanent residence or otherwise permanently residing in the United States under color of law only when those services are necessary to treat an emergency medical condition. Further, 42 CFR § 440.255 states that Federal Medicaid funding is available to States for medical services provided to aliens granted lawful temporary resident status or lawful permanent resident status and who meet all other requirements for Medicaid only when those services are necessary to treat an emergency medical condition.

Section 1903(v) of the Act and 42 CFR § 440.255 define an emergency medical condition as one manifested by acute symptoms of such severity that the absence of immediate medical attention could reasonably be expected to result in (1) placing the patient's health in serious jeopardy, (2) serious impairment to bodily functions, or (3) serious dysfunction of any body part or organ. Further, 42 CFR § 440.255 specifies that there must be "sudden onset" of the condition. In addition, 42 CFR § 440.255 states that Federal Medicaid funding is available to States for services provided to pregnant women if a provision is included in the approved State plan. These services include routine prenatal care, labor and delivery, and routine postpartum care.

[242] Article: "Across Texas, 60,000 babies of noncitizens get U.S. birthright." By Sherry Jacobson. Dallas Morning News, August 8, 2010. http://www.dallasnews.com/...

"Parkland Memorial Hospital delivers more of those babies than any other hospital in the state. Last year at Parkland, 11,071 babies were born to women who were noncitizens, about 74 percent of total deliveries. Most of these women are believed to be in the country illegally."

[243] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

Page 33: "Figure 6—Medicaid Expenditures as Percentage of Total U.S. Health Expenditures, by Service Category, CY [calendar year] 2008 … Total [=] 14.7% … Dental [=] 5.9% … Physician [=] 7.3% … Drugs [=] 8.3% … Hospital [=] 17.1% … Home Health [=] 34.7% … Nursing Home [=] 40.6%"

Among the different types of health care services, Medicaid plays the largest role in the funding of long-term care. According to the 2008 NHE, Medicaid is estimated to have paid for 34.7 percent of all freestanding home health care and 40.6 percent of all freestanding† nursing home care in the U.S.²⁹ Medicaid has a major responsibility for providing long-term care because the program covers some aged and many disabled persons, who tend to be the most frequent and most costly users of such care, and because private health insurance and Medicare often furnish only limited coverage for these benefits, particularly for nursing homes. Many people who pay for nursing home care privately become impoverished due to the expense; as a result, these people eventually become eligible for Medicaid.

[244] Book: The U.S. Nursing Home Industry. By Joseph A. Giacalone. M. E. Sharpe, 2011.

Page 6: "Expenditures for freestanding nursing home care reached $87.8 billion in 1998. The 'freestanding' designation is important because HCFA [Health Care Financing Administration, now the Centers for Medicare and Medicaid Services] data on national health expenditures do not include skilled nursing care provided by hospital-based facilities. Such nursing care expenditures are included in the hospital care component of national expenditures."

Page 17: "Table 17.1: Live Births by Medicaid Coverage … 2007 … Medicaid [=] 52.1% … No Medicaid [=] 47.9%"

[246] NOTE: Just Facts has verified all of the information quoted below with official government sources but is citing this particular source because it is clearly worded and succinct.

While Congress and the federal Centers for Medicare and Medicaid Services (CMS) set out the main rules under which Medicaid operates, each state runs its own program. As a result, the rules are somewhat different in every state, although the framework is the same throughout the country. …

The spouse of a nursing home resident--called the "community spouse" -- is limited to one half of the couple's joint assets up to $109,560 (in 2011) in "countable" assets…. This figure changes each year to reflect inflation. In addition, the community spouse may keep the first $21,912 (in 2011), even if that is more than half of the couple's assets. This figure is higher in some states, even up to the full maximum of $109,560 (in 2011). …

All assets are counted against these limits unless the assets fall within the short list of "noncountable" assets. These include the following:

• One motor vehicle is excluded, regardless of value, as long as it is used for transportation of the applicant or a household member. …

• The applicant's principal residence, provided it is in the same state in which the individual is applying for coverage.... [P]rincipal residences may be deemed noncountable only to the extent their equity is less than $500,000, with the states having the option of raising this limit to $750,000. In all states … the house may be kept with no equity limit if the Medicaid applicant's spouse or another dependent relative lives there …

In all circumstances, the income of the community spouse will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medicaid benefits. But what if most of the couple's income is in the name of the institutionalized spouse, and the community spouse's income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. How much the community spouse is entitled to depends on what the Medicaid agency determines to be a minimum income level for the community spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA, is calculated for each community spouse according to a complicated formula based on his or her housing costs. The MMMNA may range from a low of $1,821.50 to a high of $2,739 a month (in 2011). If the community spouse's own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse's income.

[247] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

In the aggregate, both Medicare and Medicaid payments fall below costs and the shortfall has been growing.

• Combined underpayments rose from $3.8 billion in 2000 to $36 billion in 2009.

• For Medicare, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicare patients in 2009.

• For Medicaid, hospitals received payment of only 89 cents for every dollar spent by hospitals caring for Medicaid patients in 2009.

[249] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

Page 7: "Figure 2 shows the resulting comparison of future Medicare and Medicaid payment rates for physician services relative to private health insurance payment rates. Medicare payment levels in 2009 were about 80 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent."

[250] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.

[251] Paper: "Auditing Access to Specialty Care for Children with Public Insurance." By Joanna Bisgaier and Karin V. Rhodes. New England Journal of Medicine, June 16, 2011. Pages 2324-2333. http://www.nejm.org/doi/full/10.1056/NEJMsa1013285

Between January and May 2010, research assistants called a stratified, random sample of clinics representing eight specialties in Cook County, Illinois, which has a high proportion of specialists. Callers posed as mothers of pediatric patients with common health conditions requiring outpatient specialty care. Two calls, separated by 1 month, were placed to each clinic by the same person with the use of a standardized clinical script that differed by insurance status.

We completed 546 paired calls to 273 specialty clinics and found significant disparities in provider acceptance of Medicaid–CHIP versus private insurance across all tested specialties. Overall, 66% of Medicaid–CHIP callers (179 of 273) were denied an appointment as compared with 11% of privately insured callers (29 of 273) (relative risk, 6.2; 95% confidence interval [CI], 4.3 to 8.8; P<0.001). Among 89 clinics that accepted both insurance types, the average wait time for Medicaid–CHIP enrollees was 22 days longer than that for privately insured children (95% CI, 6.8 to 37.5; P=0.005).

[252] Report: "Medicaid Patients Increasingly Concentrated Among Physicians." By Peter J. Cunningham and Jessica H. May. Center for Studying Health System Change, August 2006. http://hschange.org/CONTENT/866/

Medicaid payment rates, which are considerably lower than physician payment rates under Medicare or private insurance, historically have deterred physician participation in Medicaid. About one-fifth of physicians (21 percent) reported accepting no new Medicaid patients in 2004-05, a rate six times higher than for Medicare patients and five times higher than for privately insured patients, according to HSC's nationally representative Community Tracking Study Physician Survey (see Data Source and Table 1). Moreover, about half of physicians reported accepting all new Medicaid patients in 2004-05, compared with more than 70 percent for Medicare and privately insured patients. Low physician participation in Medicaid has been shown to negatively affect enrollee access to medical care.

Page 1: "The State Children's Health Insurance Program (SCHIP) was created by the Balanced Budget Act of 1997 (Public Law 105-33), under title XXI of the Social Security Act. The program provides federal funding that states can use to expand health insurance coverage to uninsured children living in families with income that is low but too high to be eligible for Medicaid."

"The fiscal year of the Treasury begins on October 1 of each year and ends on September 30 of the following year."

Page 1: "Under broad federal guidelines, the program grants states flexibility in how they design their programs, including eligibility, benefits, and cost-sharing provisions. (See Box 1 for a comparison with Medicaid.)"

Like Medicaid, CHIP is a joint federal-state program. For each dollar of state spending, the federal government makes a matching payment drawn from CHIP allotments. A state's share of program spending for Medicaid is the percentage not paid by the federal government through the FMAP [federal medical assistance percentage]. But for CHIP, the federal share is higher. That is, the enhanced FMAP (E-FMAP) for CHIP lowers the state's share of CHIP expenditures by 30% compared to the regular Medicaid FMAP. Although uncommon, certain types of CHIP expenditures are reimbursed at a rate different than the E-FMAP, and certain types of Medicaid expenditures are reimbursed at the EFMAP rate. For FY2010, the E-FMAP for CHIP ranges from 65% to 83%.

Page 49: "Under P.L. 111-148 [the Patient Protection and Affordable Care Act of 2010, a.k.a. Obamacare], states will receive a 23 percentage point increase in the CHIP match rate (EFMAP), subject to a cap of 100%, for FY2016 through FY2019 (although no CHIP appropriations are provided for those years). The 23 percentage point increase will not apply to certain expenditures."

[258] House Resolution 2015 (final text as passed by House and Senate): "Balanced Budget Act of 1997." Signed into law by Bill Clinton on August 5, 1997 (became Public Law No: 105-33). http://www.gpo.gov/...

Page 302 (in pdf): "Subtitle J—State Children's Health Insurance Program … Section 201 (a) PURPOSE.—The purpose of this title is to provide funds to States to enable them to initiate and expand the provision of child health assistance to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage for children."

Pages 319-320 (in pdf): "Section 2110 (c) ADDITIONAL DEFINITIONS.—For purposes of this title: (1) CHILD.—The term 'child' means an individual under 19 years of age. … (4) LOW-INCOME.—The term 'low-income child' means a child whose family income is at or below 200 percent of the poverty line for a family of the size involved."

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

A number of states have used waiver authority to expand coverage under SCHIP to adults. Covering parents may help to increase participation among children, because parents who are eligible may be more likely to enroll their children also. In particular, section 1115 of the Social Security Act gives the Secretary of Health and Human Services the authority to waive certain statutory and regulatory requirements of Medicaid and SCHIP. The Secretary has used that authority to allow states to expand eligibility for SCHIP to low-income parents, pregnant women, and adults without children.⁵ As a condition for those waivers, states are required to cover those populations with funds not used to cover children. Section 1115 waivers also provide states additional flexibility to use SCHIP funds to subsidize the purchase of private health insurance through premium assistance programs. Of the 18 states that have obtained section 1115 waivers, 13 have expanded coverage to parents, related caretakers, and legal guardians, as well as pregnant women. Adults without children are currently covered in four states; however, the Deficit Reduction Act of 2005 (P.L. 109- 171) prohibits the approval of such waivers in the future. …

⁵ In addition to waivers, the SCHIP statute allows states to purchase family coverage with SCHIP funds if such coverage is deemed cost-effective and does not displace private coverage. (Family coverage is considered to be cost-effective when the cost does not exceed that of coverage for children only.) That statutory test has seldom, if ever, been passed.

SCHIP was designed for uninsured children under age 19 living in families with income that is low but above Medicaid's threshold.¹ According to the SCHIP statute, states may cover children living in families with income up to 200 percent of the federal poverty level or 50 percentage points above their Medicaid threshold.² States are also allowed to disregard certain types of income and expenses in determining eligibility for the program. Eligibility criteria vary among the states. As of 2006, 26 states had a threshold of 200 percent of the poverty level, 15 states set the limit above 200 percent of the poverty level, and 9 states set it below 200 percent of the poverty level. North Dakota had the lowest threshold, at 140 percent of the poverty level, while New Jersey had the highest, at 350 percent of the poverty level.³ …

¹ Children of state employees cannot be covered under a separate program under SCHIP if they are eligible for coverage under a state health benefits plan. In addition, SCHIP is generally limited to citizens and to legal immigrants who have resided in the United States for five or more years.

² States are required to maintain the Medicaid threshold that was in place just before SCHIP was enacted. That requirement, known as "maintenance of effort," prevents states from lowering their Medicaid threshold in order to receive a higher matching rate under SCHIP for children who would have otherwise been covered by Medicaid.

³ New Jersey, for example, has effectively expanded its threshold to 350 percent of the poverty level by disregarding all income between 200 percent and 350 percent of the poverty level.

