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Spending, Prices, and Costs

Overview

* The facts below differentiate between healthcare spending, prices, and costs based upon the following definitions:

  • 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 services and products to patients. This is equivalent to prices minus profits or losses.

* From 1960 to 2017, healthcare spending in the United States increased:

  • from an average of $151/person per year to $10,731 (by 71 times).
  • from an inflation-adjusted average of $1,278/person per year to $10,993 (by 8.6 times).
  • from 5.0% of the nation’s economy (gross domestic product) to 17.9% (by 3.6 times).[1]
Portion of Economy Spent on Healthcare

[2]

* 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]

* A 2019 survey of 15 hospitals in Ohio (where state law requires hospitals to publish their prices)[6] found that the daily price of a typical hospital room ranged from $1,010 to $3,464, with an average of $2,125 and a median of $2,040.[7]

* In 1980, the average price for a typical hospital room in the U.S. was $127 per day.[8] Adjusting for inflation, this amounts to $413 in 2019 dollars.[9]

* 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.).[10] [11] Adjusting for inflation, this amounts to $590 in 2019 dollars.[12]

* In 2002, Mutual of Omaha paid an average of $748 per day for all types of hospital rooms.[13] Adjusting for inflation, this amounts to $1,068 in 2019 dollars.[14]


Third-Party Payments

* Third-party payments are healthcare expenses that are not directly paid by consumers but by other entities such as governments and insurance companies. Such entities are called “third-parties” because they do not deliver or receive healthcare. In other words, they are not patients or caregivers.[15]

* From 1960 to 2017, the portion of U.S. healthcare expenses paid:

  • directly by consumers decreased from 48% to 10%.
  • by private insurance increased from 21% to 34%.
  • by government increased from 24% to 49%.[16]

* A scientific, nationally representative survey commissioned in 2018 by Just Facts found that 40% of voters believe the government now pays a smaller portion of all U.S. healthcare costs than it did in 1960.[17] [18] [19]

* Per the Encyclopedia of Health Care Management:

[B]ecause 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.[20] [21] [22]

* 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 healthcare expenses could never exceed certain portions of their income.[23] (Accounting for inflation, $1,000 during the timeframe of this study equates to about $4,000 in 2019 dollars.[24])

* The families in the study 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.[25]
  • 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.[26]
  • 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:
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….[27]

* A 2001 study published in the American Journal of Public Health 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:

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.[28] [Click on the footnote for some limitations of the study.]

* U.S. law has incentivized and subsidized third-party healthcare payments by:

  • making employer-provided health insurance generally exempt from federal taxes but not medical expenses paid directly by consumers unless they exceed 10% of their adjusted gross income.[29] [30] [31]
  • providing health insurance through Medicare for almost all Americans aged 65 and older and for younger people who are permanently disabled (60 million people in 2018, or 18% of the population).[32] [33]
  • providing health insurance through Medicaid for people with family incomes up to 138% of federal poverty guidelines and unlimited financial assets (an average of 72 million people in 2016, or 22% of the population).[34] [35] [36] [37]
  • subsidizing health insurance through the Children’s Health Insurance Program for children in families with incomes as high as 400% of federal poverty guidelines and unlimited financial assets (9.6 million people in 2018, or 3% of the population).[38] [39] [40] [41]
  • subsidizing certain health insurance plans for individuals with incomes up to 400% of federal poverty guidelines (9.2 million people in 2019, or 3% of the population).[42] [43]
  • subsidizing certain health insurance plans for certain small businesses.[44] [45]

Wealth

* Two common measures of nations’ wealth are:

  1. gross domestic product (GDP), or the amount of the goods and services produced by an economy.[46] [47] [48]
  2. disposable income, or household income minus taxes.[49] [50]

* The Organization for Economic Cooperation and Development (OECD) is a group of 36 mostly developed nations such as Australia, Canada, Germany, Japan, and the United States.[51] [52]

* Among OECD nations, higher disposable income is generally associated with a greater portion of GDP spent on healthcare:

Healthcare Spending of OECD Nations

[53] [54] [55] [56]

* 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….”[57] [58]


Age

* Personal healthcare expenditures consist of monies directly spent to “treat individuals with specific medical conditions.”[59]

* In the U.S. during 2014, the average annual healthcare spending per person for 65–84-year-olds was 3.5 times higher than that of 19–44 year-olds:

Age Group (Years)

Annual Personal Healthcare

Spending Per Person

0–18

$3,749

19–44

$4,856

45–64

$10,212

65–84

$16,977

85+

$32,903

All ages

$8,054

[60]

* When the first wave of baby boomers reached the age of 65 in 2011, there were 4.5 Americans aged 20–64 for every American aged 65 or older. As the baby-boom generation ages and projected life expectancy increases, the Social Security Administration projects that this ratio will drop to 3.5 to 1 by 2020 and to 2.8 to 1 by 2030.[61] [62] [63]


Preventative Care

* Cancer, cardiovascular disease, and diabetes are responsible for the majority of deaths and healthcare costs in the United States.[64]

* 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.[65]

* Per the Congressional Budget Office:

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 healthcare, 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.[66]

* 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.[67]

* The study’s conclusion states:

Although effective obesity prevention leads to a decrease in costs of obesity-related diseases, this decrease is offset by cost increases due to diseases unrelated to obesity in life-years gained. Obesity prevention may be an important and cost-effective way of improving public health, but it is not a cure for increasing health expenditures.[68]

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

lengthening life generally will increase healthcare needs, particularly needs for long term nursing care as most life years are added to old age.
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.

* The study’s conclusion states:

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.[69]

Profits & Salaries

* EBITDA or “earnings before interest, taxes, depreciation and amortization,” is “an important standard measure” of company and industry profitability.[70] [71]

* From 1993 to 2017, the average EBITDA margin for all companies in the S&P 500 was 20%. For healthcare companies in the S&P 500, it was 18%:

S&P 500 EBITDA Margins

[72] [73]

* As of August 2015, the net profit margins (after taxes)[74] for various industries within the healthcare sector were as follows:

Industry

Net Profit Margin

Medical Practitioners

–11.5%

Generic Drugs

–4.4%

Long-Term Care Facilities

–2%

Home Healthcare

–0.5%

Drug-Related Products

1.7%

Healthcare Plans

3.2%

Hospitals

4.1%

Specialized Health Services

6.2%

Medical Laboratories & Research

6.4%

Drug Delivery

8.2%

Medical Appliances & Equipment

10.2%

Medical Instruments & Supplies

10.5%

Diagnostic Substances

11.4%

Non-Major Drug Manufacturers

17.6%

Biotechnology

19.5%

Major Drug Manufacturers

21.6%

[75]

* In May of 2018, the average hourly wage (not including benefits) for nonfarm workers in the U.S. was $24.98, and the average hourly wage for various healthcare occupations was as follows:

Occupation Title

Average Hourly Wage

Pharmacy Technicians

$16.35

EMTs and Paramedics

$18.15

Dietitians and Nutritionists

$29.43

Registered Nurses

$36.30

Chiropractors

$41.28

Physical Therapists

$42.73

Physician Assistants

$52.13

Pharmacists

$59.45

Dentists

$86.82

Pediatricians

$88.10

Psychiatrists

$105.95

Family and General Practitioners

$101.82

Obstetricians and Gynecologists

$114.58

Surgeons

$122.65

Anesthesiologists

$128.38

[76] [77]

* In 2018, nine of the top-10 highest-paying occupations were in the medical or dental fields.[78]

* Per the Congressional Budget Office:

The process of educating and training new physicians can be lengthy, reflecting the complexity of medical care. After obtaining a four-year college degree (usually with a “pre-med” or related major), prospective physicians generally spend four years training in medical schools and then enroll in residency programs that can last from three to seven years, depending on the medical specialty they are pursuing.[79]

Waste, Fraud & Abuse

* Per the U.S. Treasury Department, an “improper payment” is:

any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments)…. It includes any payment to an ineligible recipient, any payment for an ineligible service, any duplicate payment, payments for services not received….[80]

* Per the U.S. Government Accountability Office:

  • “Once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar.”[81]
  • “We have designated Medicare and Medicaid as high-risk programs because their size, scope, and complexity make them particularly vulnerable to fraud and abuse.”[82]
  • There “are no reliable estimates” for the amount of fraud in the Medicare and Medicaid programs “or across the health care industry generally.”[83]

* In 2018, the U.S. Department of Health and Human Services and Department of Justice spent $2.0 billion trying to control healthcare fraud and abuse.[84]

* According to federal government estimates, during 2018:

  • the Children’s Health Insurance Program made $1.4 billion in improper payments, or 9% of the program’s total outlays.[85]
  • the Medicaid program made $36 billion in improper payments, or 10% of the program’s outlays.[86]
  • the Medicare program made $48 billion in improper payments, or:
    • 7% of the program’s outlays.
    • 32% of all improper payments reported by 75 federal programs.
    • $380 per U.S. household.[87]

* In New Jersey during 2007, the agency that administers Medicaid and the Children’s Health Insurance Program provided such benefits to at least 873 families with gross incomes above $85,000, including three families with incomes above $700,000.[88] [89]

* In 2008, the Government Accountability Office 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.”[90]

* A 2009 Medicare fraud investigation by CBS News found that:

  • 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.[91]

* A 2010 Medicare fraud investigation by the Wall Street Journal found that:

  • 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.[92]

* In 2011, the Government Accountability Office reported the results of an investigation to “determine the extent to which Medicare beneficiaries obtained frequently abused drugs from multiple prescribers.” This is called “doctor shopping,” and it is one of the main ways people “obtain highly addictive” prescription drugs “for illegitimate use.” The investigation found that:

  • “about 170,000 Medicare beneficiaries received prescriptions from five or more medical practitioners for the 12 classes of frequently abused controlled substances and 2 classes of frequently abused noncontrolled substances in calendar year 2008.”
  • “these individuals incurred approximately $148 million in prescription drug costs for these drugs, much of which is paid by the Medicare program.”
  • one “beneficiary received prescriptions for a total of 3,655 oxycodone pills (a 1,679-day supply) from 58 different prescribers in 2008.”
  • another “beneficiary received prescriptions for a total of 4,574 hydrocodone pills (a 994-day supply) from 25 different prescribers in 2008.”[93]

* The Inspector General of the U.S. Department of Health and Human Services investigated opioid use among Medicare beneficiaries during 2018 to determine “the extent to which beneficiaries receive extreme amounts of opioids.”[94] This study found that:

  • about 354,000 beneficiaries (excluding cancer or hospice patients) received “high amounts of opioids.”[95]
  • about 40,000 beneficiaries “received extreme amounts of opioids.”[96]
  • one beneficiary obtained 56 prescriptions from 25 different sources.[97]
  • one physician prescribed extreme amounts of opioids to 104 beneficiaries at a total cost to Medicare of $1.2 million.[98]

* In the U.S. during 2017:

  • 18.1 million people (aged 12 or older) reported misusing prescription painkillers, tranquilizers, stimulants, or sedatives.[99] [100]
  • more than 16,790 people died from prescription opioid overdoses.[101] (For comparison, roughly 17,284 murders were committed.[102])

* Per the FBI’s “2009 Financial Crimes Report”:

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.[103]

Government Shifting Costs to Private Sector

* Federal law requires all nonprofit hospitals to treat Medicare and Medicaid patients.[104] During 2017:

  • Medicare paid hospitals an average of 13% below their costs of car­ing for Medicare patients.
  • Medicaid paid hospitals an average of 13% below their costs of caring for Medicaid patients.
  • Medicare and Medicaid paid hospitals a combined total of $77 billion less than hospitals’ costs of caring for Medicare and Medicaid patients.[105]

* As of 2018, state Medicaid plans limited payments for hospital stays to no more than 45 days in Florida, 24 days in Oklahoma, and 30 days in Texas. Many states require prior approval for hospital stays or certain procedures.[106]


* 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).[107] [108] [109]

* 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.[110]

* In 2001, emergency room physicians spent about half of their patient-care time providing treatment mandated under EMTALA.[111]


* Since 2014, the Affordable Care Act (a.k.a. Obamacare) has required private health insurers to:

  • issue coverage to all applicants regardless of their preexisting conditions and charge them the same rates as people who have been paying insurance premiums for years.
  • enroll all applicants with no more than a 90-day waiting period.[112] [113]

* The added costs of insuring people after they become ill raises the premiums of other customers.[114] [115] [116] [117] Per a 2016 report by Blue Cross Blue Shield (BCBS):

  • “Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases … than individuals who already had BCBS individual coverage.”
  • The increased rates of these diseases were 24% for hypertension, 32% for coronary artery disease, 52% for depression, 94% for diabetes, 140% for Hepatitis C, and 242% for HIV.
  • “The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.”[118]

Uncompensated Care

* “Uncompensated care” is defined as the total cost to healthcare providers of both charity care and bad debt.[119]

* In 2018, the Consumer Financial Protection Bureau reported that 58% of all third-party debt collection efforts were associated with medical bills.[120]

* In 2017, hospitals provided $38.4 billion of uncompensated care,[121] amounting to 3.6% of hospitals’ total costs.[122]


Lawsuits & Defensive Medicine

* “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.”[123]

* In 2010, the costs to the U.S. healthcare system of malpractice awards, lawyers’ fees, and lawsuit-related administrative costs were about $30 billion or 1.1% of total healthcare spending.[124] [125] (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.[126] As examples:

  • In 2016, the lowest-price malpractice insurance provider for OB/GYNs in:
    • Los Angeles County, California (the nation’s most populous county)[127] charged an average of $39,940 per policy.[128]
    • Cook County, Illinois (the nation’s second-most populous county)[129] charged an average of $127,083 per policy.[130]
    • San Francisco County, California charged an average of $16,240 per policy.[131]
    • Adams County, Illinois charged an average of $57,192 per policy.[132] [133]
  • From 2009 to 2018, the inflation-adjusted average payout per medical malpractice claim for medical doctors and doctors of osteopathic medicine ranged from a low of $200,000 in Texas to a high of $715,000 in Massachusetts.[134]

* 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% of their practice was defensive in nature.[135]


* As of August 2019, Just Facts has been unable to find a credible estimate for the system-wide costs of defensive medicine in the U.S.[136]

* A widely cited 2010 paper in the journal Health Affairs estimates 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.[137]

* The authors of this study arrived at the $38.8 billion estimate for hospitals by:

  • extrapolating the results of a study that estimated the cost savings of lawsuit reforms (like 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.”[138]
  • assuming that the following suppositions “probably serve as counterweights to one another”:
    • All costs of defensive medicine were eliminated in localities that enacted legal reforms to address it.
    • Medicare patients are less likely to sue or to receive large payouts because they are older than the general population.
    • The threat of liability with cardiac patients is greater than with other patients.
    • The threat of liability with Medicare patients is greater than other patients “because higher levels of managed care outside of Medicare reduce physicians’ discretion.”[139]

* The authors of this same study:

  • arrived at the $6.8 billion estimate for physician/clinical services by assuming that the costs of malpractice payments are equivalent to the costs of defensive medicine.[140] Defensive medicine does not involve the costs of malpractice payments but the costs of medically unnecessary actions that healthcare providers take to prevent from having to make such payments.[141]
  • did not account for defensive medicine costs outside of hospitals and physician/clinical services,[142] which accounted for 50% of U.S. healthcare spending in 2008.[143] The costs of defensive medicine for all other categories of healthcare spending, such as prescription drugs, were not quantified.[144]
  • used the methodologies above and others to estimate that total “medical liability system costs” in the U.S. during 2008 were $55.6 billion, or about 2.4% of total healthcare spending.[145] These figures have been uncritically cited by Reuters,[146] Bloomberg,[147] CBS,[148] the Chicago Tribune,[149] and U.S. News & World Report.[150]

Administration & Regulations

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

  • paperwork and billing procedures required by private insurers and government programs.[151] [152]
  • government directives and reporting requirements.[153] [154]
  • mandates that require insurers to cover the cost of specific treatments and practitioners.[155]
  • mandates that prohibit insurers from charging copayments for certain classes of services and drugs.[156]
  • Food and Drug Administration drug and medical device approval processes.[157] [158] [159]
  • a Medicare/Medicaid requirement that requires hospitals to provide translators under certain circumstances for patients who do not speak English.[160] [161]
  • mandates that require insurers to pay for health conditions that existed before customers purchased insurance.[162]
  • state regulations that prohibit residents from buying health insurance in other states.[163]
  • mandates that restrict insurers from setting premiums based upon certain risk factors that drive healthcare spending.[164] [165]
  • accreditation, licensure, certification, review, and audit requirements for healthcare facilities and professionals.[166] [167] [168] [169] [170]

* 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.[171] 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 healthcare.[172]
  • “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.”[173]
  • “Many forms … must be completed daily by clinical staff to submit to the government to justify the care provided to skilled nursing facility patients.”[174]
  • 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.[175]
  • “A Medicare patient arriving at the emergency department is required to review and sign eight different forms—just for Medicare alone.”[176]
  • “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.”[177]
  • In addition to regulation by state and local agencies and private accrediting organizations, hospitals are regulated by nearly 30 federal agencies.[178]

Government Spending

Overview

* In 2018, federal, state, and local governments in the U.S. spent $1,618 billion on health and healthcare programs.[179] This amounts to:

  • $12,679 for every household in the U.S.[180]
  • 24% of government current expenditures.[181] [182]
  • 7.9% of the U.S. gross domestic product.[183]

* Relative to other types of government spending in 2018, healthcare spending was:

  • 4% higher than spending for income security (such as Social Security, unemployment, and cash welfare).
  • 64% higher than spending for education.
  • 98% higher than spending for national defense and veterans’ benefits.
  • 4.0 times spending for public order and safety (including law enforcement, courts, prisons, fire protection, and immigration enforcement).[184]

* From 1959 to 2018, spending on health and healthcare programs rose from:

  • 3% of all federal outlays to 30%.
  • 4% of all federal, state, and local outlays to 24%:
Government Healthcare Spending

[185]


Mandatory Programs

* “Mandatory” federal programs are those that are permanently funded by law. Hence, they can spend money without Congress and the president passing new laws. In contrast, Congress and the president typically fund “discretionary” programs for one year at a time.[186] [187] [188] The four major federal mandatory healthcare programs are Medicare, Medicaid, the Children’s Health Insurance Program, and the Affordable Care Act (i.e., Obamacare) exchange subsidies.[189] [190]

* The share of federal revenues spent on mandatory healthcare programs increased from 5% in 1970 to 14% in 1990 and 36% in 2010. In 2014, the Congressional Budget Office projected that under current federal policies, this share would rise to 41% in 2030, 55% in 2050, and 75% in 2080. Combining these projections with historical data and actual outcomes since then yields the following results:

Mandatory Federal Healthcare Spending Under Current Policies

[191]

* Data from the chart above:

Year

Historical

Projection

1970

5%

1980

9%

1990

14%

2000

16%

2010

36%

2020

35%

2030

41%

2040

49%

2050

55%

2060

61%

2070

68%

2080

75%

2089

81%

Medicare

Overview

* 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.[192]

* In 2018, Medicare provided health insurance for almost all Americans aged 65 and over (roughly 51 million people) and about 9 million permanently disabled individuals under the age of 65.[193] [194] [195] In total, Medicare enrollees are about 18% of the U.S. population.[196]

* Medicare provides coverage for:

  • hospital inpatient services, skilled nursing facility care (not custodial care),[197] 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”).
  • prescription drugs through its “Part D” component.[198] [199] [200]

* To qualify for premium-free Medicare hospital insurance, individuals or their spouses must work while paying Medicare’s payroll tax for at least ten years.[201]

* In 2016 (latest available data), Medicare covered 67% of healthcare expenses for traditional Medicare beneficiaries not living in institutions such as nursing homes. The remainder of beneficiaries’ healthcare expenses were paid by:

  • direct out-of-pocket spending (14%).
  • private supplemental insurance (13%).
  • other government programs such as Medicaid and the Department of Veterans Affairs (6%).[202] [203]

Spending

* In 2018, Medicare spent about $741 billion.[204] This amounts to 16% of all federal expenditures and 21% of all federal revenues.[205]

* Medicare expenditures in 2018 were funded by:

Portion[206]

Category

Source

43%

General revenues[207]

Federal income, corporate, excise, and other taxes.[208] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[209] [210] [211]

36%

Payroll taxes

A 2.9% payroll tax on all workers’ wages and another 0.9% payroll tax on wages above $200,000 for singles and $250,000 for couples.[212] [213] [214]

15%

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.[215] [216] [217]

3%

Taxes on Social Security benefits

Taxes paid by Social Security beneficiaries whose incomes exceed certain thresholds.[218]

2%

Transfers

State governments.[219]

1%

Interest[220]

Interest paid on the Medicare Trust Fund from the general fund of the U.S. Treasury.[221] [222]

1%

Miscellaneous

Fees and gifts.[223]


Payment Rates & Access

* In 2015, 77% of primary care physicians accepted new Medicare patients, as compared to 72% who accepted new Medicaid patients and 94% who accepted new privately insured patients.[224]

* All nonprofit hospitals are required by law to treat Medicare patients.[225]

* In 2016, Medicare payment rates for inpatient hospital services were 60% of private health insurance payment rates.[226]

* In 2017, Medicare paid hospitals an average of 13% below their costs of caring for Medicare patients.[227]

* The Affordable Care Act (a.k.a. Obamacare) progressively cuts Medicare payment rates “for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services” over upcoming decades to “less than half of their level under the prior law.” The U.S. Centers for Medicare and Medicaid Services projects that by 2093, Medicare payment rates for inpatient hospital services will be about 39% of private health insurance payment rates. Medicare’s Trustees have stated that these cuts will likely cause “withdrawal of providers from the Medicare market” and “severe problems with beneficiary access to care….”[228] [229]

* From 2013 to 2017, the number of rural hospital closures in the U.S. was more than twice the number of closures during the preceding five-year period. The U.S. Government Accountability Office found that the closures “were generally preceded and caused by financial distress” that was “exacerbated” by a decline in the number of patients receiving inpatient care and “across-the-board Medicare payment reductions.”[230]

* A scientific, nationally representative survey commissioned in 2018 by Just Facts found that 45% of voters believe the price controls in Obamacare won’t worsen Medicare patients’ access to care.[231] [232] [233]


Prescription Drugs

* In 2003, Congress and Republican President George W. Bush passed a law adding a prescription drug benefit to the Medicare program.[234] [235] The bill passed with 88% of Republicans voting for it and 89% of Democrats voting against it.[236] The Congressional Budget Office estimated it would add $395 billion to the deficit over the following 10 years.[237]

* The Democratic Congressional Campaign Committee later described the Republican-passed Medicare prescription drug benefit as “costly.”[238] When this bill was being debated, 85% of House Democrats voted for a competing plan that the Congressional Budget Office estimated would add $969 billion to the deficit over the following 10 years, or 2.4 times more than the Republican plan.[239] [240]


Finances

* When Medicare began paying benefits in 1966,[241] there were 5.5 Americans in their primary working years (aged 20–64) for every American aged 65 or older. By 2017, this ratio declined to 3.8 or by 30%.[242] [243]

* As the baby-boom generation matures and projected life expectancy increases,[244] the Social Security Administration projects that the ratio of people in their primary working years to Medicare benefit recipients will decline to 2.8 by 2030, or by 49% from 1966 to 2030:

Ratio of Primary Working-Age Americans to Those 65 and Older

[245]

* From the time that Medicare was established in 1965, the general eligibility age for benefits has stayed at 65 years old.[246] [247] In 1965:

  • 65-year-old males had an average life expectancy of 12.9 more years. By 2018, this had risen to 18.1 years. This amounts to a 40% increase in the time spent collecting Medicare benefits.[248]
  • 65-year-old females had an average life expectancy of 16.3 more years. By 2018, this had risen to 20.6 years. This amounts to a 26% increase in the time spent collecting Medicare benefits.[249]

* According to Social Security Administration projections, by 2030, the life expectancy for 65-year-old Americans will rise to 18.9 years for males and 21.3 years for females. This would amount to a 46% increase in the time spent collecting Medicare benefits for males and a 31% increase for females.[250]

* In 2012, the journal Demography published research that found the Social Security Administration is using an antiquated method to project life expectancies, and as a result, the program “may be in a considerably more precarious position than officially thought.”[251]

* The 2019 Medicare Trustees Report projects the future finances of the Medicare program based upon high, low, and intermediate-cost assumptions.[252] Per the intermediate assumptions, the Medicare program faces a $42.1 trillion actuarial deficit over the next 75 years (in 2019 dollars). The resources needed to cover this deficit “would be in addition to the payroll taxes, benefit taxes, and premium payments.”[253]

* The above 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.[254] It is equivalent to 57 times the total spending for Medicare in 2018.[255]

* The Medicare Trustees have stated that measurements such as the actuarial deficit can:

  • lead to “legislative solutions” that result in “a substantial financial imbalance” and leave “the long-range sustainability of the program” in doubt.
  • 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.”[256] [257]

* 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).[258] This amounts to $42.3 trillion or an additional $161,344 from every U.S. resident aged 15 or older.[259] [260] [261] This measure approximates the method by which publicly traded companies are required by law to report the finances of their pension and retirement plans.[262] [263] [264] [265]

* The Medicare Trustees Report makes financial projections based primarily on current laws.[266] Per the Trustees, the “actual future costs for Medicare may exceed the projections shown in this report, possibly by substantial amounts.”[267] This is because:

  • current law requires future cuts in Medicare’s doctor payment rates that could drive them “increasingly below” doctors’ costs of providing care.
  • the Affordable Care Act (a.k.a. Obamacare) progressively cuts Medicare payment rates 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 prior law.
  • over coming decades, the above payment rate cuts will create the following situation:
Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services will fall increasingly short of the costs of providing these services. … Before such an outcome would occur, lawmakers would likely intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.[268] [269]

* In 2019, U.S. Centers for Medicare and Medicaid Services published an alternative projection to estimate the potential costs of Medicare given the facts listed above.[270] Per this estimate, actual Medicare costs will exceed the costs shown in the Trustees Report by 4% per year by 2040, 10% per year by 2050, 23% per year by 2070, and 37% per year by 2090.[271]

* In 2019, 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 26% higher under the alternative projection than it is under current law.[272]


Taxes

* When Democratic President Lyndon B. Johnson proposed a “hospital insurance” program for senior citizens in his 1964 State of the Union speech, he said that it would cost “no more than $1 a month” per worker.[273]

* Adjusted for inflation, $1 in 1964 equals $8.15 in 2019.[274] Individuals with the following wages now pay the following Medicare hospital insurance payroll taxes per month:

Yearly Wages

Monthly Hospital Insurance Taxes

$25,000

$60

$50,000

$121

$100,000

$242

$250,000

$642

$1,000,000

$3,017

[275]

* Hospital insurance payroll taxes fund about 36% of Medicare’s total spending. Other Medicare benefits—like physician services, lab tests, and prescription drugs—are paid through other taxes, premiums, and miscellaneous receipts.[276]

* The Medicare payroll tax amounts shown on paychecks generally do not account for the taxes that employers pay.[277] These taxes are mainly borne by employees in the form of reduced wages (for more details, see Just Facts’ research on tax distribution).[278] [279] [280] [281]

* Medicare hospital insurance payroll taxes 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] That year, the 103rd Congress and Democratic President Bill Clinton passed a law that removed the threshold, thus making all earnings subject to Medicare payroll taxes.[283] The bill passed with 85% of Democrats voting for it and 100% of Republicans voting against it.[284]

* 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).[285] [286] This threshold is not indexed for inflation or wage growth.[287]

* Starting in 2013, the Affordable Care Act (a.k.a. Obamacare) levied an additional 0.9% Medicare hospital insurance payroll tax on wages above $200,00 for singles and $250,000 for couples.[288] [289] This law passed with 89% of Democrats voting for it and 100% of Republicans voting against it.[290]

Medicaid

Overview

* The Medicaid program was founded in 1965 to pay for healthcare services for “certain low-income persons in the United States and its Territories.”[291] [292]

* In 2016, an average of 72 million people in the U.S. and its territories were enrolled in Medicaid for the entire year.[293]

* The average portion of the U.S. population receiving Medicaid benefits for the entire year increased from 2% in 1966 to 22% in 2016. Federal actuaries estimate this figure will be 23% in 2026:

Portion of Population Receiving Medicaid Benefits

[294]

* In 2016, Medicaid enrollment and spending was divided as follows:

Category

Portion of

Beneficiaries

Cost Per

Enrollee

Portion of

Medicaid Spending

Children

40%

$3,555

19%

Adults

37%

$5,494

25%

Disabled

15%

$19,754

39%

Aged

8%

$14,700

16%

[295]

* 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.[296] [297]

* 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 a certain level.[298]

* 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.”[299]

* 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.[300] [301]


Spending

* Medicaid expenditures are funded by federal and state general revenues.[302] Federal general revenues are comprised of income, corporate, excise, and other taxes.[303] [304] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[305] [306] [307]

* In 2018, Medicaid spent about $598 billion. This amounts to:

  • 9% of all federal, state, and local government spending combined.
  • 11% of all federal, state, and local government revenues combined.[308]

* 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.[309]

* 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.[310] [311]

* The average share of Medicaid spending paid by the federal government (versus the states) has risen from 48% in 1966 to 62% in 2017, with a temporary spike in 2009–2010 due to various “stimulus” bills and the Affordable Care Act:

Portion of Medicaid Spending Paid by the Federal Government

[312] [313] [314]

* In 2016, Medicaid paid for:

  • 17% of all healthcare spending in the U.S.
  • 10% of all dental spending.
  • 10% of all spending on drugs.
  • 11% of all spending on physicians.
  • 18% of all hospital spending.
  • 31% of all nursing home spending.
  • 37% all home health spending.[315] [316]

* Depending upon the state of residence, as of 2019, Medicaid will pay up to 100% of nursing home costs for individuals who have:

  • $878,000 in home equity (or unlimited equity if a spouse or dependent relative lives in the home).
  • one car (regardless of value).
  • $126,420 in other financial assets.
  • $37,926 per year in personal income (or unlimited spousal income).[317]

* Per the U.S. Centers for Medicare and Medicaid Services:

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 goods and services for Medicaid enrollees.[318]

* 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.[319]

* Illegal immigrants are not eligible for standard Medicaid coverage but can receive Medicaid 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”:

  • “placing the patient’s health in serious jeopardy.”
  • “serious impairment to bodily functions.”
  • “serious dysfunction of any body part or organ.” This does not include organ transplants but does include pregnancy-related treatment, such as prenatal care, childbirths, and postpartum care.[320] [321]

* In 2009, 74% of all babies delivered at Parkland Memorial Hospital in Dallas, Texas were born to women who were noncitizens.[322]

* In 2017, Medicaid paid for 43% of all childbirths in the U.S.[323]


Payment Rates & Access

* All nonprofit hospitals are required by law to treat Medicaid patients.[324]

* In 2016, Medicaid payment rates for inpatient hospital services were 61% of private health insurance payment rates.[325]

* In 2017, Medicaid paid hospitals an average of 13% below their costs of caring for Medicaid patients.[326]

* Under current law, Medicaid payment rates for inpatient hospital services will progressively decline to about 39% of private health insurance payment rates by 2093.[327]

* In 2016, Medicaid payment rates for physician services were about 54% of private health insurance payment rates.[328]

* Per the 2013 Medicare Trustees Report, low Medicaid payment rates for healthcare services “have already led to access problems for Medicaid enrollees.”[329] [330]

* For a study published in the New England Journal of Medicine (2011), researchers posing as mothers called 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….”
  • 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….”[331]

* 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.”[332]

* In 2015, 72% of primary care physicians accepted new Medicaid patients, as compared to 77% who accepted new Medicare patients and 94% who accepted new privately insured patients.[333]


Affordable Care Act Expansion

* Starting in 2014, the Affordable Care Act (a.k.a. Obamacare) required all states to provide Medicaid coverage for all individuals under the age of 65 with family incomes below 138% of federal poverty guidelines, without regard for any assets they have.[334] [335] In 2019, 138% of the federal poverty guideline was $35,535 for a family of four.[336]

* Obamacare stripped all federal Medicaid funds from any state that refused to comply with this expansion of Medicaid.[337]

* In the 2012 Supreme Court case of National Federation of Independent Business v. Sebelius:

  • the justices ruled (7–2) that the federal government could not force states to expand Medicaid coverage by threatening to withhold all Medicaid funding if they did not comply.
  • the justices ruled (5–4) that states can expand Medicaid coverage if they choose to do so.[338]

* As of January 2019, 36 states and the District of Columbia have expanded Medicaid in accord with Obamacare. In these states, all adults under the age of 65 with family incomes below at least 138% of federal poverty guidelines are eligible for Medicaid. Some of these states also provide Medicaid to people with higher incomes.[339]

* As of 2017, an additional 17 million people have enrolled in Medicaid as a result of the states’ expansions.[340]

* Among the 14 states that have not expanded Medicaid in accord with Obamacare:

  • 13 don’t provide Medicaid to non-disabled, non-pregnant adults who don’t have dependent children.
  • the median income eligibility level for adults who have dependent children is 40% of federal poverty guidelines.[341]

Emergency Room Visits

* In 2013, Democratic President Barack Obama stated that expanding Medicaid will reduce healthcare costs by reducing emergency room visits:

[E]ven if you don’t support the overall [Obamacare] plan, let’s at least go ahead and make sure that the folks who don’t have health insurance right now can get it through an expanded Medicaid.
And one of the reasons to do it is … we already pay for the health care of people who don’t have health insurance, we just pay for the most expensive version, which is when they go to the emergency room. Because what happens is, the hospitals have to take sick folk. They’re not just going to leave them on the streets. But people who are sick, they wait until the very last minute. It’s much more expensive to treat them.[342]

* In 2008, the state of Oregon began providing Medicaid coverage to thousands of people selected through a lottery from a pool of uninsured, low-income adults. Random selection methods like this allow researchers to directly measure of the effects of public policies.[343] In 2014, the journal Science published a study of about 25,000 people who participated in this lottery and lived in the most-populated area of Oregon. The study followed the new Medicaid recipients for about 18 months after the lottery and found they had:

  • 40% more emergency room visits than the people who did not win the lottery to receive Medicaid.
  • “increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings.”[344] [345]

* In 2016, the New England Journal of Medicine published a follow-up study to the one above. This study analyzed an additional year of data to determine if Medicaid recipients would make less use of emergency rooms over time. It found that their increased levels of emergency room visits did not decline.[346]

Children’s Health Insurance Program

* In 1997, the 105th Congress and Democratic President Bill Clinton passed a law that created a Children’s Health Insurance Program (CHIP) to help states provide insurance to low-income children.[347] [348] [349] The bill passed with 84% of Republicans and 78% of Democrats voting for it.[350]

* In 2018, 9.6 million children were enrolled in CHIP during some point in the year.[351]

* 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.[352] In 2019, 200% of the federal poverty line for a family of four was $51,500.[353]

* In 2019, states had income eligibility limits for CHIP ranging from 170% of the federal poverty line ($43,775 for a family of four) in North Dakota to 400% of the federal poverty line ($103,000 for a family of four) in New York.[354] [355]

* In 2019, the median income eligibility limit for CHIP was 254% of the federal poverty line or $65,405 for a family of four.[356] [357]

* Not all sources of household income are considered when determining eligibility for CHIP. For example, the income of the following household members is not counted unless they are legal parents or guardians of the child:

  • girlfriends/boyfriends/partners.
  • parents of the mother/father.
  • adult siblings.
  • grandparents.