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

"Appendix 2: Children's Health Coverage: 2011 Upper Income Limits … All figures are based on the 2011 Federal Poverty Level (FPL for a family of four ($22,350)"

Page 6: "47 states and the District of Columbia no longer consider a family's assets when determining eligibility for children in Medicaid and CHIP."

[265] Report: "Holding Steady, Looking Ahead: Annual Findings of a 50-State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost Sharing Practices in Medicaid and CHIP, 2010-2011." By Martha Heberlein and others. Kaiser Commission on Medicaid and the Uninsured, January 2011. http://www.kff.org/medicaid/upload/8130.pdf

Streamlined Application Requirements for Children's Health Coverage January 2011 … Asset Test NOT Required (or Asset Test Limit)¹ … Missouri⁸ [=] $250,000 … South Carolina¹¹ [=] $30,000 … Texas¹² [=]$10,000 …

8. In Missouri, families with income above 150% of the FPL are subject to a "net worth" test. …

12. In Texas, the limit is $3,000 if a family contains a disabled or elderly member. The $10,000 limit applies to those with income over 150% of the FPL.

[266] Web page: "CHIP: South Dakota's Children's Health Insurance Program, Frequently Asked Questions." South Dakota Department of Social Services. Accessed January 3, 2012 at http://dss.sd.gov/medicalservices/chip/faq.asp

1.1 MaineCare Coverage Categories in this Guide … Category … Children … Free or low cost (CHIP) …

• Income from other people in the household who are not the parents or guardians of the children living with the family (like grandparents, a boyfriend or girlfriend, adult brothers and sisters, or aunts and uncles). Anyone not legally responsible is not financially responsible and their income does not count. These other household members also do not count in figuring out family size. These individuals may be eligible for MaineCare in a different category and as a separate household.

I live with my boyfriend - do I have to include his income? - OR - My baby and I live with my parents - do I have to include my parent's income?

The CHIP application requests all household members and income, which means you must provide information about everyone who lives with you and their income, if any. CHIP has rules that determine who is and is not included when determining eligibility. For example, even though you report income for your boyfriend, it would not be used to determine if you [sic] child is eligible, unless your boyfriend is the father of your child.

Page 154: "In FY 2010, CHIP enrollment increased by 4.6 percent (7,705,723 children)."

[271] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

Page 154: "The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (P.L. 111-3) reauthorized CHIP from April 2009 through September 30, 2013 and increased funding by $44 billion through FY 2013 to maintain State programs and to cover more insured children. More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline."

In a major change, the bill allows states to cover certain legal immigrants — namely, children under 21 and pregnant women — as well as citizens.

Until now, legal immigrants have generally been barred from Medicaid and the State Children's Health Insurance Program for five years after they enter the United States. States will now be able to cover those immigrants without the five-year delay.

[273] House Resolution 2015 (final text as passed by House and Senate): "Balanced Budget Act of 1997." Signed into law by Bill Clinton on August 5, 1997 (became Public Law No: 105-33). http://www.gpo.gov/...

(a) APPROPRIATION; TOTAL ALLOTMENT.—For the purpose of providing allotments to States under this section, there is appropriated, out of any money in the Treasury not otherwise appropriated—

[274] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

Page 157: "From FY 1998 through FY 2007, the Balanced Budget Act of 1997 (BBA) (P.L. 105-33) authorized and appropriated $40 billion for CHIP allotments to States, Territories, Commonwealths, and the District of Columbia. The Balanced Budget Refinement Act of 1999 (BBRA) (P.L. 106-113) authorized and appropriated additional funding for CHIP allotments to Commonwealths and Territories."

[275] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

(A) $2,850,000,000 for the period beginning on October 1, 2012, and ending on March 31, 2013, and

(B) $2,850,000,000 for the period beginning on April 1, 2013, and ending on September 30, 2013.

NOTE: The anomalous appropriations for fiscal year 2013 were set to game the budget scoring process of the CBO. See next footnote for details.

[277] Letter to Paul Ryan (Ranking Member, Committee on the Budget, U.S. House of Representatives) from Robert A. Sunshine (Acting Director, Congressional Budget Office), January 14, 2009. http://www.cbo.gov/ftpdocs/99xx/doc9964/hr2RyanLtr.pdf

The introduced version of H.R. 2 would authorize CHIP through 2013 and would provide significant funding increases over the next few years, leading up to a total funding level of $17.4 billion in 2013. The program's funding for the second half of fiscal year 2013 would be $3 billion. Under baseline rules, that amount annualized—$6 billion—would be projected for each subsequent year. The estimated cost of the bill assumes that funding level for CHIP for fiscal years 2014 through 2019. On that basis, CBO estimates that the introduced version of H.R. 2 would increase federal direct spending by $73.3 billion through 2019, including the costs of other provisions in the bill. (That spending would be offset by increases in federal tax revenues totaling $73.6 billion over the same period, primarily from increases in the excise taxes levied on tobacco products.)

As an alternative to the introduced version of H.R. 2, you requested that CBO assume the CHIP rules and structure as currently delineated in H.R. 2 would remain unchanged through 2019 and that sufficient funding would be made available after 2013 to accommodate projected enrollment growth. The projected enrollment growth is based on expected growth in the total population, as well as changes in the health insurance market and the economy as a whole. Under those assumptions, CBO estimates that average monthly enrollment in CHIP would rise from about 9 million in 2013 to about 12 million in 2019.

Based on the assumptions you specified, CBO estimates total changes in direct spending of $115.2 billion, as compared with the $73.3 billion increase we estimate for the introduced version of H.R. 2. (Revenue increases would remain unchanged.) Thus, the net budget impact of a modified version of H.R. 2, as you specified, would be an increase in deficits totaling $41.6 billion over the 2009-2019 period.

[278] NOTE: The appropriations for the years not mentioned (2008 and 2013) are given in the report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012." Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. http://www.hhs.gov/about/FY2012budget/cmsfy12cj_revised.pdf

Page 157: "State Allotment Funding History … FY2008 [=] $6,640,000,000 … FY 2013 [=] $17,406,000,000"

[279] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

Page 154: "More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline."

Page 157: "[T]he Affordable Care Act extends Federal funding for CHIP through FY 2015, appropriating $19.1 billion in FY 2014 and $21.1 billion in FY 2015."

For HI [Hospital Insurance, a.k.a Medicare Part A], the primary source of financing is the payroll tax on covered earnings. Employers and employees each pay 1.45 percent of wages, while self-employed workers pay 2.9 percent of their net income. Starting in 2013, high-income workers will pay an additional 0.9 percent tax on their earnings above an unindexed threshold ($200,000 for single taxpayers and $250,000 for married couples). Other HI revenue sources include a portion of the Federal income taxes that people pay on their Social Security benefits, as well as interest paid on the U. S. Treasury securities held in the HI trust fund.

[281] Report: "Reducing the Deficit: Spending and Revenue Options." Congressional Budget Office, March 2011. http://cbo.gov/...

NOTE: For more detail about the economic incidence of payroll taxes, see Just Facts' research on tax distribution.

[282] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"For Medicare's Hospital Insurance (HI) program, the taxable maximum was the same as that for the OASDI [Social Security] program for 1966-1990. Separate HI taxable maximums of $125,000, $130,200, and $135,000 were applicable in 1991-93, respectively. After 1993, there has been no limitation on HI-taxable earnings."

[283] Web page: "Contribution and Benefit Base." United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified October 29, 2010. http://www.ssa.gov/oact/cola/cbb.html

"Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. … This limit generally increases each year with increases in the national average wage index."

"PL 103-66 The Omnibus Budget Reconciliation Act of 1993 (enacted 8/10/93). Section 13207 repeals the limitation on the amount of earnings subject to the HI [Medicare Hospital Insurance] tax beginning in 1994."

b) Vote 247: "Omnibus Budget Reconciliation Act of 1993." U.S. Senate, August 6, 1993. http://www.senate.gov/...

[286] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

In 1993, as part of Omnibus Budget Reconciliation Act, the Social Security taxation provision was modified to add a secondary set of thresholds and a higher taxable percentage for beneficiaries who exceeded the secondary thresholds. Specifically, the 1993 did the following:

Modified for a taxpayer with combined income exceeding a secondary threshold amount ($34,000 for an individual, $44,000 for a married couple filing a joint return, and zero for a married person filing separately), so that the amount of benefits subject to income tax is increased to the sum of (1) the smaller of (a) $4,500 for an individual, $6,000 for a married couple filing a joint return, or zero for a married person filing separately, or (b) 50% of the benefit, plus (2) 85% of the excess of the taxpayer's combined income over the secondary threshold. However, no more than 85% of the benefit amount is subject to income tax. The additional income tax revenues resulting from the increase in the taxable percentage from 50% to 85% are transferred to the HI Trust Fund. Effective for taxable years beginning after 1993.

[288] "2010 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds." United States Social Security Administration, August 9, 2010. http://www.ssa.gov/OACT/TR/2010/tr2010.pdf

Page 47: "[T]he benefit taxation threshold amounts are not indexed, so that an increasing share of benefits will be subject to tax."

[289] House Resolution 2015 (final text as passed by House and Senate): "Balanced Budget Act of 1997." Signed into law by Bill Clinton on August 5, 1997 (became Public Law No: 105-33). http://www.gpo.gov/...

(a) APPROPRIATION; TOTAL ALLOTMENT.—For the purpose of providing allotments to States under this section, there is appropriated, out of any money in the Treasury not otherwise appropriated—

[290] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

[292] Web page: "Bill Summary & Status, Major Congressional Actions, H.R.1: Medicare Prescription Drug, Improvement, and Modernization Act of 2003." Library of Congress. Accessed January 5, 2012 at http://thomas.loc.gov/cgi-bin/bdquery/z?d108:HR00001:@@@R

[293] Brief: "Spending Patterns for Prescription Drugs Under Medicare Part D." By Tamara Hayford. Congressional Budget Office, December 1st, 2011. http://cboblog.cbo.gov/?p=3033

"The centerpiece of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act) was the creation of Medicare Part D, a subsidized pharmaceutical benefit that went into effect in 2006. That additional coverage constituted the most substantial expansion of the Medicare program since its inception in 1965. In 2010, the federal government spent $62 billion on Part D, representing 12 percent of total federal spending for Medicare that year."

b) Vote 459: "Medicare Prescription Drug, Improvement, and Modernization Act." U.S. Senate, November 25, 2003. http://www.senate.gov/...

"CBO estimates that enacting this legislation would result in direct spending outlays totaling $395 billion over the 2004-2013 period. It would also lead to an increase in federal revenues totaling $0.5 billion over that 10-year period."

[296] Press release: "Michael Steele: Republicans' Glass House is Shattering." Democratic Congressional Campaign Committee, March 10, 2010. http://dccc.org/...

"The Republican culture of corruption under Tom DeLay and Republican leadership had devastating consequences that the American people are still paying the price for: a complex and costly prescription drug bill written by drug companies, an energy policy written by the Big Oil companies, and record deficits to pay for tax breaks for their most wealthy friends."

[297] Vote 330: "Rangel of New York Substitute Amendment to H.R. 1, Medicare Prescription Drug, Improvement, and Modernization Act of 2003." U.S. House of Representatives, June 27, 2003. http://clerk.house.gov/evs/2003/roll330.xml

[298] Cost Estimate: "Democratic Amendment to H.R. 1, Medicare Prescription Drug, Improvement, and Modernization Act of 2003." Congressional Budget Office, June 26, 2003. http://www.cbo.gov/ftpdocs/43xx/doc4381/hr1ltr.pdf

"The net effect of the bill, we estimate, would be an increase in the deficit of $0.4 billion in 2003, $5.1 billion in 2003, $255.0 billion over the 2004-2008 period, and $968.7 billion over the 2004-2013 period. These estimates are preliminary and subject to revision after we have had an opportunity to carefully review the legislative language. CBO has not yet completed its estimate of the discretionary costs of the bill."

[299] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

(A) $2,850,000,000 for the period beginning on October 1, 2012, and ending on March 31, 2013, and

(B) $2,850,000,000 for the period beginning on April 1, 2013, and ending on September 30, 2013.

NOTE: The anomalous appropriations for fiscal year 2013 were set to game the budget scoring process of the CBO. See next footnote for details.

[301] Letter to Paul Ryan (Ranking Member, Committee on the Budget, U.S. House of Representatives) from Robert A. Sunshine (Acting Director, Congressional Budget Office), January 14, 2009. http://www.cbo.gov/ftpdocs/99xx/doc9964/hr2RyanLtr.pdf

In a major change, the bill allows states to cover certain legal immigrants — namely, children under 21 and pregnant women — as well as citizens.

Performance Bonus Payments. CHIPRA established new incentive payments for states that adopt specific policies and procedures in Medicaid and CHIP and that were successful in enrolling already eligible children in Medicaid. CMS issued guidance on the bonus payment criteria on December 17, 2009.21 States need to meet two sets of criteria in order to qualify for a performance bonus payment. They need to have in place at least five eligibility and enrollment improvements known to promote coverage and retention, and demonstrate significant increases in Medicaid enrollment among children.²²

²² The eight qualifying program features are 12-months continuous eligibility, liberalization of assets tests, eliminating the in-person interview requirement, using the same application and renewal forms for both Medicaid and CHIP, administrative or automatic renewals, presumptive eligibility, Express Lane Eligibility, and the new premium assistance option specified in CHIPRA.

SEC. 104. CHIP PERFORMANCE BONUS PAYMENT TO OFFSET ADDITIONAL ENROLLMENT COSTS RESULTING FROM ENROLLMENT AND RETENTION EFFORTS.

Section 2105(a) (42 U.S.C. 1397ee(a)) is amended by adding at the end the following new paragraphs:

(3) PERFORMANCE BONUS PAYMENT TO OFFSET ADDITIONAL MEDICAID AND CHIP CHILD ENROLLMENT COSTS RESULTING FROM ENROLLMENT AND RETENTION EFFORTS.—

(A) IN GENERAL.—In addition to the payments made under paragraph (1), for each fiscal year (beginning with fiscal year 2009 and ending with fiscal year 2013), the Secretary shall pay from amounts made available under subparagraph (E), to each State that meets the condition under paragraph (4) for the fiscal year, an amount equal to the amount described in subparagraph (B) for the State and fiscal year. …

(4) ENROLLMENT AND RETENTION PROVISIONS FOR CHILDREN.— For purposes of paragraph (3)(A), a State meets the condition of this paragraph for a fiscal year if it is implementing at least 5 of the following enrollment and retention provisions (treating each subparagraph as a separate enrollment and retention provision) throughout the entire fiscal year: …

(B) LIBERALIZATION OF ASSET REQUIREMENTS.—The State meets the requirement specified in either of the following clauses:

(i) ELIMINATION OF ASSET TEST.—The State does not apply any asset or resource test for eligibility for children under title XIX or this title.

(I) permits a parent or caretaker relative who is applying on behalf of a child for medical assistance under title XIX or child health assistance under this title to declare and certify by signature under penalty of perjury information relating to family assets for purposes of determining and redetermining financial eligibility; and

(II) takes steps to verify assets through means other than by requiring documentation from parents and applicants except in individual cases of discrepancies or where otherwise justified.

(a) CIGARS.—Section 5701(a) of the Internal Revenue Code of 1986 is amended—

(1) by striking "$1.828 cents per thousand ($1.594 cents per thousand on cigars removed during 2000 or 2001)" in paragraph (1) and inserting "$50.33 per thousand",

(2) by striking "20.719 percent (18.063 percent on cigars removed during 2000 or 2001)" in paragraph (2) and inserting "52.75 percent", and

(3) by striking "$48.75 per thousand ($42.50 per thousand on cigars removed during 2000 or 2001)" in paragraph (2) and inserting "40.26 cents per cigar".

(1) by striking "$19.50 per thousand ($17 per thousand on cigarettes removed during 2000 or 2001)" in paragraph (1) and inserting "$50.33 per thousand", and

(2) by striking "$40.95 per thousand ($35.70 per thousand on cigarettes removed during 2000 or 2001)" in paragraph (2) and inserting "$105.69 per thousand".

(c) CIGARETTE PAPERS.—Section 5701(c) of such Code is amended by striking "1.22 cents (1.06 cents on cigarette papers removed during 2000 or 2001)" and inserting "3.15 cents".

(d) CIGARETTE TUBES.—Section 5701(d) of such Code is amended by striking "2.44 cents (2.13 cents on cigarette tubes removed during 2000 or 2001)" and inserting "6.30 cents".

b) Vote 31: "Children's Health Insurance Program Reauthorization Act of 2009." U.S. Senate, January 29, 2009. http://www.senate.gov/...

[N]egotiations on a ﬁnal bill were stalled when, on January 19, Republican Scott Brown was elected to the Massachusetts Senate seat vacated by the death of Senator Edward Kennedy. Brown's election effectively took away the Senate Democratic leadership's 60th vote in support of healthcare reform legislation. Without the ﬁlibuster-proof 60 votes in the Senate, Democrats would not have been able to overcome the procedural hurdles to passing a ﬁnal House-Senate compromise bill without Republican votes. …

b) Vote 396: "Patient Protection and Affordable Care Act." U.S. Senate, December 24, 2009. http://www.senate.gov/...

b) Vote 105: "Health Care and Education Reconciliation Act of 2010." U.S. Senate, March 25, 2010. http://www.senate.gov/...

[310] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

[312] "2010 Actuarial Report on the Financial Outlook for Medicaid." By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. http://www.cms.gov/ActuarialStudies/downloads/MedicaidReport2010.pdf

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

[314] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

SEC. 2002. INCOME ELIGIBILITY FOR NONELDERLY DETERMINED USING MODIFIED GROSS INCOME. …

(C) NO ASSETS TEST.—A State shall not apply any assets or resources test for purposes of determining eligibility for medical assistance under the State plan or under a waiver of the plan.

[315] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

Figure 2 shows the resulting comparison of future Medicare and Medicaid payment rates for physician services relative to private health insurance payment rates. Medicare payment levels in 2009 were about 80 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent.¹⁸ In this illustration, Medicaid payment rates increase to 73 percent of private health insurance levels in 2013 and 77 percent in 2014 and then return to 58 percent. Medicare physician payment rates decline to 57 percent of private health insurance payment rates in 2012, due to the scheduled reduction in the Medicare physician fee schedule of nearly 30 percent under the SGR formula in current law. (In practice, Congress is very likely to override this reduction, as it has consistently for 2003 through 2011.)

[316] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

The increasing differential between Medicare and private payment rates is due to the productivity adjustments in 2012 and later for the Medicare payment updates (and, to a lesser degree, to the other, smaller downward adjustments in 2010-2019 specified by the ACA in addition to the productivity adjustments). The smaller UPL [upper payment limit] established by the Medicare rates forces a similar differential for Medicaid payments. By the end of the long-range projection period [2085], Medicare and Medicaid payment rates for inpatient hospital services would both represent roughly 33 percent of the average level for private health insurance.

[317] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

While the Part B projections in this report are reasonable in their portrayal of future costs under current law, they are not reasonable as an indication of actual future costs. …

[318] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(b) PURPOSE.—It is the purpose of this section to, in accordance with the following provisions of this section, reduce the per capita rate of growth in Medicare spending—

(1) by requiring the Chief Actuary of the Centers for Medicare and Medicaid Services to determine in each year to which this section applies (in this section referred to as 'a determination year') the projected per capita growth rate under Medicare for the second year following the determination year (in this section referred to as 'an implementation year');

(2) if the projection for the implementation year exceeds the target growth rate for that year, by requiring the Board to develop and submit during the first year following the determination year (in this section referred to as 'a proposal year') a proposal containing recommendations to reduce the Medicare per capita growth rate to the extent required by this section; and

(3) by requiring the Secretary to implement such proposals unless Congress enacts legislation pursuant to this section. …

(A) REQUIREMENTS.—Each proposal submitted under this section in a proposal year shall meet each of the following requirements:

(i) If the Chief Actuary of the Centers for Medicare and Medicaid Services has made a determination under paragraph (7)(A) in the determination year, the proposal shall include recommendations so that the proposal as a whole (after taking into account recommendations under clause (v)) will result in a net reduction in total Medicare program spending in the implementation year that is at least equal to the applicable savings target established under paragraph (7)(B) for such implementation year. …

(i) 15 members appointed by the President, by and with the advice and consent of the Senate …

[319] Report: "The Independent Payment Advisory Board: A New Approach to Controlling Medicare Spending." By Jack Ebler, Tricia Neuman, and Juliette Cubanski. Henry J. Kaiser Family Foundation, April 2011. http://www.kff.org/medicare/upload/8150.pdf

Page 3: "Prior to 2020, the growth target is based on a measure of inflation, and in subsequent years, it is based on the per capita growth in the economy (gross domestic product (GDP) plus one percentage point)."

Page 6: "For 2015 through 2019, the target for Medicare spending per capita is the average of general and medical inflation: specifically, the average of the projected percentage increase in the consumer price index for all Urban Consumers (CPI-U) and the medical care expenditure category of the CPI-U. For 2020 and later years, the target for Medicare spending per capita is the increase in the gross domestic product (GDP) plus one percentage point, which historically has increased at a higher rate than the CPI-based measures."

[320] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

Page 834 (in pdf): "NAME CHANGE.—Any reference in the provisions of, or amendments made by, section 3403 to the 'Independent Medicare Advisory Board' shall be deemed to be a reference to the Independent Payment Advisory Board."

[321] Report: "The Independent Payment Advisory Board: A New Approach to Controlling Medicare Spending." By Jack Ebler, Tricia Neuman, and Juliette Cubanski. Henry J. Kaiser Family Foundation, April 2011. http://www.kff.org/medicare/upload/8150.pdf

Page 3: "The recommendations made by IPAB move to the Congress for fast-track consideration. If Congress does not act in the required timeframe, the Secretary is required to implement the Board's recommendations, also on a fast-track basis."

[322] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(A) IN GENERAL.—On the day on which a proposal is submitted by the President to the House of Representatives and the Senate under subsection (c)(4), the legislative proposal (described in subsection (c)(3)(B)(iv)) contained in the proposal shall be introduced (by request) in the Senate by the majority leader of the Senate or by Members of the Senate designated by the majority leader of the Senate and shall be introduced (by request) in the House by the majority leader of the House or by Members of the House designated by the majority leader of the House. …

(A) IN GENERAL.—It shall not be in order in the Senate or the House of Representatives to consider any bill, resolution, or amendment, pursuant to this subsection or conference report thereon, that fails to satisfy the requirements of subparagraphs (A)(i) and (C) of subsection (c)(2). …

(A) CONSIDERATION.—A motion to proceed to the consideration of the bill in the Senate is not debatable.

(iv) AMENDMENT NOT IN ORDER.—It shall not be in order to consider an amendment that would cause the bill to result in a net reduction in total Medicare program spending in the implementation year that is less than the applicable savings target established under subsection (c)(7)(B) for such implementation year.

(v) WAIVER AND APPEALS.—This paragraph may be waived or suspended in the Senate only by the affirmative vote of three-fifths of the Members, duly chosen and sworn. An affirmative vote of three-fifths of the Members of the Senate, duly chosen and sworn, shall be required in the Senate to sustain an appeal of the ruling of the Chair on a point of order raised under this section.

(i) IN GENERAL.—The expedited procedures provided in this subsection for the consideration of a bill introduced pursuant to paragraph (1) shall not apply to such a bill that is received by one House from the other House if such a bill was not introduced in the receiving House. …

(F) VETO.—If the President vetoes the bill debate on a veto message in the Senate under this subsection shall be 1 hour equally divided between the majority and minority leaders or their designees.