* Since 2014, the Affordable Care Act (a.k.a. Obamacare) has mandated that families can have unlimited financial assets and still be eligible for CHIP.[362] [363]

* From 1998 to 2017, the average annual inflation-adjusted CHIP spending for every person in the U.S. under the age of 18 increased from $9 to $254:

Inflation-Adjusted CHIP Spending Per Population Under 18

[364]

* From 1998 to 2017, the average annual inflation-adjusted CHIP spending per enrollee increased from $931 to $1,970:

Inflation-Adjusted CHIP Spending Per Enrollee

[365]

* 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.[366] The federal portion of CHIP funding varies by state, and before 2016, these rates ranged over time in different states from 65% to 81%.[367]

* In 2016–2019, the 2010 Affordable Care Act (a.k.a. Obamacare) raises the share of CHIP paid by the federal government by 23 percentage points per state, up to a maximum of 100%.[368] Depending upon the state, the federal government paid from 88% to 100% of CHIP costs in 2018.[369]

* In 2009, the Congress and Democratic President Barack Obama made legal immigrants immediately eligible for CHIP, overriding a previous requirement of a five-year waiting period.[370] This bill passed Congress with 99% of Democrats voting for it and 75% of Republicans voting against it.[371]

Affordable Care Act

Overview

* In 2010, the 111th Congress and President Obama passed two laws that are collectively known as the “Affordable Care Act.” Formally, these bills were named the “Patient Protection and Affordable Care Act” and the “Health Care and Education Reconciliation Act.” Informally, these bills are known as “Obamacare.” The bills were passed separately for political and procedural reasons detailed in these footnotes.[372] [373]

* The bills passed Congress with 79–89% of Democrats voting for them and 100% of Republicans voting against them.[374] [375] Together, the bills contain 1,935 pages.[376] [377]

* The Affordable Care Act:

  • prohibits the sale of health insurance policies that have:
    • annual or lifetime limits on the amount of coverage provided.
    • 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.
    • copayments for any approved preventive health services or items.
    • coverage for dependents that doesn’t include unmarried children through the age of 26.[378] [379] [380]
  • requires health insurers to issue coverage to all applicants regardless of their preexisting conditions and charge them the same rates as people who have been paying insurance premiums for years. This mandate, which began in 2014, also requires health insurers to enroll all applicants with no more than a 90-day waiting period.[381] [382] The added costs of insuring people after they become ill raises the premiums of other customers.[383] [384] [385] [386] Per a 2016 report by Blue Cross Blue Shield (BCBS):
    • “Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases … than individuals who already had BCBS individual coverage.”
    • The increased rates of these diseases were 24% for hypertension, 32% for coronary artery disease, 52% for depression, 94% for diabetes, 140% for Hepatitis C, and 242% for HIV.
    • “The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.”[387]
  • required most Americans to carry some form of health insurance or pay a monthly fine. This mandate was repealed in 2018.[388] In 2017, the maximum fine was $2,676 for individuals and $13,380 for families with three or more children.[389] People who were exempt from this fine included:
    • illegal immigrants.
    • people with low incomes.
    • members of Indian tribes.
    • members of healthcare sharing ministries.[390] [391] [392] [393] [394]
  • progressively cuts Medicare payment rates “for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services” over upcoming decades to “less than half of their level under the prior law.” The U.S. Centers for Medicare and Medicaid Services projects that by 2093, Medicare payment rates for inpatient hospital services will be about 39% of private health insurance payment rates. Medicare’s Trustees have stated that these cuts will likely cause “withdrawal of providers from the Medicare market” and “severe problems with beneficiary access to care….”[395] [396]
  • expanded Medicaid eligibility to all individuals under the age of 65 with family incomes below 138% of federal poverty guidelines (for example, a family of four with income below $35,535 in 2019) without regard for any assets they have. This expansion, along with other measures in the act, were 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 was due to become effective in 2014, but in 2012, the Supreme Court ruled that the federal government could not force states to expand Medicaid coverage. The Court also ruled that states could expand Medicaid if they wanted, and as of 2019, 36 states and the District of Columbia have done so. As of 2017, an additional 17 million people had enrolled in Medicaid as a result of the expansion.[397] [398] [399] [400] [401] [402]
  • temporarily raised Medicaid payment rates for physician services from 58% of private health insurance payment rates to 73% in 2013 and 77% in 2014. In 2015, Medicaid payment rates returned to 58% of private health insurance payment rates.[403] [404]
  • creates “marketplaces” or “exchanges” that sell private health insurance plans while subsidizing them for individuals with incomes up to 400% of federal poverty guidelines (for example, $85,320 for a family of three in 2019, $103,000 for a family of four, and $120,680 for a family of five).[405] [406] [407] Regarding this:
    • In 2019, about 9 million people (87% of exchange enrollees) received these subsidies.[408]
    • In 2014, the CEO of Aetna, the third-largest U.S. health insurer, stated that the company gained 600,000 customers from these exchanges and “87% of them are subsidized.”[409]
    • Subsidy levels are based upon income, and in 2019, the average annual amount per subsidized enrollee was $6,200.[410] [411] [412]
    • In 2019, 50-year-olds with an income of 1.5 times the federal poverty level can get a free health plan in 95% of counties where federal exchanges exist.[413] For those with an income of 2.0 times the federal poverty level, this rate was 81% in 2018.[414]
  • subsidizes certain health insurance plans for businesses with 25 or fewer full-time-equivalent employees who earn an average of less than $50,000 per year in 2014 (indexed for inflation thereafter).[415] [416] These subsidies take the form of a tax credit, which cost $541 million in 2014.[417] Per a 2016 report by the U.S. Government Accountability Office, this tax credit “has not been widely claimed” because:
    • “The maximum amount of the credit does not appear to be a large enough incentive for employers to offer or maintain insurance.”
    • “Few small employers qualify for the maximum credit amount.”
    • “For those employers who do claim the credit, the credit amount ‘phases out’ to zero as employers employ up to 25 full time equivalent (FTE) employees at higher wages.”
    • “The amount of the credit is also limited if premiums paid by an employer are more than the average premiums for the small group market in the employer’s state.”
    • “The credit can only be claimed for two consecutive years after 2013.”
    • “The cost and complexity involved in claiming the tax credit was significant, deterring small employers from claiming it.”
    • “Many small businesses have also reported that they were unaware of the credit.”[418]
  • imposes fines on employers with 50 or more full-time-equivalent employees that don’t provide at least 95% of their full-time employees with health insurance that meets certain requirements. This was initially due to begin in 2014, but the Obama administration decided not to enforce it until 2015.[419] [420] [421] [422]
  • gives presidential appointees, such as the Secretary of Health and Human Services,[423] at least 40 regulatory powers that have the force of law.[424] [425] 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.”[426] [427] [428]
    • mandate the types of benefits that health plans must cover.[429] [430]
    • mandate “mechanisms to improve health care quality” that healthcare providers must implement in order to receive payments through qualified health plans.[431]
    • define what constitutes “unreasonable increases in premiums for health insurance coverage” and “establish a process for the annual review” of such increases.[432] [433]
    • “develop and impose appropriate penalties” on health insurers for non-compliance with certain provisions of the act.[434]
    • waive various provisions of the law.[435]
  • 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.[436]
  • established a board of 15 Senate-confirmed Presidential appointees required to limit Medicare spending for years in which the Medicare chief actuary projects that the program will not meet its cost-savings targets.[437] [438] This board, called the “Independent Payment Advisory Board” (IPAB),[439] was repealed in 2018.[440] The original law stated 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.[441] [442] 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.[443]
    • the board can function with only one of its 15 seats filled,[444] and if the board does not submit a proposal by the required deadline, the Secretary of Health and Human Services (a presidential appointee) has the power to submit a proposal in its place.[445] [446]
    • 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.[447]
    • the President has the power to remove board members for “neglect of duty or malfeasance in office, but for no other cause.”[448]
    • the board cannot “ration health care,”[449] [450] [451] 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.[452] [453]
  • expanded funding for the Children’s Health Insurance Program by $29 billion dollars over 2012–2015.[454]
  • imposes or increases 10 types of taxes, fees, and penalties (not including the fines described above for not having or providing health insurance). In 2010, Congress’s Joint Committee on Taxation projected that these provisions would increase tax collections by $361 billion during 2010–2019.[455] The largest of these are:
    • a 3.8% tax on investments (such as interest, dividends, and rent) imposed on singles with income above $200,000 and couples with income above $250,000. This began in 2013.[456] [457]
    • an added 0.9% Medicare payroll tax on earnings above $200,000 for singles and $250,000 for couples. This began in 2013.[458] [459]
    • a 40% tax imposed on high-cost health insurance plans.[460] [461]
    • an annual fee imposed on health insurance providers. This began in 2014 but was not collected in 2017 or 2019.[462] [463]
    • an annual fee imposed on manufacturers and importers of pharmaceuticals. This began in 2010.[464]
    • a 2.3% tax imposed on manufacturers and importers of certain medical devices. This began in 2013.[465]
  • eliminates or reduces 6 types of targeted tax deductions and credits between 2010 and 2013. The Joint Committee on Taxation projects that these provisions will increase tax collections by $62 billion during 2010–2019.[466]
  • 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 2010–2019.[467]

* 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.[468] Examples of rejected amendments include:

  • making health insurance tax-deductible for individuals (like it is for businesses) and making other healthcare expenses tax deductible.[469]
  • repealing the Independent Payment Advisory Board.[470]
  • requiring recipients of federally funded healthcare benefits to demonstrate their identity and citizenship.[471]
  • repealing the mandate that forces people to purchase health insurance or to pay a fine.[472]
  • allowing consumers to purchase health insurance across state lines.[473]
  • a provision that states, “Nothing in this Act shall be construed to prevent or limit individuals from keeping their current health coverage.”[474]

Insurance & Doctors

* Between 2008 and 2013, Barack Obama promised at least 39 times that everyone who liked their health insurance could keep it under Obamacare. He also pledged at least 11 times that everyone who liked their doctor could keep their doctor under Obamacare.[475] For example, he stated:

No matter how we reform healthcare, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor…. If you like your healthcare plan, you’ll be able to keep your healthcare plan…. No one will take it away, no matter what.[476]

* When Obamacare’s health insurance mandates went into effect, all health insurance plans that did not meet criteria specified in the Affordable Care Act were cancelled. By the end of 2013, millions of people (precise number unknown) had received health insurance cancellation notices due to Obamacare.[477] [478] [479]

* Some of the people who lost their health insurance were eligible to purchase federally-subsidized insurance through the Obamacare exchanges.[480]

* A 2015 study by Avalere Health of insurance plans offered by Obamacare exchanges in the five states with the greatest enrollment found that:

  • the Obamacare plans have 34% fewer doctors and hospitals in network than traditional private plans.
  • the Obamacare plans have “42 percent fewer oncology and cardiology specialists; 32 percent fewer mental health and primary care providers; and 24 percent fewer hospitals.”
  • smaller provider networks leave patients “vulnerable to high costs if they seek care from a provider not included in their plan’s network.”[481]

* Some of the people who lost their health insurance because of Obamacare were eligible to enroll in Medicaid.[482]

* Per the 2011 Medicare Trustees Report, low Medicaid payment rates for healthcare services cause “access problems for Medicaid enrollees.”[483] [484]

* For a study published in the New England Journal of Medicine (2011), researchers posing as mothers called 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….”
  • 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….”[485]

Insurance Premiums

* During the 2008 presidential election campaign, Barack Obama promised at least 18 times that his healthcare plan would save families an average of $2,500 per year on insurance premiums.[486] For example, he stated:

I also have a healthcare plan that would save the average family $2,500 on their premiums.[487]
We’ll work with your employer to lower your premiums by $2,500 per family per year.[488]

* In the years surrounding the passage of the 2010 Affordable Care Act, inflation-adjusted premium increases for employer-provided family health insurance varied as follows:

Inflation-Adjusted Family Health Insurance Premiums

[489]


Costs & Savings

* Congress’s Joint Committee on Taxation and the U.S. Centers for Medicare and Medicaid Services have estimated that the following changes in federal spending and revenues are projected to occur during 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 did not take effect until 2014.[490]

Projected Federal Spending Changes From

the Affordable Care Act, 2010–2019

Provision

Increase

(billions)

Medicare Cuts

–$575

Insurance Subsidies for Individuals

$507

Medicaid Expansion

$410

Insurance Subsidies for Small Businesses

$31

CHIP Increased Funding

$29

Other Medicaid and CHIP Provisions

$28

Miscellaneous

$8

Total

$438

[491]

Projected Federal Revenue Changes From

the Affordable Care Act, 2010–2019

Provision

Increase
(billions)

Taxes and Fees

$421

Fines on Individuals & Employers

$120

CLASS Act (discussed below)

$38

Total

$579

[492] [493]

* The totals above net to a $141 billion improvement in the federal government’s finances over 2010–2019.[494] [495] This assumes Congress and the President don’t override the Medicare cuts, as they have done with Medicare cuts required under a 1997 law.[496] [497] [498] This improvement in federal finances also assumed the CLASS (Community Living Assistance Services and Supports) Act is operational.[499]

* 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.[500] The program is voluntary and financed by participant premiums, not federal subsidies.[501]

* 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.[502]

* During the debate over the CLASS Act, Republican Senator Judd Gregg offered an amendment that required the program to be “actuarially sound.” This amendment passed.[503] [504]

* 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.[505] [506]

* 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 2010–2019 by $38 billion. Over the long term, the federal government projected that the program would run a deficit.[507]

* 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.[508] [509] [510]


Life Expectancy & Health Insurance

NOTE: When interpreting the facts in this section, it is important to realize that association does not prove causation, and it is often difficult to determine causation in economics and other social sciences. This is because numerous variables might affect a certain outcome, and there is frequently no objective way to identify all of these factors and isolate the interplay between them.

* A 2016 study by the U.S. Department of Health & Human Services found that Obamacare “resulted in gains in health insurance coverage for 20.0 million nonelderly adults (ages 18 to 64).”[511]

* The following proponents of Obamacare linked insurance coverage and life expectancy to promote the law and criticize the U.S. healthcare system:

  • The journal Clinical Chemistry reported in 2014:
The U.S., the world’s wealthiest country, spends more per capita on healthcare than any other nation, yet has one of the lowest life expectancy rates in the developed world. Fortunately, we have the ability to leverage the preventive services now available with the passage of the ACA [Affordable Care Act] that are so crucial to improving healthcare outcomes while reducing healthcare expenditures in the US.[512]
  • A study conducted by the advocacy organization Families USA concluded that over 134,000 people died during 2005–2010 “due to a lack of health coverage” and that this is “one measure of the great need for the Affordable Care Act.”[513]
  • In 2012, Nobel Prize-winning economist Paul Krugman asserted that:
the fact that the United States is the only major advanced nation without some form of universal health care is at least part of the reason life expectancy is much lower in America than in Canada or Western Europe.
 
So there’s no real question that lack of insurance is responsible for thousands, and probably tens of thousands, of excess deaths of Americans each year.[514] [515]

* In the U.S. since 1960, the average life expectancy has risen by an average of 0.5 years every three years. Since most provisions of Obamacare were implemented in 2014, the average life expectancy has fallen by 0.3 years according to the latest data (2017).

Life Expectancy Increase, 3-Year Rolling Total

[516]

* Health plans sold on the Affordable Care Act marketplace must include substance abuse treatment.[517] [518] Obamacare supporters asserted that this requirement:

  • “is an absolute game changer.”[519]
  • “will revolutionize care.”[520]
  • “will have more far-reaching positive consequences” than “the discovery of methadone.”[521]

* Since Obamacare’s substance abuse coverage requirement was implemented in 2014,[522] the drug overdose death rate has risen by 48% according to the latest data (2017). During the preceding four years, the drug overdose death rate rose by 12%:[523]

Age-Adjusted Drug Overdose Death Rate

[524]

* In 2009, the American Journal of Public Health published a study that “analyzed the relationship between uninsurance and death.” Using survey data for 1988–1994 on 9,000 adults, the authors compared mortality rates at the end of the year 2000 between uninsured and privately insured participants. After controlling for 11 factors (such as age, gender, income, education, and body mass index), its authors concluded that “lack of health insurance is associated with as many as 44,789 deaths per year in the United States….”[525] The authors also:

  • calculated that uninsured Americans were 40% more likely to die in the study period than those with private health insurance, with a 95% confidence interval of 6% to 84%. They then applied this 40% “hazard ratio” to Census data to determine the 44,789 figure.[526]
  • excluded people with government health insurance like Medicaid from the study while using its results to advocate for universal government insurance.[527] [528] [529] [530] They said they excluded Medicaid enrollees because “a substantial proportion of those individuals had poor health status as a prerequisite for coverage.”[531] [532] Regarding this exclusion:
    • Medicaid eligibility is primarily based on income, not health status.[533] Of Medicaid enrollees eligible for this study, 61% were non-disabled adults.[534]
    • The study controlled for health status, thus negating the reason to exclude all Medicaid enrollees.[535]
    • The authors did not exclude people from the study who were uninsured because they had pre-existing medical conditions that prohibited them from obtaining insurance.[536] [537] [538]
  • assumed that participants who were uninsured at the time of the survey remained uninsured for the duration of the study. They did not conduct follow up surveys to determine whether participants’ insurance status changed, including those who turned 65 years old and were thus eligible for Medicare.[539] [540]

* In 2009, Health Services Research published a study on the relationship between lack of insurance and risk of death. Using survey data for 1986–2000 on 643,000 people collected by the National Center for Health Statistics, the author compared mortality rates as of 2002 between the uninsured and privately insured participants. After controlling for 17 factors (such as age, gender, income, education, and body mass index), he concluded that “there is little evidence to suggest extending insurance coverage to all adults would have a large effect on the number of deaths in the United States.”[548] [549] The study was similar to the above study from 2009 except that it:

  • examined participants who died of causes that are generally preventable with better healthcare and found “no indication that lack of insurance has any effect.”[550]
  • investigated the mortality rates of participants who turned 65 during the study (and thus were eligible for Medicare), and the results were “no different.”[551]
  • reanalyzed the data with variables most likely to include people who did not gain or lose insurance during the study period, and this did not change the results.[552]
  • cautioned that it is “not possible to draw firm causal inferences” using observational studies such as this because they cannot provably account for all relevant variables.[553] [554] [555] [556]

* In a paper published by Annals of Family Medicine in 2019, the authors conducted a meta-analysis of studies that examined associations between healthcare and health outcomes.[557] They found that:

  • “social and behavioral factors account for substantially more of the variability in premature mortality than health care does.”[558] [559]
  • four methods of analysis estimated that “health care accounts for between 5 and 15% of the variation in premature death.”[560] These methods include:
    • evaluating the health outcomes of a randomized health insurance experiment.[561] [562]
    • quantifying risk factors behind the leading causes of death based on observational data.[563]
    • measuring how different factors influence premature mortality at the county level.[564]
    • measuring the impact of various factors on deaths among Medicare enrollees from existing data.[565]

* Other than healthcare, factors that can affect mortality rates and life expectancy include:

  • behaviors, such as smoking, eating habits, and exercise.
  • genetic predispositions to certain diseases.
  • social conditions, such as education, employment, and housing.
  • environmental factors, such as exposure to lead paint and pollution.
  • crime.[566] [567] [568]

Media

Uninsured Americans

* In September 2011:

  • American Medical News (a publication of the American Medical Association),[569] published an article by Doug Trapp claiming:
The number of uninsured Americans grew by nearly 1 million between 2009 and 2010 to reach 49.9 million.[570]
  • the American Public Health Association (APHA) issued the following statement from its interim executive director, Alan Baker:
According to data released today by the U.S. Census Bureau … 49.9 million Americans are uninsured, which increased slightly from 49 million in 2009. … On behalf of the entire public health community, APHA calls on Congress to fully implement and fund the main public health and coverage provisions included in the Affordable Care Act that take effect in 2014.[571]
  • the New Jersey Star Ledger published an article stating:
The number of uninsured Americans increased steadily and significantly the past 10 years. In 2010 … the number of uninsured grew from 49.0 million in 2009 to 49.9 million—exceeding the combined population of 25 states.[572]
  • the New York Times editorial board wrote:
Nearly one million more Americans went without health insurance in 2010 than in 2009. This distressing news is further evidence of the need for government safety net programs and the national health care reforms that will take effect mostly in 2014. The Census Bureau reported this week that the number of uninsured people rose to 49.9 million last year, up from 49 million the previous year.[573]

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

  • 19% of the 49.9 million uninsured “Americans” were noncitizens.
  • 37% of the uninsured had annual household incomes above $50,000.
  • 19% of the uninsured had annual household incomes above $75,000.[574]
  • “underreporting of health insurance coverage appears to be a larger problem” in this survey “than in other national surveys that ask about insurance.”[575]

* 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 the survey actually had insurance through Medicaid.[576] [577]


Health Insurance Profits

* From 2007 through 2017, the annual portion of total private health insurance company revenues paid out in healthcare benefits for customers ranged from 86.5% to 88.5%.[578] [579] 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.[580] [581] [582]

* From 2007 through 2010 (later data not available), 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 made by any of these companies in any year was 7.3%.

Net Profit Margins of the Ten Largest Health Insurance/Managed Care Companies

Year

Median

High

Low

2007

4.4%

6.6%

1.4%

2008

2.1%

4.5%

–1.1%

2009

3.1%

7.3%

–0.3%

2010

4.2%

6.3%

–1.0%

[583] [584] [585]


* In 2009, CNN uncritically reported the following statement from U.S. Senate Majority Leader Harry Reid:

There is no business in America that makes more money than the insurance industry.[586]

* 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.[587] [588]

* EBITDA or “earnings before interest, taxes, depreciation and amortization,” is “an important standard measure” of company and industry profitability.[589] [590]

* In 2009, the average EBITDA margin for health insurance/managed care companies in the S&P 500 was 8%. For various other industries in the S&P 500, the margins were as follows:

Industry

2009 EBITDA Margin

Auto Parts & Equipment

5%

Automobile Manufacturers

7%

Advertising

12%

Retail Apparel

14%

Publishing

18%

Brewers

19%

Information Technology

22%

Movies & Entertainment

28%

Healthcare Equipment

30%

Telecom Services

33%

Pharmaceuticals

33%

Systems Software

41%

[591] [592]

* From 1995 through 2017, the following industries (and others) in the S&P 500 had continually higher EBITDA margins than the health insurance/managed care industry:

EBITDA Margins in the S&P 500 for the Health Insurance/Managed Care Industry, Movies & Entertainment, Systems Software, and Information Technology

[593] [594]


* In 2009, the following exchange occurred on NBC:

Chris Matthews (MSNBC host):

I’d regulate the insurance companies like public utilities, and squeeze them down to a reasonable profit level. Why don’t they do that? That’s the solution.

Katty Kay (BBC’s Washington correspondent):

Well, you’d stop the insurance companies making outrageous profits.[595]

* In the last quarter of 2011 (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.[596] EBITDA margins for utilities are not available.[597]


* In 2010 on NPR’s All Things Considered, reporter Julie Rovner stated:

Critics, of course, point out that unlike automakers, many health insurance companies are earning huge profits these days, even while raising premiums.[598]

* In 2010, the average EBITDA margin for health insurance/managed care companies in the S&P 500 was 15% higher than automakers, 52% lower than brewers, and 69% lower than telecom companies:

EBITDA Margins in the S&P 500 for the Health Insurance/Managed Care Industry, Automakers, Brewers, and Telecom Services

[599] [600]


* In 2011, the New York Times published a story by Reid Abelson stating:

The nation’s major health insurers are barreling into a third year of record profits, enriched in recent months by a lingering recessionary mind-set among Americans who are postponing or forgoing medical care.
Yet the companies continue to press for higher premiums, even though their reserve coffers are flush with profits and shareholders have been rewarded with new dividends.[601]

* In the last quarter of 2011 (full-year 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,[602] 5.2% for music & video stores, 9.7% for toys & games, 14.0% for wireless communications, and 53.1% for periodical publishers.[603]

* In 2011, the average EBITDA margin for health insurance/managed care companies in the S&P 500 was 7% higher than auto parts & equipment, 59% lower than publishing, and 74% lower than pharmaceuticals:

EBITDA Margins in the S&P 500 for the Health Insurance/Managed Care Industry, Auto Parts & Equipment, Publishing, And Pharmaceuticals

[604] [605]

International Comparisons

Introductory Notes

* The facts in this section pertain to countries that are members of the Organization for Economic Cooperation and Development (OECD). This is a group of 36 mostly developed nations like Australia, Canada, Germany, Japan, and the United States.[606] [607]

* Per the Handbook of Health Economics, “results obtained with international comparisons should be treated with considerable caution.” The significance of such comparisons is limited by:

  • inconsistent definitions between countries.
  • the thoroughness or accuracy of data collection.
  • difficulties in controlling for social, cultural, demographic, and economic differences between nations.[608] [609] [610]

Spending

* A product or service is a luxury good if people spend a larger portion of their budget on it when their income increases.[611]

* Comparisons of developed countries show that healthcare is a luxury good: as national income increases, generally so does the portion of the economy spent on healthcare.[612] [613] [614] [615]

* Two common measures of nations’ wealth are:

  1. gross domestic product (GDP), or the amount of the goods and services produced by an economy.[616] [617] [618]
  2. disposable income, or household income minus taxes.[619] [620]

* Among OECD nations, higher disposable income is generally associated with a greater portion of GDP spent on healthcare. In 2017, the U.S. had the highest average disposable income in the OECD and spent 17.1% of its economy on healthcare. This is an outlier from the trend of other nations and is 1.9 times the median for all OECD members:[621]

Healthcare Spending of OECD Countries

[622] [623] [624] [625]

* The relatively high healthcare spending in the U.S. may result from higher prices, but direct price comparisons are limited by a lack of comparable data. A 2018 study published by the Journal of the American Medical Association found that:

  • compared to other countries, the United States spends more on pharmaceuticals, administrative costs, and doctors’ salaries.
  • since the U.S. has levels of government health spending and overall resource utilization similar to other developed countries, the spending difference is not due to these factors.[626]

* From 1970 to 2017, healthcare spending as a portion of GDP in the 10 most-populated OECD countries grew as follows:

Healthcare Spending in the 10 Largest OECD Countries

[627]

* From 1970 to 2017, healthcare spending as a portion of GDP rose by 173% in the United States. In the next four most-populated OECD countries with data available during that period, healthcare spending rose from 97% to 182%:

Healthcare Spending Cumulative Increase Since 1970

[628]


Utilization

* Several factors can affect the quantity, quality, and appropriateness of the healthcare that people receive, including but not limited to:


Rationing

* Rationing is a process of deliberately reducing people’s healthcare use to save money or restrict use of limited supplies.[635] [636] [637] Some considerations that lead to rationing include but are not limited to:

  • the value of healthcare spending relative to other spending, such as education or infrastructure.[638] [639]
  • shortages of medical personnel caused by certification regulations.[640]
  • patients using unnecessary healthcare services because they pay for little or none of their medical expenses.[641] [642] [643]

* Rationing can include but is not limited to:

  • refusing to pay for certain services or products. For example:
    • a government agency in England prohibits certain “clinically effective treatments” if the agency decides they are too costly.[644] [645] [646] [647]
    • a government agency in Australia must approve drugs for cost-effectiveness in order to be covered by the government plan.[648]
  • narrowing the field of patients eligible for a treatment. For example:
    • organ transplant centers in the U.S. generally exclude people over 75 years old and sometimes exclude patients with a history of addiction in order to decrease the odds of failure.[649] [650]
    • local government agencies in the U.K. set thresholds that patients must meet before a doctor can refer them for treatment, such as a minimum number of cases of tonsillitis before having a tonsillectomy.[651]
  • increasing the portion of costs that patients pay out of pocket, which incentivizes them to self-ration.[652] For example:
    • France began charging user fees for certain services in 2005 and expanded them in 2008.[653]
    • Switzerland requires patients to make a higher co-payment on brand-name pharmaceuticals that have a generic alternative.[654]

* In order to avoid the effects of rationing in their public or private insurance plan, some people purchase additional policies that:

  • cover services not provided by the primary plan. These policies:
  • cover out-of-pocket expenses. These policies:
  • better cover services already provided by the primary plan. These policies:
    • include more providers, enabling patients to bypass waiting lists or visit higher-quality facilities.[666] [667] [668] [669]
    • are often provided through employers.[670] [671]
    • are encouraged by some governments through tax incentives because they alleviate some of the demand on the publicly funded system.[672] [673] [674] [675]
    • are outlawed by some governments because they give people who can afford them better and quicker access to healthcare than poor people.[676] [677] [678]

* The portion of people with private health insurance in the OECD ranges from 96% in France to 0% in the Czech Republic, Hungary, Poland, and the Slovak Republic:

Population With Private Health Insurance

[679] [680]

* In 2013, before Obamacare required most Americans to have health insurance or pay a fine, the U.S. led the OECD in the portion of all healthcare spending not provided or mandated by the government:

Private Healthcare Spending

[681]


Waiting Times

* Long waiting times for health services can cause increased pain and disability, worse medical outcomes, and lost wages.[682] [683] According to the latest OECD survey data, the U.S. has the lowest portion of patients who wait more than four weeks to get an appointment with a specialist:

Patients Waiting More Than Four Weeks for an Appointment

[684] [685]

* Some aspects of long waiting times in developed countries include:[686]

  • prioritizing patients according to the urgency or severity of their condition, such as in Norway, Italy, and Portugal.[687]
  • rationing, such as government agencies in the U.K. setting minimum waiting times in order to delay paying for certain treatments.[688] [689] [690]
  • patients cancelling treatment or seeking care elsewhere.[691] [692]

Resources

* The World Health Organization identifies human resources as the most important—and often the most costly aspect of healthcare.[693]

* The staff of medical professionals in OECD nations ranges from 1.1 to 5.4 doctors per 1,000 people. The United States has 2.6 doctors per 1,000 people, which is less than the OECD’s median of 3.3 and average of 3.5:

Supply of Doctors

[694]

* The staff of medical professionals in OECD countries ranges from 0.9 to 18.1 nurses per 1,000 people. The United States has 8.6 nurses per 1,000 people, which is less than the OECD’s median of 8.9 and average of 9.1:

Supply of Nurses

[695] [696]

* In OECD nations, people visit a doctor an average of 6.6 times per year, with a median of 6.1 times. Americans visit a doctor about 4.0 times per year:

Doctor Visits

[697] [698]

* Medical technologies such as Magnetic Resonance Imaging (MRI) and Computed Tomography (CT) are important for properly diagnosing diseases in order to improve the efficiency of treatments and reduce unnecessary procedures.[699] [700] [701] The OECD does not have guidelines for the ideal number of MRI units or CT scanners. Too few units could lead to long waiting times, and too many units could lead to overuse.[702]

* The following four charts show the number and use of MRI units and CT scanners in OECD countries. The United States has more of these units and performs more of these exams than the average and median for the OECD:

Magnetic Resonance Imaging (MRI) Units

[703]

Magnetic Resonance Imaging (MRI) Exams

[704]

Computed Tomography (CT) Scans

[705]

Computed Tomography (CT) Exams

[706]

* Certain cancer screenings can contribute to earlier diagnoses and more effective treatment. The World Health Organization recommends breast cancer screening for women aged 50–69.[707] [708] In the OECD, screening rates for this target group range from 28.1% to 90.4% with a median of 72.7%:

Breast Cancer Screening Rates

[709] [710]


Financial Burden

* The portion of medical expenses that patients pay out of pocket affects their use of healthcare services. The OECD states:

The financial protection that people have against the cost of illness depends not only on whether they have a health insurance, but also on the range of goods and services covered and the extent to which these goods and services are covered.[711] [712]

* In the majority of OECD countries, 100% of the population has health insurance. In the United States, approximately 91% of the population has health insurance. Mexico has the lowest insured rate with 89%.[713] [714] [715]

* Cost control through rationing can prevent doctors from recommending medical care,[716] [717] and patients may forgo recommended treatment if their share of the cost is too high. The OECD measures the latter through surveys.[718] [719] [720] According to the most recent survey data (collected during 2010–2016), the portion of patients who skip recommended medical care ranges from about 3% in the U.K. to about 20% in the U.S.:

Patients Who Skipped a Medical Test, Treatment, or Follow-Up Due to Cost

[721] [722]

* When patients pay a lower (or no) portion of their medical expenses out of pocket, they use more healthcare services. This is called the moral hazard effect, and it was demonstrated in two randomized health insurance experiments:[723] [724]

  1. 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 with maximum out-of-pocket limits and randomly assigned to plans with varying levels of cost-sharing. 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.[725]
    • 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.[726]
  1. In 2008, the state of Oregon began providing Medicaid coverage to thousands of people selected through a lottery from a pool of uninsured, low-income adults. In 2014, the journal Science published a study of about 25,000 people who participated in this lottery and lived in the most-populated area of Oregon. The study followed the new Medicaid recipients for about 18 months after the lottery and found they had:
    • 40% more emergency room visits than the people who did not win the lottery to receive Medicaid.
    • “increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings.”[727] [728]

* Government-run health systems and private insurance companies can use rationing to limit overutilization from the moral hazard effect.[729]


Healthcare Outcomes

* Healthcare outcomes measure if medical care improves patient health. These are not the same as health outcomes, which also reflect a range of non-medical factors.[730] [731]

* Cancer survival rates reflect how effectively healthcare systems provide early detection and treatment.[732] The United States has higher cancer survival rates than the average and median of OECD countries for three out of four common types of cancer:

Five-Year Cancer Survival Rates, 2010–2014 (%)

Cancer

OECD Average

OECD Median

United States

Breast

85

86

90

Cervical

66

66

63

Colon

62

64

65

Rectal

61

63

64

[733] [734]

* Per the OECD, measuring the mortality rate of patients hospitalized for a heart attack is a “good indicator of acute care quality” because it “reflects the processes of care, such as timely transport of patients and effective medical interventions.”[735]

* In the United States, about 9% of patients hospitalized for a heart attack die within 30 days, which is also the median for OECD countries:

Deaths Within 30 Days of Hospitalization For Heart Attack

[736]


Health Outcomes

* Per the OECD, health outcomes, as opposed to healthcare outcomes, are “not only related to health spending and the performance of health systems, but also to a wide range of non-medical determinants of health.”[737] [738]

* Besides healthcare, other factors that can affect life expectancy include but are not limited to:

  • behaviors such as smoking, eating habits, and exercise.
  • genetic predisposition to certain diseases.
  • social conditions such as education, employment, and housing.
  • environmental factors such as exposure to lead paint.
  • crime.[739] [740]

* When comparing health outcomes in the United States to those of other countries, a 2019 paper in the Journal of the American Medical Association explains that:

the United States average, in comparison to averages of smaller, more homogenous countries, may lead to erroneous conclusions. For example … Minnesota, a state comparable in size and demographics to Sweden or Denmark, has more similar population health outcomes to these countries than Minnesota has in comparison to Mississippi.[741] [742]

* From 1960 to 2017, OECD nations gained between five and 31 years of life expectancy. Life expectancy now ranges from 75 to 84 years, with an average and median of 81:

Life Expectancy

[743]

* Most non-communicable diseases are linked to tobacco use, physical inactivity, unhealthy diet, or alcohol overuse.[744] Among people aged 15 and older in OECD countries:

  • the portion who smoke on a daily basis ranges from 8% to 27%, with an average and median of 18%. About 11% of Americans aged 15 and older smoke daily.[745]
  • the portion who are overweight or obese ranges from 26% to 74%, with an average of 59% and a median of 62%. About 71% of Americans aged 15 and older are overweight or obese.[746]
  • alcohol consumption ranges from 2 liters to 15 liters per person per year, with an average of 10 liters and a median of 11 liters. Americans consume about 10 liters.[747]

* In the United States, the death rate from non-health causes (like accidents, suicides, and assaults) is 60% higher than the average for developed countries.[748]

* Infant mortality rates can vary between countries because of differences in birth registration practices. For example, some countries use a minimum weight or gestational age to define a live birth.[749] [750] [751] Based on data that only includes births at or after 22 weeks of gestation or weighing at least 500 grams, the infant mortality rate in the U.S. is the third highest in the OECD:

Infant Mortality Rates at 22 Weeks Gestation or Later

[752] [753]

* Besides healthcare, other factors that can affect infant mortality rates include but are not limited to:

Footnotes

[1] Calculated with data from:

a) Dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 11, 2018. <www.cms.gov>

b) Dataset: “CPI—All Urban Consumers (Current Series).” U.S. Department of Labor, Bureau of Labor Statistics. Accessed February 1, 2019 at <www.bls.gov>

“Series Id: CUUR0000SA0; Series Title: All Items in U.S. City Average, All Urban Consumers, Not Seasonally Adjusted; Area: U.S. City Average; Item: All Items; Base Period: 1982–84=100”

c) Dataset: “Table 1.1.5: Gross Domestic Product [Billions of Dollars].” United States Department of Commerce, Bureau of Economic Analysis. Last revised February 28, 2019. <www.bea.gov>

Line 1: “Gross Domestic Product”

d) Dataset: “Table 7.1. Selected Per Capita Product and Income Series in Current and Chained Dollars.” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised February 28, 2019. <www.bea.gov>

Line 18: “Population (Midperiod, Thousands)”

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

[2] Calculated with data from:

a) Dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 11, 2018. <www.cms.gov>

b) Dataset: “Table 1.1.5: Gross Domestic Product (Billions of Dollars).” United States Department of Commerce, Bureau of Economic Analysis. Last revised February 28, 2019. <www.bea.gov>

Line 1: “Gross Domestic Product”

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

[3] Receipt: Christ Hospital, 176 Palisade Avenue, Jersey City, NJ, 1942.