(A) as an exercise of the rulemaking power of the Senate and the House of Representatives, respectively, and is deemed to be part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in that House in the case of bill under this section, and it supersedes other rules only to the extent that it is inconsistent with such rules; and

(B) with full recognition of the constitutional right of either House to change the rules (so far as they relate to the procedure of that House) at any time, in the same manner, and to the same extent as in the case of any other rule of that House. …

(1) IN GENERAL.—Notwithstanding any other provision of law, the Secretary shall, except as provided in paragraph (3), implement the recommendations contained in a proposal submitted by the President to Congress pursuant to this section on August 15 of the year in which the proposal is so submitted. …

(3) EXCEPTION.—The Secretary shall not be required to implement the recommendations contained in a proposal submitted in a proposal year by the President to Congress pursuant to this section if—

(A) prior to August 15 of the proposal year, Federal legislation is enacted that includes the following provision: 'This Act supercedes the recommendations of the Board contained in the proposal submitted, in the year which includes the date of enactment of this Act, to Congress under section 1899A of the Social Security Act. …

[Clause 2] Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law.

[324] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(1) VACANCIES.—No vacancy on the Board shall impair the right of the remaining members to exercise all the powers of the Board.

(2) QUORUM.—A majority of the appointed members of the Board shall constitute a quorum for the transaction of business, but a lesser number of members may hold hearings.

"The Senate approved the nomination of Kathleen Sebelius to head the Department of Health and Human Services, filling the final seat in President Obama's Cabinet on the eve of his 100th day in office."

[326] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

— If, with respect to a proposal year, the Board is required, to but fails, to submit a proposal to the President by the deadline applicable under paragraph (3)(A)(i), the Secretary shall develop a detailed and specific proposal that satisfies the requirements of subparagraphs (A) and (C) (and, to the extent feasible, subparagraph (B)) of paragraph (2) and contains the information required paragraph (3)(B)).

[327] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(3) EXCEPTION.—The Secretary shall not be required to implement the recommendations contained in a proposal submitted in a proposal year by the President to Congress pursuant to this section if— …

(B) in the case of implementation year 2020 and subsequent implementation years, a joint resolution described in subsection (f)(1) is enacted not later than August 15, 2017. …

(1) IN GENERAL.—For purposes of subsection (e)(3)(B), a joint resolution described in this paragraph means only a joint resolution—

(F) MAJORITY REQUIRED FOR ADOPTION.—A joint resolution considered under this subsection shall require an affirmative vote of three-fifths of the Members, duly chosen and sworn, for adoption.

(3) TERMINATION.—If a joint resolution described in paragraph (1) is enacted not later than August 15, 2017—

(ii) provide any opinion pursuant to subsection (c)(3)(B)(iii) after January 16, 2018;

(B) the Board shall not submit any proposals or advisory reports to Congress under this section after January 16, 2018; and

[328] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(4) REMOVAL.—Any appointed member may be removed by the President for neglect of duty or malfeasance in office, but for no other cause.

[329] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(A) REQUIREMENTS.—Each proposal submitted under this section in a proposal year shall meet each of the following requirements: …

(ii) The proposal shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria. …

(B) ADDITIONAL CONSIDERATIONS.—In developing and submitting each proposal under this section in a proposal year, the Board shall, to the extent feasible—

(II) protect and improve Medicare beneficiaries' access to necessary and evidence-based items and services …

NOTE: "Evidence-based" medicine is sometimes used to ration health care. The term is defined and explicated in the next two footnotes.

[330] Book: Healthcare Management Dictionary. By Annie Phillips. Radcliffe Medical Press, 2003. Page 58:

The systematic analysis of data in order to assess the clinical efficacy and cost-effectiveness of treatments. First described in the British Medical Journal in 1996 as 'the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients', it is a discipline that aims to invalidate previously accepted diagnostic tests and therapies and replace them with new ones that are more powerful, accurate, efficacious, and safe.

The practice of evidence-based medicine means integrating individual and clinical expertise with the best available external clinical evidence from systematic research.1 This process underpins, for example, the work of the [U.K.'s] National Institute for Clinical Excellence (NICE), which decides the technologies and treatments that should be made available on the NHS [National Health Service].

[331] Book: Rationing of Medical Services in Europe: An Empirical Study. Edited by J.-Matthias Graf von der Schulenburg and Michael Blanke. IOS Press, 2004.

Chapter I: "Rationing Health Care in Europe – Finland." By Janne Martikainen and Hannu Valtonen.

Page 18: "An unstructured question was used to explore which form of rationing professionals themselves believed to be the most effective in controlling cost escalation, since 78% of them believed that cost escalation can be controlled somehow. The most preferred forms of rationing were priority setting [20.0%], preventative treatments [15.5%] and evidence based medicine [8.9%] (Table 14). In the Finnish publicity, instead of the term 'rationing' the term 'prioritization' has been used since the beginning of the 90s."

[332] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(5) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the implementation by the Secretary under this subsection of the recommendations contained in a proposal.

[333] Article: "Obamacare's Other Unconstitutional Provision." By Clint Bolick. Hoover Institution, December 16, 2011. http://www.hoover.org/...

The law directs IPAB—a 15-member commission appointed by the president with Senate confirmation, and whose composition (unlike most other agencies) need not be bipartisan—to make annual "legislative proposals" starting in 2014 that will result in reducing the per capita rate of growth in Medicare. The law says that certain proposals are off-limits, including any that "ration health care, raise revenues or increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility requirements."

There are three whopping problems with this directive. First, if Medicare beneficiaries cannot be required to pay more and their benefits cannot be reduced, there is only one way to achieve cost-containment: to reduce payments to physicians and hospitals. Those reductions will further diminish the number of Medicare providers and/or reduce the quality of care—in essence, creating precisely the de facto rationing of health-care services the bill supposedly prohibits.

Second, crucial terms such as "rationing" are undefined, and the requirements are confusing and contradictory. Elsewhere, the law directs IPAB to "protect and improve Medicare beneficiaries' access to necessary and evidence-based items and services." So IPAB is not allowed to ration health care, but it must decide which services are "necessary and evidence-based"—which, of course, is rationing.

[334] Report: "Justification of Estimates for Appropriations Committees, Fiscal Year 2012."

Page 154: "More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline."

Page 157: "[T]he Affordable Care Act extends Federal funding for CHIP through FY 2015, appropriating $19.1 billion in FY 2014 and $21.1 billion in FY 2015."

[The Affordable Care Act] ... will enable and support states' creation by 2014 of "American Health Benefit Exchanges." An exchange cannot be an insurer, but will provide eligible individuals and small businesses with access to insurers' plans in a comparable way. The exchange will consist of a selection of private plans as well as "multi-state qualified health plans," administered by the Office of Personnel Management. Individuals will only be eligible to enroll in an exchange plan if they are not enrolled in Medicare, Medicaid, or acceptable employer coverage as a full-time employee. Based on income, certain individuals may qualify for a tax credit toward their premium costs and a subsidy for their cost-sharing; the credits and subsidies will be available only through an exchange.

[336] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

The refundable premium tax credits in section 1401 of the PPACA [the Patient Protection and Affordable Care Act] (as amended by section 1001 of the Reconciliation Act) would limit the [health insurance] premiums paid by individuals with incomes up to 400 percent of the FPL to a range of 2.0 to 9.5 percent of their income and would cost an estimated $451 billion through 2019. An estimated 25 million Exchange enrollees (79 percent) would receive these Federal premium subsidies. The cost-sharing credits would reimburse individuals and families with incomes up to 400 percent of the FPL for a portion of the amounts they pay out-of-pocket for health services, as specified in section 1402, as amended. These credits are estimated to cost $55 billion through 2019.

The PPACA establishes the Exchange premium subsidies during 2014-2018 in such a way that the reduced premiums payable by those with incomes below 400 percent of FPL would maintain the same share of total premiums over time. As a result, the Federal premium subsidies for a qualifying individual would grow at the same pace as per capita health care costs during this period. Because the cost-sharing assistance is based on a percentage of health care costs incurred by qualifying individuals and families, average Federal expenditures for this assistance would also increase at the same rate as per capita health care costs. After 2018, if the Federal cost of the premium and cost-sharing subsidies exceeded 0.504 percent of GDP, then the share of Exchange health insurance premiums paid by enrollees below 400 percent of the FPL would increase such that the Federal cost would stay at approximately 0.504 percent of GDP. We estimate that the subsidy costs in 2018 would represent about 0.518 percent of GDP, with the result that the enrollee share of the total premium would generally increase in 2019 and later.

NOTE: Although the statement above does not explicitly designate the year in which an "estimated 25 million Exchange enrollees … would receive these Federal premium subsidies," the year can be deduced by data in Table 2 (on page 24 of the pdf file). For the year 2019, this table specifies 31.6 million Exchange enrollees. As explained above, "79 percent" of these would receive subsidies. Since 79% of 31.6 million equals 25.0 million, the year 2019 is implied above.

"Persons in Family [=] 3 … 48 Contiguous States and D.C. [=] $18,530 … Alaska [=] $23,160 … Hawaii [=] $21,320"

"Persons in Family [=] 4 … 48 Contiguous States and D.C. [=] $22,350 … Alaska [=] $27,940… Hawaii [=] $25,710"

"Persons in Family [=] 5 … 48 Contiguous States and D.C. [=] $26,170 … Alaska [=] $32,720 … Hawaii [=] $30,100"

Page 19: "Table 3 Continued. Estimated Effects of PPACA and the Reconciliation Act on Insurance Coverage (Millions of nonelderly people, by calendar year) 2014 … Average exchange subsidy per subsidized enrollee (Dollars) [=] $4,610"

[339] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Small businesses and eligible tax-exempt employers who are required to make certain non-elective contributions toward the costs of employee health benefits will be eligible for a small business credit to offset the cost of employee health insurance. …

In order to qualify, the business must have no more than 25 full-time equivalent employees, pay average annual wages of less than $50,000, and provide qualifying coverage. The full amount of the credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000, and will phase out when those thresholds are exceeded. The average wage threshold for determining the phase-out of credits will be adjusted for inflation after 2013. …

Effective date – The provision is effective for amounts paid or incurred after December 31, 2009, and to the determination of AMT credits after that date and their carryback.

[340] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

The Act contains many provisions affecting employers. They generally fall into two broad categories. The first category is a set of penalties that must be paid by certain large employers that either do not offer health insurance or offer health insurance that employees opt out of in favor of acquiring coverage through an exchange. The second category is comprised of changes that employers may be required to make to their health plans. In general, however, the Act provides a broad grandfathering provision for plans in existence on the date of enactment.

PPACA [the Patient Protection and Affordable Care Act] does not mandate an employer to provide employees with coverage; however, beginning in 2014, it does impose requirements on certain employers.¹⁵ An employer with at least 50 full-time equivalents¹⁶(FTEs) that does not provide coverage may be subject to a penalty if at least one of its full-time employees receives a premium credit. An employer with at least 50 FTEs that provides access to coverage but fails to meet certain requirements may also be subject to a penalty. The number of FTEs excludes those full-time seasonal employees who work for less than 120 days during the year. The penalty for an applicable employer who provides coverage is similar to the penalty assessed against an employer who does not provide coverage. An employer may be subject to a penalty only in relation to its full-time workers, defined as those working an average of at least 30 hours per week. An employer is not subject to a penalty in relation to its part-time workers (those working less than an average of 30 hours per week). For additional information besides that provided below, see CRS Report R41159, Summary of Potential Employer Penalties Under PPACA (P.L. 111-148).

For an employer that chooses to offer health insurance, the following rules would apply:

• A small employer may offer full-time employees and their dependents coverage in an exchange plan.

• A large employer may offer full-time employees the opportunity to enroll in a group health plan.

• An employer will not be treated as meeting the employer requirements if at least one full-time employee receives premium credits in an exchange plan because the employee's required contribution exceeds 9.5% of the employee's household income or if the plan offered by the employer pays for less than 60% of covered health care expenses.¹⁷

• An employer must file a return providing the name of each individual for whom they provide the opportunity to enroll in minimum essential coverage, the length of any waiting period, the number of months that coverage was available, the monthly premium for the lowest cost option, the plan's share of covered health care expenses paid for, the number for full-time employees, the number of months employees were covered (if any), and any other information required by the Secretary.¹⁸ The employer must provide notice to employees about the existence of the exchange, including a description of the services provided by the exchange.¹⁹

• An employer will not pay a penalty for any part-time workers (those working less than 30 hours), even if that employee receives a premium credit.