Service

Price ($)

Hospital room ($7.00 per day)

70.00

Operating Room Fee (Baby circumcision)

5.00

Laboratory Fee

1.00

Maternity Room

15.00

Care of Baby

7.50

Total

98.50

Special Allowance

–33.50

Balance

65.00

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.

[4] Webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed October 12, 2011 at <www.bls.gov>

“$7.00 in 1942 has the same buying power as $97.29 in 2011”

[5] Email from 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.

* This amount is payable in full prior to discharge.

* A $500.00 deposit is required at time of pre-registration.

* 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] Ohio Revised Code, Title 37, Chapter 3727, Section 3727.42: “Price Information List.” Ohio General Assembly. Accessed March 25, 2019 at <law.justia.com>

(A) Every hospital shall compile and make available for inspection by the public a price information list containing the information specified in division (B) of this section and shall periodically update the list to maintain current information. The price information list shall be compiled and made available in a format that complies with the electronic transaction standards and code sets adopted by the United States secretary of health and human services under 42 U.S.C. 1320d-2.

(B) Each price information list required by division (A) of this section shall contain all of the following information:

(1) The usual and customary room and board charges for each level of care within the hospital, including but not limited to private rooms, semiprivate rooms, other multiple patient rooms, and intensive care and other specialty units;

(2) Rates charged for nursing care, if the hospital charges separately for nursing care;

(3) The usual and customary charges, stated separately for inpatients and outpatients if different charges are imposed, for any of the following services provided by the hospital:

(a) The thirty most common x-ray and radiological procedures;

(b) The thirty most common laboratory procedures;

(c) Emergency room services;

(d) Operating room services;

(e) Delivery room services;

(f) Physical, occupational, and pulmonary therapy services;

(g) Any other services designated as high volume services by a rule which shall be adopted by the director of health .

(4) The hospital’s billing policies, including whether the hospital charges interest on an amount not paid in full by any person or government entity and the interest rate charged;

(5) Whether or not the charges listed include fees for the services of hospital-based anesthesiologists, radiologists, pathologists, and emergency room physicians and, if a charge does not include such fees, how such fee information can be obtained.

(C) Every hospital shall do all of the following with the price information list required by this section:

(1) At the time of admission, or as soon as practical thereafter, inform each patient of the availability of the list and on request provide the patient with a free copy of the list;

(2) On request, provide a paper copy of the list to any person or governmental agency, subject to payment of a reasonable fee for copying and processing;

(3) Make the list available free of charge on the hospital’s internet web site.

Amended by 129th General Assembly File No.127, HB 487, §101.01, eff. 9/10/2012.

Effective Date: 10-01-1987; 11-13-2006

[7]

Hospital

Price

Type of Room

Mercy Health Willard Hospital

$1,645

Semi-private

Mount Carmel St. Ann’s

$2,040

Routine care

Mercy Health St. Anne Hospital

$2,443

Semi-private

McCullough-Hyde Memorial Hospital

$1,766

Medical/surgical (no option for routine care or semi-private)

Bay Park Hospital

$3,464

Medical/surgical private (no option for routine care or semi-private)

Upper Valley Medical Center

$3,184

Medical/surgical (no option for routine care or semi-private)

Parma Medical Center

$1,419

Routine care (semi-private)

Fairview Hospital

$1,656

Medical/surgical

University Hospitals Rainbow Babies & Children’s Hospital

$2,246

Adult medical/surgical (semi-private standard)

Springfield Regional Medical Center

$2,124

Semi-private

OhioHealth Grady Memorial Hospital

$1,792

Medical/surgical (no option for routine care or semi-private)

Fisher-Titus Medical Center

$1,010

Routine

Greene Memorial Hospital

$2,236

Private or semi-private

Toledo Hospital

$3,464

Medical/surgical (private or semi-private)

Southern Ohio Medical Center

$1,393

General medical surgical

Average

$2,125

Median

$2,040

NOTE: In 2015, Just Facts used a random number generator (<www.randomizer.org>) to select 15 hospitals from 200 that were listed on the Ohio Department of Health’s “Hospital Registration Information” webpage [<publicapps.odh.ohio.gov>]. This original group of 15 hospitals included Trumbull Regional Medical Center, but as of 2019, its online price list does not include hospital rooms. Just Facts requested this price from Trumbull’s parent company, Steward Health Care, and has not received a response as of September 2019. Thus, Just Facts used the random number generator above to replace Trumbull Regional Medical Center in its 2019 survey.

[8] Article: “70% Rise in Hospital Room Costs Since 1980.” Associated Press, November 5, 1986. <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.

[9] Webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed March 25, 2019 at <www.bls.gov>

“$127.00 in January 1980 has the same buying power as $412.63 in February 2019”

[10] 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.”

[11] 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.”

[12] Webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed March 25, 2019 at <www.bls.gov>

“$270 in January 1988 has the same buying power as $589.88 in February 2019”

[13] 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.”

[14] Webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed March 25, 2019 at <www.bls.gov>

“$748 in January 2002 has the same buying power as $1,067.63 in February 2019”

[15] Book: Practical Decision Making in Health Care Ethics: Cases and Concepts (3rd edition). By Raymond J. Devettere. Georgetown University Press, 2010.

Page 459–460:

Thanks to Medicare, Medicaid, and the various other insurance programs, by the last third of the twentieth century most people in the United States were not paying for hospitals and doctors with their own money. They were covered by nonprofit insurance plans such as Blue Cross or Blue Shield, commercial (for profit) insurance plans, or the government plans. All these plans became known as third-party payers. The phrase third-party payer means someone other than the patient (first party) or the providers (the second party—doctors, hospitals, pharmacies, etc.) is paying for medical care.

[16] Calculated with the dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 11, 2018. <www.cms.gov>

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

[17] Article: “Scientific Survey Finds Voters of All Parties, Ages, and Genders Are Broadly Misinformed.” By James D. Agresti. Just Facts, October 30, 2018. <www.justfacts.com>

[T]he survey shows that many voters are not only uninformed about major issues—they are positively misinformed.

Those are the findings of an annual, national poll commissioned by Just Facts, a non-profit research and educational institute. The poll was conducted by an academic research firm that used sound methodologies to assess U.S. residents who regularly vote. …

The survey was conducted by Triton Polling & Research, an academic research firm used by scholars, corporations, and political campaigns. The responses were obtained through live telephone surveys of 1,000 likely voters across the United States during October 2–13, 2018. This sample size is large enough to accurately represent the U.S. population. Likely voters are people who say they vote “every time there is an opportunity” or in “most” elections.

The margin of sampling error for the total pool of respondents is ±3% with at least 95% confidence. The margins of error for the subsets are 5% for Democrat voters, 5% for Republican voters, 11% for third-party voters, 4% for males, 4% for females, 10% for 18 to 34 year olds, 5% for 35 to 64 year olds, and 5% for 65+ year olds. The survey results presented in this article are slightly weighted to match the ages and genders of likely voters. The political parties and geographic locations of the survey respondents almost precisely match the population of likely voters. Thus, there is no need for weighting based upon these variables.

[18] Dataset: “Just Facts’ 2018 Survey of Voter Knowledge on Public Policy Issues.” Just Facts, October 2018. <www.justfacts.com>

Page 6:

Q21: In 1960, governments paid for 24% of all healthcare costs in the U.S. Do you think governments now pay a greater portion or a lesser portion of all healthcare costs in the U.S.?

Greater [=] 54.6%

Lesser [=] 39.7%

Unsure [=] 5.6%

[19] For facts about how surveys work and why some are accurate while others are not, click here.

[20] 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.”

[21] Book: Practical Decision Making in Health Care Ethics: Cases and Concepts (3rd edition). By Raymond J. Devettere. Georgetown University Press, 2010.

Page 459–460:

The shift from patient payment to third-party payment did not immediately disturb the basic FFS [fee-for-service] system. Providers of medical services—hospitals, physicians, pharmacies, and others—continued charging fees for their goods and services. The only major difference was that a party other than the patient or family paid the fees that were billed.

FFS Flaws

Two major structural flaws eventually undermined this combined FFS/third-party payment system. First, the third-party payers had no control over the extent or the cost of the services rendered. Patients decided when to seek treatment, physicians controlled what they would provide and, along with hospitals and pharmacies, what fees they would charge for their services. The third-party payers had no say in the services provided or the fees charged; they simply paid the bills.

The second structural flaw was the incredible built-in incentive for providers to raise their fees rapidly. In the FFS/third-party payer system, the government or the insurance company pays whatever fees are considered customary for the service or medicine. What determines a “customary” fee? Obviously a customary fee is a fee roughly the same as what other physicians, hospitals, and drug companies in the same geographical area are charging. Hence, the faster everyone raises their fees, the faster what is considered “customary” also rises. As long as patients and their families were paying the fees, physicians and hospitals tended to be sensitive to what they charged these people. But when the billing shifted to anonymous government and institutional payers—the third-party payers—it did not take long for everyone reimbursed by these third-party payers to begin to raise their fees rapidly, thereby raising the level of what was considered customary.

[22] Report: “Drug Industry: Profits, Research and Development Spending, and Merger and Acquisition Deals.” U.S. Government Accountability Office, November 17, 2017. <www.gao.gov>

Page 13:

According to economic experts, the usual mechanisms that enforce market discipline may not work in the same way in the health care market as they do in other markets. In most markets—automobiles, for example—consumers are expected to be conscious of the price of goods. If a company raises the price of its goods, consumers would likely purchase fewer goods, causing the company’s revenues to decline. However, in the health care market, the purchase of goods and services is largely influenced by health care providers, who may not be well-informed about, or incentivized to consider, the prices involved. In the case of drugs, some experts argue that marketing and advertising may further distort provider decision making. In addition, if the patients’ medical bills are largely paid by insurance plans (other than copayment or coinsurance costs), then patients’ demand may not be significantly influenced by changes in price to the extent that it might be in other markets where the consumers see and pay the bill themselves.

[23] Paper: “Some Interim Results From a Controlled Trial of Cost Sharing.” By Joseph P. Newhouse and others. Rand Corporation, January 1982. <www.rand.org>

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.”

Page v:

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

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.

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.”

[24] Calculated with data from the webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed March 25, 2019 at <www.bls.gov>

“$1,000 in January 1974 has the same buying power as $5,424.38 in February 2019”

“$1,000 in January 1982 has the same buying power as $2,680.55 in February 2019”

CALCULATION (to obtain an average of the figures above): ($5,424 + $2,680) / 2 = $4,052

[25] Paper: “Some Interim Results From a Controlled Trial of Cost Sharing.” By Joseph P. Newhouse and others. Rand, January 1982. <www.rand.org>

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.”

Page v:

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

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.

Pages 12, 15:

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”

Plan

Total Expenditure†

Free Plan $ Increase

Free care

$401 (±52)

0%

75% coverage

$346 (±58)

16%

50% coverage

$328 (±149)

22%

5% coverage

$254 (±37)

58%

† 95-percent confidence intervals are shown in parentheses.

NOTE: Just Facts has extracted, simplified, and systematized data from this table to make it more understandable.

Page 16: “Table 5—Predicted Total Expenditure Per Person, By Plan, Site, and Year”

Plan

Total Expenditure

Free Plan $ Increase

Free care

$430

0%

75% coverage

$348

24%

50% coverage

$288

49%

5% coverage

$297

45%

NOTE: Just Facts has extracted, simplified, and systematized data from this table to make it more understandable.

Page 23:

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-percent coinsurance plans (Table 3).

[26] Book: Free for All? Lessons from the Rand Health Insurance Experiment. By Joseph P. Newhouse and the Insurance Experiment Group. Harvard University Press, 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.

[27] Paper: “Some Interim Results From a Controlled Trial of Cost Sharing.” By Joseph P. Newhouse and others. Rand, January 1982. <www.rand.org>

Page 25:

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).

[28] Paper: “Effects of Cost Sharing on Care Seeking and Health Status: Results From the Medical Outcomes Study.” By Mitchell D. Wong and others. American Journal of Public Health, November 2001. Pages 1889–1894. <www.ncbi.nlm.nih.gov>

Page 1889:

[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. …

… [A]dults with 1 or more chronic illnesses were followed over 4 years. …

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.”

Pages 1892–1893:

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.

[29] Webpage: “Form W-2 Reporting of Employer-Sponsored Health Coverage.” United States Department of the Treasury, Internal Revenue Service. Last updated June 20, 2018. <www.irs.gov>

“The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable.”

[30] Publication 502: “Medical and Dental Expenses.” United States Department of the Treasury, Internal Revenue Service, November 2016. <www.irs.gov>

Page 2:

What Are Medical Expenses?

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.

Page 3:

How Much of the Expenses Can You Deduct?

You can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI [adjusted gross income].

[31] 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. <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 [adjusted gross income] 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.

[32] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 1:

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

Medicare serves approximately one in six Americans and virtually all of the population aged 65 and over.2 In 2019, the program will cover an estimated 61 million persons (52 million aged and 9 million disabled).

Page 6:

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 (about 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.

[33] Calculated with data from:

a) Dataset: “Medicare Enrollment Dashboard.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, February 20, 2019. <www.cms.gov>

Tab: “Yearly Enrollment Counts”: “2018 Hospital and/or Medical Total … National … [=] 59,924,449”

b) Dataset: “Table 1. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2018.” U.S. Census Bureau, December 2018. <www2.census.gov>

“United States … Population Estimate (as of July 1) … 2018 [=] 327,167,434”

CALCULATION: 59,924,449 Medicare enrollees / 327,167,434 population = 18.3%

[34] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 2 (of PDF):

In existence for 47 years, Medicaid is a means-tested entitlement program that financed the delivery of primary and acute medical services as well as long-term care ….

Understanding the complex statutory and regulatory rules that govern Medicaid is further complicated by the fact that each state designs and administers its own version of the program 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.

Pages 1–2:

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 6 with family income below 133% of the federal poverty level (FPL),7

7 For example, in 2012, the FPL for a family of four is $23,050—133% of FPL for such a family would equal $30,656.50. See <aspe.hhs.gov>.

[35] “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. <www.cms.gov>

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.

Page 28:

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.

Page iv:

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.

[36] 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). <www.gpo.gov>

Page 162 (of PDF):

Title II—Role of Public Programs

Subtitle A—Improved Access to Medicaid …

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.

[37] Calculated with data from:

a) “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

Page iv: “Medicaid provided health care assistance for an estimated 72.2 million enrollees on average in 2016, including those enrolled in Territory Medicaid programs and 11.2 million expansion adults.”

b) Dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960–2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 27, 2018. <www.cms.gov>

“Population (Millions) … 2016 [=] 323”

CALCULATION: 72,200,000 enrollees / 323,000,000 population = 22%

[38] Report: “Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and Timeline.” By Julie Stone and others. Congressional Research Service, August 19, 2010. <www.everycrsreport.com>

Page 48: “CHIP [Children’s Health Insurance Program] 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.”

[39] Webpage: “Medicaid, Children’s Health Insurance Program, & Basic Health Program Eligibility Levels.” Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services. Accessed April 25, 2019 at <www.medicaid.gov>

Medicaid and CHIP Eligibility Levels

CMS [Centers for Medicare and Medicaid Services] has worked with states to “convert” their Medicaid and CHIP [Children’s Health Insurance Program] eligibility levels to be based on modified adjusted gross income (MAGI) as required by the Affordable Care Act. Not all populations that are enrolled in Medicaid and CHIP will have their eligibility determined based on MAGI. The table below reflects eligibility levels in each state for key MAGI coverage groups, relative to the federal poverty guidelines, as of April 1, 2016.

State Medicaid and CHIP Income Eligibility Standards (For Selected MAGI Groups, Based on State Decisions as of April 1, 2019)

Children Separate CHIP … New York [=] 400%

[40] Final rule: “Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010.” Federal Register, March 23, 2012. <www.gpo.gov>

Page 17156:

Agency: Centers for Medicare & Medicaid Services (CMS), HHS.

7. No Resource Test or Income Disregards (§ 435.603(g))

Comment: Many commenters supported the proposal to prohibit consideration of assets in determining financial eligibility for Medicaid and CHIP [Children’s Health Insurance Program]. A few commenters recommended retaining the asset test because eliminating the test entirely could incentivize people with significant assets to stop working and could result in others with significant assets, but minimal income, being enrolled in Medicaid at the taxpayer’s expense.

Response: Section 1902(e)(14)(C) of the Act, as added by section 2002 of the Affordable Care Act, expressly prohibits consideration of assets in determining eligibility for individuals whose financial eligibility is based on MAGI [modified adjusted gross income methods]. We do not have the flexibility to issue regulations to the contrary and are finalizing the regulation at § 435.603(g) as proposed. We note that currently almost all States do not consider assets when determining children’s eligibility for Medicaid and nearly half of all States have also dropped the asset test for parents.

[41] Calculated with data from:

a) “Federal Fiscal Year (FFY) 2018 Statistical Enrollment Data System (SEDS) Reporting.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, May 1, 2019. <www.medicaid.gov>

Pages 2–3: Table: “Unduplicated Number of Children Ever Enrolled … CHIP FY 2018 … Totals [=] 9,632,367”

b) Dataset: “Table 1. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2018.” U.S. Census Bureau, December 2018. <www2.census.gov>

“United States … Population Estimate (as of July 1) … 2018 [=] 327,167,434”

CALCULATION: 9,632,367 enrollees / 327,167,434 population = 2.9%

[42] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 2 (of PDF): “[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.”

[43] Calculated with data from:

a) Fact sheet: “Early 2019 Effectuated Enrollment Snapshot.” Centers for Medicare & Medicaid Services, August 12, 2019. <www.cms.gov>

“Table 1: Total Effectuated Enrollment and Enrollees Receiving APTC and CSR by State, February 2019.” <www.cms.gov>

“State [=] Total … APTC [Advance Premium Tax Credits] Enrollment [=] 9,250,423.”

b) Dataset: “Table 1. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2018.” U.S. Census Bureau, December 2018. <www2.census.gov>

“United States … Population Estimate (as of July 1) … 2018 [=] 327,167,434”

CALCULATION: 9,250,423 enrollees receiving tax credits / 327,167,434 population = 2.8%

[44] 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. <www.deloitte.com>

Page 16:

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 [alternative minimum tax] credits after that date and their carryback.

[45] Webpage: “Small Business Health Care Tax Credit and the SHOP [Small Business Health Options Program] Marketplace.” Internal Revenue Service. Last updated May 3, 2019. <www.irs.gov>

If you are a small employer, there is a tax credit that can put money in your pocket.

The small business health care tax credit benefits employers that:

• Have fewer than 25 full-time equivalent employees

• Pay average wages of less than $50,000 a year per full-time equivalent (indexed annually for inflation beginning in 2014)

• For tax year 2014, the inflation-adjusted amount is $51,000

• For tax year 2015, the inflation-adjusted amount is $52,000

• For tax year 2016, the inflation-adjusted amount is $52,000

• For tax year 2017, the inflation-adjusted amount is $53,000

• Offer a qualified health plan to its employees through a Small Business Health Options Program Marketplace (or qualify for a limited exception to this requirement)

• Pay at least 50 percent of the cost of employee-only—not family or dependent—health care coverage for each employee …

How Will the Credit Make a Difference for You?

The maximum credit is:

• 50 percent of premiums paid for small business employers and

• 35 percent of premiums paid for small tax-exempt employers

• The credit is available to eligible employers for two consecutive taxable years

The amount of the credit you receive works on a sliding scale. The smaller the employer, the bigger the credit. So if you have more than 10 full-time equivalent employees or if the average wage is more than $25,000 (as adjusted for inflation), the amount of the credit you receive will be less. For example, if you pay $50,000 a year toward employees’ health care premiums, and if you qualify for a $10,000 credit each year, you can save $20,000 over the course of two years.

Even if your small business does not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

The credit is refundable, so if you’re tax-exempt and have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. Refund payments issued to small tax-exempt employers claiming the refundable portion of the credit are subject to sequestration.

[46] Paper: “Measuring the Economy: A Primer on GDP and the National Income and Product Accounts.” U.S. Department of Commerce, Bureau of Economic Analysis, December 2015. <www.bea.gov>

Page 1:

How fast is the economy growing? Is it speeding up or slowing down? How does the trade deficit affect economic growth? What’s happening to the pattern of spending on goods and services in the economy?

To answer these types of questions about the economy, economists and policymakers turn to the national income and product accounts (NIPAs) produced by the Bureau of Economic Analysis (BEA). … Featured in the NIPAs is gross domestic product (GDP), which measures the value of the goods and services produced by the U.S. economy in a given time period.

GDP is one of the most comprehensive and closely watched economic statistics: It is used by the White House and Congress to prepare the Federal budget, by the Federal Reserve to formulate monetary policy, by Wall Street as an indicator of economic activity, and by the business community to prepare forecasts of economic performance that provide the basis for production, investment, and employment planning.

Page 8: “…GDP—is defined as the market value of goods, services, and structures produced by the Nation’s economy during a given period less the value of the goods and services used up in production.”

[47] Report: “International Comparisons of GDP Per Capita and Per Hour, 1960–2011.” U.S. Department of Labor, Bureau of Labor Statistics, November 7, 2012. <www.bls.gov>

Page 1: “GDP per capita, when converted to U.S. dollars using purchasing power parities, is the most widely used income measure for international comparisons of living standards.”

Page 2:

Gross Domestic Product (GDP) is defined as the value of all market and some nonmarket goods and services produced within a country’s geographic borders. As such, it is the most comprehensive measure of a country’s economic output that is estimated by statistical agencies. GDP per capita may therefore be viewed as a rough indicator of a nation’s economic well-being, while GDP per hour worked can provide a general picture of a country’s productivity.

[48] Book: Economics: Principles and Policy (12th edition). By William Baumol and Alan Blinder. South-Western Cengage Learning, 2011.

Page 491:

To sharpen the point, observe that real GDP is, by definition, the product of the total hours of work in the economy times the amount of output produced per hour—what we have just called labor productivity:

GDP = Hours of work × Output per hour = Hours worked × Labor productivity

For example, in the United States today, in round numbers, GDP is about $15 trillion and total hours of work per year are about 230 billion. Thus labor productivity is roughly $15 trillion/230 billion hours, or about $65 per hour.

[49] Webpage: “Household Disposable Income.” Organization for Economic Cooperation and Development. Accessed November 5, 2019 at <data.oecd.org>

Disposable income is closest to the concept of income as generally understood in economics. Household disposable income measures the income of households (wages and salaries, self-employed income, income from unincorporated enterprises, social benefits, etc.), after taking into account net interest and dividends received and the payment of taxes and social contributions. Net signifies that depreciation costs have been subtracted from the income presented. “Real” means that the indicator has been adjusted to remove the effects of price changes. Household gross adjusted disposable income is the income adjusted for transfers in kind received by households, such health or education provided for free or at reduced prices by government and NPISHs [non-profit institutions serving households]. This indicator is presented both in terms of annual growth rates (for real net disposable income) and in terms of USD per capita at current prices and PPPs (gross adjusted disposable income). All OECD countries compile their data according to the 2008 System of National Accounts (SNA 2008).

[50] News release: “Personal Income, February 2019; Personal Outlays, January 2019.” U.S. Department of Commerce, Bureau of Economic Analysis, March 29, 2019. <www.bea.gov>

Personal income is the income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or losses.

Disposable personal income is the income available to persons for spending or saving. It is equal to personal income less personal current taxes.

[51] Webpage: “List of OECD Member Countries—Ratification of the Convention on the OECD.” Organization for Economic Cooperation and Development. Accessed April 9, 2019 at <www.oecd.org>

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

[52] Report: Beyond Economic Growth: An Introduction to Sustainable Development (2nd edition). By Tatyana P. Soubbotina. World Bank, 2004. <www.worldbank.org>

Pages 132–133:

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. … 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.”

Page 141:

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.

[53] Chart constructed with data from:

a) Dataset: “OECD Health Statistics 2019: Frequently Requested Data.” July 2019. <www.oecd.org>

Tab: “Current Expenditure, % GDP [gross domestic product]”

b) Dataset: “Household Disposable Income, Gross Adjusted, US Dollars Purchasing Power Parity per Capita, 2016.” Organization for Economic Cooperation and Development, April 16, 2019. <stats.oecd.org>

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

[54] Report: “Indicators of the Global Health Expenditure Database.” World Health Organization, December 5, 2018. apps.who.int/nha/database/DocumentationCentre/GetFile/57114641/en

Page 3:

Current Health Expenditure (CHE) as % Gross Domestic Product (GDP)

This indicator describes the share of spending on health in each country relative to the size of its economy, for a specific year. It shows the importance of the health sector in the economy and indicates the societal priority, measured in monetary terms, given to health.

Current health expenditure corresponds to the final consumption of health care goods and services while excluding investment, exports and intermediate consumption.

[55] Webpage: “Household Disposable Income.” Organization for Economic Cooperation and Development. Accessed June 18, 2019 at <data.oecd.org>

Real household net disposable income is defined as the sum of household final consumption expenditure and savings, minus the change in net equity of households in pension funds. This indicator also corresponds to the sum of wages and salaries, mixed income, net property income, net current transfers and social benefits other than social transfers in kind, less taxes on income and wealth and social security contributions paid by employees, the self-employed and the unemployed. Household gross adjusted disposable income additionally reallocates “income” from government and non-profit institutions serving households (NPISHs) to households to reflect social transfers in kind. These transfers reflect expenditures made by government or NPISHs on individual goods and services, such as health and education, on behalf of an individual household. The indicator includes the disposable income of non-profit institutions serving households. Disposable income, as a concept, is closer to the idea of income as generally understood in economics, than is either national income or gross domestic product (GDP). This indicator is measured in terms of net in annual growth rates and in terms of gross adjusted in USD [U.S. dollars] per capita at current prices and PPPs [purchasing power parities]. All OECD [Organization for Economic Cooperation and Development] countries compile their data according to the 2008 system of National Accounts (SNA).

[56] Webpage: “Glossary of Statistical Terms: Purchasing Power Parities (PPPs).” Organization for Economic Cooperation and Development, September 25, 2001. Last updated 6/11/13. <stats.oecd.org>

Purchasing power parities (PPPs) are the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries. In their simplest form, PPPs are simply price relatives which show the ratio of the prices in national currencies of the same good or service in different countries.

[57] Textbook: Handbook of Health Economics (Volume 1A). Edited by Anthony J. Cuyler and Joseph P. Newhouse. Elsevier, 2000. Chapter 1: “International Comparisons of Health Expenditure.” By Ulf-G. Gerdtham and Bengt Jönsson. Pages 11–53.

Pages 19–20:

[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 is 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.

Page 45:

A common and extremely robust result of international comparisons is that the effect of per capita GDP [gross domestic product] (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.

NOTE: † Income elasticity is the “proportionate change in the demand for a good in response to a change in income. It is reflected in how people change their consumption habits with changes in their income levels. In a growing economy (where income levels are rising) goods whose demand is highly income-dependent will sell more than the goods whose demand is not income-dependent. For example, demand for staple food items normally does not increase with higher income levels; but demand for gourmet food or restaurant food does increase as individual’s income grows. Also called income sensitivity of demand, it is mathematically expressed as percent change in quantity demanded ÷ percent change in income.” [Entry: “Income Elasticity of Demand.” BusinessDictionary.com. Accessed October 28, 2011 at <www.businessdictionary.com>]

[58] Textbook: Health Economics: Theories, Insights, and Industry Studies (5th edition). By Rexford E. Santerre and Stephen P. Neun. South-Western, Cengage Learning, 2010.

Page 131:

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 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.

[59] Report: “National Health Expenditures Accounts: Definitions, Sources, and Methods, 2009.” U.S. Department of Health & Human Services. <www.cms.gov>

Page 4:

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).

[60] Dataset: “Table 7 PHC. Total Personal Health Care Per-Capita Spending by Gender and Age Group, Calendar Years 2002, 2004, 2006, 2008, 2010, 2012, 2014 Level (Dollars).” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services. Last modified April 26, 2019. <www.cms.gov>

CALCULATION: $16,977 / $4,856 = 3.5

[61] Report: “The Baby Boom Cohort in the United States: 2012 to 2060.” By Sandra L. Colby and Jennifer M. Ortman. U.S. Census Bureau, May 2014. <www.census.gov>

Page 1:

The cohort born during the post-World War II baby boom in the United States, referred to as the baby boomers, has been driving change in the age structure of the U.S. population since their birth. This cohort is projected to continue to influence characteristics of the nation in the years to come. The baby boomers began turning 65 in 2011 and are now driving growth at the older ages of the population.

Page 2: “The term ‘baby boomer’ refers to individuals born in the United States between mid-1946 and mid-1964 (Hogan, Perez, and Bell, 2008).”

[62] Report: “The 2017 Long-Term Budget Outlook.” Congressional Budget Office, March 2017. <www.cbo.gov>

Page 4 (of PDF):

Much of the spending growth for Social Security and Medicare results from the aging of the population: As members of the baby-boom generation age and as life expectancy continues to increase, the percentage of the population age 65 or older will grow sharply, boosting the number of beneficiaries of those programs.

In addition, growth in spending on Medicare and the other major health care programs is driven by rising health care costs per person, which are projected to increase more quickly than GDP [gross domestic product] per capita (after the effects of aging and other demographic changes are removed).

Page 15: “The retirement of the baby-boom generation and continued gains in life expectancy will increase the share of the population that is age 65 or older from 15 percent to 22 percent between 2017 and 2047.”

[63] Calculated with the dataset: “Table V.A3.–Social Security Area Population on July 1 and Dependency Ratios, Calendar Years 1941–2095.” United States Social Security Administration, Office of the Chief Actuary, June 5, 2018. <www.ssa.gov>

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

[64] Paper: “The Impact of Prevention on Reducing the Burden of Cardiovascular Disease.” By Richard Kahn and others. American Heart Association Circulation, July 7, 2008. Pages 576–585. <circ.ahajournals.org>

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.”

[65] Paper: “The Impact of Prevention on Reducing the Burden of Cardiovascular Disease.” By Richard Kahn and others. American Heart Association Circulation, July 7, 2008. Pages 576–585. <circ.ahajournals.org>

Page 576:

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.

Page 579:

Table 2. Cost of Interventions … Aspirin to high-risk patients … Total Cost/Year [=] $91 … Lower LDL cholesterol to < 130 mg/dL in high-risk individuals … Total Cost/Year [=] $1816 … Lower blood pressure in diabetic individuals … Total Cost/Year [=] $1582 …

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.

Page 580:

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%).

[66] 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. <www.cbo.gov>

Pages 1–2:

Preventive medical care includes services such as cancer screening, cholesterol management, and vaccines. In making its estimates of the budgetary effects of expanded governmental support for preventive care, CBO [Congressional Budget Office] takes into account any estimated savings that would result from greater use of such care as well as the estimated costs of that additional care. 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. Even when the unit cost of a particular preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively. 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.2 As a result, preventive care can have the largest benefits relative to costs when it is targeted at people who are most likely to suffer from a particular medical problem; however, such targeting can be difficult because preventive services are generally provided to patients who have the potential to contract a given disease but have not yet shown symptoms of having it.

[67] Paper: “Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure.” By Pieter H. M. van Baal and others. PLoS Medicine, February 2008. Pages 0242–0249. <www.plosmedicine.org>

Page 0249:

Compared to people with a healthy weight (a BMI [body mass index] 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]”

CALCULATIONS:

  • (281 – 250) / 250 = 12.4%
  • (281 – 220) / 220 = 27.7%

[68] Paper: “Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure.” By Pieter H. M. van Baal and others. PLoS Medicine, February 2008. Pages 0242–0249. <www.plosmedicine.org>

Page 0242: “Although effective obesity prevention leads to a decrease in costs of obesity-related diseases, this decrease is offset by cost increases due to diseases unrelated to obesity in life-years gained. Obesity prevention may be an important and cost-effective way of improving public health, but it is not a cure for increasing health expenditures.”

[69] Paper: “Preventing Fatal Diseases Increases Healthcare Costs: Cause Elimination Life Table Approach.” By Luc Bonneux and others. British Medical Journal, January 3, 1998. Pages 26–29. <www.bmj.com>

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. …

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.

Pages 27–28:

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).

NOTE: Credit for bringing this paper to attention belongs to Sally C. Pipes [Book: The Top Ten Myths of American Health Care: A Citizen’s Guide. Pacific Research Institute, 2008. <www.pacificresearch.org>]

[70] Article: “What Is EBITDA?” By Katherine Arline. Business News Daily, May 9, 2013. Updated February 25, 2015. <www.businessnewsdaily.com>

Having a reliable measure of your company’s financial health is invaluable both to you and to potential business partners. The accounting technique EBITDA—earnings before interest, taxes, depreciation and amortization—is an important standard measure of profitability. …

To calculate EBITDA, a business must know its income, expenses, interest, taxes, depreciation (the loss in value of operational assets, such as equipment) and amortization, which is expenses for intangible assets, such as patents, that are spread out over a number of years. With those numbers in hand, the formula is:

EBITDA = Revenue – Expenses (excluding tax, interest, depreciation and amortization)

One way to get a more realistic profit picture is to calculate EBITDA margin. To determine EBITDA margin, a business must first calculate its EBITDA and then divide that number by total revenue.

EBITDA Margin = EBITDA ÷ Total Revenue

This result helps show how much operating expenses are eating into a company’s profits. In the end, the higher the EBITDA margin, the less risky a company is considered financially.

[71] Email from Yardeni Research (<www.yardeni.com>) to Just Facts, March 29, 2016.

“EBITDA [earnings before interest, taxes, depreciation, and amortization] margins are the cleanest way to do comparisons across different types of industries.”

[72] Calculated with the dataset: “S&P 500 and Healthcare Earnings Before Interest, Tax, Depreciation, and Amortization [EBITDA] Margins.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on May 28, 2019.

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

[73] Webpage: “S&P 500.” Standard and Poors. Accessed April 9, 2019 at <us.spindices.com>

“The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD [U.S. dollars] 9.9 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 3.4 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization.”

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

Page 33:

Revenues – Expenses = Net Income (or Net Loss)

An income statement starts by showing he 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”

[75] Dataset: “Healthcare Sector.” Yahoo! Finance. Accessed August 27, 2015 at <finance.yahoo.com>

Variable: “Net Profit Margin % (most recent quarter)”

[76] Webpage: “May 2018 National Occupational Employment and Wage Estimates.” U.S. Department of Labor, Bureau of Labor Statistics. Last modified April 2, 2019. <www.bls.gov>

[77] Webpage: “Technical Notes for May 2018 OES Estimates.” U.S. Department of Labor, Bureau of Labor Statistics. Last modified March 29, 2019. <www.bls.gov>

The Occupational Employment Statistics (OES) survey is a semiannual 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, nonproduction bonuses, employer cost for supplementary benefits, and tuition reimbursements.

[78] Webpage: “Occupational Outlook Handbook: Highest Paying Occupations.” U.S. Department of Labor, Bureau of Labor Statistics. Last modified September 4, 2019. <www.bls.gov>

Highest Paying Occupations

Occupation

2018 Median Pay

Psychiatrists

This wage is equal to or greater than $208,000 per year

Anesthesiologists

This wage is equal to or greater than $208,000 per year

Obstetricians and gynecologists

This wage is equal to or greater than $208,000 per year

Surgeons

This wage is equal to or greater than $208,000 per year

Orthodontists

This wage is equal to or greater than $208,000 per year

Oral and maxillofacial surgeons

This wage is equal to or greater than $208,000 per year

Family and general practitioners

$201,100 per year

Physicians and surgeons, all other

$200,890 per year

Internists, general

$194,500 per year

Chief executives

$189,600 per year

Prosthodontists

$176,540 per year

Pediatricians, general

$170,560 per year

Nurse anesthetists

$167,950 per year

Dentists, general

$151,850 per year

Dentists, all other specialists

$146,970 per year

Computer and information systems managers

$142,530 per year

Architectural and engineering managers

$140,760 per year

Airline pilots, copilots, and flight engineers

$140,340 per year

Petroleum engineers

$137,170 per year

Marketing managers

$134,290 per year

[79] Report: “Key Issues in Analyzing Major Health Insurance Proposals.” Congressional Budget Office, December 18, 2008. <www.cbo.gov>

Page 100:

The process of educating and training new physicians can be lengthy, reflecting the complexity of medical care. After obtaining a four-year college degree (usually with a “pre-med” or related major), prospective physicians generally spend four years training in medical schools and then enroll in residency programs that can last from three to seven years, depending on the medical specialty they are pursuing.

[80] “2010 Financial Report of the United States Government.” U.S. Department of the Treasury, December 21, 2010. <www.gao.gov>

Page 245:

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

39 Pub. 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.

40 IPIA 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.

[81] 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. <www.gao.gov>

Page 44:

The following are GAO’s [General Accountability Office’s] comments on the Social Security Administration’s letter dated May 28, 2010.

1. 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.

[82] Report: “Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards.” Government Accountability Office, January 2016. <www.gao.gov>

Page 1: “We have designated Medicare and Medicaid as high-risk programs because their size, scope, and complexity make them particularly vulnerable to fraud and abuse.”

[83] Report: “Health Care Fraud: Information on Most Common Schemes and the Likely Effect of Smart Cards.” Government Accountability Office, January 2016. <www.gao.gov>

Page 1: “Although there have been convictions for multimillion dollar schemes that defrauded federal health care programs, the extent of the problem is unknown as there are no reliable estimates of the magnitude of fraud within these programs or across the health care industry generally.”

[84] “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2018.” Department of Health and Human Services and Department of Justice, May 2019. <oig.hhs.gov>

Page 116:

Total Health Care Fraud and Abuse Control Resources

The table below sets forth HCFAC [Health Care Fraud and Abuse Control] funding, by agency, for health care fraud and abuse control activities in FY 2018, including sequester reductions. The FBI also receives a stipulated amount of HIPAA [Health Insurance Portability and Accountability Act of 1996] funding for use in support of the Fraud and Abuse Control Program, which is shown below. Separately, CMS [Centers for Medicare and Medicaid Services] receives additional Mandatory Resources under the Medicare Integrity Program (section 1817(k)(4) of the Social Security Act). The inclusion of the activities supported with these funds is not required in this report, and this information is included for informational purposes. Since 2009, Congress has also appropriated annual amounts to help carry out health care fraud and abuse control activities within DOJ [Department of Justice] and HHS [Health and Human Services]. Those amounts are set forth as Discretionary Resources in the table below and the results of the efforts supported with these funds are contained within this report.

Mandatory Resources24

Fiscal Year 2018

Office of Inspector General

$190,388,777

Health and Human Services Wedge25

36,414,133

Medicare Integrity Program26

877,243,936

MIP/Medicare (non-add)

809,763,633

Medi-Medi (non-add)

67,480,303

Department of Justice Wedge2

59,444,617

Federal Bureau of Investigation27

134,525,069

Subtotal, Mandatory HCFAC

$1,298,016,532

Discretionary Resources

Office of Inspector General

$84,398,000

CMS Program Integrity

584,766,000

Medicare Program Integrity (Non-Add)

482,368,000

Medicaid Program Integrity (Non-Add)28

84,398,000

Senior Medicare Patrols (ACL Non-Add)29

18,000,000

Department of Justice

75,836,000

Subtotal, Discretionary HCFAC

$745,000,000

Grand Total, HCFAC

$2,043,016,532

[85] “Payment Accuracy 2018 Dataset.” Payment Accuracy (An Official Website of the United States Government). Accessed April 10, 2019 at <paymentaccuracy.gov>

Tab: “All Program Results” (<paymentaccuracy.gov>): “CHIP … FY 2018 Outlays ($M) [=] $16,223.92 … FY 2018 IP [Improper Payments] Amount ($M) [=] $1,389.63 … FY 2018 IP Rate [=] 9%”

[86] “Payment Accuracy 2018 Dataset.” Payment Accuracy (An Official Website of the United States Government). Accessed April 10, 2019 at <paymentaccuracy.gov>

Tab: “All Program Results” (<paymentaccuracy.gov>): “Medicaid … FY 2018 Outlays ($M) [=] $370,391.00 … FY 2018 IP [Improper Payments] Amount ($M) [=] $36,249.70 … FY 2018 IP Rate [=] 10%”

[87] Calculated with data from:

a) “Payment Accuracy 2018 Dataset.” Payment Accuracy (An Official Website of the United States Government). Accessed April 10, 2019 at <paymentaccuracy.gov>

Tab: “All Program Results” (<paymentaccuracy.gov>)

b) Dataset: “HH-1. Households by Type: 1940 to Present (Numbers in Thousands).” U.S. Census Bureau, Current Population Survey, November 2018. <www.census.gov>

NOTES:

  • The 2018 Payment Accuracy survey lists 168 government programs. Among these, 78 reported outlays and 75 reported improper payments.
  • An Excel file containing the data and calculations is available upon request.

[88] Webpage: “Health Care Services.” State of New Jersey Department of Human Services. Accessed November 25, 2011 at <www.state.nj.us>

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.

[89] “Annual Report of the New Jersey Office of Legislative Services, Office of the State Auditor, For the Calendar Year Ended December 31, 2008.” By Richard L. Fair. NJ Office of the State Auditor, February 13, 2009. <www.njleg.state.nj.us>

Pages 18–19:

NJ FamilyCare Program

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. …

Unreported Income

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.

[90] Report: “Covert Testing Exposes Weaknesses in the Durable Medical Equipment Supplier Screening Process.” United States Government Accountability Office, July 2008. <www.gao.gov>

Page 2 (of PDF):

Investigators easily set up two fictitious DMEPOS [durable medical equipment, prosthetics, orthotics, and supplies] companies using undercover names and bank accounts. GAO’s [Government Accountability Office’s] fictitious companies were approved for Medicare billing privileges despite having no clients and no inventory. CMS [Centers for Medicare and Medicaid Services] 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.

[91] Article: “Medicare Fraud: A $60 Billion Crime.” CBS News, October 23, 2009. <www.cbsnews.com>

The tiny medical supply company billed Medicare … a half million dollars while “60 Minutes” was there in August, but we never found anybody inside, and our phone calls were never returned.

[W]e went looking for a pharmacy at 7511 NW 73rd Street that billed Medicare $300,000 in charges. It turned out to be in the middle of a public warehouse storage area. …

[I]t’s usually people like 76-year-old Clara Mahoney who catch them.

She began to notice all sorts of crazy things turning up on her quarterly Medicare statements back in 2003—things that Medicare paid for on her behalf that she had never ordered, never wanted and never received. …

Mahoney … began calling Medicare to tell them that someone was ripping them off. But the only responses she received were letters saying that someone was looking into it. The bogus charges are still turning up on her statements. …

They have been “looking” into Mahoney’s issue for six years.

NOTE: Credit for bringing this article and its dating disparity to our attention belongs to Dustin Siggins [Commentary: “Occupy Debt.” By Dustin Siggins and Jonathan Rourke. <rightwingnews.com>]

[92] Article: “Confidentiality Cloaks Medicare Abuse.” By Mark Schoofs and Maurice Tamman. Wall Street Journal. December 22, 2010. <online.wsj.com>

Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That’s more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data. …

Physical therapy, which cost Medicare almost $3.5 billion in 2008, offers a case study in how Medicare polices its payments. Even when Medicare identified providers whose physical-therapy billing raised red flags, it kept paying thousands or even millions of dollars, sometimes for years, The Wall Street Journal found. …

One Florida physician—not Dr. Wayne—made almost all his money from physical therapy, according to the Journal’s analysis of the 5% database. According to separate billing totals reviewed by The Wall Street Journal, this internal-medicine doctor took home more than $8.1 million from Medicare from 2007 through 2009. …

Dr. Rice billed Medicare nothing in 2007 for services she performed or supervised, according to a person familiar with her business. But starting in October 2008, billing under her provider number skyrocketed. In less than a year, Medicare received claims totaling over $11.6 million and paid out more than $7.1 million. …

Brooklyn physical therapist Aleksandr Kharkover billed Medicare for more than $2.5 million in 2008, according to a person familiar with his business, and received more than $1.8 million.

[93] Report: “Medicare Part D: Instances of Questionable Access to Prescription Drugs.” By Gregory D. Kutz. United States Government Accountability Office, October 4, 2011. <www.gao.gov>

Page 1:

My statement today summarizes our report,1 describing indications of doctor shopping in the Medicare Part D program for 14 categories of frequently abused prescription drugs.2 The objectives of the forensic audit and related investigation were to (1) determine the extent to which Medicare beneficiaries obtained frequently abused drugs from multiple prescribers, (2) identify examples of doctor shopping activity, and (3) determine the actions taken by the Centers for Medicaid & Medicare Services (CMS) to limit access to drugs for known abusers.

2 According to the Drug Enforcement Administration, doctor shopping generally refers to visits by an individual to several doctors, each of whom writes a prescription for a controlled substance. The individual will visit several pharmacies, receiving more of the drug than intended by any single physician, typically for the purpose of abuse.”

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Our analysis found that about 170,000 Medicare beneficiaries received prescriptions from five or more medical practitioners for the 12 classes of frequently abused controlled substances and 2 classes of frequently abused noncontrolled substances in calendar year 2008.3 This represented about 1.8 percent of the Medicare Part D beneficiaries who received prescriptions for these 14 classes of drugs during the same calendar year. These individuals incurred approximately $148 million in prescription drug costs4 for these drugs,5 much of which is paid by the Medicare program.

3 We selected the 14 classes of drugs and the five or more prescribers threshold based on our review of drug diversion literature and prior GAO [Government Accountability Office] work and discussions with a criminal investigator whose recognized expertise is in drug diversion and with an official representing state prescription drug monitoring programs.

5 The $148 million in prescription costs represents about 5 percent of total Medicare Part D prescription costs for these 14 classes of highly abused drugs. The prescription drug costs included in this study do not include related costs associated with obtaining prescriptions, such as the corresponding visits to the doctor’s office and emergency room. These costs are billed separately from the prescription drug claims.

Page 4: “According to the Department of Justice (DOJ), doctor shopping is the primary method to obtain highly addictive prescription opioids (e.g., hydrocodone and oxycodone) for illegitimate use.8

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Case Details

• The beneficiary received prescriptions for a total of 3,655 oxycodone pills (a 1,679-day supply) from 58 different prescribers in 2008. The beneficiary received a prescription for at least 1 of the 14 selected drugs from at least 66 different prescribers, and she filled her prescriptions at 45 different pharmacies in 2008.

• A pharmacy discovered that the beneficiary was forging a prescription from a physician. The pharmacy has noted in its system that its store and other pharmacies in the chain should refuse to fill controlled substances prescriptions for this beneficiary.

• Another pharmacy refused to fill a prescription for the beneficiary, after believing that the beneficiary tried to fill a forged prescription at the store. The beneficiary has not returned to the store since that refusal.

• A physician who frequently treated the beneficiary was repeatedly asked for early refills of Oxycontin prescriptions. After the physician would no longer prescribe Oxycontin, the beneficiary’s medical visits to him ceased. The beneficiary did not inform the physician about seeing other physicians. The physician would not have prescribed any controlled substances had he known they were being prescribed by other physicians.

• Another physician stated that he was suspicious of the beneficiary’s need for the drugs because (1) the beneficiary stated a desire for Oxycontin because of an allergy to other drugs and (2) the beneficiary refused to see a specialist despite his repeated directions. The beneficiary quit seeing the physician after the physician refused to prescribe any more narcotics. The physician was not aware of any attempted forgeries, but stated that he would not be surprised because it is easy to forge prescriptions in Georgia. The physician stated that Georgia has no requirements that prescriptions be written on any type of special security paper and that an individual can simply print or copy a prescription at home using a personal computer and regular computer paper. …

Case Details

• The beneficiary received prescriptions for a total of 4,574 hydrocodone pills (a 994-day supply) from 25 different prescribers in 2008.

• A previous physician stated that the beneficiary was obligated to inform him about receiving other prescriptions for controlled substances. The physician stated that he did not know that other physicians were prescribing narcotics to the beneficiary. The physician stated that it was medically unnecessary, and possibly dangerous, to consume the amount of narcotics obtained by the beneficiary. Had he been informed that the beneficiary was receiving narcotics from other doctors, the physician would have ceased prescribing the drugs.

[94] Report: “Opioid Use Decreased in Medicare Part D, While Medication-Assisted Treatment Increased.” Office of Inspector General, U.S. Department of Health and Human Services, July 2019. <oig.hhs.gov>

Page 1: “The Nation has been grappling with an opioid crisis for several years. … The Office of Inspector General (OIG) has been tracking opioid use in Medicare during this crisis, particularly since 2016.1 OIG has identified prescribers with questionable prescribing for these beneficiaries.”

Pages 10–11:

Methodology

We based this data brief on an analysis of prescription drug event (PDE) records for Part D drugs. This data brief includes prescriptions that beneficiaries received through Part D. It does not include prescriptions paid through other programs, prescriptions paid for in cash, or illicitly purchased drugs. Part D sponsors submit a PDE record to CMS [Centers for Medicare and Medicaid Services] each time a drug is dispensed to a beneficiary enrolled in their plans. Each record contains information about the drug and beneficiary, as well as the identification numbers for the pharmacy and the prescriber.

To obtain descriptive information about the drugs, beneficiaries, and prescribers, we matched PDE records to data from the First DataBank, National Claims History File, Part C Encounter Data, CDC’s [Centers for Disease Control’s] morphine milligram equivalent (MME) conversion file, and the National Plan and Provider Enumeration System (NPPES). First DataBank contains information about each drug, such as the drug name, strength of the drug, therapeutic class (e.g., an opioid). The National Claims History File contains claims data from Medicare Parts A and B, including diagnoses codes. Part C Encounter Data contains medical claims data, including diagnosis codes, for beneficiaries enrolled in Medicare Advantage plans. CDC’s MME conversion file contains information about each opioid’s drug morphine milligram equivalence.29 NPPES contains information about prescribers, such as their name, address, and taxonomy (i.e., specialty). For the purposes of this study, we use the term “prescription” to mean one PDE record.

Analysis of Part D Opioid Utilization and Spending

We identified PDE records for opioids that beneficiaries received in 2018.30 We calculated the total number of Part D beneficiaries who received opioids in 2018. We then calculated the total number of opioid prescriptions paid for by Part D in 2018 and the average number of opioid prescriptions per beneficiary. We compared the 2018 data to the data from 2016 and 2017 in our previous data briefs, which used the same methodology. Next, we calculated Part D spending for opioids from 2006 (the first year of Part D) to 2018. To do this, we summed four fields on the PDE records that represent the total gross drug costs: ingredient cost, dispensing fee, vaccine administration fee, and sales tax.

Next, we calculated the proportion of beneficiaries who received opioids in the Nation and in each State in 2018. We based this analysis on the PDE records and the Medicare enrollment data. We then identified the most commonly prescribed opioids by calculating the total number of prescriptions for each generic drug name (delineated by strength and form). We then identified all PDE records for (1) MAT [medication-assisted treatment] drugs indicated for the treatment of OUD [opioid use disorder] and (2) naloxone (the opioid overdose reversal drug). We first calculated the total number of beneficiaries who received MAT drugs and the number of prescriptions for these drugs from 2006 through 2018.31 Next, we calculated the total number of beneficiaries who received naloxone and the number of prescriptions for naloxone from 2006 through 2018.32

Beneficiary Analysis

We determined the amount of opioids that each beneficiary received in 2018. To do this, we calculated each beneficiary’s average daily morphine equivalent dose (MED).33 The MED converts opioids of different ingredients, strengths, and forms into equivalent milligrams of morphine. It allows us to sum dosages of different opioids to determine a beneficiary’s daily opioid level. …

We analyzed the MED data using the same criteria that we used in our previous analysis of the 2016 and 2017 data.36 We began by determining the extent to which beneficiaries received high amounts of opioids. … We determined that a beneficiary received high amounts of opioids if he or she exceeded an average daily MED of 120 mg for any 90-day period and had received opioids for 90 or more days in the year. The MED of 120 mg exceeds the 90-mg MED level that CDC [Centers for Disease Control] recommends avoiding for patients with chronic pain.

[95] Report: “Opioid Use Decreased in Medicare Part D, While Medication-Assisted Treatment Increased.” Office of Inspector General, U.S. Department of Health and Human Services, July 2019. <oig.hhs.gov>

Pages 4–5:

More Than 350,000 Part D Beneficiaries Received High Amounts of Opioids in 2018

In 2018, a total of 353,751 beneficiaries received high amounts of opioids through Medicare Part D; these beneficiaries did not have cancer and were not in hospice care. This is a decrease of 23 percent from 2017, when 458,935 beneficiaries received high amounts of opioids. In 2016, a total of 501,008 beneficiaries received high amounts of opioids.11

Each of the 353,751 beneficiaries who received high amounts of opioids in 2018 had an average morphine equivalent dose (MED) of greater than 120 mg a day for at least 3 months. MED is a measure that equates all the various opioids and strengths into one standard value.

Although beneficiaries may receive opioids for legitimate purposes, these amounts raise concern. The Centers for Disease Control and Prevention (CDC) recommends that prescribers use caution when ordering opioids at any dosage and avoid increasing dosages to the equivalent of 90 mg or more MED a day for chronic pain.12

[96] Report: “Opioid Use Decreased in Medicare Part D, While Medication-Assisted Treatment Increased.” Office of Inspector General, U.S. Department of Health and Human Services, July 2019. <oig.hhs.gov>

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Two groups of beneficiaries that are at serious risk of opioid misuse or overdose are (1) beneficiaries who receive extreme amounts of opioids and (2) beneficiaries who appear to be doctor shopping. Other Part D beneficiaries may also be at serious risk of opioid misuse or overdose but do not fall into either group.

A total of 48,558 beneficiaries were in these two groups in 2018.15 This does not include beneficiaries who have cancer or were in hospice care. Specifically, 40,374 beneficiaries received extreme amounts of opioids (i.e., an average daily MED [morphine equivalent dose] greater than 240 mg for 12 months) and 8,796 beneficiaries appeared to be doctor shopping (i.e., received high amounts of opioids and had 4 or more prescribers and 4 or more pharmacies). A total of 612 beneficiaries were in both groups.

[97] Report: “Opioid Use Decreased in Medicare Part D, While Medication-Assisted Treatment Increased.” Office of Inspector General, U.S. Department of Health and Human Services, July 2019. <oig.hhs.gov>

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Examples of Beneficiaries at Serious Risk of Misuse or Overdose

A Pennsylvania beneficiary received 10,728 oxycodone tablets and 570 fentanyl patches in 2018. Her average daily MED [morphine equivalent dosage] was nearly 2,900 mg for the year—32 times the level that CDC recommends avoiding. She received all of her opioid prescriptions from a single physician.

A New York beneficiary received 38 opioid prescriptions during the year, including 14 1-month supplies of one strength of extended release morphine tablets and an additional 13 1-month supplies of another strength of morphine. In total, this beneficiary’s average daily MED for the year was 2,173 mg. All of her prescriptions were ordered by a single physician.

Over the course of a year, an Alabama beneficiary received 56 opioid prescriptions ordered by 25 prescribers and filled at 5 pharmacies. These included prescriptions for morphine, oxycodone, and oxycodone-acetaminophen. In 1 month alone, this beneficiary received seven prescriptions from five different prescribers.

[98] Report: “Opioid Use Decreased in Medicare Part D, While Medication-Assisted Treatment Increased.” Office of Inspector General, U.S. Department of Health and Human Services, July 2019. <oig.hhs.gov>

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Examples of Prescribers with Questionable Prescribing Patterns

One physician in Florida ordered opioids for 104 beneficiaries who received extreme amounts of opioids during 2018. In total, this physician ordered 2,619 opioids for these beneficiaries, costing Part D almost $1.2 million. In one instance, this physician ordered 37 opioid prescriptions for a single beneficiary, all of which were for oxycodone. The beneficiary had an average daily MED that was over 10 times the level that CDC recommends avoiding.

[99] Webpage: “About the Survey.” Substance Abuse and Mental Health Services Administration, U.S. Department of Health and Human Services. Accessed April 10, 2019 at <nsduhweb.rti.org>

Project Description

The National Survey on Drug Use and Health (NSDUH) is a nationwide study that provides up-to-date information on tobacco, alcohol, and drug use, mental health and other health-related issues in the United States.

Each year, NSDUH interviews approximately 70,000 people age 12 and older for this important study. The study results are released each September, and are used to inform public health programs and policies.

NSDUH is authorized by Section 505 of the Public Health Service Act, which requires annual surveys to collect data on the level and patterns of substance use.

The Substance Abuse and Mental Health Services Administration (SAMHSA), an agency in the U.S. Department of Health and Human Services (DHHS), sponsors NSDUH. SAMHSA's Center for Behavioral Health Statistics and Quality (CBHSQ), oversees all aspects of the study including data collection, analysis and reporting.

[100] “Results From the 2017 National Survey on Drug Use and Health: Detailed Tables.” Center for Behavioral Health Statistics and Quality, Substance Abuse and Mental Health Services Administration, September 14, 2018. <www.samhsa.gov>

Page 167 (of PDF): “Table 1.1A – Types of Illicit Drug Use in Lifetime, Past Year, and Past Month Among Persons Aged 12 or Older: Numbers in Thousands, 2016 and 2017 … Misuse of Psychotherapeutics3 … Past Year (2017) [=] 18,077 … 3 Prescription Psychotherapeutics include pain relievers, tranquilizers, stimulants, or sedatives and do not include over-the-counter drugs.”

[101] Calculated with data from the webpage: “Prescription Opioid Data.” Centers for Disease Control and Prevention. Last updated December 19, 2018. <www.cdc.gov>

46 people die every day from overdoses involving prescription opioids.4 In 2017, prescription opioids continue to contribute to the epidemic in the U.S.—they were involved in more than 35% of all opioid overdose deaths.

4 Scholl L, Seth P, Kariisa M, Wilson N, Baldwin G. Drug and Opioid Overdose Deaths – United States, 2013–2017. Morb Mortal Wkly Rep. ePub: 21 December 2018

CALCULATION: 365 days x 46 deaths per day = 16,790

[102] Report: “Crime in the United States, 2017: Murder.” Federal Bureau of Investigation, U.S. Department of Justice, Fall 2018. <ucr.fbi.gov>

Page 1: “The FBI’s Uniform Crime Reporting (UCR) Program defines murder and nonnegligent manslaughter as the willful (nonnegligent) killing of one human being by another.”

Page 2: “In 2017, the estimated number of murders in the nation was 17,284.”

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 17,284 murders cited above also include nonnegligent manslaughters.

[103] “2009 Financial Crimes Report.” Federal Bureau of Investigation. <www.fbi.gov>

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.

HCF [health care fraud] is expected to continue to rise as people live longer. This increase will produce a greater demand for Medicare benefits. As a result, it is expected that the utilization of long and short-term care facilities such as skilled nursing, assisted living, and hospice services will expand substantially in the future. Additionally, fraudulent billings and medically unnecessary services billed to health care insurers are prevalent throughout the country. These activities are becoming increasingly complex and can be perpetrated by corporate-driven schemes and systematic abuse by providers.

[104] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

Page 1:

Hospital participation in Medicare and Medicaid is voluntary. However, as 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 60 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid.

[105] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

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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.

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In the aggregate, both Medicare and Medicaid payments fell below costs in 2017:

• Combined underpayments were $76.8 billion in 2017. This includes a shortfall of $53.9 billion for Medicare and $22.9 billion for Medicaid.

• For Medicare, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicare patients in 2017.

• For Medicaid, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicaid patients in 2017.

• In 2017, 66 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[106] Webpage: “Medicaid Benefits: Inpatient Hospital Services, Other Than in an Institution for Mental Disease.” Henry J. Kaiser Family Foundation. Accessed July 25, 2019 at <www.kff.org>

Timeframe: 2018 … Limits on services … Alaska [=] Must be prior authorized … Colorado [=] Prior authorization is required for transplants and bariatric surgery … Connecticut [=] Prior authorization on inpatient admissions … Florida [=] Up to 45 days per fiscal year for recipients age 21 or older … Georgia [=] Must be medically necessary … Indiana [=] Prior approval for non-emergency admissions other than deliveries; second opinions required for specified procedures … Missouri [=] Inpatient hospital admissions must be certified as medically necessary and appropriate … Oklahoma [=] General acute care inpatient hospital services are limited to 24 days per individual per State fiscal year … Oregon [=] In Oregon limits are based upon the condition/treatment pair and not the facility type. The physician would prior authorize the service to be performed in the hospital … Texas [=] Spell of illness limitation of 30 days … Virginia [=] service authorization required … Washington [=] Inpatient rehabilitation requires prior authorization and concurrent review for length of stay … West Virginia [=] All inpatient admissions, with the exception of those related to labor and delivery, are subject to medical necessity review and certification of admission by the Utilization Management Contractor … Wisconsin [=] A small number of services require prior approval to be covered or to receive enhanced reimbursement rates … Wyoming [=] Prior authorization is required for acute psych, rehab, transplants and some other surgeries

[107] 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 <www.law.cornell.edu>

(a) Medical Screening Requirement

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

(1) In General

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. …

(e) Definitions

In this section:

(1) The term “emergency medical condition” means—

(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,

(ii) serious impairment to bodily functions, or

(iii) serious dysfunction of any bodily organ or part; or

(B) with respect to a pregnant woman who is having contractions—

(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.

(3)

(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).

[108] Report: “EMTALA: Access to Emergency Medical Care.” By Edward C. Liu. Congressional Research Service, July 1, 2010. <www.everycrsreport.com>

Page 2 (of PDF):

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.

Page 1:

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.

[109] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

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 60 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid.”

[110] Report: “The Impact of EMTALA on Physician Practices.” By Carol K. Kane. American Medical Association, February 2003. <www.researchgate.net>

Pages 2–3:

We measure the financial impact of EMTALA [Emergency Medical Treatment and Active Labor Act] 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.

Page 4:

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].

[111] Report: “The Impact of EMTALA on Physician Practices.” By Carol K. Kane. American Medical Association, February 2003. <www.researchgate.net>

Page 1:

The data in this report are from the American Medical Association’s 2001 Patient Care Physician Survey (PCPS). The PCPS is a nationally representative survey of post-residency, non-federal, patient care physicians that is conducted via mail and phone interviews. Physicians surveyed in the PCPS were asked how many hours they spent providing EMTALA [Emergency Medical Treatment and Active Labor Act] mandated care in a typical week of practice and asked for the percent of their 2000 bad debt that was associated with such care.

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.”

[112] 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). <www.gpo.gov>

Pages 36, 43 (of PDF):

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 …

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.

[113] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 3: “Immediate Individual and Group Market Reforms … providing coverage for preexisting health conditions for enrollees under age 19….”

Pages 11–12:

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).

[114] Book: Economics For Dummies (2nd edition). By Sean Flynn (PhD., Assistant Professor of Economics, Scripps College). Wiley 2011.

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People who already have medical problems have preexisting conditions. Health insurance has difficulty coping with preexisting conditions due to adverse selection, which occurs when insurance is disproportionately purchased by those who are more likely to need costly reimbursements in the future. Adverse selection can drive up insurance rates and even kill off an insurance market altogether. (For details on adverse selection in auto insurance markets, see Chapter 11.)

To see how adverse selection wreaks havoc on health insurance markets, suppose an insurance company offers health insurance to a large group of people—say, the population of Massachusetts. For those with preexisting conditions, purchasing insurance is a no-brainer, because they’re certain that their future healthcare bills will be larger than their insurance premiums. But the money to pay for their future medical bills has to come from somewhere. With all the sick people purchasing insurance, the insurance company knows that future treatment costs will be high. The only way to cover those costs is to charge high premiums, getting enough money out of those without preexisting conditions to pay the expected costs.

Those without preexisting conditions will react the same way people react to higher prices when considering any good or service: Some will stop buying the product. Their dropping out of the insurance market makes things even worse for the insurance company, because it’ll be forced to raise premiums even higher. But by raising insurance premiums, even more healthy people will choose not to purchase health insurance, and premiums will go up again.

[115] Book: Accounting Fundamentals for Health Care Management (3rd edition). By Steven A. Finkler, Thad Calabrese, and David M. Ward. Jones & Bartlett Learning, 2019.

Page 26:

Why does the law [2010 Affordable Care Act] have penalties for those who do not purchase health insurance? Part of the law eliminates the ability of insurance companies to not cover services for preexisting medical conditions. Preexisting conditions would have to be covered by insurers, and the health insurance premium would be required by law to be the same for someone with such a condition as for someone without that condition. This is a great benefit to people who have long-term illnesses and attempt to get insurance coverage. However, unless there is a requirement or strong incentive for everyone to have health insurance, many people are likely to only buy health insurance when and if they become ill, and the illness would be covered. If many people went that route, then insurance would become prohibitively expensive. In other words, healthier populations (referred to as “young invincibles” in policy debates) are needed in the insured pool; these individuals pay for health insurance but are less likely to utilize services than those with long-term health concerns. Because insurance premiums do not differentiate between these two types of insured individuals, the healthier population pays higher premiums that effectively subsidize the sicker population that pays lower premiums. Imagine if no one purchased fire insurance until his or her house caught on fire. Insurance works by spreading risk across a large population, some of whom incur a loss, and most of whom don’t. Fire insurance works because many people pay small premiums (i.e., small compared to the cost of rebuilding their house if it burns down) and only a few houses actually burn down. All homeowners share the risk of a loss due to fire. If the only people who bought fire insurance were the ones who had fires, then the annual premium would cost as much or more than the cost of the house. No one could afford insurance under such conditions.

This means that if individuals are covered for preexisting conditions but don’t have to buy insurance until they get sick, premiums for everyone could rise so high as to make it nearly impossible for anyone to afford health insurance.

[116] Working paper: “The Effect of State Community Rating Regulations on Premiums and Coverage in the Individual Health Insurance Market.” By Bradley Herring and Mark V. Pauley. U.S. Department of Health and Human Services, August 2006. <aspe.hhs.gov>

Page 9:

The log of condition-related expense is also statistically significant in both data sets, implying that families with the presence of high-risk chronic conditions do appear to pay, on average, higher premiums in the individual market. However, the economic magnitude of this effect is modest, implying that there is a high level of pooling. Families with health conditions that are twice as expensive to treat pay premiums that are only 11.5–15.5 percent higher than average. If insurers knew or could have known about the chronic condition and its effect on expected expense, this result implies that, somehow, those with chronic conditions that make them twice as expensive as average spread 85 percent or more of that risk to premiums paid by others.

[117] Article: “New York Offers Costly Lessons on Insurance.” By Anemona Hartocollis. New York Times, April 17, 2010. <www.nytimes.com>

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.

[118] Report: “Newly Enrolled Members in the Individual Health Insurance Market After Health Care Reform: The Experience From 2014 and 2015.” Blue Cross and Blue Shield Association, March 20, 2016. <www.bcbs.com>

Page 2:

Comparing the health status and use of medical services among those who enrolled in individual coverage before and after the ACA [Affordable Care Act] took effect, as well as those with employer-based health insurance, the study finds that:

• Members who newly enrolled in BCBS [Blue Cross and Blue Shield] individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who already had BCBS individual coverage.

• Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical services in their first year of coverage, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health coverage.

• The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

Page 3:

Percentage Difference in 2015 Prevalence of Select Conditions Between Individuals Who Enrolled Prior to 2014 Versus Newly Enrolled in 2014 and 2015 (Based on the First Nine Months of 2015 Medical Claims Data)

Hypertension 24%

Diabetes 94%

Depression 52%

Coronary Artery Disease 32%

Hepatitis C 140%

HIV 242%

[119] Report: “Uncompensated Hospital Care Cost Fact Sheet.” American Hospital Association, January 2019. <www.aha.org>

Page 1:

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 financial assistance it provides. Financial assistance includes care for which hospitals never expected to be reimbursed and care provided at a reduced cost for those in need. 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 financial assistance, or are unwilling to pay their bills. Uncompensated care excludes other unfunded costs of care, such as underpayment from Medicaid and Medicare.

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, the AHA [American Hospital Association] data on hospitals’ uncompensated care are expressed in terms of costs not charges. It should be noted that the uncompensated care figures do not include Medicaid or Medicare underpayment costs.

[120] Report: “Market Snapshot: Third-Party Debt Collections Tradeline Reporting.” By Michael Furey and Ryan Kelly. Consumer Financial Protection Bureau, July 2019. <files.consumerfinance.gov>

Pages 2–3:

This report provides a brief overview of two types of third-party debt collections2 tradelines reflected on credit reports compiled by the nationwide consumer reporting agencies (NCRAs)3….

A tradeline is information about a consumer account that is sent, generally on a regular basis, to a consumer reporting agency.6 Tradelines contain data such as the account balance, payment history, and the status of the account (e.g. current, past due, or charged-off). Debt collections tradelines, which are considered negative, generally may appear on a consumer report for up to seven years.7

2 The term “third-party debt collections” refers to a situation where collections on a consumer account are not handled by the original creditor. When a creditor collects on its own account, the term used is “first party debt collections.”

3 The three NCRAs are Equifax, Experian, and TransUnion. These three firms are sometimes referred to as “credit bureaus.”

Page 5: “Medical debt accounted for 58 percent of total third-party collections tradelines in Q2 2018.”

[121] Report: “Uncompensated Hospital Care Cost Fact Sheet.” American Hospital Association, January 2019. <www.aha.org>

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 by all types of 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 3: “National Uncompensated Care Based on Costii: 1990–2017 (in Billions), Community Hospitals … 2017 … Uncompensated Care Cost [=] $38.4”

[122] Calculated with data from:

a) Report: “Uncompensated Hospital Care Cost Fact Sheet.” American Hospital Association, January 2019. <www.aha.org>

Page 3: “National Uncompensated Care Based on Costii: 1990–2017 (in Billions), Community Hospitals … 2017 … Uncompensated Care Cost [=] $38.4”

b) Webpage: “Fast Facts on US Hospitals.” American Hospital Association. Updated January 2019. <www.aha.org>

Pages 1–2 (of PDF): “2017 AHA Annual Survey … Total Expenses for All U.S. Hospitals [=] $1,060,933,249,000”

CALCULATION: $38,400,000,000 uncompensated care / $1,060,933,249,000 total expenses = 3.6%

[123] Position statement: “Medical Liability Reform.” American Academy of Orthopaedic Surgeons. Accessed November 28, 2011 at <www.aaos.org>

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

[124] Report: “2011 Update on U.S. Tort Cost Trends.” Towers Watson, January 2012.

<www.casact.org>

Page 8:

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”)

• Defense costs

• Administrative expenses

Page 17: “Appendix 5 – Medical malpractice tort costs … Total cost … 2010 [=] $29,844,869”

NOTES:

  • “All dollar amounts are in $000s.”
  • Willis Towers Watson informed Just Facts that an updated study to this report has not been conducted as of October 8, 2019.

[125] Calculated with data from the footnote above and: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960–2013.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 9, 2014. <www.cms.gov>

“Total National Health Expenditures … 2010 [=] $2,604,131 million”

CALCULATION: $29,844,869,000 / $2,604,131,000,000 = 1.1%

[126] Report: “Medical Malpractice Law in the United States.” By Peter P. Budetti and Teresa M. Waters. Henry J. Kaiser Family Foundation, May 2005. <kaiserfamilyfoundation.files.wordpress.com>

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.