In 2014, the monthly penalty assessed to the employer for each full-time employee who receives a premium credit will be 1/12 of $3,000 for any applicable month. However, the total penalty for an employer will be limited to the total number of the firm's full-time employees minus 30, multiplied by 1/12 of $2,000 for any applicable month. After 2014, the penalty amounts will be indexed by a premium adjustment percentage for the calendar year.

Finally those firms with more than 200 full-time employees that offer coverage will automatically enroll new full-time employees in a plan (and continue enrollment of current employees).²⁰ Automatic enrollment programs will be required to include adequate notice and the opportunity for an employee to opt out.

A firm with at least 50 FTEs that chooses not to offer health insurance to its full-time employees (and their dependents) will be subject to a penalty if any of its full-time employees receive premium credits in an exchange plan. In 2014, the penalty assessed to the employer will be equal to the number of full-time employees minus 30 multiplied by 1/12 of $2,000, for any applicable month. After 2014, the penalty payment amount would be indexed by a premium adjustment percentage for the calendar year.

Employers that do not offer coverage must also file a return stating that they do not offer coverage, the number of full-time employees, and other information required by the Secretary. They must provide notice to employees about the existence of the exchange, including a description of the services provided by the exchange.²¹

An employer offering minimum essential coverage who pays any portion of the costs of such plan will provide free choice vouchers to each qualified employee.²² A qualified employee is defined as an employee whose required contribution to the employer plan is greater than 8% and less than 9.5% of the employee's household income for the taxable year, whose household income is not greater than 400% of the FPL for the relevant family size, and who does not participate in the plan offered by the employer. Beginning after 2014, the 8% and 9.5% would be indexed by the rate of premium growth.

The amount of a voucher will be equal to the monthly portion of the cost of the employer plan that would have been paid by the employer if the employee were covered under the plan for which the employer pays the largest portion of plan costs, for either self or, if elected by the employee, family coverage.

An exchange will credit the amount of a voucher to the monthly premium of a qualified health plan in which the qualified employee is enrolled, and the employer will pay the exchange the credited amount. If the amount of the voucher exceeds the premium, the excess will be paid to the employee. A individual receiving a free choice voucher will not be eligible for the exchange premium credits or cost-sharing subsidies described later in this report.²³ No penalty will be imposed on an employer with respect to any employee who is provided with a voucher.

[342] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

Page 5: "Employer penalties [for not providing employees with health insurance] would be $2,000 per employee in 2014, generally, which is substantially less than the cost of providing health insurance coverage. The relationship between penalties and premiums is much more complicated for individuals than for employers; still, for many individuals the applicable penalty would be considerably smaller than the cost of coverage."

[344] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

For the estimated 23 million people who would remain uninsured in 2019, roughly 5 million are undocumented aliens who would be ineligible for Medicaid or the Exchange coverage subsidies under the health reform legislation. The balance of 18 million would choose not to be insured and to pay the penalty (if applicable) associated with the individual mandate. For the most part, these would be individuals with relatively low health care expenses for whom the individual or family insurance premium would be significantly in excess of any penalty and their anticipated health benefit value. In other instances, as happens currently, some people would not enroll in their employer plans or take advantage of the Exchange opportunities even though it would be in their best financial interest to do so.

[345] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

[346] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

For many individuals, the penalty amounts for not having insurance coverage were not sufficiently large to have a sizable impact on the coverage decision. Also, in this regard, individuals or families would not be subject to a penalty for failing to enroll in an Exchange plan if the "bronze" premium level (reduced by the premium tax credit, if applicable) would exceed 8 percent of income. We estimate that this provision would exempt individuals and families with incomes between about 400 percent and 542 percent of the FPL, representing about 16 percent of the non-aged population.

[347] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

Sec. 2704. Prohibition of preexisting condition exclusions or other discrimination based on health status.

(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not impose any preexisting condition exclusion with respect to such plan or coverage. …

SEC. 2708. PROHIBITION ON EXCESSIVE WAITING PERIODS. A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not apply any waiting period (as defined in section 2704(b)(4)) that exceeds 90 days.

Page 3: "Immediate Individual and Group Market Reforms … providing coverage for preexisting health conditions for enrollees under age 19…."

The law will apply new federal health insurance standards to group health plans as well as health insurance coverage offered in the individual, small group, and large group markets (depending on the standard), effective for plan years beginning on or after January 1, 2014. Among the insurance reforms are provisions that will subject new plans to the following requirements: …

• Prohibit group health plans (new and grandfathered) and issuers in the individual and group markets from excluding coverage for preexisting health conditions.³⁴ (A "preexisting health condition" is a medical condition that was present before the date of enrollment for health coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date. Excluding coverage for preexisting conditions refers to the case in which an applicant for coverage is offered a health insurance policy but that policy does not provide benefits for certain medical conditions.)

• Prohibit group health plans and issuers in the individual and group markets from basing eligibility for coverage on health status-related factors.³⁵ (Such factors include health status, medical condition (including both physical and mental illness), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), disability, and any other health status-related factor determined appropriate by the Secretary). …

• Prohibit group health plans and issuers in the group market (new and grandfathered) from imposing a waiting period greater than 90 days.³⁷ (A "waiting period" refers to the time period that must pass before an individual is eligible to use health benefits.)

• Require individual and group health insurance issuers to offer coverage on a guaranteed issue and guaranteed renewal basis.³⁸ ("Guaranteed issue" in health insurance is the requirement that an issuer accept every applicant for health coverage. "Guaranteed renewal" in health insurance is the requirement on an issuer to renew group coverage at the option of the plan sponsor [e.g., employer] or individual coverage at the option of the enrollee. Guaranteed issue and renewal alone would not guarantee that the insurance offered is affordable.)

• Require issuers in the individual and small group markets to determine premiums for such coverage using adjusted community rating rules.³⁹ ("Adjusted, or modified, community rating" prohibits issuers from pricing health insurance policies based on health factors, but allows it for other key characteristics such as age or gender.) Under the law, premiums will vary based only on the following risk factors: self-only or family enrollment; rating area,⁴⁰ as specified by the state; age (by no more than a 3:1 ratio across age rating bands established by the Secretary, in consultation with the National Association of Insurance Commissioners (NAIC)), and tobacco use (by no more than 1.5:1 ratio).

[349] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

(1) IN GENERAL.—With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group market—

(A) such rate shall vary with respect to the particular plan or coverage involved only by—

(iii) age, except that such rate shall not vary by more than 3 to 1 for adults (consistent with section 2707(c)); and

(iv) tobacco use, except that such rate shall not vary by more than 1.5 to 1; and

(B) such rate shall not vary with respect to the particular plan or coverage involved by any other factor not described in subparagraph (A).

(A) IN GENERAL.—Each State shall establish 1 or more rating areas within that State for purposes of applying the requirements of this title.

TITLE I—QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS … Subtitle A—Immediate Improvements in Health Care Coverage for All Americans … PART A—INDIVIDUAL AND GROUP MARKET REFORMS … SUBPART II—IMPROVING COVERAGE …

(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage shall, at a minimum provide coverage for and shall not impose any cost sharing requirements for—

(1) evidence-based items or services that have in effect a rating of 'A' or 'B' in the current recommendations of the United States Preventive Services Task Force;

(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; and

(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.

(4) with respect to women, such additional preventive care and screenings not described in paragraph (1) as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph.

(5) for the purposes of this Act, and for the purposes of any other provision of law, the current recommendations of the United States Preventive Service Task Force regarding breast cancer screening, mammography, and prevention shall be considered the most current other than those issued in or around November 2009.

Effective for plan years beginning on or after six months after enactment, a group health plan, a grandfathered plan, and a health insurance issuer offering coverage in the group or individual markets that provided dependent coverage must extend that coverage to adult children until the individual is 26 years of age.¹¹³ This will not apply to a child of the child receiving dependent coverage. For group plans that are grandfathered, the coverage is limited to those adult children that do not have an offer of coverage from an employer.¹¹⁴

[351] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

The Act imposes several other requirements affecting employer plans. Some are effective for plan years beginning six months after enactment (January 1, 2011, for calendar year plans), while others are not effective until 2014. The provisions with the earlier effective date include a prohibition against lifetime or unreasonable annual limits, a requirement to cover preventive services and immunizations without any cost sharing, and a requirement that all plans offering dependent coverage allow unmarried children to remain covered under a parent's plan through age 26. Beginning in 2014 … all annual limits will be prohibited….

Summary: "The report indicates that PPACA [the Patient Protection and Affordable Care Act the Patient Protection and Affordable Care Act] gives federal agencies substantial responsibility and authority to "fill in the details" of the legislation through subsequent regulations. Although some regulations are required in 2010, it seems likely that other regulations will be issued for years, or even decades to come."

Federal regulations generally start with an act of Congress and are the means by which statutes are implemented and specific requirements are established. In Building a Legislative-Centered Public Administration, David H. Rosenbloom succinctly described why regulations are important, why Congress delegates rulemaking authority to federal agencies, and congressional responsibilities when such delegations are made:

Rulemaking and lawmaking are functional equivalents. Legislative (substantive) rules made by agencies have the force of law. When agencies make such rules, in effect they legislate.

Page 2: "This report identifies provisions in PPACA that require, permit, or contemplate rulemaking by federal agencies to implement the legislation. … Although these searches identified more than 40 regulatory provisions in PPACA, it is unclear whether they identified all such provisions in the act."

And now Congress has handed Ms. Sebelius the authority to implement the Patient Protection and Affordable Care Act (aka, ObamaCare).

A quick search of the legislation reveals that the word "Secretary" appears nearly 3,000 times in the 2,700-page legislation. And the vast majority of those references are to the secretary of HHS.

Over and over again we see: "the Secretary shall establish"; "the Secretary shall promulgate regulations"; "the Secretary shall develop standards"; "the Secretary shall periodically review"; "as the Secretary deems are important"; "the Secretary may develop and impose appropriate penalties"; "the Secretary may adjust the rates"; "if the Secretary determines necessary"; and "the Secretary has the authority."

Subsection (c) of Section 1311 of PPACA ("Affordable Choices of Health Benefit Plans") states that "The Secretary shall, by regulation, establish criteria for the certification of health plans as qualified health plans." It goes on to say that the criteria must require that such plans meet eight minimum requirements (e.g., not employ marketing practices that discourage enrollment, ensure a sufficient choice of providers, include health plan networks that serve predominately low-income, medically underserved individuals, and utilize a standard format to present heath benefits plan options).

[356] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

TITLE I—QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS … Subtitle D—Available Coverage Choices for All Americans … PART II—CONSUMER CHOICES AND INSURANCE COMPETITION THROUGH HEALTH BENEFIT EXCHANGES …

(1) IN GENERAL.—Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an "Exchange") for the State that—

(1) IN GENERAL.—The Secretary shall, by regulation, establish criteria for the certification of health plans as qualified health plans. Such criteria shall require that, to be certified, a plan shall, at a minimum…

[357] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

• Require QHPs [qualified health plans] and issuers in the individual and small group markets to offer coverage that includes the "essential health benefits package" (see description below).⁴¹ …

The Secretary will specify the "essential health benefits" included in the "essential health benefits package" that QHPs [qualified health plans] will be required to cover (effective beginning in 2014). Essential health benefits⁴⁸ will include at least the following general categories:

• mental health and substance use disorder services, including behavioral health treatment;

[359] Article: "Obama Reaffirms Insurers Must Cover Contraception." By Robert Pear. New York Times, January 20, 2012. http://www.nytimes.com/...

Subsection (h) of Section 1311 of the act ("Affordable Choices of Health Benefit Plans") states that, beginning on January 1, 2015, a qualified health plan may contract with a health care provider "only if such provider implements such mechanisms to improve health care quality as the Secretary may by regulation require." Given this wording, the Secretary appears to be allowed not to require such improvement mechanisms. If the Secretary decides to require mechanisms to improve health care quality, it is unclear whether this subsection requires the Secretary to do so through regulations or whether other, non-regulatory methods can be used.