[127] Dataset: “Annual Estimates of the Resident Population by Sex, Race, and Hispanic Origin for the United States, States, and Counties: April 1, 2010 to July 1, 2016.” U.S. Census Bureau. Accessed May 2, 2019 at <factfinder.census.gov>

“Population Estimate (as of July 1) … 2016 … [Rank 1] … Los Angeles County, California [=] 10,137,915”

[128] Webpage: “California Medical Malpractice Insurance.” Cunningham Group. Accessed May 2, 2019 at <www.cunninghamgroupins.com>

“2016 … CAP-MPT … County [=] Los Angeles, Orange, Kern Counties … OB/GYN [=] $39,940”

[129] Dataset: “Annual Estimates of the Resident Population by Sex, Race, and Hispanic Origin for the United States, States, and Counties: April 1, 2010 to July 1, 2016.” U.S. Census Bureau. Accessed May 2, 2019 at <factfinder.census.gov>

“Population Estimate (as of July 1) … 2016 … [Rank 2] … Cook County, Illinois [=] 5,203,499”

[130] Webpage: “Illinois Medical Malpractice Insurance.” Cunningham Group. Accessed May 2, 2019 at <www.cunninghamgroupins.com>

“2016 … Medical Protective – MedPro … County [=] Cook, Jackson, Madison, St. Clair and Will Counties … OB/GYN [=] $127,083”

[131] Webpage: “California Medical Malpractice Insurance.” Cunningham Group. Accessed May 2, 2019 at <www.cunninghamgroupins.com>

“2016 … CAP-MPT … County [=] Alameda, Contra Costa, Fresno, Kings, Inyo, Madera, Mariposa, Merced, Monterey, San Benito, San Francisco, San Luis Obispo, San Mateo, Santa Clara, Santa Cruz, Stanislaus and Tulane Counties … OB/GYN [=] $16,240”

[132] Webpage: “Illinois Medical Malpractice Insurance.” Cunningham Group. Accessed May 2, 2019 at <www.cunninghamgroupins.com>

“2016 … Medical Protective – MedPro … County [=] Adams, Knox, Peoria and Rock Island Counties [=] $57,192”

[133] 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 <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.

[134] Calculated with data from: “Adverse Action and Medical Malpractice Payment Reports.” U.S. Department of Health & Human Services, National Practitioner Data Bank, March 31, 2019. <www.npdb.hrsa.gov>

“Display: Graph; Rows: Report Type, Columns: State; Start Year: 2009; End Year: 2018; Report Type: Medical Malpractice Payment; Range: All; State: All; Practitioner Type: Physician (MD) and Physician (DO); Display Value: Report Counts; Malpractice Inflation Adjusted: Yes”

“Display: Graph; Rows: Report Type, Columns: State; Start Year: 2009; End Year: 2018; Report Type: Medical Malpractice Payment; Range: All; State: All; Practitioner Type: Physician (MD) and Physician (DO); Display Value: Dollar Amounts ($M); Malpractice Inflation Adjusted: Yes”

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

[135] “Quantifying the Cost of Defensive Medicine: Summary of Findings.” Jackson Healthcare, February 2010. <www.jacksonhealthcare.com>

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.”

Page 2:

Key Findings from Gallup Survey

• 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.”

[136] Just Facts has 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:

  • Use of mail surveys, which are prone to response bias.†
  • Arbitrary extrapolations of data from different healthcare sectors to others that have widely different characteristics.
  • Reliance upon poll questions that solicit subjective responses.

NOTE: † Paper: “Response Rates to Mail Surveys Published in Medical Journals.” By David A. Asch and others. Journal of Clinical Epidemiology, 1997. Pages 1129–1136. <www.ncbi.nlm.nih.gov>

Page 1129:

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.

Page 1135:

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.

[137] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello, Amitabh Chandra, Atul A. Gawande, and David M. Studdert. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

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.”

NOTE: For examples of news outlets that have cited this study, see the last sets of facts in this section.

[138] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello and others. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

Pages 1572–1573:

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.

[139] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello and others. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

Page 1573:

Treatment intensity for other diagnoses may be less subject to physician discretion than cardiac care. …

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.

[140] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello and others. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

Pages 1573–1574:

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).16 We 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.

[141] Position statement: “Medical Liability Reform.” American Academy of Orthopaedic Surgeons. Accessed November 28, 2011 at <www.aaos.org>

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

[142] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello and others. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

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.”

[143] 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. <www.cms.gov>

“Total National Health Expenditures … 2008 [=] $2,391,383.7 million … Total Hospital Expenditures … 2008 [=] $722,143.8 million … Total Physician and Clinical Expenditures … 2008 [=] $486,486.2 million”

CALCULATION: ($722,143.8 + $486,486.2) / $2,391,383.7 = 50.54%

[144] Report: “National Health Expenditures Accounts: Definitions, Sources, and Methods, 2009.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, 2009. <www.cms.gov>

Page 7:

Exhibit 4: Assembly and Data Sources in the NHEA [National Health Expenditures Accounts], 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.

[145] Paper: “National Costs of the Medical Liability System.” By Michelle M. Mello and others. Health Affairs, September 2010. Pages 1569–1577. <content.healthaffairs.org>

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.”

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

[146] Article: “Malpractice Liability Costs U.S. $55.6 Billion: Study.” By Maggie Fox. Reuters, September 7, 2010. <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.

[147] Article: “Medical Liability Costs Make Up 2.4% of U.S. Health Spending.” By Pat Wechsler. Bloomberg, September 7, 2010. <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.”

[148] Article: “Malpractice Lawsuits and the National Debt.” By Paula Reid. CBS News, December 3, 2010. <www.cbsnews.com>

“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. Of that figure, it’s estimated that medical liability costs about $55.6 billion or 2.4%.”

[149] Article: “Malpractice Costs Top $55 Billion a Year in U.S., Harvard Study Says.” By Bruce Japsen. Chicago Tribune, September 8, 2010. <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.”

[150] Article: “Cost of Medical Malpractice Tops $55 Billion a Year in U.S.” U.S. News & World Report, September 7, 2010. <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.”

[151] 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. Pages 27–40.

Page 28:

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.

[152] 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. <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 [American Medical Association] 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.

Page 5:

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 [Centers for Medicare and Medicaid Services] 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.

[153] 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. <www.ama-assn.org>

Page 7:

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.

Page 8:

In our significant experience with educating physicians about federal policies, the AMA [American Medical Association] 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.

[154] 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. <www.deloitte.com>

Page 19:

Reporting Related to Individual Mandate, Employer Penalties

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.

Disclosure of Tax Return Information

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.

Effective date – The change in disclosure rules is effective upon enactment.

Observation

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.

[155] Memo: “State Health Insurance Mandates and the ACA [Affordable Care Act] Essential Benefits Provisions.” National Conference of State Legislatures, April 12, 2018. <www.ncsl.org>

Appendix I

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. Prior to the passage of the PPACA [Patient Protection and Affordable Care Act], between the federal government and the states there are upwards of 2,000 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 Benefit Laws

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.

Mandated Insurance Benefits and the Cost of Health Insurance

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 0.1% 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.

[156] Article: “Obama Reaffirms Insurers Must Cover Contraception.” By Robert Pear. New York Times, January 20, 2012. <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.

[157] Paper: “The Price of Innovation: New Estimates of Drug Development Costs.” By Joseph A. DiMasi, Ronald W. Hansen, and Henry G. Grabowski. Journal of Health Economics, 2003. Pages 151–185. <www.cptech.org>

Page 151:

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.”

Pages 164–165:

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.

[158] Article: “Medical Treatment, Out of Reach.” By Andrew Pollack. New York Times, February 9, 2011. <www.nytimes.com>

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.”

[159] Book: Vaccinology: An Essential Guide. Edited by Gregg N. Milligan and Alan D. T. Barrett. Wiley-Blackwell, 2015.

Page 234:

In addition, the length of time for the field trials, any modifications that arc made to the product or application, and the time the pharmaceutical company takes to respond to correspondence with the regulatory authorities can influence the time frame and the associated costs related to vaccine development. Lastly, the nature of the pathogen itself can also affect how efficiently a vaccine can be developed and manufactured.

The policies and regulations for registering and licensing veterinary vaccines vary among countries, which can also affect the time frame for developing and licensing veterinary vaccines. This factor also has implications on the regulations regarding the importation and exportation of vaccines between countries. Since some countries use different quality standards for the approval of the use of a vaccine, imported vaccines during nonemergency situations may be required to go through a conventional licensing process, which can be costly and time consuming. There has been some effort by different organizations to harmonize the testing procedures used by different countries to prevent duplicate testing of imported vaccines that are undergoing registration.

[160] Report: “A Physician’s Guide to Language Interpreter Services.” Minnesota Medical Association, 2004. <www.mnmed.org>

Page 3:

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.

Page 4:

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 [limited English proficiency] 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:

1. Assessing the language needs of the patient population;

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

4. Monitoring to ensure LEP patients have meaningful access to health care.

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.

[161] Webpage: “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. Last reviewed 7/26/13. <www.hhs.gov>

III. Who Is Covered?

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 [Department of Justice] LEP Guidance are to apply additionally to the programs and activities of federal agencies, including HHS.

Recipients of HHS assistance may include, for example:

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

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

• State, county, and local health agencies.

• State Medicaid agencies.

• State, county and local welfare agencies.

• Programs for families, youth, and children.

• Head Start programs.

• Public and private contractors, subcontractors and vendors.

• 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.

[162] Article: “New York Offers Costly Lessons on Insurance.” By Anemona Hartocollis. New York Times, April 17, 2010. <www.nytimes.com>

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.

[163] Webpage: “FAQ: Selling Health Insurance Across State Lines.” By Phil Galewitz and Lexie Verdon. Kaiser Health News, January 25, 2011. <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.

[164] Brief: “Rate Regulation.” National Association of Insurance Commissioners. Accessed January 12, 2012 at <www.naic.org>

Page 1 (of PDF):

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.

[165] House Resolution 3590: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010 (became Public Law No: 111-148). <www.gpo.gov>

Page 37:

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 …

Sec. 2701. Fair health insurance premiums.

(a) Prohibiting Discriminatory Premium Rates.—

(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—

(i) whether such plan or coverage covers an individual or family;

(ii) rating area, as established in accordance with paragraph (2);

(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).

(2) Rating Area.—

(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.

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

Pages 118–119:

Hospital Licensure, Certification, and Accreditation

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.

[167] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.

[168] 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. <www.ama-assn.org>

Pages 5–6:

We ask CMS [Centers for Medicare and Medicaid Services] 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 [American Medical Association] 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.

[169] Webpage: “Physician Licensure: An Update of Trends.” American Medical Association. Accessed January 18, 2012 at <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 [osteopathic doctors] and MD’s [medical doctors]; 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.

[170] Textbook: Nurse Anesthesia (4th edition). By John J. Nagelhout and Karen Plaus. Saunders Elsevier, 2009.

Page 19:

In all states, it is a physician, usually the patient’s attending physician or surgeon, who determines the patient’s need for anesthesia or anesthesia-related services; therefore, anesthesiology has always been a referral service to anesthesiologists or CRNAs [Certified Registered Nurse Anesthetist]. It must be noted that the idiosyncratic language between doctors and nurses has reflected that referral over the years in the terminology of “ordering,” for example, “anesthetic.” For the most part, such ordering has not been technique, drug, or device specific. It may have been as simple as posting a patient for anesthesia and surgery within the operating room. Historically, it has been accepted that each anesthesia provider knows what techniques, drugs, and devices are safest in his or her hands for a particular patient.

The changing regulatory scene regarding physician supervision and the continual complaints of CRNAs regarding the TEFRA [Tax Equity and Fiscal Responsibility Act of 1982] regulations, which are believed by many CRNAs to adversely affect their ability to practice, came to a head in two additional initiatives pursued by the AANA [American Association of Nurse Anesthetists] in the 1990s.

Page 20:

In this age of cost containment in health-care services, the TEFRA rules preclude cost-effective use of both CRNAs and anesthesiologists without the anesthesiologists’ risking a crossing of the line into fraudulent practice. Some anesthesia groups consisting of both types of providers have decided to eliminate TEFRA as a concern by billing for each provider’s services as though the provider were practicing alone.

[171] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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).

NOTE: The layers of paperwork are detailed on pages 25–29.

[172] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

Page 21:

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. …

Care Setting

Ratio of Patient Care

to Paperwork Time

Emergency Department Care

1 to 1

Surgery and Acute Inpatient Care

1 to 0.6

Skilled Nursing Care

1 to 0.5

Home Health Care

1 to 0.8

[173] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.

[174] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.”

[175] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.)

[176] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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

[177] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.”

[178] Report: “Patients or Paperwork: The Regulatory Burden Facing America’s Hospitals.” PricewaterhouseCoopers (commissioned by the American Hospital Association), 2001. <procentive.com>

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.

[179] Dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

“Government … Health … 2018 [=] 1,617.7”

[180] Calculated with data from:

a) Dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

“Government … Health … 2018 [=] 1,617.7”

b) Dataset: “Table HH-1. Households by Type: 1940 to Present.” U.S. Census Bureau, Current Population Survey, November 2018. <www.census.gov>

“(Numbers in thousands) … 2018 … Total households [=] 127,586”

CALCULATION: $1,617,700,000,000 health spending / 127,586,000 households = $12,679

[181] Calculated with the dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

“2018 … Government [=] 6,786.6 … Health [=] 1,617.7”

CALCULATION: $1,617.7 billion / $6,786.6 billion = 24%

[182] As documented below, government “total expenditures” is a more inclusive measure of spending than “current expenditures,” but the U.S. Bureau of Economic Analysis—which provides the only comprehensive and timely estimates of government spending at all levels—does not publish total expenditures broken down by function (e.g., education, healthcare, etc.). Instead, it only publishes current expenditures by function.† ‡

“Current expenditures” include “all spending by government on current-period activities,” such as:

  • “consumption expenditures,” or “what government spends on its work force and for goods and services, such as fuel for military jets and rent for government buildings and other structures.”
  • “current transfer payments,” which consist of:
    • “social benefits,” or “payments from social insurance funds, such as social security and Medicare, and payments providing other income support, such as Medicaid and food stamp benefits.”
    • “grants-in-aid to state and local governments.”
    • “transfers to the rest of the world,” or “federal aid to foreign countries and payments to international organizations such as the United Nations.”
  • “interest payments,” or the costs “of borrowing by governments to finance their capital and operational costs.”
  • “subsidies,” or grants to businesses, other government entities, and homeowners.§ †

“Total expenditures” include all current expenditures plus:

  • “gross investment,” or “what government spends on structures, equipment, and software, such as new highways, schools, and computers.” This also includes research expenditures.
  • “other capital-type expenditures that affect future-period activities,” such as payments to foreigners.
  • “net purchases of nonproduced assets,” such as land.§ † Φ

NOTES:

  • † Report: “A Primer on BEA’s Government Accounts.” By Bruce E. Baker and Pamela A. Kelly. U.S. Bureau of Economic Analysis, March 2008. <www.bea.gov>. Page 29: “The federal estimates in the NIPAs [National Income and Product Accounts] contain much of the same information as the Budget of the United States Government, although the information is classified differently. The state and local estimates in the NIPAs are the only comprehensive estimates of state and local government activity available on a timely basis.” Page 34: “Current transfer payments. These consist of social benefits and other current transfer payments to the rest of the world. Social benefits are payments from social insurance funds, such as social security and Medicare, and payments providing other income support, such as Medicaid and food stamp benefits. Other current transfers to the rest of the world consists of federal aid to foreign countries and payments to international organizations such as the United Nations. Federal ‘other current transfer payments’ also includes grants-in-aid to state and local governments. … Interest payments. These represent the cost of borrowing by governments to finance their capital and operational costs. … Subsidies. These are payments to businesses, including homeowners and government enterprises at another level of government.”
  • ‡ Email from the U.S. Bureau of Economic Analysis to Just Facts, March 18, 2015. “BEA does not produce an estimate of government total expenditures by function as defined by the national income and product accounts (NIPAs).”
  • § Webpage: “FAQ: BEA Seems to Have Several Different Measures of Government Spending. What Are They for and What Do They Measure?” U.S. Bureau of Economic Analysis (BEA), May 28, 2010. <www.bea.gov>. “Consumption expenditures include what government spends on its work force and for goods and services, such as fuel for military jets and rent for government buildings and other structures. Gross investment includes what government spends on structures, equipment, and software, such as new highways, schools, and computers. … Current expenditures measures all spending by government on current-period activities, and consists not only of government consumption expenditures, but also current transfer payments, interest payments, and subsidies (and removes wage accruals less disbursements#). … Total government expenditures: In addition to the transactions that are included in current expenditures, this measure includes gross investment (as defined earlier), and other capital-type expenditures that affect future-period activities, such as capital transfer payments and net purchases of nonproduced assets (for example, land).”£
  • # Email from the U.S. Bureau of Economic Analysis to Just Facts, March 18, 2015. “Wage accruals less disbursements is no longer an adjustment that is needed in the accounts as BEA’s income estimates for wages were moved to an accrual basis during the 2013 comprehensive revision.”
  • £ Webpage: “Glossary: Capital Transfers to the Rest of the World (Net).” U.S. Bureau of Economic Analysis. Last modified April 13, 2018. <www.bea.gov>. “Cash or in-kind transfers to foreigners that are linked to the acquisition or disposition of a fixed asset.”
  • Φ Email from the U.S. Bureau of Economic Analysis to Just Facts, June 19, 2015. “As of July 2013, research expenditures are included in the NIPAs as investment.”

[183] Calculated with data from:

a) Dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

“Government … Health … 2018 [=] 1,617.7”

b) Dataset: “Table 1.1.5. Gross Domestic Product [Billions of Dollars].” United States Department of Commerce, Bureau of Economic Analysis. Last revised August 29, 2019. <www.bea.gov>

“Gross domestic product … 2018 [=] 20,580.2”

CALCULATION: $1,617.7 billion health spending / $20,580.2 billion GDP = 7.9%

[184] Calculated with data from:

a) Dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

b) Report: “Fiscal Year 2020 Historical Tables: Budget Of The U.S. Government.” White House Office of Management and Budget, March 2019. <www.whitehouse.gov>

Pages 50–59: “Table 3.1—Outlays by Superfunction and Function: 1940–2024.”

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

[185] Calculated with the dataset: “Table 3.16. Government Current Expenditures by Function [Billions of Dollars].” U.S. Department of Commerce, Bureau of Economic Analysis. Last revised September 13, 2019. <www.bea.gov>

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

[186] Report: “CBO’s 2011 Long-Term Budget Outlook.” Congressional Budget Office, June 2011. <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.

[187] “A Glossary of Terms Used in the Federal Budget Process.” U.S. Government Accountability Office. September, 2005. <www.gao.gov>

Page 46:

Discretionary

A term that usually modifies either “spending,” “appropriation,” or “amount.” “Discretionary spending” refers to outlays from budget authority that is provided in and controlled by appropriation acts. “Discretionary appropriation” refers to those budgetary resources that are provided in appropriation acts, other than those that fund mandatory programs. “Discretionary amount” refers to the level of budget authority, outlays, or other budgetary resources (other than those which fund mandatory programs) that are provided in, and controlled by, appropriation acts. (See also Appropriation Act; Appropriations under Forms of Budget Authority under Budget Authority; One-Year Authority under Duration under Budget Authority; Gramm-Rudman-Hollings. For a contrast, see Entitlement Authority; Mandatory.)

Page 66:

Mandatory

A term that usually modifies either “spending” or “amount.” “Mandatory spending,” also known as “direct spending,” refers to budget authority that is provided in laws other than appropriation acts and the outlays that result from such budget authority. Mandatory spending includes entitlement authority (for example, the Food Stamp, Medicare, and veterans’ pension programs), payment of interest on the public debt, and non-entitlements such as payments to states from Forest Service receipts. By defining eligibility and setting the benefit or payment rules, Congress controls spending for these programs indirectly rather than directly through appropriations acts. “Mandatory amount” refers to the level of budget authority, outlays, or other budgetary resources that are controlled by laws other than appropriations acts. Budget authority provided in annual appropriations acts for certain programs is treated as mandatory because the authorizing legislation entitles beneficiaries to receive payment or otherwise obligates the government to make payment. (See also Appropriated Entitlement; Appropriations under Forms of Budget Authority under Budget Authority; Multiple-Year Authority and No-Year Authority under Duration under Budget Authority; Committee Allocation; Direct Spending Authority; Discretionary; Entitlement Authority; Gramm-Rudman-Hollings.)

[188] Report: “The Congressional Appropriations Process: An Introduction.” By James V. Saturno, Bill Heniff Jr., and Megan S. Lynch. Congressional Research Service. Updated November 30, 2016. <www.senate.gov>

Page 2 (of PDF):

Appropriations measures are under the jurisdiction of the House and Senate Appropriations Committees. In recent years these measures have provided approximately 35% to 39% of total federal spending. The remainder of federal spending comprises direct (or mandatory) spending, controlled by House and Senate legislative committees, and net interest on the public debt.

The annual appropriations cycle is initiated with the President’s budget submission, which is due on the first Monday in February. This is followed by congressional consideration of a budget resolution that, in part, sets spending ceilings for the upcoming fiscal year. The target date for completion of the budget resolution is April 15. Committee and floor consideration of the annual appropriations bills occurs during the spring and summer months and may continue through the fall and winter until annual appropriations are enacted. Floor consideration of appropriations measures is subject to procedural rules that may limit the content of those measures and any amendments thereto.

Congress has established a process that provides for two separate types of measures associated with discretionary spending: authorization bills and appropriation bills. These measures perform different functions. Authorization bills establish, continue, or modify agencies or programs. Appropriations measures subsequently provide funding for the agencies and programs authorized.

There are three types of appropriations measures. Regular appropriations bills provide most of the funding that is provided in all appropriations measures for a fiscal year and must be enacted by October 1, the beginning of the fiscal year. If regular bills are not enacted by the beginning of the new fiscal year, Congress adopts continuing resolutions to continue funding, generally until regular bills are enacted. Supplemental appropriations bills provide additional appropriations to become available during a fiscal year.

[189] Report: “CBO’s 2011 Long-Term Budget Outlook.” Congressional Budget Office, June 2011. <www.cbo.gov>

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 be 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.

[190] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 2 (of PDF): “[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.”

[191] Calculated with data from:

a) “Supplemental Data for CBO’s 2011 Long-Term Budget Outlook.” Congressional Budget Office, June 2011. <www.cbo.gov>

Tab: “Figure B-1. Primary Spending and Revenues, by Category, Under CBO’s Long-Term Budget Scenarios Through 2085”

b) Dataset: “The 2016 Long-Term Budget Outlook.” Congressional Budget Office, July 12, 2016. <www.cbo>

Tab: “Figure 3-5. Medicare’s Dedicated Taxes and Offsetting Receipts as a Share of Medicare Spending”

c) Dataset: “The 2018 Long-Term Budget Outlook.” Congressional Budget Office, June 26, 2018. <www.cbo.gov>

Tab: “Figure 2. Federal Debt, Spending, and Revenues”

Tab: “Figure 8. Federal Spending on the Major Health Care Programs, by Category”

d) Dataset: “An Update to the Budget and Economic Outlook: 2017 to 2027.” Congressional Budget Office, June 29, 2017. <www.cbo.gov>

Tab: “Table 1. CBO’s Baseline Budget Projections, by Category”

Tab: “Table 2. Mandatory Outlays Projected in CBO’s Baseline”

e) Dataset: “The Budget and Economic Outlook: 2018 to 2028.” Congressional Budget Office, April 9, 2018. <www.cbo.gov>

Tab: “Table 2-2. Mandatory Outlays Projected in CBO’s Baseline”

Tab: “Table 4-1. CBO’s Baseline Budget Projections, by Category”

f) Dataset: “Updated Budget Projections: 2019 to 2029.” Congressional Budget Office, May 2, 2019. <www.cbo.gov>

Tab: “Table 1. CBO’s Baseline Budget Projections, by Category”

Tab: “Table 5 Supplement. CBO’s Baseline Projections of Mandatory Outlays”

g) Dataset: “The 2019 Long-Term Budget Outlook.” Congressional Budget Office, June 25, 2019. <www.cbo.gov>

Tab: “Figure 1-9. Federal Outlays for the Major Health Care Programs, by Category”

Tab: “Figure 1.3. CBO’s Budget Projections in Brief”

h) Dataset: “The 2014 Long-Term Budget Outlook.“ Congressional Budget Office, July 15, 2014. <cbo.gov>

Tab: “6. Summary Data for the Extended Alternative Fiscal Scenario, Without Economic Feedback“

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

[192] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 2 (of PDF): “Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65.”

Page 3:

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 quarters to become entitled to premium-free benefits. Medicare Part B is voluntary, with a monthly premium required of beneficiaries who choose to enroll.

[193] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 1: “Medicare serves … virtually all of the population aged 65 and over.2

Page 6:

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 (about 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.

[194] Dataset: “Medicare Enrollment Dashboard.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, February 20, 2019. <www.cms.gov>

Tab: “Aged Disabled Yearly Cnts.”: “National … 2018 Aged Total [=] 51,266,826 … 2018 Disabled Total [=] 8,657,623”

[195] Dataset: “2018 Population by Age.” U.S. Census Bureau. Accessed May 7, 2019 at <www.census.gov>

“(Numbers in Thousands) … 65 to 80+ [=] 51,080”

[196] Calculated with data from:

a) Dataset: “Medicare Enrollment Dashboard.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, February 20, 2019. <www.cms.gov>

Tab: “Yearly Enrollment Counts”: “2018 Hospital and/or Medical Total … National … [=] 59,924,449”

b) Dataset: “Table 1. Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2018.” U.S. Census Bureau, December 2018. <www2.census.gov>

“United States … Population Estimate (as of July 1) … 2018 [=] 327,167,434”

CALCULATION: 59,924,449 Medicare enrollees / 327,167,434 population = 18.3%

[197] Booklet: “Medicare Coverage of Skilled Nursing Facility Care.” Centers for Medicare and Medicaid Services, January 2015. <www.medicare.gov>

Page 5:

If you or someone you care for needs skilled nursing facility (SNF) care….

SNF care is health care given when you need skilled nursing or therapy 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 17).

A SNF 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, therapy services, and/or other related health services.

Medicare doesn’t cover custodial care if it’s 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.

[198] “2019 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, April 22, 2019. <www.cms.gov>

Page 1:

The Medicare program has two separate trust funds, the Hospital Insurance Trust Fund (HI) and the Supplementary Medical Insurance Trust Fund (SMI). HI, otherwise known as Medicare Part A, helps pay for hospital, home health services following hospital stays, skilled nursing facility, and hospice care for the aged and disabled. 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. Medicare Advantage and Program of All-Inclusive Care for the Elderly (PACE) plans receive prospective, capitated payments for such beneficiaries from the HI and SMI Part B trust fund accounts; the other plans are paid from the accounts on the basis of their costs.

Page 20:

[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; it reached 35.6 percent in 2018 from 12.8 percent in 2004. Payments to Medicare Advantage plans are based on benchmarks that range from 95 to 115 percent of local fee-for-service Medicare costs, with bonus amounts payable for plans meeting high quality-of-care standards. As was the case last year, the Trustees project that the overall participation rate for private health plans will continue to increase—from almost 37 percent in 2019 to about 40 percent in 2028 and thereafter.

[199] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 1:

• Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, hospice care, and some home health services. 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 Parts 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 outpatient prescription drug benefits. Funding is included in the SMI trust fund and is financed through beneficiary premiums, general revenues, and state transfer payments.

Page 4:

In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173),10 which 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….

Pages 6–7:

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 (about 10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under the age of 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 the age of 65 who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium ($437 in 2019) or, for persons with at least 30 quarters of covered employment, a reduced monthly premium ($240 in 2019).24 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 the age of 65 who are not entitled to premium-free Part A) may enroll in Part B by paying a monthly premium.25 In 2019, the monthly premium is $135.50; however, about 3.5% of Part B enrollees pay less, due to a “hold-harmless” provision in the Social Security Act.26 Since 2007, higher income Part B enrollees pay higher premiums. (See “Part B Financing.”) Although enrollment in Part B is voluntary for most individuals, in most cases, those who enroll in Part A by paying a premium also must enroll in Part B. Additionally, ESRD [end-stage renal disease] beneficiaries and Medicare Advantage enrollees (discussed below) also must enroll in Part B. …

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. Since 2011, some higher-income enrollees 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.

[200] Brief: “Spending Patterns for Prescription Drugs Under Medicare Part D.” By Tamara Hayford. Congressional Budget Office, December 1, 2011. <www.cbo.gov>

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.

[201] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <fas.org>

Page 3:

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 quarters to become entitled to premium-free benefits. Medicare Part B is voluntary, with a monthly premium required of beneficiaries who choose to enroll.

Pages 6–7:

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 (about 10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under the age of 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 the age of 65 who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium ($437 in 2019) or, for persons with at least 30 quarters of covered employment, a reduced monthly premium ($240 in 2019).24 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 the age of 65 who are not entitled to premium-free Part A) may enroll in Part B by paying a monthly premium.25 In 2019, the monthly premium is $135.50; however, about 3.5% of Part B enrollees pay less, due to a “hold-harmless” provision in the Social Security Act.26 Since 2007, higher income enrollees pay higher premiums.

[202] Report: “Health Care Spending and the Medicare Program.” U.S. Congress, Medicare Payment Advisory Commission, June 2019. <www.medpac.gov>

Page 32:

Chart 3–4. Total Spending on Health Care Services for Noninstitutionalized FFS† Medicare Beneficiaries, by Source of Payment, 2016

Per capita total spending = $15,065 … Medicare 67% … Public supplements 6% … Private supplements 13% … Beneficiaries’ direct spending 14% …

FFS (fee-for-service). “Private supplements” include employer-sponsored plans and individually purchased coverage. “Public supplements” includes Medicaid, Department of Veterans Affairs, and other public coverage. “Beneficiaries’ direct spending” is on Medicare cost sharing and noncovered services, but not supplemental premiums. Analysis includes only FFS beneficiaries not living in institutions such as nursing homes. We excluded Medicare Advantage enrollees.

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 <www.omnicare.com>]

[203] “2016 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, June 22, 2016. <www.cms.gov>

Page 192: “About 10 million Medicare beneficiaries receive supplemental coverage through the Medicaid program; neither the growth rates for Medicare nor those for private health insurance reflect the Medicaid costs for these dual beneficiaries.”

[204] “2019 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, April 22, 2019. <www.cms.gov>

Page 8: “Total Medicare expenditures were $741 billion in 2018.”

[205] Calculated with data from:

a) “2019 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, April 22, 2019. <www.cms.gov>

Page 8: “Total Medicare expenditures were $741 billion in 2018.”

b) Table 3.2: “Federal Government Current Receipts and Expenditures.” United States Department of Commerce, Bureau of Economic Analysis. Last revised on April 26, 2019. <www.bea.gov>

“2018 … Current receipts … (Billions of dollars) [=] 3,496.1 … Current expenditures [=] 4,482.0”

CALCULATIONS:

  • $741 billion Medicare expenditures / $4,482.0 billion total expenditures = 16.5%
  • $741 billion Medicare expenditures / $3,496.1 billion total receipts = 21.2%

[206] Calculated with data from: “2019 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, April 22, 2019. <www.cms.gov>

Page 10: “Table II.B1.—Medicare Data for Calendar Year 2018.”

Page 175: “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; and any gifts received by the Medicare trust funds.”

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

[207] Report: “Analytical Perspectives: Budget of the United States Government, Fiscal Year 2005.” White House Office of Management and Budget, February 2004. <fraser.stlouisfed.org>

Page 339: “The main financing component of the Federal funds group is the general fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program. It consists of all collections not earmarked by law to finance other funds, including virtually all income taxes and many excise taxes….”

[208] The Encyclopedia of Taxation & Tax Policy. Edited by Joseph J. Cordes and others. Urban Institute Press, 2005.

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.”

[209] The table below shows the average federal general revenue taxes paid by various income groups in 2016:

Average Federal General Revenue Taxes (2016)

Household Income Group

Full Income

Effective Tax Rate

Taxes Per Household

Lowest 20%

$35,400

-5.2%

-$1,857

Second 20%

$52,200

0.2%

$79

Middle 20%

$75,900

4.3%

$3,250

Fourth 20%

$111,300

8.0%

$8,886

Highest 20%

$292,200

19.6%

$57,329

81st–90th%

$160,700

11.4%

$18,258

91st–95th%

$219,200

14.3%

$31,329

96th–99th%

$360,300

19.8%

$71,237

Top 1%

$1,789,800

30.8%

$552,088

The figures above were calculated with data from:

a) Dataset: “The Distribution of Household Income, 2016.” Congressional Budget Office, July 2019. <www.cbo.gov>

“Table 3. Average Household Income, by Income Source and Income Group, 1979 to 2016, 2016 Dollars”

“Table 7. Components of Federal Taxes, by Income Group, 1979 to 2016, 2016 Dollars”

b) Dataset: “Composition of Social Insurance, Retirement Receipts, and Excise Taxes, 1940–2024.” Executive Office of the President of the United States, Office of Management and Budget, 2019. <www.govinfo.gov>

c) The Encyclopedia of Taxation & Tax Policy. Edited by Joseph J. Cordes and others. Urban Press Institute, 2005.

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.”

d) Report: “Present Law and Background Information on Federal Excise Taxes.” United States Congress, Joint Committee on Taxation, January 2011. <www.jct.gov>

Page 1: “Revenues from certain Federal excise taxes are dedicated to trust funds (e.g., the Highway Trust Fund) for designated expenditure programs, and revenues from other excise taxes (e.g., alcoholic beverages) go to the General Fund for general purpose expenditures.”

NOTES:

  • An Excel file containing the data and calculations is available upon request.
  • The next two footnotes contain important context for these calculations.

[210] Report: “The Distribution of Household Income, 2014.” Congressional Budget Office, March 19, 2018. <www.cbo.gov>

Page 1: “Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes.”

Page 14:

Federal taxes allocated to households in this analysis account for approximately 94 percent of all federal revenues, on average. The remaining federal revenue sources not allocated to U.S. households include states’ deposits for unemployment insurance, estate and gift taxes, net income earned by the Federal Reserve, customs duties, and miscellaneous fees and fines.

Because of the complexity of estimating state and local taxes for individual households, this report considers federal taxes only. Researchers differ about whether state and local taxes are, on net, regressive, proportional, or slightly progressive, but most agree that state and local taxes are less progressive than federal taxes.

Page 12:

Means-tested transfers are cash payments and in-kind transfers from federal, state, and local governments. The largest means-tested transfers consist of transfers provided through Medicaid and the Children’s Health Insurance Program (measured as the average cost to the government of providing these benefits); the Supplemental Nutrition Assistance Program (formerly known as the Food Stamp Program); and Supplemental Security Income.

Income before transfers and taxes is market income plus social insurance benefits. Market income consists of labor income; business income; capital income (including capital gains); income received in retirement for past services; and other nongovernmental income sources. Social insurance benefits consist of benefits provided through Social Security (Old Age, Survivors, and Disability Insurance); Medicare (measured as the average cost to the government of providing those benefits); unemployment insurance; and workers’ compensation.

[211] Economists typically use a “comprehensive measure of income” to calculate effective tax rates, because this provides a complete “measure of ability to pay” taxes.† In keeping with this, Just Facts determines effective tax rates by dividing all measurable taxes by all income. The Congressional Budget Office [CBO] previously did the same,‡ but in 2018, CBO announced that it would exclude means-tested transfers from its measures of income and effective tax rates.§

Given this change, Just Facts now uses CBO data to determine comprehensive income and effective tax rates by adding back the means-tested transfers that CBO publishes but takes out of these measures. To do this, Just Facts makes a simplifying assumption that households in various income quintiles do not significantly change when these transfers are added. This is mostly true, but as CBO notes:

Almost one-fifth of the households in the lowest quintile of income before transfers and taxes would have been in higher quintiles if means-tested transfers were included in the ranking measure (see Table 5). Because net movement into a higher income quintile entails a corresponding net movement out of those quintiles, more than one-fifth of the households in the second quintile of income before transfers and taxes would have been bumped down into the bottom before-tax income quintile. Because before-tax income excludes income in the form of means-tested transfers, almost one-fifth of the people in the lowest quintile of income before transfers and taxes were in higher before-tax income quintiles. There is no fundamental economic change represented by those changes in income groups—just a change in the income definition used to rank households. Because means-tested transfers predominantly go to households in the lower income quintiles, there is not much shuffling across income quintile thresholds toward the top of the distribution.§

NOTES:

[212] “2019 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, April 22, 2019. <www.cms.gov>

Page 10:

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 a worker’s wages, while self-employed workers pay 2.9 percent of their net earnings. Starting in 2013, high-income workers 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).

[213] Report: “Reducing the Deficit: Spending and Revenue Options.” Congressional Budget Office, March 2011. <www.cbo.gov>

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 [Congressional Budget Office] and most economists, the employers’ share of payroll taxes is passed on to employees in the form of lower wages.