[361] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

(1) IN GENERAL.—The Secretary, in conjunction with States, shall establish a process for the annual review, beginning with the 2010 plan year and subject to subsection (b)(2)(A), of unreasonable increases in premiums for health insurance coverage.

(2) JUSTIFICATION AND DISCLOSURE.—The process established under paragraph (1) shall require health insurance issuers to submit to the Secretary and the relevant State a justification for an unreasonable premium increase prior to the implementation of the increase. Such issuers shall prominently post such information on their Internet websites. The Secretary shall ensure the public disclosure of information on such increases and justifications for all health insurance issuers.

The new health care law, signed in March by President Obama, calls for the annual review of "unreasonable increases in premiums for health insurance coverage."

The law did not define unreasonable — a gap the administration is now trying to fill.

[363] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

(A) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage shall annually submit to the Secretary, and to enrollees under the plan or coverage, a report on whether the benefits under the plan or coverage satisfy the elements described in subparagraphs (A) through (D) of paragraph (1). …

(D) PENALTIES.—In developing the reporting requirements under paragraph (1), the Secretary may develop and impose appropriate penalties for non-compliance with such requirements.

[364] House Resolution 3590: "Patient Protection and Affordable Care Act." Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). http://www.gpo.gov/...

(1) IN GENERAL.—A State may apply to the Secretary for the waiver of all or any requirements described in paragraph

(2) with respect to health insurance coverage within that State for plan years beginning on or after January 1, 2017. Such application shall—

(i) a comprehensive description of the State legislation and program to implement a plan meeting the requirements for a waiver under this section; and

(ii) a 10-year budget plan for such plan that is budget neutral for the Federal Government; and

(c) WAIVER OF PROVISIONS.—Notwithstanding section 1115(a) of the Social Security Act (42 U.S.C. 1315(a)), the Secretary may waive such provisions of titles XIX, XVIII, and XI of that Act as may be necessary to accomplish the goals of the demonstration, ensure beneficiary access to acute and post-acute care, and maintain quality of care.

(e) WAIVER AUTHORITY.—The Secretary may waive such requirements of titles XI and XVIII of the Social Security Act as may be necessary to carry out the program.

(5) WAIVER OF DE MINIMIS PREMIUMS.—The Secretary shall, under procedures established by the Secretary, permit a prescription drug plan or an MA–PD plan to waive the monthly beneficiary premium for a subsidy eligible individual if the amount of such premium is de minimis. If such premium is waived under the plan, the Secretary shall not reassign subsidy eligible individuals enrolled in the plan to other plans based on the fact that the monthly beneficiary premium under the plan was greater than the low-income benchmark premium amount.

(2) The Secretary may give consideration to whether an applicant has received a grant under subsection (a) of section 4101 of the Patient Protection and Affordable Care Act.

(1) under appropriate circumstances, waive the application of all or part of the requirements of this subsection with respect to an SBHC for not to exceed 2 years; and

(2) upon a showing of good cause, waive the requirement that the SBHC provide all required comprehensive primary health services for a designated period of time to be determined by the Secretary.

(2) WAIVER.—The Secretary may waive all or part of the matching requirement described in paragraph (1) for any fiscal year for the SBHC if the Secretary determines that applying the matching requirement to the SBHC would result in serious hardship or an inability to carry out the purposes of this section.

(B) WAIVER OF REQUIREMENT HALF OF TRAINING BE PROVIDED IN NON-HOSPITAL COMMUNITY-BASED CARE SETTING IN CERTAIN AREAS.—The Secretary may waive the requirement under subparagraph (A)(ii) with respect to eligible hospitals located in rural or medically underserved areas.

(iii) HARDSHIP EXCEPTION; WAIVER FOR CERTAIN MEDICAID PROVIDERS.—The Secretary may, on a caseby- case basis, exempt a provider of medical or other items or services or supplier from the imposition of an application fee under this subparagraph if the Secretary determines that the imposition of the application fee would result in a hardship. The Secretary may waive the application fee under this subparagraph for providers enrolled in a State Medicaid program for whom the State demonstrates that imposition of the fee would impede beneficiary access to care.

(C) WAIVER BY SECRETARY.—In the case of any such failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the penalty imposed by paragraph (1), to the extent that the payment of such penalty would be excessive or otherwise inequitable relative to the failure involved.

(iii) MATCHING FUNDS.—As a condition for receiving an award under this subsection, an eligible entity shall contribute to the project non-Federal funds in the amount of $1 for every $3 awarded under clauses (i) and (ii), except that the Director of NIH may waive or modify such matching requirement in any case where the Director determines that the goals and objectives of this section cannot adequately be carried out unless such requirement is waived.

The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, March 23, 2010) creates, requires others to create, or authorizes dozens of new entities to implement the legislation. Some of these new entities are offices within existing cabinet departments and agencies, and are assigned certain administrative or representational duties related to the legislation. Other entities are new boards and commissions with particular planning and reporting responsibilities. Still others are advisory bodies that were created to study particular issues, offer recommendations, or both. Although PPACA describes some of these new organizations and advisory bodies in detail, in many cases it is currently impossible to know how much influence they will ultimately have over the implementation of the legislation.

This report describes dozens of new governmental organizations or advisory bodies that are mentioned in PPACA, but does not include other types of entities that were created by the legislation (e.g., various demonstration projects, grants, trust funds, programs, systems, formulas, guidelines, risk pools, websites, ratings areas, model agreements, or protocols). A table in the Appendix is organized in terms of entities (1) that were created by PPACA itself (e.g., through statutory language stating that an organization is "established" or "created"); (2) that PPACA requires the President to establish (e.g., "the President shall establish"); (3) that PPACA requires the Secretary of the Department of Health and Human Services (HHS) to establish (e.g., "the Secretary shall establish"); (4) that PPACA requires some other organization to establish; and (5) that PPACA authorizes to be established. For each entity listed, the table identifies (to the extent provided in the legislation) the relevant section of PPACA, the name of the entity, the date that the entity is required to be created and its location, the composition of the entity and its leadership, and the purpose and duties of the entity.

NOTE: The above-mentioned appendix (pages 20-38) lists 46 new governmental offices, centers, boards, councils, commissions, committees, advisory bodies, working groups, panels, task forces, and an institute.

a) Report: "Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872, The 'Reconciliation Act Of 2010,' As Amended, In Combination With The Revenue Effects Of H.R. 3590, The 'Patient Protection And Affordable Care Act ('PPACA'),' As Passed By The Senate, And Scheduled For Consideration By The House Committee On Rules On March 20, 2010." United States Congress, Joint Committee on Taxation, March 20, 2010. http://www.jct.gov/publications.html?func=startdown&id=3672

b) Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

[367] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

The Act includes a proposal offered by President Obama for an unearned income Medicare contribution levied on income from interest, dividends, capital gains, annuities, royalties, and rents, other than such income that is derived in the ordinary course of a trade or business and not treated as a passive activity. The Act taxes this income at a rate of 3.8 percent (up from 2.9 percent in the president's plan). … These thresholds are set at $200,000 for singles and $250,000 for joint filers. …

The new unearned income Medicare contribution applies to taxable years beginning after December 31, 2012.

[368] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 20: "The ACA [Affordable Care Act] also specifies that individuals with incomes greater than $200,000 per year and couples above $250,000 will pay an additional "Medicare contribution" of 3.8 percent on some or all of their non-work income (such as investment earnings). However, the revenues from this tax are not allocated to the Medicare trust funds."

²² Sec, 3101(b), as amended by the Patient Protection and Affordable Care Act ("PPACA"), Pub. L. No. 111-148.

[370] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

Page 9: "Starting in 2013, high-income workers will pay an additional 0.9 percent tax on their earnings above an unindexed threshold ($200,000 for single taxpayers and $250,000 for married couples)."

[371] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Page 9: "Beginning in 2018, the Act imposes a nondeductible 40 percent excise tax on the "excess benefit" provided in any month under any employer-sponsored health plan. This provision is projected to raise $32 billion through 2019. An excess benefit is a benefit the cost of which, on an annual basis, exceeds $10,200 a year for individuals or $27,500 for families. … Effective date – The high-cost plan excise tax applies to taxable years beginning after 2017."

[372] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Page 10: "An annual fee will be imposed on covered entities providing health insurance with respect to U.S. health risks. … Effective date – The fee will first be payable in 2014 with respect to net premium written in 2013."

[373] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Page 11: "The Act imposes an annual fee on pharmaceutical manufacturers and importers of branded prescription drugs (including certain biological products). … Effective date – The fee will first be payable in 2011 with respect to sales in 2010."

[374] Report: "Prescription for change 'filled': Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010." By Clint Stretch and others. Deloitte, March 30, 2010. http://www.deloitte.com/...

Page 12: "The Act imposes an excise tax of 2.3 percent on the sale price of any taxable medical device sold by manufacturers and importers beginning in 2013. Covered devices – The Act generally applies to sales for use in the United States of any medical device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans."

[377] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Page 2: "No less than 101 amendments were submitted to the Rules Committee, and no less than 10 amendments were submitted to the Budget Committee. As part of the Democrat majority's plan to silence the Republican minority, none of the following amendments were adopted in the Reconciliation bill."

[378] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: … The OPTION Act will extend the tax deduction on health care premiums to all individuals, making health care expenses totally deductible for individuals, and not just businesses. All expenses currently allowed to be purchased with Health Savings Accounts (HSAs) will be tax deductible also. Individuals who have employer health care plans but still incur costs on medical expenses, deductibles, premiums, pharmaceuticals (prescribed, over the counter, etc.), or any medical related expenses would qualify for this deduction. Medicare recipients will also be allowed to deduct their Medicare supplemental insurance premiums.

Action: The amendment was rejected by a vote of 9 to 4. This amendment was previously introduced as stand-alone legislation on October 21, 2009, H.R. 3889, Offering Patients True and Individualized Options Now Act.

Page 8: "Summary: This amendment would allow for 100% deductibility of individual medical expenses. Action: The amendment was rejected by a vote of 9 to 4."

[379] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: This amendment would repeal the enactment of the Independent Medicare Advisory Board … which was renamed the Independent Payment Advisory Board (IPAB), made up of non-elected government bureaucrats that are empowered to make arbitrary cuts to Medicare providers and make recommendations to non-federal health programs that will limit access to care for seniors. Congress would be required to consider legislation implementing the proposal or alternative proposals with the same budgetary impact on a fast track basis. The recommendations of the board would go into effect automatically unless blocked by subsequent legislative action. …

Action: The amendment was rejected by a vote of 9 to 4. This amendment was introduced in March 2010 as stand-alone legislation, H.R. 4985, the Medicare Decisions Accountability Act of 2010.

[380] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: This amendment would require that all individuals under Medicaid have to demonstrate their identity and citizenship. Currently, there are 11.1 million illegal aliens residing in the United States. This amendment would prevent the crippling burden of providing free health care to these non-citizens from falling on the shoulders of the U.S. taxpayer.

Action: The Democrat majority did not consider this amendment in committee. Rep. Deal introduced a similar amendment in the House Energy & Commerce Committee mark-up of H.R. 3200, which was rejected.

Summary: This amendment would require a valid photo ID when applying for Medicaid or SCHIP. While the bill requires that applicants give a social security number, it contains no requirement that an individual show a valid ID in order to match the individual with the social security number provided—thus creating a vast opportunity for fraud and abuse.

Summary: This amendment would require any individual who wishes to access to a health Exchange or affordability tax credits to provide documentation of citizenship or nationality. The Senate bill contains the same insufficient and ineffective verification methods as the House, causing some to be concerned that it would still allow for illegal immigrants to access the Exchange and subsidies.