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

[214] Report: “Overview of the Federal Tax System as in Effect for 2016.” U.S. Congress, Joint Committee on Taxation, May 10, 2016. <www.jct.gov>

Pages 15–16:

Additional Hospital Insurance Tax on Certain High-Income Individuals

The employee portion of the HI [Hospital Insurance, a.k.a. Medicare Part A] tax is increased by an additional tax of 0.9 percent on wages received in excess of a specific threshold amount.36 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, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case (unmarried individual, head of household or surviving spouse).37

The same additional HI tax applies to the HI portion of SECA [Self-Employment Contributions Act] 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.38

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

37 These threshold amounts are not indexed for inflation.

38 Sec. 1402(b).

[215] “2019 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, April 22, 2019. <www.cms.gov>

Page 37:

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

[216] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 4: “In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173),10 which … introduced the concept of income testing into Medicare, with higher-income persons paying larger Part B premiums beginning in 2007….”

[217] Brief: “Spending Patterns for Prescription Drugs Under Medicare Part D.” By Tamara Hayford. Congressional Budget Office, December 1, 2011. <www.cbo.gov>

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. …

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.

[218] “2019 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, April 22, 2019. <www.cms.gov>

Page 46:

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 915: “Social Security and Equivalent Railroad Retirement Benefits for Use in Preparing 2018 Returns.” United States Department of the Treasury, Internal Revenue Service, January 9, 2019. <www.irs.gov>]

[219] “2019 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, April 22, 2019. <www.cms.gov>

Page 175: “Dedicated Medicare financing sources include … State transfers for the prescription drug benefit….”

[220] 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. <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.

[221] Report: “Medicare Financial Status: In Brief.” By Patricia A. Davis. Congressional Research Service, July 2, 2018. <fas.org>

Page 3: “Other sources of income to the HI [Hospital Insurance, i.e., Part A] Trust Fund include … interest on federal securities held by the trust fund. … When the government receives Medicare revenues … income is credited by the Treasury to the HI Trust Fund in the form of special-issue interest-bearing government securities.11 (Interest on these securities is also credited to the trust fund.)”

[222] “2019 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, April 22, 2019. <www.cms.gov>

Pages 10–11: “Other HI [Hospital Insurance, i.e., Part A] revenue sources include a portion of the Federal income taxes that Social Security recipients with incomes above certain unindexed thresholds pay on their benefits, as well as interest paid from the general fund on the U.S. Treasury securities held in the HI trust fund.”

Page 237: “For the HI 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.”

Page 22: “Moreover, in the absence of legislation to address the financial imbalance, interest earnings on trust fund assets and redemption of those assets will cover the difference between HI [Hospital Insurance, i.e., Part A] dedicated revenues and expenditures until 2026.”

[223] “2019 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, April 22, 2019. <www.cms.gov>

Page 175: “Dedicated Medicare financing sources include … fees on brand-name prescription drugs paid to Part B; and any gifts received by the Medicare trust funds.”

[224] Report: “Percentage of Office-Based Primary Care Physicians Accepting New Patients, by Source of Payment Accepted—National Electronic Health Records Survey, 2015.” By Ninee Yang and Esther Hing. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, July 21, 2017. <www.cdc.gov>

Page 1:

Overall, 88.9% of primary care physicians reported that they accepted new patients. However, acceptance varied by the patient’s expected payment source: 94.2% of physicians accepting new patients accepted privately insured patients, 77.4% accepted new Medicare patients, and 71.6% accepted new Medicaid patients. The percentages of primary care physicians accepting new Medicaid or Medicare patients were significantly lower than the percentage of primary care physicians accepting new privately insured patients.

[225] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

Page 1:

Hospital participation in Medicare and Medicaid is voluntary. However, as 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 60 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid.

[226] Report: “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, April 22, 2019. <www.cms.gov>

Pages 5–6:

For inpatient hospital services, Medicare payment rates in 2016 were about 60 percent, and Medicaid payment rates were about 61 percent, of private health insurance payment rates (including Medicaid disproportionate share hospital, or DSH, payments).13

13 American Hospital Association, 2015 TrendWatch Chartbook.

[227] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

Pages 1–2:

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 fell below costs in 2017:

• Combined underpayments were $76.8 billion in 2017. This includes a shortfall of $53.9 billion for Medicare and $22.9 billion for Medicaid.

• For Medicare, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicare patients in 2017.

• For Medicaid, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicaid patients in 2017.

• In 2017, 66 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[228] Report: “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, April 22, 2019. <www.cms.gov>

Page 6:

As shown in figure 1, Medicaid payment rates equal Medicare payment rates in 2018, and both decline in tandem relative to private health insurance payment rates over the next 75 years. 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 during the period 2010 through 2019 that are specified by the ACA [Affordable Care Act] 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 [2093], Medicare and Medicaid payment rates for inpatient hospital services would both represent roughly 39 percent of the average level for private health insurance.

[229] “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. <www.cms.gov>

Pages 265–266:

Statement of Actuarial Opinion

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. …

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.

[230] Report: “Rural Hospital Closures: Number and Characteristics of Affected Hospitals and Contributing Factors.” U.S. Government Accountability Office, August 29, 2018. <www.gao.gov>

Page 2 (of PDF):

GAO’s [Government Accountability Office’s] analysis of data from HHS [Department of Health & Human Services] and an HHS-funded research center shows that 64 rural hospitals closed from 2013 through 2017. This represents approximately 3 percent of all the rural hospitals in 2013 and more than twice the number of closures of the prior 5-year period. …

According to literature GAO reviewed and stakeholders GAO interviewed, rural hospital closures were generally preceded and caused by financial distress. In particular, rural hospitals that closed typically had negative margins that made it difficult to cover their fixed costs. According to these sources, financial distress has been exacerbated in recent years by multiple factors, including the decrease in patients seeking inpatient care and across-the-board Medicare payment reductions.

Page 20:

Medicare Dependent Hospitals—one of three Medicare rural hospital payment designations in which hospitals were eligible to receive a payment rate other than standard Medicare inpatient payment rate—were disproportionately represented among hospital closures. Specifically, Medicare Dependent Hospitals represented 9 percent of the rural hospitals in 2013, but accounted for 25 percent of the rural hospital closures from 2013 through 2017. Rural hospitals that did not receive one of these three Medicare rural hospital payment designations also represented a disproportionate share of the closures (see fig. 3). In addition, hospitals designated as Low Volume Hospitals had a disproportionate share of the rural hospital closures.39

Page 21:

Figure 3: Percentage of Rural Hospitals in 2013 Relative to Percentage of Rural Hospital Closures from 2013 through 2017, by Medicare Rural Hospital Payment Designation …

Medicare Dependent Hospital … All rural hospitals nationwide 2013 [=] 9% … All rural hospital closures nationwide 2013–2017 [=] 25% … Hospitals receiving Medicare standard inpatient paymenta … All rural hospitals nationwide 2013 [=] 22% … All rural hospital closures nationwide 2013–2017 [=] 30% … a Hospitals that did not qualify as a Critical Access Hospital, Sole Community Hospital, or Medicare Dependent Hospital are included in this figure as hospital receiving Medicare standard inpatient payment. Medicare paid these hospitals for inpatient services based on the inpatient prospective payment system methodology.

Pages 25–26:

Another factor highlighted by literature we reviewed and stakeholders we interviewed as contributing to rural hospitals’ increased financial distress was across-the-board Medicare payment reductions. Rural hospitals are sensitive to changes to Medicare payments because, on average, Medicare accounted for approximately 46 percent of their gross patient revenues in 2016.48 A 2016 study found that Medicare Dependent Hospitals’ operating margins decreased each year from 2012 through 2014, which could explain the disproportionate number of closures among the Medicare Dependent Hospital payment designation.49 The literature we reviewed and stakeholders we interviewed highlighted the recent Medicare payments cuts as contributing to rural hospital closures, which included the following:

Reductions in nearly all Medicare reimbursements. Under sequestration—the cancellation of budgetary resources under presidential order implemented pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985, as amended—each fiscal year since 2013, nearly all Medicare’s budget authority is subject to a reduction not exceeding 2 percent, which is implemented through reductions in payment amounts.50 According to stakeholders we interviewed, these payment reductions have contributed to negative margins for rural hospitals.

Reductions in Medicare bad debt payments. Under the Middle Class Tax Relief and Job Creation Act of 2012, Medicare bad debt reimbursements for hospitals were reduced beginning in fiscal year 2013.51 According to stakeholders, Medicare bad debt cuts have been one of the most important factors contributing to the recent increase in rural hospital closures.

48 Revenue estimate is from the American Hospital Association, which defined rural as non-metropolitan counties. In comparison, Medicare accounted for approximately 43 percent of urban hospitals’ gross revenues in 2016.

49 One of the eligibility requirements for the Medicare Dependent Hospitals is the hospital must have greater than or equal to 60 percent of inpatient days or discharges from Medicare beneficiaries. See app. I, table 2, for a description of each of the five Medicare rural hospital payment designations. See S.R. Thomas and others, 2012–14 Profitability of Urban and Rural Hospitals by Medicare Payment Classification (Chapel Hill, N.C.: North Carolina Rural Health Research Program. 2016), 3.

[231] Article: “Scientific Survey Finds Voters of All Parties, Ages, and Genders Are Broadly Misinformed.” By James D. Agresti. Just Facts, October 30, 2018. <www.justfacts.com>

[T]he survey shows that many voters are not only uninformed about major issues—they are positively misinformed.

Those are the findings of an annual, national poll commissioned by Just Facts, a non-profit research and educational institute. The poll was conducted by an academic research firm that used sound methodologies to assess U.S. residents who regularly vote. …

The survey was conducted by Triton Polling & Research, an academic research firm used by scholars, corporations, and political campaigns. The responses were obtained through live telephone surveys of 1,000 likely voters across the United States during October 2–13, 2018. This sample size is large enough to accurately represent the U.S. population. Likely voters are people who say they vote “every time there is an opportunity” or in “most” elections.

The margin of sampling error for the total pool of respondents is ±3% with at least 95% confidence. The margins of error for the subsets are 5% for Democrat voters, 5% for Republican voters, 11% for third-party voters, 4% for males, 4% for females, 10% for 18 to 34 year olds, 5% for 35 to 64 year olds, and 5% for 65+ year olds. The survey results presented in this article are slightly weighted to match the ages and genders of likely voters. The political parties and geographic locations of the survey respondents almost precisely match the population of likely voters. Thus, there is no need for weighting based upon these variables.

[232] Dataset: “Just Facts’ 2018 Survey of Voter Knowledge on Public Policy Issues.” Just Facts, October 2018. <www.justfacts.com>

Page 6:

Q23. In 2010, Congress passed and President Obama signed the Affordable Care Act, also known as “Obamacare.” This law uses price controls to save money in the Medicare program. Do you think these price controls will worsen Medicare patients’ access to care?

Yes [=] 47.2%

No [=] 45.2%

Unsure [=] 7.3%

[233] For facts about how surveys work and why some are accurate while others are not, click here.

[234] Webpage: “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 <www.congress.gov>

“12/8/2003 Signed by President … 12/8/2003 Became Public Law No: 108-173.”

[235] Brief: “Spending Patterns for Prescription Drugs Under Medicare Part D.” By Tamara Hayford. Congressional Budget Office, December 1, 2011. <www.cbo.gov>

Page 1:

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.

[236] Calculated with data from:

a) Vote 669: “Medicare Prescription Drug, Improvement, and Modernization Act.” U.S. House of Representatives, November 22, 2003. <clerk.house.gov>

b) Vote 459: “Medicare Prescription Drug, Improvement, and Modernization Act.” U.S. Senate, November 25, 2003. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

246

88%

34

12%

0

0%

Democrat

27

11%

224

89%

2

1%

Independent

1

50%

1

50%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[237] Cost estimate: “H.R. 1, Medicare Prescription Drug, Improvement, and Modernization Act of 2003.” Congressional Budget Office, November 20, 2003. <www.cbo.gov>

Page 1 (of PDF): “CBO [Congressional Budget Office] 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.”

[238] Press release: “Michael Steele: Republicans’ Glass House is Shattering.” Democratic Congressional Campaign Committee, March 10, 2010. <www.usnews.com>

“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.”

[239] Calculated with data from 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. <clerk.house.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

0

0%

226

99%

3

1%

Democrat

174

85%

29

14%

2

1%

Independent

1

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[240] Calculated with data from the cost estimate: “Democratic Amendment to H.R. 1, Medicare Prescription Drug, Improvement, and Modernization Act of 2003.” Congressional Budget Office, June 26, 2003. <www.cbo.gov>

Page 1 (of 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 [Congressional Budget Office] has not yet completed its estimate of the discretionary costs of the bill.

CALCULATION: $969 billion / $395 billion = 2.45

[241] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 3: “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 posthospital services and Part B coverage for doctors and other medical services.”

[242] Calculated with the dataset: “Table V.A3.–Social Security Area Population on July 1 and Dependency Ratios, Calendar Years 1941–2095.” United States Social Security Administration, Office of the Chief Actuary, June 5, 2018. <www.ssa.gov>

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

[243] 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. <wdr.doleta.gov>

Page 1 (of PDF): “California’s primary working age population (20–64 years of age) will shrink as a share of the state population after 2010.”

[244] Report: “The 2018 Long-Term Budget Outlook.” Congressional Budget Office, June 2018. <www.cbo.gov>

Page 19: “The Aging Population. In CBO’s [Congressional Budget Office’s] projections, the aging of the baby-boom generation and continued gains in life expectancy increase the share of the population that is age 65 or older from 16 percent to 22 percent between 2018 and 2048.”

Page 37:

The aging of the population is the most important factor driving down the overall [labor force] participation rate over the next 30 years; the effects of other factors roughly offset one another.

Because older people tend to participate in the labor force at lower rates than younger people, the aging of the population is expected to significantly dampen the rate of participation over the next 30 years. The share of people over the age of 65 is projected to increase from 16 percent in 2018 to 22 percent in 2048, and the share of the population ages 20 to 64 is expected to decline from 59 percent to 55 percent during that 30-year period.

[245] Calculated with the dataset: “Table V.A3. Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1941–2095.” United States Social Security Administration, Office of the Chief Actuary, June 5, 2018. <www.ssa.gov>

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

[246] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, August 2, 2017. Updated 5/20/19. <www.fas.org>

Page 2 (of PDF): “Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65.”

[247] Report: “Raising the Age of Eligibility for Medicare to 67: An Updated Estimate of the Budgetary Effects.” Congressional Budget Office, October 24, 2013. <www.cbo.gov>

Page 1:

Medicare, one of the federal government’s largest programs, provides health care benefits primarily to elderly people. The usual age of eligibility for those benefits is 65, although certain people qualify for the program earlier. (Medicare is available to people under age 65 who have been eligible for Social Security disability benefits for at least 24 months or who have end-stage renal disease.) Outlays for Medicare are projected to increase rapidly in coming decades because of the retirement of the baby-boom generation and because growth in per capita spending for health care is expected to continue to exceed growth in per capita gross domestic product over the long term. Moreover, increases in life expectancy mean that the average length of time that people are covered by Medicare has risen significantly since the program began in 1965. That trend, which increases the program’s costs, will almost certainly continue.

[248] Calculated with data from “Table V.A4–Period Life Expectancy.” United States Social Security Administration, Office of the Chief Actuary, April 22, 2019. <www.ssa.gov>

1965 … At age 65 … Male [=] 12.9 …

2018 … At age 65 … Male [=] 18.1 …

The period life expectancy at a given age for a given year is the average remaining number of years expected prior to death for a person at that exact age, born on January 1, using the mortality rates for that year over the course of his or her remaining life.

CALCULATION: (18.1 – 12.9) / 12.9 = 40%

[249] Calculated with data from “Table V.A4–Period Life Expectancy.” United States Social Security Administration, Office of the Chief Actuary, April 22, 2019. <www.ssa.gov>

1965 … At age 65 … Female [=] 16.3 …

2018 … At age 65 … Female [=] 20.6 …

The period life expectancy at a given age for a given year is the average remaining number of years expected prior to death for a person at that exact age, born on January 1, using the mortality rates for that year over the course of his or her remaining life.

CALCULATION: (20.6 – 16.3) / 16.3 = 26%

[250] Calculated with data from “Table V.A4–Period Life Expectancy.” United States Social Security Administration, Office of the Chief Actuary, April 22, 2019. <www.ssa.gov>

1965 … At age 65 … Male [=] 12.9 … Female [=] 16.3 …

2030 … At age 65 … Male [=] 18.9 … Female [=] 21.3 …

The period life expectancy at a given age for a given year is the average remaining number of years expected prior to death for a person at that exact age, born on January 1, using the mortality rates for that year over the course of his or her remaining life.

CALCULATIONS:

  • (18.9 – 12.9) / 12.9 = 46% increase for males
  • (21.3 – 16.3) / 16.3 = 31% increase for females

[251] Paper: “Statistical Security for Social Security.” By Samir Soneji and Gary King. Demography, May 17, 2012. <gking.harvard.edu>

We begin by detailing information necessary for replicating the Social Security Administration’s (SSA’s) forecasting procedures, which until now has been unavailable in the public domain. … The most recent SSA mortality forecasts were based on the best available technology at the time, which was a combination of linear extrapolation and qualitative judgments. Unfortunately, linear extrapolation excludes known risk factors and is inconsistent with long-standing demographic patterns such as the smoothness of age profiles. Modern statistical methods typically outperform even the best qualitative judgments in these contexts. We show how to use such methods here, enabling researchers to forecast using far more information, such as the known risk factors of smoking and obesity and known demographic patterns. Including this extra information makes a substantial difference: For example, by only improving mortality forecasting methods, we predict three fewer years of net surplus, $730 billion less in Social Security trust funds, and program costs that are 0.66% greater of projected taxable payroll compared to SSA projections by 2031. …

We predict higher life expectancy and an older age distribution of death, when considering the steady decline in smoking and rapid rise in obesity, than do the SSA projections, which use no covariates except implicitly. The result indicates that Social Security, especially the OASI [Old-Age and Survivors Insurance] program, may be in a considerably more precarious position than officially thought.

[252] “2019 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, April 22, 2019. <www.cms.gov>

Page 12: “To illustrate the uncertainty and sensitivity inherent in estimates of future Medicare trust fund operations, the Board has prepared current-law projections under a low-cost and a high-cost set of economic and demographic assumptions as well as under an intermediate set.”

[253] “2019 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, April 22, 2019. <www.cms.gov>

Pages 199–200:

From the 75-year budget perspective, the present value of the additional resources that would be necessary to meet projected expenditures, 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 $59.0 trillion.98 To put this very large figure in perspective, it would represent 4.2 percent of the present value of projected GDP over the same period ($1,389 trillion). The components of the $59.0-trillion total are as follows:

Unfunded Medicare [Part A] and OASDI [Social Security] obligations99

$19.1 trillion

(1.4% of GDP)

HI, SMI, and OASDI asset [trust fund] redemptions

$3.2 trillion

(0.2% of GDP)

SMI [Parts B and D] general revenue financing

$36.8 trillion

(2.6% of GDP)

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

98 As 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.

99 Additional revenues and/or expenditure reductions totaling $19.1 trillion, together with $3.2 trillion in asset redemptions, would cover the projected financial imbalance but would leave the HI and OASDI trust funds depleted at the end of the 75-year period. The long-range actuarial deficits for HI and OASDI include 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.

Page 67: “As noted previously, over the full 75-year period, the [HI trust] fund has a projected present value unfunded obligation of $5.3 trillion. This unfunded obligation indicates that if $5.3 trillion were added to the trust fund at the beginning of 2019, the program would meet the projected cost of 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. Medicare Advantage and Program of All-Inclusive Care for the Elderly (PACE) plans receive prospective, capitated payments for such beneficiaries from the HI and SMI Part B trust fund accounts; the other plans are paid from the accounts on the basis of their costs.

Page 9: “Total Medicare expenditures were $741 billion in 2018.”

CALCULATION: $5.3 trillion in unfunded obligations for the HI Trust Fund (Part A) + $36.8 trillion in general revenue financing needed to fund SMI (Parts B and D) = $42.1 trillion

[254] See footnote above.

[255] Calculated with data from the footnotes above.

CALCULATION: $42,100 billion in unfunded obligations and general revenue financing / $741 billion in Medicare spending during 2018 = 56.8

[256] “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. <www.cms.gov>

Pages 85–86:

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.

[257] “2017 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, July 13, 2017. <www.cms.gov>

Page 213: “Experts have noted that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations because summary measures (such as the actuarial balance and open-group unfunded obligations) reflect the full amount of taxes paid by the next two or three generations of workers, but not the full amount of their benefits.”

[258] “2018 Financial Report of the United States Government.” U.S. Department of the Treasury, March 28, 2019. <fiscal.treasury.gov>

Page 134:

Current participants in the Social Security and Medicare programs are the “closed group” of taxpayers and/or beneficiaries who are at least age 15 years 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.

Page 196: “Experts have noted that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations because summary measures (such as the actuarial balance and open-group unfunded obligations) 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 197: “The shorter horizon understates the total 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.”

[259] The following points provide important context for understanding the data and calculation in the next footnote:

  • Federal general revenues are “used to carry out the general purposes of Government rather than being restricted by law to a specific program.” [Report: “Analytical Perspectives: Budget of the United States Government, Fiscal Year 2005.” White House Office of Management and Budget, February 2004. <fraser.stlouisfed.org> Page 339.]
  • Medicare Part A (a.k.a. HI or Hospital Insurance) covers hospital inpatient services, skilled nursing facility care (not custodial care), and hospice care. This part of Medicare is funded by dedicated revenues (not general revenues), and the law does not allow for the transfer of general revenues to cover projected shortfalls. [“2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, May 31, 2013. <www.cms.gov>. Page 202: “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 (a.k.a. SMI or Supplementary Medical Insurance) cover physician, hospital outpatient, prescription drug, and other healthcare services. The law specifies that these parts of Medicare are automatically funded with general revenues to cover any shortfalls between dedicated revenues and expenses. [“2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, May 31, 2013. <www.cms.gov>. Page 44: “[B]oth the Part B and Part D accounts of the SMI trust fund will remain in financial balance for all future years because beneficiary premiums and general revenue transfers will be set at a level 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. Medicare Advantage and Program of All-Inclusive Care for the Elderly (PACE) plans receive prospective, capitated payments for such beneficiaries from the HI [Part A] and SMI Part B trust fund accounts; the other plans are paid on the basis of their costs.” [“2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, May 31, 2013. <www.cms.gov>. Page 1.]
  • Medicare’s “closed-group population … includes all persons currently participating in the program as either taxpayers or beneficiaries, or both.” [“2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, May 31, 2013. <www.cms.gov>. Page 251.]
  • Medicare’s “closed-group unfunded obligation” represents “the financial burden or liability being passed on to future generations.” [Textbook: Fiscal Challenges: An Interdisciplinary Approach to Budget Policy. Edited by Elizabeth Garrett, Elizabeth A. Graddy, and Howell E. Jackson. Cambridge University Press, 2009. Chapter 6: “Counting the Ways: The Structure of Federal Spending.” By Howell E. Jackson. Page 207: “The measure featured here is the ‘closed-group liability’ for each program. This measure reflects the financial burden or liability being passed on to future generations.”]
  • Previous Medicare participants wash out of the calculations below, because their taxes and benefits have already been paid.

[260] Calculated with data from the “2019 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, April 22, 2019. <www.cms.gov>

Page 202:

The first line of table V.G2 [which displays unfunded Part A obligations] 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 $12.8 trillion.

Page 205: “Table V.G4.—Unfunded Part B Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2019; dollar amounts in trillions] … Equals unfunded obligations for past and current participants … General revenue contributions [=] 23.7”

Page 207: “Table V.G6.—Unfunded Part D Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2019; dollar amounts in trillions] … Equals unfunded obligations for past and current participants … General revenue contributions [=] 5.8.”

CALCULATION: $12.8 trillion in closed-group unfunded obligations for Medicare Part A + $23.7 trillion in closed-group unfunded obligations for Part B + $5.8 trillion in closed-group unfunded obligations for Part D = $42.3 trillion in closed-group unfunded obligations for the Medicare program

[261] Calculated with data from the previous two footnotes and the dataset: “Current Population Survey: 2018 Persons by Age.” U.S. Census Bureau. Accessed May 29, 2019 at <www.census.gov>

“15 to 80+ [=] 262,172 (Numbers in Thousands)”

CALCULATION: $42,300,000,000,000 closed group deficit / 262,172,000 Americans aged 15 or older = $161,344 per person

[262] 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, January 16, 2002. <www.justfacts.com>

Page 2 (of 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 [Securities and Exchange Commission] 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.

[263] Summary of Statement No. 106: “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” Financial Accounting Standards Board, December 1990. <www.fasb.org>

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.

[264] 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.

[265] Webpage: “Measuring the Deficit: Cash vs. Accrual.” U.S. Government Accountability Office. Accessed December 20, 2011 at <www.gao.gov>

Accrual Deficit

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.

[266] “2019 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, April 22, 2019. <www.cms.gov>

Pages 1–2:

[T]he projections in this year’s report, with one exception related to Part A, are based on current law; that is, they assume that laws on the books will be implemented and adhered to with respect to scheduled taxes, premium revenues, and payments to providers and health plans. The one exception is that the Part A projections disregard payment reductions that would result from the projected depletion of the Medicare Hospital Insurance trust fund. Under current law, payments would be reduced to levels that could be covered by incoming tax and premium revenues when the HI [Hospital Insurance] trust fund was depleted. If the projections reflected such payment reductions, then any imbalances between payments and revenues would be automatically eliminated, and the report would not fulfill one of its critical functions, which is to inform policy makers and the public about the size of any trust fund deficits that would need to be resolved to avert program insolvency. To date, lawmakers have never allowed the assets of the Medicare HI trust fund to become depleted.

[267] “2019 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, April 22, 2019. <www.cms.gov>

Page 179: “The Social Security Act requires the Trustees to evaluate the financial status of the Medicare trust funds. To comply with this mandate, the Trustees must assess whether the financing provided under current law is adequate to cover the benefit payments and other expenditures required under current law.”

Pages 180–181:

Over time, unless providers could alter their use of inputs to reduce their cost per service correspondingly, Medicare’s payments for health services would fall increasingly below providers’ costs. Providers could not sustain continuing negative margins and would have to withdraw from serving Medicare beneficiaries or (if total facility margins remained positive) shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers. Under such circumstances, lawmakers might feel substantial pressure to override the productivity adjustments, much as they did to prevent reductions in physician payment rates while the sustainable growth rate (SGR) system was in effect. …

In view of these issues, it is important to note that the actual future costs for Medicare may exceed the projections shown in this report, possibly by substantial amounts.

[268] “2019 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, April 22, 2019. <www.cms.gov>

Page 179:

The Social Security Act requires the Trustees to evaluate the financial status of the Medicare trust funds. To comply with this mandate, the Trustees must assess whether the financing provided under current law is adequate to cover the benefit payments and other expenditures required under current law. Accordingly, the estimates shown in this report are based on all of the current statutory requirements, including (i) the reductions in payment updates by the increase in economy-wide productivity for most non-physician provider categories; (ii) the physician payment updates specified by MACRA [the Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015] for all future years; and (iii) the expiration in 2025 of the 5-percent bonuses for qualifying physicians in advanced alternative payment models (advanced APMs) and of the $500-million payments for physicians in the merit-based incentive payment system (MIPS).

Pages 180–181:

Over time, unless providers could alter their use of inputs to reduce their cost per service correspondingly, Medicare’s payments for health services would fall increasingly below providers’ costs. Providers could not sustain continuing negative margins and would have to withdraw from serving Medicare beneficiaries or (if total facility margins remained positive) shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers. Under such circumstances, lawmakers might feel substantial pressure to override the productivity adjustments, much as they did to prevent reductions in physician payment rates while the sustainable growth rate (SGR) system was in effect.

While the physician payment system put in place by MACRA avoided the significant short-range physician payment issues resulting from the SGR system approach, it nevertheless raises important long-range concerns that will almost certainly need to be addressed by future legislation. In particular, additional updates totaling $500 million per year and 5-percent annual bonuses are scheduled to expire in 2025, resulting in a payment reduction for most physicians. In addition, the law specifies the physician payment updates for all years in the future, and these updates do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases. The specified rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large. The Trustees previously estimated that physician payment rates under current law will be lower than they would have been under the SGR formula by 2048 and will be about 30 percent lower by the end of the projection period. Absent a change in the delivery system or level of update by subsequent legislation, the Trustees expect access to Medicare-participating physicians to become a significant issue in the long term.

In view of these issues, it is important to note that the actual future costs for Medicare may exceed the projections shown in this report, possibly by substantial amounts.

Page 243:

Statement of Actuarial Opinion

The annual reports of the Board of Trustees and the accompanying Actuarial Opinions have cautioned for a number of years about the challenges of adhering to current-law Medicare payment updates. For physician services, current law specifies payment rate updates that are expected to be lower than overall inflation and not keep up with underlying physician costs. For most categories of non-physician health services, current law specifies that annual price updates be adjusted downward each year by the growth in economy-wide productivity. Sustaining these price reductions will be challenging for health care providers, as the best available evidence indicates that most providers cannot improve their productivity to this degree for a prolonged period given the labor-intensive nature of these services. Should these price updates prove to be inadequate, beneficiaries’ access to and the quality of Medicare benefits would deteriorate over time, or future legislation would need to be enacted that would likely increase program costs beyond those projected under current law in this report.

[269] “2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, July 28, 2014. <www.cms.gov>

Pages 276–277:

Statement of Actuarial Opinion

The Affordable Care Act [ACA] is making important changes to the Medicare program that are designed, in part, to substantially improve its financial outlook. While the ACA has been successful in reducing many Medicare expenditures to date, there is a strong possibility 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 ability of health care providers to sustain these price reductions will be challenging, as the best available evidence indicates that most providers cannot improve their productivity to this degree for a prolonged period given the labor-intensive nature of these services.†

Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services will fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for many services would be less than half of their level without consideration of the productivity price reductions. Before such an outcome would occur, lawmakers would likely 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 lawmakers have done repeatedly in the case of physician payment rates, would lead to substantially higher costs for Medicare in the long range than those projected in this report.

† NOTE: The Affordable Care Act’s cuts in Medicaid payment rates affect “hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services.” [“2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” Centers for Medicare and Medicaid Services, May 31, 2013. <www.cms.gov>. Page 273.]

[270] Report: “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, April 22, 2019. <www.cms.gov>

Page 1:

The Trustees Report is based on current law; as a result of questions regarding the operations of certain Medicare provisions, however, the projections shown in the report under current law may well understate expenditures for most categories of health care providers. The purpose of this memorandum is to present a Medicare projection under a hypothetical alternative to these provisions to help illustrate and quantify the magnitude of the potential cost understatement under current law.

… 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 potential policy reactions to the situation.

[271] Calculated with data from the report: “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, April 22, 2019. <www.cms.gov>

Page 14: “Table 4. Projected Total Medicare Expenditures as a Percentage of Gross Domestic Product (GDP) Under Current Law and the Illustrative Alternative, Selected Years 2018–2093”

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

[272] Calculated with data from the “2018 Financial Report of the United States Government.” U.S. Department of the Treasury, March 28, 2019. <fiscal.treasury.gov>

Page 134: “The estimates in the consolidated SOSI [Statement of Social Insurance] of the open group measures are for persons who are participants or eventually will participate in the programs as contributors (workers) or beneficiaries (retired workers, survivors, and disabled) during the 75-year projection period.”

Pages 136–137:

The specified rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large. The gap will continue to widen throughout the projection, and it is anticipated that physician payment rates under current law will be lower than they would have been under the sustainable growth rate (SGR) formula by 2048. Absent a change in the delivery system or level of update by subsequent legislation, access to Medicare-participating physicians may become a significant issue in the long term under current law. Overriding the price updates in current law, as lawmakers repeatedly did in the case of physician payment rates, would lead to substantially higher costs for Medicare in the long range than those projected in this report.

To help illustrate and quantify the potential magnitude of the cost understatement, the Trustees asked the Office of the Actuary at CMS [Centers for Medicare and Medicaid Services] to prepare an illustrative Medicare Trust Fund projection under a hypothetical alternative. This scenario illustrates the impact that would occur if the payment updates that are affected by the productivity adjustments transition from current law to the payment updates assumed for private health plans over the period 2028 to 2042. It also reflects physician payment updates that transition from current law to the increase in the Medicare Economic Index over the same period. Finally, the scenario assumes the continuation of the 5 percent bonuses for physicians in advanced alternative payment models (APMs) and of the $500 million payments for physicians in the merit-based incentive payment system, which are set to expire in 2025. This alternative was developed for illustrative purposes only; the calculations have not been audited; no endorsement of the policies underlying the illustrative alternative by the Trustees, CMS, or the Office of the Actuary should be inferred; 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 updates 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 estimated future income and estimated future expenditures under current law with those under the illustrative alternative scenario.

Page 139: “The extent to which actual future Part A and Part B costs exceed the projected amounts due to changes to the productivity adjustments and specified physician updates depends on what specific changes might be legislated and whether Congress would pass further provisions to help offset such costs.”

Page 186:

The [SOSI] projections in this year’s report, with one exception related to Part A, are based on current law; that is, it is assumed that laws on the books will be implemented and adhered to with respect to scheduled taxes, premium revenues, and payments to providers and health plans. The one exception is that the projections disregard payment reductions that would result from the projected depletion of the HI [Hospital Insurance] Trust Fund. Under current law, payments would be reduced to levels that could be covered by incoming tax and premium revenues when the HI Trust Fund was depleted.

Page 195:

Table 5 shows the magnitudes of the primary expenditures and sources of financing for the three trust funds computed on an open-group basis for the next 75 years and expressed in present values. The data are consistent with the Statements of Social Insurance included in the principal financial statements. For HI, revenues from the public are projected to fall short of total expenditures by $4,708 billion in present value terms which is the additional amount needed in order to pay scheduled benefits over the next 75 years.14 From the trust fund perspective, the amount needed is $4,506 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 [Supplementary Medical Insurance], revenues from the public for Part B and D combined are estimated to be $32,981 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.

14 Interest income is not a factor in this table as dollar amounts are in present value terms.

Page 138: “Medicare Present Values (in trillions) (Unaudited) … Excess of Expenditures over Income … 2018 Consolidated SOSI Current Law [=] $37.6 … Illustrative Alternative Scenario [=] $47.4”

CALCULATION: ($47.4 trillion – $37.6 trillion) / $37.6 trillion = 26.1%

[273] “Annual Message to the Congress on the State of Union.” By Lyndon B. Johnson, January 8, 1964. <www.presidency.ucsb.edu>

“We must provide hospital insurance for our older citizens financed by every worker and his employer under Social Security, contributing no more than $1 a month during the employee’s working career to protect him in his old age in a dignified manner without cost to the Treasury, against the devastating hardship of prolonged or repeated illness.”

[274] Webpage: “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed May 29, 2019 at <www.bls.gov>

“$1.00 in January 1964 has the same buying power as $8.15 in January 2019”

[275] “2019 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, April 22, 2019. <www.cms.gov>

Pages 10–11:

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 a worker’s wages, while self-employed workers pay 2.9 percent of their net earnings. Starting in 2013, high-income workers 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 Social Security recipients with incomes above certain unindexed thresholds pay on their benefits, as well as interest paid from the general fund on the U.S. Treasury securities held in the HI trust fund.

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

[276] See the section above on Medicare spending.

[277] Determined by examining varied paychecks.

[278] Report: “Understanding the Tax Reform Debate: Background, Criteria, & Questions.” United States Government Accountability Office, September 2005. <www.gao.gov>

Page 48:

Transparent tax systems include the following elements: …

Taxpayers know their own tax burden and the tax burden of others: Irrespective of who actually writes a check to the government, taxpayers can identify who actually bears the burden of a tax. For example, the payroll tax is not transparent to the extent that taxpayers in general are unaware of the incidence of the tax. Even though payroll taxes are divided equally between employees and employers, economists generally agree that employees bear the entire burden of payroll taxes in the form of reduced wages.

Page 68: “Payroll Taxes Often synonymous with social insurance taxes. However, in some cases the term ‘payroll taxes’ may be used more generally to include all tax withholding. For the purposes of this report, payroll taxes are synonymous with social insurance taxes.”

Page 69: “Social Insurance Taxes Tax payments to the federal government for Social Security, Medicare, and unemployment compensation. While employees and employers pay equal amounts in social insurance taxes, economists generally agree that employees bear the entire burden of social insurance taxes in the form of reduced wages.”

[279] “Data on the Distribution of Federal Taxes and Household Income.” Congressional Budget Office, April 2009. <www.cbo.gov>

Methodology (<www.cbo.gov>):

Page 3:

Who Pays Taxes?

CBO’s [Congressional Budget Office’s] analysis of effective tax rates … assumes—as do most economists—that employers’ share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid. Therefore, the amount of those taxes is included in employees’ income, and the taxes are counted as part of employees’ tax burden.

[280] Textbook: Public Finance (2nd edition). By John E. Anderson. South-Western Cengage Learning, 2012.

Page 397:

When we consider the burden of a tax, we must distinguish between the burden as it is specified in the tax law and the true economic burden. Statutory incidence refers to tax incidence required by legal statutes. Of course, it is not possible to specify true economic incidence in law, but that does not stop lawmakers from trying. Consider a simple example. The U.S. Social Security payroll tax requires that employers and employees split the tax, each paying one-half of the total. Hence, the statutory incidence of the tax is that half the tax falls on the employer and half falls on the employee. … But, the true economic incidence of the payroll tax is quite different. The employer has some ability to adjust the employee’s wage and pass the employer’s half of the tax on to the employee. In fact, the employee may bear the entire tax. Of course, the extent to which the employer can pass the tax on to the employee depends on the labor supply elasticity of the employee; that is, the willingness of the employee to accept a lower wage and supply the same, or nearly the same, quantity of labor. Recent evidence in Gruber (1997), based on the Chilean payroll tax, for example, suggests that workers bear most of the burden of any increase in the tax rate.

[281] Webpage: “Current Law Distribution of Taxes.” Tax Policy Center. Accessed August 25, 2012 at <www.taxpolicycenter.org>

“A key insight from economics is that taxes are not always borne by the individual or business that writes the check to the IRS. Sometimes taxes are shifted. For example, most economists believe that the employer portion of payroll taxes translate into lower wages and are thus ultimately borne by workers.”

[282] Webpage: “Contribution and Benefit Base.” United States Social Security Administration, Office of the Chief Actuary. Accessed September 22, 2015 at <www.ssa.gov>

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 changes each year with changes in the national average wage index. …

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] Webpage: “History of SSA-Related Legislation—103rd Congress.” United States Social Security Administration. Accessed September 22, 2015 at <www.socialsecurity.gov>

“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.”

[284] Calculated with data from:

a) Vote 406: “Omnibus Budget Reconciliation Act of 1993.” U.S. House of Representatives, August 5, 1993. <clerk.house.gov>

b) Vote 247: “Omnibus Budget Reconciliation Act of 1993.” U.S. Senate, August 6, 1993. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

0

0%

219

100%

0

0%

Democrat

268

85%

47

15%

0

0%

Independent

1

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[285] “2019 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, April 22, 2019. <www.cms.gov>

Page 46:

Up to 85 percent of an individual’s or couple’s OASDI [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 OASDI 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 2018 Returns.” United States Department of the Treasury, Internal Revenue Service, January 9, 2019. <www.irs.gov>]

[286] Research Note #12: “Taxation of Social Security Benefits.” By Larry DeWitt. Social Security Administration Historian’s Office, February 2001. <www.ssa.gov>

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 [Hospital Insurance, a.k.a. Medicare Part A] Trust Fund. Effective for taxable years beginning after 1993.

[287] “2019 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, April 22, 2019. <www.cms.gov>

Page 26: “[A]fter 2019, HI [Hospital Insurance, a.k.a. Medicare Part A] income from taxation of Social Security benefits will also increase faster than taxable payroll because the income thresholds determining taxable benefits are not indexed for price inflation.”

[288] Report: “Overview of the Federal Tax System as in Effect for 2012.” U.S. Congress, Joint Committee on Taxation, February 24, 2012. <www.jct.gov>

Page 15:

Additional Hospital Insurance Tax on Certain High-Income Individuals

For remuneration received in taxable years beginning after December 31, 2012, the employee portion of the HI [Hospital Insurance, a.k.a. Medicare Part A] 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 (unmarried individual or head of household).

The same additional HI tax applies to the HI portion of SECA [Self-Employment Contributions Act] 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. 1402(b).

[289] “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. <www.cms.gov>

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).”

[290] Calculated with data from:

a) Vote 165: “Patient Protection and Affordable Care Act.” U.S. House of Representatives, March 21, 2010. <clerk.house.gov>

b) Vote 396: “Patient Protection and Affordable Care Act.” U.S. Senate, December 24, 2009. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

0

0%

217

100%

1

0%

Democrat

277

89%

34

11%

0

0%

Independent

2

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[291] “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. <www.cms.gov>

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.”

[292] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

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). Medicaid grew out of and replaced two earlier programs of federal grants to states that provided medical care to welfare recipients and the elderly.”

[293] “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

Page 6:

Enrollment is measured as person-year equivalents, or the average enrollment over the course of a year. In 2016, 72.2 million individuals are estimated to have been enrolled in Medicaid (including enrollment in the U.S. Territories).9

9 Since data for some States are not available for 2013 and 2014, and no data are available for 2015 and 2016, enrollment figures in this report are estimates for these years, as described further in section IV of the report. In addition, past reports have provided figures for ever-enrolled enrollment, or the number of people who were enrolled at any time during the year. As no data are currently available that show the number of expansion adults who were ever-enrolled, and since there is no historical experience with this population, this report does not provide an estimate of ever-enrolled enrollment for 2016.

[294] Calculated with data from:

a) Dataset: “Table V.A3.–Social Security Area Population on July 1 and Dependency Ratios, Calendar Years 1941–2095.” United States Social Security Administration, Office of the Chief Actuary, April 22, 2019. <www.ssa.gov>

b) “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

Page 6:

Enrollment is measured as person-year equivalents, or the average enrollment over the course of a year. In 2016, 72.2 million individuals are estimated to have been enrolled in Medicaid (including enrollment in the U.S. Territories).9

9 Since data for some States are not available for 2013 and 2014, and no data are available for 2015 and 2016, enrollment figures in this report are estimates for these years, as described further in section IV of the report. In addition, past reports have provided figures for ever-enrolled enrollment, or the number of people who were enrolled at any time during the year. As no data are currently available that show the number of expansion adults who were ever-enrolled, and since there is no historical experience with this population, this report does not provide an estimate of ever-enrolled enrollment for 2016.

Page 12: “Table 2—Historical and Projected Medicaid Enrollment and Expenditures and Average Federal Share of Expenditures, Selected Years (Enrollment in millions of person-year equivalents, expenditures in billions of dollars)”

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

[295] Calculated with data from the: “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

Page 60: “Table 21 shows estimated enrollment and expenditures by eligibility group for 2016.5454 There are some differences between Medicaid outlays and Medicaid expenditures, mainly due to timing differences between States paying for services and States receiving Federal funds. Thus, the levels and trends in outlays and expenditures differ slightly.”

Page 61:

Table 21—Estimated Enrollment, Expenditures, and Per Enrollee Expenditures, by Enrollment Category, Fiscal Year 2016 … Per Enrollee Spending (2016) … Children [=] $3,555 … Persons with Disabilities [=] $19,754 … Aged [=] $14,700 … Enrollment (in millions) … Adults [=] 15.3 … Expansion Adults [=] 11.2 … Total [=] 72.2 … Expenditures (in billions) … Adults [=] $79.1 … Expansion Adults [=] $66.5 … Total [=] $592.2

Page 62:

Figure 8 shows each enrollment group’s relative share of enrollment and expenditures in Medicaid in 2016. … Figure 8—Estimated Medicaid Enrollment and Expenditures by Enrollment Group, as a Share of Total, Fiscal Year 2016 … Enrollment … Aged [=] 8% … Persons with Disabilities [=] 15% … Children [=] 40% … Expenditures … Aged [=] 16% … Persons with Disabilities [=] 39% … Children [=] 19%

CALCULATIONS:

  • (15.3 million adults + 11.2 million expansion adults) / 72.2 million total enrollment = 37% adult enrollment
  • ($79.1 billion adults + $66.5 billion expansion adults) / $592.2 billion total expenditures = 25% adult spending
  • ($79.1 billion adults + $66.5 billion expansion adults) / (15.3 million adults + 11.2 million expansion adults) = $5,494 spending per adult enrollee

[296] “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

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 five U.S. Territories have Medicaid programs.

The Federal government establishes certain requirements for the States’ Medicaid programs. 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 of the Social Security Act specifies which groups of people must be eligible, and States have the flexibility to extend coverage to additional groups. In addition to income, eligibility is typically based on several other factors, including age, disability status, other government assistance, other health or medical conditions such as pregnancy, and in some cases financial resources (or assets). As of January 2014, States have had the authority to expand Medicaid eligibility to almost all individuals under age 65 who are living in families with income below 138 percent of the Federal poverty level (FPL) (and who are citizens or eligible legal residents), with the Federal government initially paying 100 percent of the costs for expansion adults, to be reduced to 90 percent by 2020.3

Title XIX specifies that certain medical services must be covered under Medicaid, while also granting the States flexibility to cover many other benefits.

[297] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 2 (of PDF): “[E]ach 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.”

Pages 1–2:

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 6 with family income at or below 133% of the federal poverty level (FPL)7

7 For example, in 2012, the FPL for a family of four is $23,050—133% of FPL for such a family would equal $30,656.50. See <aspe.hhs.gov>.

[298] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Pages 1–2:

The federal Medicaid statute (Title XIX of the Social Security Act) 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 (as generally defined under the federal Supplemental Security Income Program, or SSI) 3, 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. 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 programs4 or 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 cash assistance program;5

• families losing Medicaid eligibility due to increased earnings from work who receive up to 12 months of Medicaid coverage;6

• pregnant women and children through age 6 with family income at or below 133% of the federal poverty level (FPL);7

• children ages 6 through 18 with family income at or below 100% FPL, rising to 133% FPL beginning in 2014 (or sooner at state option);

• low-income individuals who are age 65 and older, or blind, or under age 65 and disabled who qualify for cash assistance under the SSI program;8

• 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….

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.

7 For example, in 2012, the FPL for a family of four is $23,050—133% of FPL for such a family would equal $30,656.50. See <aspe.hhs.gov>.

8 Some states use income, resource and disability standards that differ from current SSI standards.

[299] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 14: “[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.”

[300] 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.

Page 27:

Appendix E: Medicaid-Covered Services in the Environmental Scanning and Program Characteristics Database

Medicaid-Covered Services

• Ambulance

• Certified registered nurse anesthetist

• Chiropractor

• Dental

• Dentures

• Diagnostic, screening, and preventive

• Early and periodic screening, diagnosis and treatment

• Extended services for pregnant women

• Eyeglasses

• Family planning

• Federally qualified health center

• Freestanding ambulatory surgery center

• Hearing aids

• Home- and community-based services waiver

• Home health services

• Hospice care

• ICF [intermediate care facility] services for the mentally retarded

• Inpatient hospital services, other than in an IMD [institution for mental diseases]

• Inpatient hospital, nursing facility and ICF/IMD

• Inpatient psychiatric services, under age 21

• Laboratory and x-ray, outside hospital or clinic

• Medical and remedial care—other practitioners

• Medical equipment and supplies

• Medical/surgical services of a dentist

• Mental health and substance abuse rehabilitation

• Nonemergency medical transportation

• Nurse midwife

• Nurse practitioner

• Nursing facility services, other than in an IMD

• Occupational therapy

• Optometrist

• Outpatient hospital

• Personal care

• Physical therapy

• Physician

• Podiatrist

• Prescription drugs

• Private duty nursing

• Program of All-inclusive Care for the Elderly

• Prosthetic and orthotic devices

• Psychologist

• Public health and mental health clinics

• Religious nonmedical HCI [health care institution] and practitioner

• Rural health clinic

• Speech, hearing and language disorders

• Targeted case management

[301] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 2 (of PDF): “[E]ach 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 Patient Protection and Affordable Care Act … makes both mandatory and optional changes to Medicaid along some of these dimensions.”

[302] “2016 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, 2016. <www.cms.gov>

Page 3: “Medicaid costs are met primarily by Federal and State general revenues, on an as-needed basis; the States may also rely on local government revenues to finance a portion of their share of Medicaid costs. The Federal financing is authorized through an annual appropriation by Congress.”

[303] Report: “Analytical Perspectives: Budget of the United States Government, Fiscal Year 2005.” White House Office of Management and Budget, February 2004. <fraser.stlouisfed.org>

Page 339: “The main financing component of the Federal funds group is the general fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program. It consists of all collections not earmarked by law to finance other funds, including virtually all income taxes and many excise taxes….”

[304] Article: “Ways and Means Committee.” By Albert Buckberg. The Encyclopedia of Taxation & Tax Policy. Urban Institute Press, 2005.

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.”

[305] The table below shows the average federal general revenue taxes paid by various income groups in 2016:

Average Federal General Revenue Taxes (2016)

Household Income Group

Full Income

Effective Tax Rate

Taxes Per Household

Lowest 20%

$35,400

-5.2%

-$1,857

Second 20%

$52,200

0.2%

$79

Middle 20%

$75,900

4.3%

$3,250

Fourth 20%

$111,300

8.0%

$8,886

Highest 20%

$292,200

19.6%

$57,329

81st–90th%

$160,700

11.4%

$18,258

91st–95th%

$219,200

14.3%

$31,329

96th–99th%

$360,300

19.8%

$71,237

Top 1%

$1,789,800

30.8%

$552,088

The figures above were calculated with data from:

a) Dataset: “The Distribution of Household Income, 2016.” Congressional Budget Office, July 2019. <www.cbo.gov>

“Table 3. Average Household Income, by Income Source and Income Group, 1979 to 2016, 2016 Dollars”

“Table 7. Components of Federal Taxes, by Income Group, 1979 to 2016, 2016 Dollars”

b) Dataset: “Composition of Social Insurance, Retirement Receipts, and Excise Taxes, 1940–2024.” Executive Office of the President of the United States, Office of Management and Budget, 2019. <www.govinfo.gov>

c) The Encyclopedia of Taxation & Tax Policy. Edited by Joseph J. Cordes and others. Urban Press Institute, 2005.

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.”

d) Report: “Present Law and Background Information on Federal Excise Taxes.” United States Congress, Joint Committee on Taxation, January 2011. <www.jct.gov>

Page 1: “Revenues from certain Federal excise taxes are dedicated to trust funds (e.g., the Highway Trust Fund) for designated expenditure programs, and revenues from other excise taxes (e.g., alcoholic beverages) go to the General Fund for general purpose expenditures.”

NOTES:

  • An Excel file containing the data and calculations is available upon request.
  • The next two footnotes contain important context for these calculations.

[306] Report: “The Distribution of Household Income, 2014.” Congressional Budget Office, March 19, 2018. <www.cbo.gov>

Page 1: “Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes.”

Page 14:

Federal taxes allocated to households in this analysis account for approximately 94 percent of all federal revenues, on average. The remaining federal revenue sources not allocated to U.S. households include states’ deposits for unemployment insurance, estate and gift taxes, net income earned by the Federal Reserve, customs duties, and miscellaneous fees and fines.

Because of the complexity of estimating state and local taxes for individual households, this report considers federal taxes only. Researchers differ about whether state and local taxes are, on net, regressive, proportional, or slightly progressive, but most agree that state and local taxes are less progressive than federal taxes.

Page 12:

Means-tested transfers are cash payments and in-kind transfers from federal, state, and local governments. The largest means-tested transfers consist of transfers provided through Medicaid and the Children’s Health Insurance Program (measured as the average cost to the government of providing these benefits); the Supplemental Nutrition Assistance Program (formerly known as the Food Stamp Program); and Supplemental Security Income.

Income before transfers and taxes is market income plus social insurance benefits. Market income consists of labor income; business income; capital income (including capital gains); income received in retirement for past services; and other nongovernmental income sources. Social insurance benefits consist of benefits provided through Social Security (Old Age, Survivors, and Disability Insurance); Medicare (measured as the average cost to the government of providing those benefits); unemployment insurance; and workers’ compensation.

[307] Economists typically use a “comprehensive measure of income” to calculate effective tax rates, because this provides a complete “measure of ability to pay” taxes.† In keeping with this, Just Facts determines effective tax rates by dividing all measurable taxes by all income. The Congressional Budget Office [CBO] previously did the same,‡ but in 2018, CBO announced that it would exclude means-tested transfers from its measures of income and effective tax rates.§

Given this change, Just Facts now uses CBO data to determine comprehensive income and effective tax rates by adding back the means-tested transfers that CBO publishes but takes out of these measures. To do this, Just Facts makes a simplifying assumption that households in various income quintiles do not significantly change when these transfers are added. This is mostly true, but as CBO notes:

Almost one-fifth of the households in the lowest quintile of income before transfers and taxes would have been in higher quintiles if means-tested transfers were included in the ranking measure (see Table 5). Because net movement into a higher income quintile entails a corresponding net movement out of those quintiles, more than one-fifth of the households in the second quintile of income before transfers and taxes would have been bumped down into the bottom before-tax income quintile. Because before-tax income excludes income in the form of means-tested transfers, almost one-fifth of the people in the lowest quintile of income before transfers and taxes were in higher before-tax income quintiles. There is no fundamental economic change represented by those changes in income groups—just a change in the income definition used to rank households. Because means-tested transfers predominantly go to households in the lower income quintiles, there is not much shuffling across income quintile thresholds toward the top of the distribution.§

NOTES:

[308] Calculated with data from:

a) Table 3.12: “Government Social Benefits.” United States Department of Commerce, Bureau of Economic Analysis. Last revised July 30, 2019. <www.bea.gov>

“2018 … Medicaid … (billions of dollars) [=] 597.7”

b) Table 3.1: “Government Current Receipts and Expenditures.” United States Department of Commerce, Bureau of Economic Analysis. Last revised July 26, 2019. <www.bea.gov>

“2018 … (billions of dollars)… Current receipts [=] 5,537.7 … Current expenditures [=] 6,786.6”

CALCULATIONS:

  • $597.7 billion Medicaid expenditures / $6,786.6 billion total expenditures = 8.8%
  • $597.7 billion Medicaid expenditures / $5,537.7 billion total receipts = 10.8%

[309] Report: “Medicaid’s Federal Medical Assistance Percentage (FMAP).” By Alison Mitchell. Congressional Research Service, February 9, 2016. <fas.org>

Page 2 (of PDF):

Generally determined annually, the FMAP formula is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. For FY [fiscal year] 2017, regular FMAP rates range from 50.00% to 74.63%. The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services.

[310] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 9:

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.

[311] 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. <www.urban.org>

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.

[312] Calculated with data from: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960–2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 27, 2018. <www.cms.gov>

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

[313] “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. <www.cms.gov>

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 [fiscal year] 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.

[314] “2016 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, 2016. <www.medicaid.gov>

Page 16:

For much of history, the average annual Federal share [of Medicaid expenditures] has been about 57 percent of total expenditures, with several years of greater Federal shares due to changes specified in legislation. Over the next 10 years, the Federal share of Medicaid expenditures is projected to vary, largely due to the Affordable Care Act. The average Federal share was 58 percent in 2013 and increased to 61 percent in 2014 due mainly to the higher FMAP [federal medical assistance percentage] for newly eligible Medicaid beneficiaries, and it is estimated to have increased to 63 percent in 2015 and to have remained at 63 percent through 2016. The average Federal share is expected to decline to 61 percent by 2021 and to remain at that level through 2025, as the matching rate for the newly eligible adults is gradually reduced from 100 percent in 2016 to 90 percent in 2020.

[315] “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

Pages 25–26:

Among the different types of health care services, Medicaid plays the largest role in the funding of long-term care. According to the 2016 NHEA [national health expenditure accounts], during that year Medicaid is estimated to have paid for 36.8 percent of all freestanding† home health care and 30.7 percent of all freestanding nursing home care in the United States. In addition, Medicaid covered an estimated 56.7 percent of other health, personal, and residential care in 2016, including Medicaid payments for intermediate care facilities for individuals with intellectual and developmental disabilities and such payments for home and community-based waivers.33 Medicaid has a major responsibility for providing long-term care because the program covers some aged persons and many persons with disabilities of all ages—individuals 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. Many people who pay privately for nursing home care or community-based long-term care become impoverished due to the expense; as a result, these people eventually become eligible for Medicaid.

33 M. Hartman and others, “National Health Spending in 2016: Spending and Enrollment Growth Slow After Initial Coverage Expansions.”

Page 26: “Figure 6—Medicaid Expenditures as Percentage of Total U.S. Health Expenditures by Service Category, Calendar Year 2016 … Total [=] 16.9% … Dental [=] 9.7% … Drugs [=] 10.2% … Physician [=] 10.9% … Hospital [=] 17.5% … Nursing Home [=] 30.7% … Home Health [=] 36.8%”

NOTE: † See the next footnote for the definition of “freestanding” in this context.

[316] 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.

[317] Just Facts has verified all of the information quoted below with official government sources but is citing these sources because they are clearly worded and succinct:

a) Webpage: “Medicaid Rules.” ElderLawAnswers. Accessed May 28, 2019 at <attorney.elderlawanswers.com>

“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.”

b) Webpage: “Medicaid’s Asset Rules.” ElderLawAnswers. Last modified March 3, 2019. <www.elderlawanswers.com>

The spouse of a nursing home resident—called the “community spouse”—is limited to one half of the couple’s joint assets up to $126,420 (in 2019) in “countable” assets. This figure changes each year to reflect inflation. Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. The least that a state may allow a community spouse to retain is $25,284 (in 2019). …

Some states, however, are more generous toward the community spouse. In these states, the community spouse may keep up to $126,420 (in 2019), regardless of whether or not this represents half the couple’s assets. …

All assets are counted against these limits unless the assets fall within the short list of “noncountable” assets. These include the following:

• Personal possessions, such as clothing, furniture, and jewelry

• One motor vehicle, regardless of value, as long as it is used for transportation of the applicant or a household member. The value of an additional automobile may be excluded if needed for health or self-support reasons (check your state’s rules).

• 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 $585,000 (in 2019), with the states having the option of raising this limit to $878,000 (in 2019). In all states … the house may be kept with no equity limit if the Medicaid applicant’s spouse or another dependent relative lives there

c) Webpage: “Medicaid’s Attempt to Ensure the Healthy Spouse Has Enough Income: The MMMNA.” ElderLawAnswers. Last modified March 4, 2019. <www.elderlawanswers.com>

Although Medicaid limits the assets that the spouse of a Medicaid applicant can retain, the income of the “community spouse” is not counted in determining the Medicaid applicant’s eligibility. Only income in the applicant’s name is counted. Thus, even if the community spouse is still working and earning, say, $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid. In some states, however, if the community spouse’s income exceeds certain levels, he or she does have to make a monetary contribution towards the cost of the institutionalized spouse’s care. The community spouse’s income is not considered in determining eligibility, but there is a subsequent contribution requirement.

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 local 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 $2,057.50 to a high of $3,160.50 a month (in 2019). 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.

CALCULATION: $3,160.50 per month personal income × 12 months per year = $37,926

[318] “2017 Actuarial Report on the Financial Outlook for Medicaid.” By Christian J. Wolfe, Kathryn E. Rennie, and Christopher J. Truffer. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, October 1, 2018. <www.cms.gov>

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 goods and services for Medicaid enrollees.”

Page 63: “In particular, Medicaid pays almost all health care costs for enrolled children and adults. However, many aged beneficiaries or beneficiaries with disabilities are also enrolled in Medicare, which is the primary payer of benefits before Medicaid; thus, the per enrollee Medicaid estimates are less than the total cost of such beneficiaries’ annual health care across all payers.56

[319] Article: “You Paid For It: Ambulance Rides, Health Care Reform.” By Michael Wooten. WGRZ (Local NBC affiliate in Buffalo NY), July 30, 2009. <www.wgrz.com>

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.

Medicaid picked up the tab for each ride, costing taxpayers at least $118,158.

[320] Report: “Medicaid: A Primer.” By Elicia J. Herz. Congressional Research Service, July 18, 2012. <fas.org>

Page 7:

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.

[321] 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. <oig.hhs.gov>

Page 1:

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. …

Federal Emergency Medicaid Funding for Aliens

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.

[322] Article: “Across Texas, 60,000 Babies of Noncitizens Get U.S. Birthright.” By Sherry Jacobson. Dallas Morning News, August 8, 2010. <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.”

[323] Report: “Births in the United States, 2017.” By Joyce A. Martin, Brady E. Hamilton, and Michelle J.K. Osterman. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, August 2018. <www.cdc.gov>

Page 1: “Data from the National Vital Statistics System … Medicaid was the source of payment for 43.0% of all births in 2017, an increase of 1% from 2016, and it increased for all maternal age groups.”

[324] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

Page 1:

Hospital participation in Medicare and Medicaid is voluntary. However, as 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 60 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid.

[325] Report: “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, April 22, 2019. <www.cms.gov>

Pages 5–6: “For inpatient hospital services, Medicare payment rates in 2016 were about 60 percent, and Medicaid payment rates were about 61 percent, of private health insurance payment rates (including Medicaid disproportionate share hospital, or DSH, payments).1313 American Hospital Association, 2018 TrendWatch Chartbook.”

[326] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, January 2019. <www.aha.org>

Page 1:

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.

Page 2:

In the aggregate, both Medicare and Medicaid payments fell below costs in 2017:

• Combined underpayments were $76.8 billion in 2017. This includes a shortfall of $53.9 billion for Medicare and $22.9 billion for Medicaid.

• For Medicare, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicare patients in 2017.

• For Medicaid, hospitals received payment of only 87 cents for every dollar spent by hospitals caring for Medicaid patients in 2017.

• In 2017, 66 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[327] Report: “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, April 22, 2019. <www.cms.gov>

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 during the period 2010 through 2019 that are specified by the ACA [Affordable Care Act] 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 [2093], Medicare and Medicaid payment rates for inpatient hospital services would both represent roughly 39 percent of the average level for private health insurance.

[328] Report: “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, April 22, 2019. <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 2017 were about 75 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent. In this illustration, Medicaid payment rates increase to 73 percent of private health insurance levels in 2013 and to 77 percent in 2014 before falling to 54 percent for 2016 and beyond.15 Medicare physician payment rates would decline steadily through the projection period relative to private health insurance payment rates.

[329] “2013 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 31, 2013. <downloads.cms.gov>

Pages 273–274:

Statement of Actuarial Opinion

Without unprecedented changes in health care delivery systems and payment mechanisms, 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 without consideration of the productivity price reductions. 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.

[330] Article: “Republican Matt Bevin Elected Governor of Kentucky.” By Adam Beam. Associated Press, November 4, 2015. <www.readingeagle.com>

Stanley and Deborah Harp own their own business in Georgetown. They had health insurance, but the type of plan they had vanished after the Affordable Care Act went into effect. They couldn’t afford their new health insurance premiums, but they did qualify for the expanded Medicaid program. Even though they now have free health insurance, they aren’t happy about it. They had to leave the doctor they had been using for 20 years.

“We’ve had the same doctor groups for the past 20 years who have our history, our kids had as pediatricians,” said Deborah Harp, adding that she voted for Bevin.

[331] 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. <www.nejm.org>

Page 2324:

Methods

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.

Results

We completed 546 paired calls to 273 specialty clinics and found significant disparities in provider acceptance of Medicaid-CHIP [Children’s Health Insurance Program] 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).

[332] Report: “Medicaid Patients Increasingly Concentrated Among Physicians.” By Peter J. Cunningham and Jessica H. May. Center for Studying Health System Change, August 2006. <hschange.org>

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 [Health System Change’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.

[333] Report: “Percentage of Office-Based Primary Care Physicians Accepting New Patients, by Source of Payment Accepted—National Electronic Health Records Survey, 2015.” By Ninee Yang and Esther Hing. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, July 21, 2017. <www.cdc.gov>

Page 1:

Overall, 88.9% of primary care physicians reported that they accepted new patients. However, acceptance varied by the patient’s expected payment source: 94.2% of physicians accepting new patients accepted privately insured patients, 77.4% accepted new Medicare patients, and 71.6% accepted new Medicaid patients. The percentages of primary care physicians accepting new Medicaid or Medicare patients were significantly lower than the percentage of primary care physicians accepting new privately insured patients.

[334] “2016 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, 2016. <www.cms.gov>

Page 2:

As of January 2014, the Affordable Care Act granted the States the authority under their State plans to expand Medicaid eligibility to almost all individuals under age 65 who are living in families with income below 138 percent of the Federal poverty level (FPL) (and who are citizens or eligible legal residents), with the Federal government currently paying 100 percent of the costs for newly eligible adults, to be reduced to 90 percent by 2020.2 (The Affordable Care Act also simplified eligibility processes for most adults, children, and pregnant women who are covered by Medicaid.)

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.

[335] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.gov>

Title II, Subtitle A, Section 2002a: …

(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. …

Effective Date.—The amendments made by subsections (a) and (b) take effect on January 1, 2014.

[336] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“Persons in Family/Household [=] 4 … 2019 Poverty Guidelines for the 48 Contiguous States and the District Of Columbia … [=] $25,750 … 2019 Poverty Guidelines for Alaska [=] $32,190 … 2019 Poverty Guidelines for Hawaii [=] $29,620”

CALCULATION: $25,750 × 138% = $35,535

[337] Ruling: National Federation of Independent Business v. Sebelius. U.S. Supreme Court, June 28, 2012. <www.law.cornell.edu>

Pages 1–2:

Another key provision of the Act is the Medicaid expansion. The current Medicaid program offers federal funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. 42 U. S. C. §1396d(a). The Affordable Care Act expands the scope of the Medicaid program and increases the number of individuals the States must cover. For example, the Act requires state programs to provide Medicaid coverage by 2014 to adults with incomes up to 133 percent of the federal poverty level, whereas many States now cover adults with children only if their income is considerably lower, and do not cover childless adults at all. §1396a(a)(10)(A)(i)(VIII). The Act increases federal funding to cover the States’ costs in expanding Medicaid coverage. §1396d(y)(1).But if a State does not comply with the Act’s new coverage requirements, it may lose not only the federal funding for those requirements, but all of its federal Medicaid funds. §1396c.

Twenty-six States, several individuals, and the National Federation of Independent Business brought suit in Federal District Court, challenging the constitutionality of the individual mandate and the Medicaid expansion.

[338] Ruling: National Federation of Independent Business v. Sebelius. U.S. Supreme Court, June 28, 2012. <www.law.cornell.edu>

Partly decided 7–2: Majority: Alito, Breyer, Kagan, Kennedy, Roberts, Scalia, Thomas. Dissenting: Ginsburg, Sotomayor.

Partly decided 5–4: Majority: Breyer, Ginsburg, Kagan, Roberts, Sotomayor. Dissenting: Alito, Kennedy, Scalia, Thomas.

Pages 4–6:

5. Chief Justice Roberts, joined by Justice Breyer and Justice Kagan, concluded in Part IV that the Medicaid expansion violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. Pp. 45–58.

(a) The Spending Clause grants Congress the power “to pay the Debts and provide for the … general Welfare of the United States.” Art. I, §8, cl. 1. Congress may use this power to establish cooperative state-federal Spending Clause programs. The legitimacy of Spending Clause legislation, however, depends on whether a State voluntarily and knowingly accepts the terms of such programs. Pennhurst State School and Hospital v. Halderman, 451 U. S. 1. “[T]he Constitution simply does not give Congress the authority to require the States to regulate.” New York v. United States, 505 U. S. 144. When Congress threatens to terminate other grants as a means of pressuring the States to accept a Spending Clause program, the legislation runs counter to this Nation’s system of federalism. Cf. South Dakota v. Dole, 483 U. S. 203. Pp. 45–51.

(b) Section 1396c gives the Secretary of Health and Human Services the authority to penalize States that choose not to participate in the Medicaid expansion by taking away their existing Medicaid funding. 42 U. S. C. §1396c. The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the “right to alter, amend, or repeal any provision” of Medicaid. §1304. But the expansion accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically. The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. Pp. 51–55.

(c) The constitutional violation is fully remedied by precluding the Secretary from applying §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. See §1303. The other provisions of the Affordable Care Act are not affected. Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the Medicaid expansion. Pp. 55–58.

6. Justice Ginsburg, joined by Justice Sotomayor, is of the view that the Spending Clause does not preclude the Secretary from withholding Medicaid funds based on a State’s refusal to comply with the expanded Medicaid program. But given the majority view, she agrees with The Chief Justice’s conclusion in Part IV-B that the Medicaid Act’s severability clause, 42 U. S. C. §1303, determines the appropriate remedy. Because The Chief Justice finds the withholding—not the granting—of federal funds incompatible with the Spending Clause, Congress’ extension of Medicaid remains available to any State that affirms its willingness to participate. Even absent §1303’s command, the Court would have no warrant to invalidate the funding offered by the Medicaid expansion, and surely no basis to tear down the ACA [Affordable Care Act] in its entirety. When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislation. See, e.g., Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320 –330. Pp. 60–61.

Roberts, C. J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III-C, in which Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined; an opinion with respect to Part IV, in which Breyer and Kagan, JJ., joined; and an opinion with respect to Parts III-A, III-B, and III-D. Ginsburg, J., filed an opinion concurring in part, concurring in the judgment in part, and dissenting in part, in which Sotomayor, J., joined, and in which Breyer and Kagan, JJ., joined as to Parts I, II, III, and IV. Scalia, Kennedy, Thomas, and Alito, JJ., filed a dissenting opinion. Thomas, J., filed a dissenting opinion.

[339] Report: “Medicaid and CHIP [Children’s Health Insurance Program] Eligibility, Enrollment, and Cost-Sharing Policies as of January 2019: Findings From a 50-State Survey.” By Tricia Brooks, Lauren Roygardner, and Samantha Artiga. Kaiser Family Foundation, March 2019. <files.kff.org>

Page 2:

Under the Affordable Care Act (ACA), most states have expanded Medicaid to low-income adults, helping to fill longstanding gaps in coverage. In the past year, there was an uptick in state activity to expand Medicaid, with five additional states taking steps forward. With this state action, 37 states, including DC, had adopted the ACA Medicaid expansion as of January 2019. Eligibility remains very restricted for adults in the 14 states that have not yet adopted the expansion, with the median eligibility level for parents at 40% FPL [federal poverty level] ($8,532 per year for a family of three as of 2019) and other adults remaining ineligible regardless of their income in all of these states, except Wisconsin.

Pages 8–9:

Under the ACA, most states have expanded Medicaid to low-income adults. As of January 2019, 34 states, including DC, had implemented the Medicaid expansion, extending eligibility to parents and other adults with incomes up to 138% FPL ($29,435 for a family of three or $17,236 for an individual as of 2019) (Figures 4 and 5). Connecticut and DC provide eligibility to higher levels. DC covers parents to 221% FPL and other adults to 215% FPL, and Connecticut restored parent eligibility to 155% FPL in 2018, after it had been reduced to 138% FPL in 2017. …

There was an uptick in state action to expand in the past year, with five additional states taking steps forward. In January 2019, Maine and Virginia implemented the Medicaid expansion, significantly increasing eligibility for parents and other adults (Figure 6). Through ballot initiatives in November 2018, Idaho, Nebraska, and Utah voters adopted the expansion, although it had not yet been implemented as of January 2019, and Utah and Idaho are seeking to add restrictions to their expansions. With this state action, 37 states, including DC, had adopted the expansion as of January 2019.

In the 14 states that have not yet adopted or implemented the Medicaid expansion, eligibility levels remain limited to very low-income parents, and other adults are largely ineligible. In these states, the median eligibility level for parents was 40% FPL, or $8,532 for a family of three, with ten states limiting parent eligibility to less than half of the poverty level. Other adults remain ineligible for Medicaid regardless of their income in all of these states, except Wisconsin. Moreover, in 10 of these 14 states, the parent eligibility level has been eroding over time as a percent of the FPL (from 42% FPL to 39% FPL between January 2014 and January 2019), because it is tied to a static dollar threshold, while the FPL generally increases each year. This erosion further widens the disparity in coverage available for adults in expansion states versus those that have not yet adopted the expansion.

[340] Webpage: “Medicaid Expansion Enrollment.” Kaiser Family Foundation. Accessed August 26, 2019 at <www.kff.org>

“Timeframe: FY 2017 … Location [=] United States … Expansion Group Enrollment [=] 17,090,600 … Expansion Group Enrollment: Total number of adults who have enrolled in Medicaid as a result of the ACA [Affordable Care Act] expansion of the program.”