[381] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: This amendment would repeal the individual mandate. PPACA imposes $17 billion tax increase for non-compliance with the individual mandate. Furthermore, the individual mandate necessitates a government definition of acceptable health care coverage. Because the benefit package found in the Democrats' health care bills are quite large (or in some cases still to be determined by an unelected bureaucratic board of the Secretary of HHS), it is likely that millions of Americans would be unable to keep their existing health care coverage and be forced to pay for more expensive health insurance or pay a fine. CBO found that 3.9 million Americans would pay $17 billion in taxes

[382] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: This amendment would add a section on interstate purchasing of health insurance, which was previously introduced as H.R. 3217, Health Care Choice Act of 2009. This Act empowers consumers by giving them the ability to purchase an affordable health insurance policy with a range of options. It will allow consumers to purchase health insurance licensed in other states – expanding choice and increasing affordability. Interstate shopping is vital to bringing prices down through free enterprise. The National Center for Policy Analysis notes that a healthy 25-year-old male could purchase a basic health insurance policy in Kentucky for $960 a year. That same policy in New Jersey, however, would cost $5,880 a year. The Health Care Choice Act would enable the market to mitigate such enormous price differentials.

Action: The amendment was rejected by a vote of 9 to 4. This amendment was previously introduced on July 14, 2009 as stand-alone legislation, H.R. 3217, Health Care Choice Act of 2009.

Pages 33-34: "Summary: This amendment would force health insurance companies to compete across state lines, which expands consumers' choice and increases affordability. Interstate shopping is vital to bringing down prices down through free enterprise. Action: The Democrat majority did not consider this bill in committee. Rep. John Shadegg introduced similar stand-alone legislation, H.R. 3217, the Health Care Choices Act of 2009."

[383] Report: "Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010." Republican Study Committee, August 2010. http://rsc.jordan.house.gov/...

Summary: This amendment would extend the protection of existing coverage in section 1251, "Preservation of Right to Maintain Existing Coverage," to those who are enrolled after the date of enactment. This amendment would change the section of the bill entitled "Protecting the Choice to keep Current Coverage" to include appropriate language in keeping with this section's title. Currently, this section contains language forcing all employer health plans to comply with new mandates from the Secretary of HHS within five years of the bill's enactment, thus essentially preventing Americans from keeping their current plans. This amendment would replace these provisions with the statement "Nothing in this Act shall be construed to prevent or limit individuals from keeping their current health coverage." This language far more closely represents the section title's intent as well as President Obama's promise to the American people.

Action: The Democrat majority did not consider this amendment in committee. This amendment was previously introduced and rejected in House Energy & Commerce Committee mark-up of H.R. 3200.

[384] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

The estimated costs and savings shown in the table are based on the effective dates specified in the law as enacted. Additionally, we assume that employers and individuals would take roughly 3 to 5 years to fully adapt to the new insurance coverage options and that the enrollment of additional individuals under the Medicaid coverage expansion would be completed by the third year of implementation. Because of these transition effects and the fact that most of the coverage provisions would be in effect for only 6 of the 10 years of the budget period, the cost estimates shown in this memorandum do not represent a full 10-year cost for the new legislation.

[385] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

We estimate … $575 billion in net savings for the Medicare provisions, a net cost of $28 billion for the Medicaid/CHIP provisions (excluding the expansion of Medicaid eligibility and the additional CHIP funding), $2 billion in savings from provisions intended to help reduce the rate of growth in health spending … and $10 billion in costs for the immediate insurance reforms. …

… ($410 billion) can be attributed to expanding Medicaid coverage for all adults who live in households with incomes below 133 percent of the FPL. … [A]dditional funding for the CHIP program for 2014 and 2015, which would increase such expenditures by an estimated $29 billion. [R]efundable tax credits and reduced cost-sharing requirements for low-to-middle-income enrollees purchasing health insurance through the Exchanges ($507 billion) and credits for small employers who choose to offer insurance coverage ($31 billion).

[386] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

The increases in Federal expenditures would be partially offset by the penalties paid by affected individuals who choose to remain uninsured and employers who opt not to offer coverage; such penalties total $120 billion through fiscal year 2019….

[387] Calculated with data from the report: "Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872, The 'Reconciliation Act Of 2010,' As Amended, In Combination With The Revenue Effects Of H.R. 3590, The 'Patient Protection And Affordable Care Act ('PPACA'),' As Passed By The Senate, And Scheduled For Consideration By The House Committee On Rules On March 20, 2010." United States Congress, Joint Committee on Taxation, March 20, 2010. http://www.jct.gov/publications.html?func=startdown&id=3672

"Fiscal years 2010-19 … [Billions of Dollars] … 6. Require information reporting on payments to corporations [=] 17.1 … NET TOTAL [=] 437.8

NOTE: Revenue provision # 6 (Require information reporting on payments to corporations) has been repealed and is thus subtracted from the total. [Article: "President Signs Repeal of Expanded 1099 Requirements." Journal of Accountancy, April 14, 2011. http://www.journalofaccountancy.com/web/20114071.htm]

[388] This figure of $141 billion, which was calculated by Just Facts using data from the Joint Committee on Taxation and the Centers for Medicare and Medicaid Services, is $17 billion higher than the projection of the Congressional Budget Office.† In keeping with our Standards of Credibility, we are citing the higher of these numbers to give "preferentiality to figures that are contrary to our viewpoints."

[389] "2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf

"Overriding the [Affordable Care Act] productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law."

[390] Letter: "Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers." By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. http://www.cms.gov/...

The purpose of the SGR [Sustainable Growth Rate] system, which was enacted as part of the Balanced Budget Act of 1997, is to limit growth in spending on physician services to a sustainable rate, roughly in line with the rate of overall economic growth.

Because actual physician-related spending has exceeded the target spending levels for 2001 through 2009, physician payment reductions have been scheduled for every year since 2002. An update of −4.8 percent was required and was allowed to take effect in 2002—the only historical year in which a negative physician update was implemented under the SGR. For the next 9 years (2003-2011), scheduled negative updates of at least −5 percent were overridden by new legislation, which provided updates ranging from 0 percent to 2.2 percent. For 2004 through 2006, these legislative acts not only provided replacement updates and increased the actual physician spending, they also specified that the target level of spending would not be increased to match.⁵ Thus, the cumulative difference between actual and target spending has increased substantially. Each of the legislative changes to the physician updates for 2007through 2011 increased both actual and target spending, but required that the payment updates for subsequent years be determined as if the updates in the prior years had not been changed.

Page 6: "The increasing differential between Medicare and private payment rates is due to the productivity adjustments in 2012 and later for the Medicare payment updates (and, to a lesser degree, to the other, smaller downward adjustments in 2010-2019 specified by the ACA in addition to the productivity adjustments)."

[391] "Remarks by the President on 20th Anniversary of the Americans with Disabilities Act

So the Affordable Care Act I signed into law four months ago will give every American more control over their health care—and it will do more to give Americans with disabilities control over their own lives than any legislation since the ADA [Americans with Disabilities Act]. …

… And because Americans with disabilities are living longer and more independently, this law will establish better long-term care choices for Americans with disabilities as a consequence of the CLASS Act, an idea Ted Kennedy championed for years. (Applause.)

[392] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

Title VIII of the health reform act establishes a new, voluntary, Federal insurance program providing a cash benefit if a participant is unable to perform at least two or three activities of daily living or has substantial cognitive impairment. The program will be financed by participant premiums, with no Federal subsidy. Participants will have to meet certain modest work requirements during a 5-year vesting period before becoming eligible for benefits. Benefits are intended to be used to help purchase community living assistance services and supports (CLASS) that would help qualifying beneficiaries maintain their personal and financial independence and continue living in the community. Benefits can also be used to help cover the cost of institutional long-term care. …

[393] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

We estimate that roughly 2.8 million persons will participate in the program by the third year. This level represents about 2 percent of potential participants, compared to a participation rate of 4 percent for private long-term care insurance offered through employers. Factors affecting participation in CLASS include the program's voluntary nature, the lack of a Federal subsidy, a minimal premium for students and individuals with incomes under 100 percent of the FPL (initially $5 per month), a relatively high premium for all other participants as a result of adverse selection and the effect of subsidizing participants paying the $5 premium, a new and unfamiliar benefit, and the availability of lower-priced private long-term care insurance for many.

If anyone can claim responsibility for the CLASS Act's demise, it's probably Sen. Judd Gregg. During the health reform debate, the former Republican senator from New Hampshire secured an amendment requiring the Department of Health and Human Services to certify that the long-term insurance program would be fiscally sound. …

Sen. Judd Gregg: I knew we weren't going to kill the CLASS Act because it was Sen. Ted Kennedy's proposal, and he was very sick, and most of us were very sensitive to the fact he was sick. This was his last hurrah, legislatively. I knew we were going to implement it, although I didn't think the concept was sound. Conceptually, it makes sense to prefund long-term care insurance.... but what this bill did was just the opposite. It was totally unsound.

My thought was, let's put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.

Section 8002 of the act ("Establishment of a National Voluntary Insurance Program for Purchasing Community Living Assistance Services and Support") amended the PHSA [Public Health Service Act] by, among other things, adding a new Section 3203 ("CLASS Independence Benefit Plan") that requires the Secretary to develop at least three "actuarially sound benefit plans as alternatives for consideration for designation by the Secretary as the CLASS Independence Benefit Plan under which eligible beneficiaries shall receive benefits under this title." Subsection (a)(2) of this new section requires a "CLASS Independence Advisory Council" to evaluate the alternative plans and recommend the one that "best balances price and benefits to meet enrollee's needs in an actuarially sound manner." Using this information, Subsection (a)(3) requires the Secretary to designate a benefit plan as the CLASS Independence Benefit Plan, and to do so "along with details of the plan and the reasons for the selection by the Secretary, in a final rule that allows for a period of public comment."

[396] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, thereby leading to additional premium increases. This effect has been termed the "classic assessment spiral" or "insurance death spiral." The problem of adverse selection is intensified by requiring participants to subsidize the $5 premiums for students and low-income enrollees. Although Title VIII includes modest work requirements in lieu of underwriting and specifies that the program is to be "actuarially sound" and based on "an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period," there is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.¹³

¹³ An analysis of the potential adverse selection problems for the CLASS program was performed by a nonpartisan, joint workgroup of the American Academy of Actuaries and the Society of Actuaries. Their report was issued on July 22, 2009 and is available at http://www.actuary.org/pdf/health/class_july09.pdf.

[397] Blog post: "Secretary Sebelius Cannot Fix CLASS." By Brian Blase and John S. Hoff. Heritage Foundation, March 16, 2011. http://heritage.org/...

The main problem is that the program's design will result in a badly skewed pool of participants. This is primarily because health status cannot be a factor used for calculating premiums. This means healthy individuals are less likely to participate because they do not receive credit in the form of a lower premium, like they would if they purchased LTC insurance in the private market. Instead, CLASS participants are likely to be disabled individuals who are able to work part-time and individuals who anticipate future LTC needs.

Moreover, the adverse selection problem is exacerbated because individuals earning below the poverty line are subjected to only a $5 monthly premium, and less healthy people are much more likely to be below the poverty line. The artificially low premium for them means that premiums will have to be much higher for others, which will diminish overall enrollment in the program and worsen its long-run solvency. The poor design of CLASS almost guarantees that the program will collapse or need a bailout.

[398] Report: "Estimated Financial Effects of the 'Patient Protection and Affordable Care Act,' as Amended." By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

Participants will have to meet certain modest work requirements during a 5-year vesting period before becoming eligible for benefits. Benefits are intended to be used to help purchase community living assistance services and supports (CLASS) that would help qualifying beneficiaries maintain their personal and financial independence and continue living in the community. Benefits can also be used to help cover the cost of institutional long-term care.

As shown in the table on page 2, we estimate a net Federal savings for the CLASS program of $38 billion during the first 9 years of operations—the first 5 of which are prior to the commencement of benefit payments. After 2015, as benefits are paid, the net savings from this program will decline; in 2025 and later, projected benefits exceed premium revenues, resulting in a net Federal cost in the longer term.¹²

¹² The CLASS program is intended to be financed on a long-range, 75-year basis through participant premiums that would fully fund benefits and administrative expenses. If this goal can be achieved, despite anticipated serious adverse selection problems (described subsequently), then annual expenditures would be met through a combination of premium income and interest earnings on the assets of the CLASS trust fund. The Federal Budget impact would be the net difference between premium receipts and program outlays. Thus, the trust fund would be adequately financed in this scenario, but the Federal Budget would have a net savings each year prior to 2025 and a net cost each year thereafter.

The Obama administration announced Friday that it was scrapping a long-term care insurance program created by the new health care law because it was too costly and would not work. …

"We have not identified a way to make Class work at this time," Ms. Sebelius said. She said the program, which had been championed by Senator Edward M. Kennedy, Democrat of Massachusetts, was financially unsustainable.

My thought was, let's put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.

[401] Article: "Obama opposes repeal of healthcare program suspended last week." By Julian Pecquet. The Hill, October 17, 2011. http://thehill.com/...

"President Obama is against repealing the health law's long-term care CLASS Act and might veto Republican efforts to do so, an administration official tells The Hill, despite the government's announcement Friday that the program was dead in the water."

[402] Article: "Obama: 'If You Like Your Doctor, You Can Keep Your Doctor'." By Mary Lu Carnevale. Wall Street Journal, June 15, 2009. http://blogs.wsj.com/...

President Barack Obama's address to the annual meeting of the American Medical Association today didn't break new ground, but attempted to assure doctors and their patients that his prescription for overhauling the health care system would be good for them.

So let me begin by saying this: I know that there are millions of Americans who are content with their health care coverage – they like their plan and they value their relationship with their doctor. And that means that no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what's broken and build on what works.

[403] Calculated with data from: "National Health Expenditure Web Tables (Calendar Years 1960-2010)." U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services. Accessed January 16, 2012 at http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf

Table 4: "National Health Expenditures, by Source of Funds and Type of Expenditure: Calendar Years 2004-2010 [billions $]"

Variables: Private health insurance "health consumption expenditures" and "net cost of health insurance"

Net cost of health insurance is calculated as the difference between CY [calendar year] incurred premiums earned and benefits paid for private health insurance. This includes administrative costs, and in some cases, additions to reserves, rate credits and dividends, premium taxes, and plan profits or losses. Also included in this category is the difference between premiums earned and benefits paid for the private health insurance companies that insure the enrollees of the following programs: Medicare, Medicaid, Children's Health Insurance Program, and workers' compensation (health portion only).

NOTE: An Excel file containing the data and calculations is available upon request.

[404] Book: Medical Care Output and Productivity. Edited by David M. Cutler and Ernst R. Berndt. University of Chicago Press, 2001.

Chapter 7: "National Health Accounts/National Income and Product Accounts Reconciliation: Hospital Care and Physician Services." By Arthur Sensenig and Ernest Wilcox.

Page 276: "Since 1964, the U.S. Department of Health and Humans Services has published an annual series of statistics presenting total national health expenditures during each year. … [The] net cost of private health insurance [is] … the difference between premiums earned by insurers and the claims or losses for which insurers become liable…."

Includes premiums paid to traditional managed care, self-insured health plans and indemnity plans. This category also includes the net cost of private health insurance which is the difference between health premiums earned and benefits incurred. The net cost consists of insurers' costs of paying bills, advertising, sales commissions, and other administrative costs; net additions to reserves; rate credits and dividends; premium taxes; and profits or losses.

[407] Book: Cost Accounting. By V. Rajasekaran & R. Lalitha. Dorling Kindersley, 2011.

Administration overhead … Examples: Salary of administrative-office personnel, rent, taxes of general office, remuneration and sitting fees of directors, lighting, heating and other expenses of general office; all stationary and communication of expenses of office, audit fees, legal fees, insurance premium of office buildings, furniture and fixtures and their respective depreciation and bank changes. …

Selling overhead … Examples: Salary and all incentives offered for sales personnel, travelling expenses of sales personnel, rebates and discounts in the costs of price list, brochures, samples, collections costs for debts, repair and maintenance, insurance premium paid and deprecation with respect to sales office building, sales office equipment, furniture and fixtures.

a) "Industries, Health Care: Insurance and Managed Care." Fortune, May 5, 2008. http://money.cnn.com/...

b) "Industries, Health Care: Insurance and Managed Care." Fortune, May 4, 2009. http://money.cnn.com/...

c) "Industries, Health Care: Insurance and Managed Care." Fortune, May 3, 2010. http://money.cnn.com/...

d) "Industries, Health Care: Insurance and Managed Care." Fortune, May 23, 2011. http://money.cnn.com/...

NOTE: An Excel file containing the data and calculations is available upon request.

[409] Book: The Essentials of Finance and Budgeting. Harvard Business School Publishing, 2005. Page 33:

As Congress prepares to head into a monthlong August recess, Democratic leaders on Capitol Hill ripped into the insurance industry, framing the health care debate as a battle against insurers. …

Senate Majority Leader Harry Reid also called out insurers at a news conference Thursday.

"I don't think we should be crying great big tears for the insurance industry," he said. "There is no business in America that makes more money than the insurance industry. Over the past 10 years their profits have been increased by over 450 percent.

"Any arrangement for health care in which an organization, such as an HMO, another type of doctor-hospital network, or an insurance company, acts as intermediate between the person seeking care and the physician."

Chris Matthews showed his distain for the companies' profits on NBC Sept. 6 saying: "I'd regulate the insurance companies like public utilities, and squeeze them down to a reasonable profit level." He asked his guests that day, "Why don't they do that? That's the solution."

Katty Kay, BBC's Washington correspondent, replied, "Well, you'd stop the insurance companies making outrageous profits."

"Net Profit Margin % (most recent quarter) … The New York Times Company (NYT) [=] 2.92%"

[421] Press Release: "New U.S. census data show rise in number of uninsured Americans, underscoring importance of Affordable Care Act." Statement from Alan Baker (interim executive director), American Public Health Association, September 13, 2011. http://www.apha.org/...

[422] Article: "Key points of U.S. Census report: Health insurance and poverty." By Star-Ledger Staff. Star Ledger, September 14, 2011. http://www.nj.com/...

[424] Report: "Income, Poverty, and Health Insurance Coverage in the United States: 2010." By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. http://www.census.gov/prod/2011pubs/p60-239.pdf

Page 1: "This report presents data on income, poverty, and health insurance coverage in the United States based on information collected in the 2011 and earlier Current Population Survey Annual Social and Economic Supplements (CPS ASEC) conducted by the U.S. Census Bureau."

Page 26: "Table 8. People Without Health Insurance Coverage by Selected Characteristics: 2009 and 2010"

[425] Report: "Income, Poverty, and Health Insurance Coverage in the United States: 2010." By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. http://www.census.gov/prod/2011pubs/p60-239.pdf

National surveys and health insurance coverage. Health insurance coverage is likely to be underreported on the Current Population Survey (CPS). While underreporting affects most, if not all, surveys, underreporting of health insurance coverage appears to be a larger problem in the Annual Social and Economic Supplement (ASEC) than in other national surveys that ask about insurance. … Compared with other national surveys, the CPS estimate of the number of people without health insurance more closely approximates the number of people who are uninsured at a specific point in time during the year than the number of people uninsured for the entire year.

Reporting of coverage through major federal health insurance programs. The CPS ASEC data underreport Medicare and Medicaid coverage compared with enrollment and participation data from the Centers for Medicare and Medicaid Services (CMS).¹ Because the CPS is largely a labor force survey, interviewers receive less training on health insurance concepts than labor concepts. Additionally, many people may not be aware that a health insurance program covers them or their children if they have not used covered services recently. CMS data, on the other hand, represent the actual number of people who have enrolled or participated in these programs. …

¹ CMS is the federal agency primarily responsible for administering the Medicare and Medicaid programs at the national level.

[426] Report: "Income, Poverty, and Health Insurance Coverage in the United States: 2010." By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. http://www.census.gov/prod/2011pubs/p60-239.pdf

The State Health Access Data Assistance Center (SHADAC) of the University of Minnesota has worked with the U.S. Census Bureau, CMS, and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) on a research project to evaluate why CPS ASEC [the Current Population Survey Annual Social and Economic Supplement (i.e., this report)] estimates of the number of people with Medicaid are lower than counts of the number of people enrolled in the program from CMS [the Centers for Medicare and Medicaid Services]. Reports from all four phases of the research project are available from the Census Bureau's Web site at <www.census.gov/did/www/snacc/>.

During Phase 1, a database of Medicaid and Medicare enrollment was built using the CMS Medicaid Statistical Information System (MSIS) files merged with CMS Medicare Enrollment Database (EDB) files. The quality of the database was evaluated using two Census Bureau files: the Master Address File/Auxiliary Reference File (MAFARF) and the Person Characteristics File (PCF).

… A key finding indicating survey response error in the CPS ASEC was that 16.9 percent of people with an MSIS record indicating Medicaid coverage reported in the CPS ASEC that they were uninsured. …

Phase 4 consisted of repeating the Phase 2 process using the National Health Interview Survey (NHIS) data instead of CPS ASEC data. The purpose of this was twofold: to provide explanations for the differences found between NHIS data and MSIS files and to examine how differing survey designs and methodologies affect the survey data and estimates. The report found that the NHIS Medicaid undercount was 27.3 percent in 2001 and 21.7 percent in 2002, but noted that the NHIS added questions in 2004 and these results may not apply to more recent data.

NOTE: See the next footnote, which shows that the uninsured undercount in 2005 was even greater than 16.9%.

a) Report: "Income, Poverty, and Health Insurance Coverage in the United States: 2010." By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. http://www.census.gov/prod/2011pubs/p60-239.pdf

Page 77: "Table C-1: Health Insurance Coverage: 1987 to 2010 (Numbers in thousands. People as of March of the following year) … 2005 … Not covered [=] 43,035"

b) Report: "Research Project to Understand the Medicaid Undercount: Phase V Research Results: Extending the Phase II Analysis of Discrepancies between the National Medicaid Statistical Information System (MSIS) and the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) from Calendar Years 2000-2001 to Calendar Years 2002-2005. By Michael Davern and others. State Health Access Data Assistance Center, January 4, 2010. http://www.census.gov/...

This paper describes the results of the fifth phase of a multi-phase research project coordinated by the University of Minnesota's State Health Access Data Assistance Center (SHADAC), Centers for Medicare and Medicaid Services (CMS), Assistant Secretary for Planning and Evaluation (ASPE), National Center for Health Statistics (NCHS), Administration for Healthcare Research and Quality (AHRQ), and U.S. Census Bureau. The research is designed to explain why discrepancies exist between survey estimates of enrollment in Medicaid and the number of enrollees reported in state and national administrative data. …

When measured using raw counts (i.e., counts with no or minimal adjustments), the size of the undercount is about 35 percent (i.e., the CPS ASEC [the Current Population Survey Annual Social and Economic Supplement (i.e., the report cited in (a) above)] shows 35 percent fewer people enrolled in Medicaid than MSIS [Medicaid Statistical Information System] administrative records). Some of this raw undercount can be accounted for by the fact that the two data sources have different concepts of Medicaid coverage as well as different universes. When the counts are fully adjusted to account for these differences, the undercount is reduced by about 3 percentage points to 32 percent. …

The linked file suggests that a predominant part of the adjusted undercount can be accounted for by false negative respondent error (i.e., persons on the CPS ASEC being incorrectly classified as lacking Medicaid coverage). Most of this error comes from cases where enrollment status was explicitly reported (as opposed to cases where the enrollment status was imputed or edited).

Table 3 shows that for all of the years studied, similar conclusions can be drawn regarding the importance of false negative error as a contributor to the undercount.

Table 3: False Negative Survey Errors on the CPS … Calendar Year 2005 … "Other Insurance" status of false negative population … Uninsured [=] 7,800,000

Table 3 also shows the "other insurance" status of the population with false negative errors (i.e. whether or not the person is categorized on the CPS ASEC as having any other insurance coverage, either public or private). This information is useful when considering the impact that the false negative population has on the estimate of the size of the uninsured population. Surveyed persons mistakenly classified as not enrolled in Medicaid will only affect the estimate of the uninsured population if they are not also classified as having any other insurance coverage. Table 3 shows that in all years only about 40% of the false negative population is classified as having no other insurance – i.e. less than half of the population with false negative errors has any impact on the estimate of the uninsured population.

CALCULATION: 7,800,000 uninsured false negatives in 2005 / 43,035,000 uninsured in the Census Bureau's 2005 Current Population Survey = 18.1%