[341] Report: “Medicaid and CHIP [Children’s Health Insurance Program] Eligibility, Enrollment, and Cost-Sharing Policies as of January 2019: Findings From a 50-State Survey.” By Tricia Brooks, Lauren Roygardner, and Samantha Artiga. Kaiser Family Foundation, March 2019. <files.kff.org>

Pages 8–9:

In the 14 states that have not yet adopted or implemented the Medicaid expansion, eligibility levels remain limited to very low-income parents, and other adults are largely ineligible. In these states, the median eligibility level for parents was 40% FPL [federal poverty level], or $8,532 for a family of three, with ten states limiting parent eligibility to less than half of the poverty level. Other adults remain ineligible for Medicaid regardless of their income in all of these states, except Wisconsin. Moreover, in 10 of these 14 states, the parent eligibility level has been eroding over time as a percent of the FPL (from 42% FPL to 39% FPL between January 2014 and January 2019), because it is tied to a static dollar threshold, while the FPL generally increases each year. This erosion further widens the disparity in coverage available for adults in expansion states versus those that have not yet adopted the expansion.

[342] Transcript: “Remarks by the President on the Economy—Port of New Orleans.” White House, Office of the Press Secretary, November 8, 2013. <www.presidency.ucsb.edu>

So we want to work with everybody—mayor, governor, insurance—whoever it is that wants to work with us here in Louisiana to make sure that even if you don’t support the overall plan, let’s at least go ahead and make sure that the folks who don’t have health insurance right now can get it through an expanded Medicaid. Let’s make sure we do that. (Applause.) It’s the right thing to do.

And one of the reasons to do it is—I’ve said this before; sometimes people don’t fully appreciate it—we already pay for the health care of people who don’t have health insurance, we just pay for the most expensive version, which is when they go to the emergency room. Because what happens is, the hospitals have to take sick folk. They’re not just going to leave them on the streets. But people who are sick, they wait until the very last minute. It’s much more expensive to treat them. Hospitals have to figure out how to get their money back, which means they jack up costs for everybody who does have health insurance by about $1,000 per family.

[343] Paper: “Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects.” By Michael L. Anderson. Journal of the American Statistical Association, December 2008. Pages 1481–1495. <are.berkeley.edu>

Page 1483: “The random assignment process makes estimation of causal effects straightforward.”

Page 1484: “Note that no assumptions regarding the distributions or independence of potential outcomes are needed. This is because the randomized design itself is the basis for inference (Fisher 1935), and preexisting clusters cannot be positively correlated with the treatment assignments in any systematic way.”

NOTE: For comprehensive documentation about the ability of random assignment studies to measure causes and effects, see the introductory section of Just Facts’ research on education.

[344] Article: “Medicaid Increases Emergency-Department Use: Evidence from Oregon’s Health Insurance Experiment.” By Amy N. Finkelstein, Sarah L. Taubman, and others. Science, January 2, 2014. Pages 263–268. <www.sciencemag.org>

Page 263:

In 2008, Oregon initiated a limited expansion of a Medicaid program for uninsured, low-income adults, drawing names from a waiting list by lottery. This lottery created a rare opportunity to study the effects of Medicaid coverage using a randomized controlled design. Using the randomization provided by the lottery and emergency-department records from Portland-area hospitals, we study the emergency-department use of about 25,000 lottery participants over approximately 18 months after the lottery. We find that Medicaid coverage significantly increases overall emergency use by 0.41 visits per person, or 40 percent relative to an average of 1.02 visits per person in the control group. We find increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings. …

In 2008, Oregon initiated a limited expansion of its Medicaid program for low-income adults, drawing about 30,000 names by lottery from a waiting list of almost 90,000 individuals. Those selected were enrolled in Medicaid if they completed the application and met eligibility requirements. … The lottery allowed us to isolate the causal effect of insurance on emergency-department visits and care; random assignment through the lottery can be used to study the impact of insurance without the problem of confounding factors that might otherwise differ between insured and uninsured populations.

[345] “2008 Oregon Population Report.” By Risa S. Proehl. Portland State University, Population Research Center, March 2009. <www.pdx.edu>

Page 6: “Table 2. Population Estimates of Oregon by Area Type and Specific Metropolitan Areas: 2000 to 2008 … Metropolitan Areas … July 1, 2008 … Portland-Vancouver-Beaverton [=] 2,191,785 … [the next highest is] Eugene-Springfield [=] 345,880.”

[346] Paper: “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment.” By Sarah L. Taubman and others. New England Journal of Medicine, October 20, 2016. Pages 1505–1507. <www.nejm.org>

Page 1506:

Extending our ED [emergency department] administrative data by a year to span the 2007–2010 period, we analyzed the pattern of the effect of Medicaid coverage on ED use over a 2-year period after the 2008 lottery. … Thus, using another year of ED data, we found no evidence that the increase in ED use due to Medicaid coverage is driven by pent-up demand that dissipates over time; the effect on ED use appears to persist over the first 2 years of coverage.

Page 1507:

For policymakers deliberating about Medicaid expansions, our results, which draw on the strength of a randomized, controlled design, suggest that newly insured people will most likely use more health care across settings—including the ED and the hospital—for at least 2 years and that expanded coverage is unlikely to drive substantial substitution of office visits for ED use.

[347] Report: “The State Children’s Health Insurance Program.” Congressional Budget Office, May 2007. <www.cbo.gov>

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.”

[348] Public Law 105-33: “Balanced Budget Act of 1997.” 105th Congress. Signed into law by Bill Clinton on August 5, 1997. <www.govinfo.gov>

Title XXI, Section 2101a:

State Children’s Health Insurance Program

(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.

[349] Report: “Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA [Patient Protection and Affordable Care Act]: Summary and Timeline.” By Julie Stone and others. Congressional Research Service, August 19, 2010. <www.everycrsreport.com>

Page 48: “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.”

[350] Calculated with data from:

a) Vote 345: “Balanced Budget Act of 1997.” U.S. House of Representatives, July 30, 1997. <clerk.house.gov>

b) Vote 209: “Balanced Budget Act of 1997.” U.S. Senate, July 31, 1997. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

235

84%

44

16%

3

1%

Democrat

196

78%

55

22%

1

0%

Independent

0

0%

1

100%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[351] Dataset: “Unduplicated Number of Children Ever Enrolled in CHIP and Medicaid.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, May 1, 2019. <www.medicaid.gov>

“Unduplicated Number of Children Ever Enrolled in CHIP and Medicaid … CHIP FY 2018 … Totals [=] 9,632,367”

[352] 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). <www.gpo.gov>

Page 302 (of 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 (of 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.”

[353] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“2019 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $25,750 … Alaska [=] $32,190 … Hawaii [=] $29,620”

CALCULATION: $25,750 × 200% = $51,500

[354] Webpage: “Medicaid, Children’s Health Insurance Program, & Basic Health Program Eligibility Levels.” Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services. Accessed August 27, 2019 at <www.medicaid.gov>

The following table provides eligibility levels in each state for key coverage groups that use Modified Adjusted Gross Income (MAGI), as of April 1, 2019. The data represent the principal, but not all, MAGI coverage groups in Medicaid, the Children’s Health Insurance Program (CHIP), and the Basic Health Program (BHP). All income standards are expressed as a percentage of the federal poverty level (FPL). The MAGI-based rules generally include adjusting an individual’s income by an amount equivalent to a 5% FPL disregard. Other eligibility criteria also apply, such as citizenship, immigration status, and state residency.

State Medicaid, CHIP and BHP Income Eligibility Standards (For Selected MAGI Groups, based on state decisions as of April 1, 2019)

Children Separate CHIP2 … New York [=] 400% … North Dakota [=] 170% … 2 CHIP covers birth up to age 19 unless otherwise noted in parentheses.

[355] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“2019 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $25,750”

CALCULATIONS:

  • $25,750 × 170% = $43,775
  • $25,750 × 400% = $103,000

[356] Report: “Medicaid and CHIP [Children’s Health Insurance Program] Eligibility, Enrollment, and Cost-Sharing Policies as of January 2019: Findings From a 50-State Survey.” By Tricia Brooks, Lauren Roygardner, and Samantha Artiga. Kaiser Family Foundation, March 2019. <files.kff.org>

Pages 30–31:

Table 1. Income Eligibility Limits for Children’s Health Coverage as a Percent of the Federal Poverty Level, January 20191 … State [=] Median4 … Separate CHIP for Uninsured Children Ages 0–183 [=] 254%

1 January 2019 income limits are reported as a percentage of the federal poverty level (FPL). The 2019 FPL for a family of three was $21,330. The reported levels reflect Modified Adjusted Gross Income (MAGI)-converted income standards and include a disregard equal to five percentage points of the FPL applied at the highest income level for Medicaid and separate CHIP coverage. In states without a separate CHIP program, the disregard is added to the highest Medicaid or the CHIP-funded Medicaid expansion limit. In states with a separate CHIP program, the disregard is applied to the highest Medicaid or CHIP-funded Medicaid expansion limit as well as to the upper eligibility limit of the separate CHIP program. Because CHIP funding is limited to uninsured children, in states that have a higher eligibility limit for their CHIP-funded Medicaid expansion than regular Medicaid, there may be a small number of children who have another source of coverage that would be eligible for Medicaid when the five percentage point disregard is applied, which is not reflected in the table. Eligibility levels are reported as a percentage of the FPL.

3 The states noted use federal CHIP funds to operate separate child health insurance programs for children not eligible for Medicaid. Such programs may either provide benefits similar to Medicaid or a somewhat more limited benefit package. They also may impose premiums or other cost sharing obligations on some or all families with eligible children. These programs typically provide coverage for uninsured children until the child’s 19th birthday.

4 Medians for CHIP-funded uninsured children are based on the upper limit of coverage.

[357] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“Persons in Family/Household [=] 4 … 2019 Poverty Guidelines for the 48 Contiguous States and the District Of Columbia [=] $25,750 … 2019 Poverty Guidelines for Alaska [=] $32,190 … 2019 Poverty Guidelines for Hawaii [=] $29,620”

CALCULATION: $25,750 × 254% = $65,405

[358] Webpage: “Eligibility Benefits.” PA.Gov. Accessed May 30, 2019 at <www.chipcoverspakids.com>

I live with my boyfriend or girlfriend, do I have to include their income?

The CHIP [Children’s Health Insurance Program] application requires that you provide information including income for everyone who lives with you as well as everyone who is expected to be included on your tax return, even if they do not live with you. CHIP has rules that determine who is included and those that are not included when determining eligibility.

My baby and I live with my parents, do I have to include my parent’s income?

Yes, the CHIP application requires that you provide information, including income, for everyone who lives with you as well as everyone who is expected to be included on your tax return even if they do not live with you. CHIP has rules that determine who is included and who is not included when determining eligibility. For example, your parent’s income may be counted when determining eligibility for you and your child if you are claimed as a tax dependent on their tax return.

[359] Pamphlet: “Application for Medical Assistance for Families with Children.” State of Kansas. Revised November 2018. <www.kancare.ks.gov>

Page 2:

About Your Family

Your income and family size help us decide what programs you qualify for. With this information, we can make sure everyone gets the most coverage possible.

Here’s who you need to include on this application:

• Yourself

• Your spouse

• Your children under 21 who live with you

• Your partner who lives with you (but only if you have children together who need medical assistance)

• Anyone you include on your tax return, even if they don’t live with you

• Anyone else under 21 who you take care of and lives with you

[360] “Children’s Health Insurance Program (CHIP): Eligibility and Benefits Handbook.” Pennsylvania Department of Human Services. April 5, 2017. <www.chipcoverspakids.com>

Page 37:

7.3 MAGI [modified adjusted gross income] Non-Tax Filer Household

MAGI non-tax filer household composition includes: the applicant child under age 19, their parents (biological, adoptive or step), their siblings under 19 (biological, adoptive or step), their spouse, if married, and their dependent children under 19 (biological, adoptive or step).

7.3.1 Use Non-Filer Rules for:

• Individuals not expected to file taxes that are not tax dependents

• Tax dependents that do not have an immediate relationship with the tax filer

• Children under the age of 19 living with both parents in the household and the parents are not expected to file taxes together

• Children under the age of 19 who are expected to be claimed as tax dependents by non-custodial parents

Note: Due to the recent allowance of same-sex marriages, contractors must ensure the eligibility determination includes the appropriate parents and their income.

Example 1: John Smith lives with his adopted son, Lucas Smith, and his partner Matthew Williams. Matthew has not adopted Lucas. Only John’s income will count towards the eligibility determination.

[361] “MaineCare Eligibility Guide.” Maine Equal Justice Partners, June 14, 2018. <www.mejp.org>

Page 55:

What income does not count: (partial list)

• Income from other people in the home who are not the parents or guardians of the children living with the family (like grandparents, adult brothers and sisters, or aunts and uncles). Those not legally responsible are not financially responsible and their income does not count. These other household members also do not count in figuring family size. These individuals may be eligible for MaineCare in a different category and as a separate household.

[362] Report: “Modern Era Medicaid: Findings of a 50-State Survey of Eligibility, Enrollment, Renewal, and Cost Sharing Practices in Medicaid and CHIP as of January 2015.” By Tricia Brooks and others. Kaiser Commission on Medicaid and the Uninsured, January 20, 2015. <files.kff.org>

Page 3:

The ACA [Affordable Care Act] also changed the method for determining financial eligibility for Medicaid for children, pregnant women, parents, and adults and CHIP [Children’s Health Insurance Program] to a standard based on modified adjusted gross income (MAGI).7 This new approach is intended to prevent gaps in coverage between programs by largely adopting the rules for determining eligibility for subsidies to purchase Marketplace coverage. While these changes went into effect on January 1, 2014, some states continued to refine the conversion of their pre-ACA eligibility levels to MAGI-based standards.

7 The ACA established new standards for determining eligibility based on tax law in order to align coverage across the insurance affordability programs, including Medicaid, CHIP and subsidies in the health insurance marketplaces. MAGI rules establish specific guidelines for counting income and household size, although there are some exceptions in determining Medicaid eligibility only. States can no longer use asset tests in determining eligibility and were required to convert their pre-ACA eligibility levels accounting for the use of income disregards and deductions to the new MAGI standards, which were implemented on January 1, 2014. A standard five-percentage point disregard applies to the upper eligibility limits in determining MAGI-based eligibility.

[363] Final rule: “Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010.” Federal Register, March 23, 2012. <www.gpo.gov>

Page 17156:

Agency: U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services …

7. No Resource Test or Income Disregards (§ 435.603(g))

Comment: Many commenters supported the proposal to prohibit consideration of assets in determining financial eligibility for Medicaid and CHIP [Children’s Health Insurance Program]. A few commenters recommended retaining the asset test because eliminating the test entirely could incentivize people with significant assets to stop working and could result in others with significant assets, but minimal income, being enrolled in Medicaid at the taxpayer’s expense.

Response: Section 1902(e)(14)(C) of the Act, as added by section 2002 of the Affordable Care Act, expressly prohibits consideration of assets in determining eligibility for individuals whose financial eligibility is based on MAGI [modified adjusted gross income] methods. We do not have the flexibility to issue regulations to the contrary and are finalizing the regulation at § 435.603(g) as proposed.

[364] Calculated with data from:

a) Dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 11, 2018. <www.cms.gov>

b) Dataset: “Table 3. Poverty Status of People, by Age, Race, and Hispanic Origin: 1959 to 2017.” U.S. Census Bureau. Accessed May 31, 2019 at <www2.census.gov>

c) Dataset: “CPI—All Urban Consumers (Current Series).” U.S. Department of Labor, Bureau of Labor Statistics. Accessed February 1, 2019 at <www.bls.gov>

“Series Id: CUUR0000SA0; Series Title: All Items in U.S. City Average, All Urban Consumers, Not Seasonally Adjusted; Area: U.S. City Average; Item: All Items; Base Period: 1982–84=100”

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

[365] Calculated with data from:

a) Dataset: “National Health Expenditures by Type of Service and Source of Funds: Calendar Years 1960 to 2017.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 11, 2018. <www.cms.gov>

b) Dataset: “CPI—All Urban Consumers (Current Series).” U.S. Department of Labor, Bureau of Labor Statistics. Accessed February 1, 2019 at <www.bls.gov>

“Series Id: CUUR0000SA0; Series Title: All Items in U.S. City Average, All Urban Consumers, Not Seasonally Adjusted; Area: U.S. City Average; Item: All Items; Base Period: 1982–84=100”

c) Report: “CHIPRA [Children’s Health Insurance Program Reauthorization Act of 2009] Mandated Evaluation of the Children’s Health Insurance Program: Final Findings.” Mathematica Policy Research & The Urban Institute, August 1, 2014. <aspe.hhs.gov>

Page 122: “Table B.2. Number of Children Enrolled in CHIP from FFY 1998 Through FFY 2012, by State (Alphabetically Listed)”

d) “Number of Children Ever Enrolled Report, 2012–2018.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services. Accessed May 31, 2019 at <www.medicaid.gov>

e) Webpage: “Reports & Evaluations.” Centers for Medicare & Medicaid Services. Accessed May 31, 2019 at <www.medicaid.gov>

“For the purposes of SEDS [Statistical Enrollment Data System] reporting, ‘ever enrolled’ is defined as the enrollment totals for the program in which children were last enrolled in the FY [fiscal year], either separate CHIP, Title XXI-funded Medicaid, or Medicaid. For example, children who began the year in a separate CHIP but transitioned to Medicaid would be reported in the Medicaid enrollment totals.”

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

[366] Report: “The State Children’s Health Insurance Program.” Congressional Budget Office, May 2007. <www.cbo.gov>

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.)”

[367] Webpage: “CHIP Financing.” Medicaid and CHIP Payment and Access Commission. Accessed August 30, 2019 at <www.macpac.gov>

Regardless of program design, states’ CHIP [Children's Health Insurance Program] spending is reimbursed by the federal government at a matching rate higher than Medicaid’s. CHIP’s enhanced federal medical assistance percentage (E-FMAP) varies by state, historically ranging from 65 percent to 81 percent, compared to 50 percent to 73 percent for children in Medicaid. In fiscal years (FYs) 2016 through 2019, the CHIP matching rate is increased by 23 percentage points, ranging from 88 percent to 100 percent. In FY 2020, the matching rate will be increased by 11.5 percent, and in FY 2021 and subsequent years, the matching rate will return to the regular CHIP E-FMAP.

[368] Report: “Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and Timeline.” By Julie Stone and others. Congressional Research Service, August 19, 2010. <www.everycrsreport.com>

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) [enhanced federal medical assistance percentage], subject to a cap of 100%, for FY [fiscal year] 2016 through FY2019 (although no CHIP appropriations are provided for those years). The 23 percentage point increase will not apply to certain expenditures.

[369] Report: “Federal Financing for the State Children’s Health Insurance Program (CHIP).” By Alison Mitchell. Congressional Research Service, May 23, 2018. <fas.org>

Page 2 (of PDF):

The federal government’s share of CHIP expenditures (including both services and administration) is determined by the enhanced federal medical assistance percentage (E-FMAP) rate. The E-FMAP varies by state; statutorily, the E-FMAP can range from 65% to 85%. The E-FMAP rate is increased by 23 percentage points for FY2016 through FY2019 and by 11.5 percentage points for FY2020. In FY2021, the E-FMAP is to return to the regular E-FMAP rates.

Page 2:

The ACA [Affordable Care Act] included a provision to increase the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures from FY [fiscal year] 2016 through FY2019. The continuing resolution enacted on January 22, 2018 (P.L. 115-120) extended the increase to the E-FMAP rate by one year (i.e., through FY2020), but the increase for FY2020 is to be 11.5 percentage points rather than 23 percentage points.

The increase to the E-FMAP [enhanced federal medical assistance percentage] does not apply to certain expenditures, such as translation services, CHIP children above 300% of FPL [federal poverty level] (with an exception for certain states), expenditures for administration of citizenship documentation requirements, expenditures for administration of payment error rate measurement, and Medicaid coverage of certain breast or cervical cancer patients.

The 23 percentage point increase changed the statutory range of the E-FMAP rate to between 88% and 100%. In FY2018, 13 states have E-FMAP rates of 100%.

[370] Article: “Obama Signs Children’s Health Insurance Bill.” By Robert Pear. New York Times, February 4, 2009. <www.nytimes.com>

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.

[371] Calculated with data from:

a) Vote 50: “Children’s Health Insurance Program Reauthorization Act of 2009.” U.S. House of Representatives, February 4, 2009. <clerk.house.gov>

b) Vote 31: “Children’s Health Insurance Program Reauthorization Act of 2009.” U.S. Senate, January 29, 2009. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

49

22%

165

75%

5

2%

Democrat

306

98%

2

1%

4

1%

Independent

1

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[372] Article: “Healthcare Reform Legislation Signed Into Law.” By Jerry Klepner and Briana Nord. Dialysis & Transplantation, June 18, 2010. <onlinelibrary.wiley.com>

[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].

[373] Report: “The Budget Reconciliation Process: The Senate’s ‘Byrd Rule.’ ” By Bill Heniff Jr. Congressional Research Service, September 13, 2010. Updated 11/22/16. <www.senate.gov>

Pages 17–19:

At the beginning of the 111th Congress, in 2009, President Barack Obama proposed a legislative agenda focusing on health care reform, as well as broad initiatives in education and other policy areas. An immediate point of contention was whether the proposals regarding health care reform should be pursued through the regular legislative process or the expedited procedures available under the reconciliation process. The Democratic leadership in the Senate was concerned, in particular, that passage of the proposals in the Senate could be stymied by a filibuster conducted by Republican opponents. Use of the reconciliation process, with its debate limitations and other expedited features, would ensure that a filibuster could not be employed against the legislation. On the other hand, in such a comprehensive reform proposal, many important provisions might be vulnerable to challenge under the Byrd rule and other enforcement procedures; the resulting legislation might become like “Swiss cheese” if many parliamentary challenges were successful.

Congressional leaders decided to consider health care reform (and education reform) proposals under the regular legislative process, but to include reconciliation directives in the FY2010 budget resolution so that reconciliation procedures could be used as a fallback if regular legislative procedures failed. One of the factors influencing the decision was that, at the time, the Democrats held a 60-seat majority in the Senate, exactly the minimum number of votes needed to invoke cloture (i.e., to terminate a filibuster). Title II of the FY2010 budget resolution, S.Con.Res. 13, included reconciliation directives for FY2009–FY2014 to three House and two Senate committees that would accommodate health care and education reform initiatives.39

The House and Senate passed separate versions of health care reform legislation in late 2009 but did not resolve their differences before the session ended. The House passed H.R. 3962 on November 7 by a vote of 220–215. The Senate chose another House-passed bill dealing with unrelated subject matter, H.R. 3590, and transformed it into a health care reform measure; the Senate passed the bill on December 24 by a vote of 60–39. (In addition, the House passed an education reform measure in 2009, H.R. 3221, but the Senate did not.)

In early 2010, the Democratic leadership in the Senate found an altered political situation; a special election held in Massachusetts in January to fill a vacant seat (due to the death of Senator Ted Kennedy) resulted in a changeover to Republican control of the seat, thereby reducing the Democratic majority in the Senate to 59 seats. In assessing how to resolve the House–Senate differences in the health care reform legislation, the Democratic leadership faced a dilemma: the Democrats no longer held the 60-seat majority necessary to thwart a filibuster (and Republican opposition to the measure was unified), and the House could not pass the Senate version without change, thereby sending it to the President, because that version was not acceptable to a majority of House Members.

The solution to the dilemma settled on by the Democratic leadership was for the House to pass the Senate version of health care reform legislation, H.R. 3590, while simultaneously passing a reconciliation measure (referred to colloquially as a “sidecar”) that would amend H.R. 3590 in a manner acceptable to majorities in both chambers. In this manner, comprehensive health care reform legislation could be enacted without concern about challenges under the Byrd rule that could strip away many of its provisions, while the revisions to the measure necessary to accommodate the political agreement could be achieved through an expedited reconciliation process that relied upon a simple majority vote in the Senate rather than a 60-vote supermajority. Education reform provisions also would be included in the reconciliation measure. Compared with the comprehensive health care reform measure, the reconciliation bill was much more narrow in scope and focused on budgetary matters.40

To execute this strategy, the House on March 21, 2010, adopted a special rule reported by the House Rules Committee, H.Res. 1203, by a vote of 224–206. Under the terms of the special rule, the House then concurred in the Senate amendments to H.R. 3590 (thus clearing the bill for the President) by a vote of 219–212. Finally, the House passed H.R. 4872, the reconciliation measure, by a vote of 220–211.

Following the House’s actions on March 21, the Senate considered H.R. 4872 on March 23, 24, and 25, passing the measure on March 25 by a vote of 56–43. Republican opponents of the measure offered a series of amendments and motions to recommit to the bill, all of which were defeated by motions to table or points of order. Nine of the amendments fell when points of order raised under the Byrd rule were sustained (in each instance, after a waiver motion had been rejected). All but one of the points of order were raised on the ground that the amendment included provisions outside the jurisdiction of the instructed committees.41

Toward the end of Senate consideration of the reconciliation measure on March 25, Senator Judd Gregg successfully raised two points of order under the Byrd rule, striking two brief provisions in the education reform portion of the measure dealing with the Pell grant program.42 The provisions were judged to be in violation of the Byrd rule on the ground that they produced no changes in outlays or revenues.

As required under the Byrd rule, the Senate then returned the reconciliation measure (with the two provisions pertaining to the Pell grant program removed) to the House for further action. On March 25, the House agreed to a special rule, H.Res. 1225, providing for the consideration of a motion for the House to concur in the Senate amendment to H.R. 4872. The House agreed to the motion by a vote of 220–207, thus clearing the measure for the President.

President Obama signed H.R. 3590, the Patient Protection and Affordable Care Act, into law on March 23 as P.L. 111-148, and H.R. 4872, the Health Care and Education Reconciliation Act of 2010, into law on March 30 as P.L. 111-152.

[374] Calculated with data from:

a) Vote 165: “Patient Protection and Affordable Care Act.” U.S. House of Representatives, March 21, 2010. <clerk.house.gov>

b) Vote 396: “Patient Protection and Affordable Care Act.” U.S. Senate, December 24, 2009. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

0

0%

178

100%

1

0%

Democrat

277

79%

73

21%

0

0%

Independent

2

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[375] Calculated with data from:

a) Vote 194: “Health Care and Education Reconciliation Act of 2010.” U.S. House of Representatives, March 25, 2010. <clerk.house.gov>

b) Vote 105: “Health Care and Education Reconciliation Act of 2010.” U.S. Senate, March 25, 2010. <www.senate.gov>

Party

Voted “Yes”

Voted “No”

Voted “Present” or Did Not Vote †

Number

Portion

Number

Portion

Number

Portion

Republican

0

0%

215

99%

3

1%

Democrat

274

89%

35

11%

1

0%

Independent

2

100%

0

0%

0

0%

NOTE: † Voting “Present” is effectively the same as not voting.

[376] 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). <www.gpo.gov>

NOTE: This bill contains 906 pages.

[377] House Resolution 4872: “Health Care and Education Reconciliation Act.” Signed into law by Barack Obama on March 30, 2010 (became Public Law No: 111-152). <www.gpo.gov>

NOTE: This bill contains 1,029 pages.

[378] 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). <www.gpo.gov>

Page 37 (of PDF):

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 …

Sec. 2701. Fair health insurance premiums.

(a) Prohibiting Discriminatory Premium Rates.—

(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—

(i) whether such plan or coverage covers an individual or family;

(ii) rating area, as established in accordance with paragraph (2);

(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).

(2) Rating Area.—

(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.

Pages 13–14 (of PDF):

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 …

Sec. 2713. Coverage of Preventive Health Services.

(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.

[379] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 35:

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

[380] 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. <www.deloitte.com>

Page 24:

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….

[381] 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). <www.gpo.gov>

Pages 36, 43 (of PDF):

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 …

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.

[382] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 3: “Immediate Individual and Group Market Reforms … providing coverage for preexisting health conditions for enrollees under age 19….”

Pages 11–12:

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).

[383] Book: Economics For Dummies (2nd edition). By Sean Flynn (PhD., Assistant Professor of Economics, Scripps College). Wiley, 2011.

Page 223:

People who already have medical problems have preexisting conditions. Health insurance has difficulty coping with preexisting conditions due to adverse selection, which occurs when insurance is disproportionately purchased by those who are more likely to need costly reimbursements in the future. Adverse selection can drive up insurance rates and even kill off an insurance market altogether. (For details on adverse selection in auto insurance markets, see Chapter 11.)

To see how adverse selection wreaks havoc on health insurance markets, suppose an insurance company offers health insurance to a large group of people—say, the population of Massachusetts. For those with preexisting conditions, purchasing insurance is a no-brainer, because they’re certain that their future healthcare bills will be larger than their insurance premiums. But the money to pay for their future medical bills has to come from somewhere. With all the sick people purchasing insurance, the insurance company knows that future treatment costs will be high. The only way to cover those costs is to charge high premiums, getting enough money out of those without preexisting conditions to pay the expected costs.

Those without preexisting conditions will react the same way people react to higher prices when considering any good or service: Some will stop buying the product. Their dropping out of the insurance market makes things even worse for the insurance company, because it’ll be forced to raise premiums even higher. But by raising insurance premiums, even more healthy people will choose not to purchase health insurance, and premiums will go up again.

[384] Book: Accounting Fundamentals for Health Care Management (3rd edition). By Steven A. Finkler, Thad Calabrese, and David M. Ward. Jones & Bartlett Learning, 2019.

Page 26:

Why does the law [2010 Affordable Care Act] have penalties for those who do not purchase health insurance? Part of the law eliminates the ability of insurance companies to not cover services for preexisting medical conditions. Preexisting conditions would have to be covered by insurers, and the health insurance premium would be required by law to be the same for someone with such a condition as for someone without that condition. This is a great benefit to people who have long-term illnesses and attempt to get insurance coverage. However, unless there is a requirement or strong incentive for everyone to have health insurance, many people are likely to only buy health insurance when and if they become ill, and the illness would be covered. If many people went that route, then insurance would become prohibitively expensive. In other words, healthier populations (referred to as “young invincibles” in policy debates) are needed in the insured pool; these individuals pay for health insurance but are less likely to utilize services than those with long-term health concerns. Because insurance premiums do not differentiate between these two types of insured individuals, the healthier population pays higher premiums that effectively subsidize the sicker population that pays lower premiums. Imagine if no one purchased fire insurance until his or her house caught on fire. Insurance works by spreading risk across a large population, some of whom incur a loss, and most of whom don’t. Fire insurance works because many people pay small premiums (i.e., small compared to the cost of rebuilding their house if it burns down) and only a few houses actually burn down. All homeowners share the risk of a loss due to fire. If the only people who bought fire insurance were the ones who had fires, then the annual premium would cost as much or more than the cost of the house. No one could afford insurance under such conditions.

This means that if individuals are covered for preexisting conditions but don’t have to buy insurance until they get sick, premiums for everyone could rise so high as to make it nearly impossible for anyone to afford health insurance.

[385] Working paper: “The Effect of State Community Rating Regulations on Premiums and Coverage in the Individual Health Insurance Market.” By Bradley Herring and Mark V. Pauley. U.S. Department of Health and Human Services, August 2006. <aspe.hhs.gov>

Page 9:

The log of condition-related expense is also statistically significant in both data sets, implying that families with the presence of high-risk chronic conditions do appear to pay, on average, higher premiums in the individual market. However, the economic magnitude of this effect is modest, implying that there is a high level of pooling. Families with health conditions that are twice as expensive to treat pay premiums that are only 11.5–15.5 percent higher than average. If insurers knew or could have known about the chronic condition and its effect on expected expense, this result implies that, somehow, those with chronic conditions that make them twice as expensive as average spread 85 percent or more of that risk to premiums paid by others.

[386] Article: “New York Offers Costly Lessons on Insurance.” By Anemona Hartocollis. New York Times, April 17, 2010. <www.nytimes.com>

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.

[387] Report: “Newly Enrolled Members in the Individual Health Insurance Market After Health Care Reform: The Experience From 2014 and 2015.” Blue Cross and Blue Shield Association, March 20, 2016. <www.bcbs.com>

Page 2:

Comparing the health status and use of medical services among those who enrolled in individual coverage before and after the ACA [Affordable Care Act] took effect, as well as those with employer-based health insurance, the study finds that:

• Members who newly enrolled in BCBS [Blue Cross Blue Shield] individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who already had BCBS individual coverage.

• Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical services in their first year of coverage, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health coverage.

• The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

Page 3:

Percentage Difference in 2015 Prevalence of Select Conditions Between Individuals Who Enrolled Prior to 2014 Versus Newly Enrolled in 2014 and 2015 (Based on the first nine months of 2015 medical claims data)

Hypertension 24%

Diabetes 94%

Depression 52%

Coronary Artery Disease 32%

Hepatitis C 140%

HIV 242%

[388] Public Law 115-97: “Tax Cuts and Jobs Act.” 115th Congress. Signed into law by Donald Trump on December 22, 2017. Accessed January 20, 2018 at <www.congress.gov>

Part VIII—Individual Mandate

Sec. 11081. Elimination of Shared Responsibility Payment for Individuals Failing to Maintain Minimum Essential Coverage.

a) In General.—Section 5000A(c) is amended—

(1) in paragraph (2)(B)(iii), by striking “2.5 percent” and inserting “Zero percent”, and

(2) in paragraph (3)—

(A) by striking “$695” in subparagraph (A) and inserting “$0”, and

(B) by striking subparagraph (D).

(b) Effective Date.—The amendments made by this section shall apply to months beginning after December 31, 2018.

[389] Webpage: “Individual Shared Responsibility Provision—Reporting and Calculating the Payment.” Internal Revenue Service, October 3, 2017. <www.irs.gov>

Your payment amount is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace. For 2016, the annual national average premium for a bronze level health plan available through the Marketplace is $2,676 per year ($223 per month) for an individual and $13,380 per year ($1,115 per month) for a family with five or more members.

[390] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

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.

[391] 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. <www.cms.gov>

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

Page 8:

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.

[392] Brief: “The Cost of the Individual Mandate Penalty for the Remaining Uninsured.” By Matthew Rae and others. Kaiser Family Foundation, December 9, 2015. <files.kff.org>

Pages 1–2:

Some individuals are exempt from the penalty, including undocumented immigrants, those whose incomes are so low that they are not required to file taxes, people with incomes below 138% of poverty in the “Medicaid gap” in states that have not expanded eligibility for Medicaid under the ACA [Affordable Care Act], people who have to pay more than 8.13% of household income for insurance (taking into account any employer contributions or subsidies) and certain individuals who have membership in certain groups or face a particular hardship.

For those who are uninsured and do not meet one of the exemptions, the penalty for 2016 is calculated as the greater of two amounts:

1. A flat dollar amount equal to $695 per adult plus $347.50 per child, up to a maximum of $2,085 for the family.

2. 2.5% of family income in excess of the 2015 income tax filing thresholds ($10,300 for a single person and $20,600 for a family).

The penalty can be no more than the national average premium for a bronze plan (the minimum coverage available in the individual insurance market under the ACA), which was $2,484 in 2015 for single coverage and $12,420 for a family of three or more children.

Page 3:

Among individuals who were uninsured in early 2015 and eligible to enroll in the marketplace, the average household penalty in 2016 is $969. This is up 47% from the average estimated penalty this year of $661. Those who are eligible for premium subsidies will face an average household penalty of $738 in 2016, while the average household penalty totals $1,450 for uninsured individuals not eligible for any financial assistance.

[393] 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). <www.gpo.gov>

Pages 128–130 (of PDF):

(d) Applicable individual.—For purposes of this section—

(1) In general.—The term “applicable individual” means, with respect to any month, an individual other than an individual described in paragraph (2), (3), or (4).

(2) Religious exemptions.—

(A) Religious conscience exemption.—Such term shall not include any individual for any month if such individual has in effect an exemption under section 1311(d)(4)(H) of the Patient Protection and Affordable Care Act which certifies that such individual is a member of a recognized religious sect or division thereof which is described in section 1402(g)(1), and an adherent of established tenets or teachings of such sect or division as described in such section.

(B) Health care sharing ministry—

(i) In general.—Such term shall not include any individual for any month if such individual is a member of a health care sharing ministry for the month.

(ii) Health care sharing ministry.—The term “health care sharing ministry” means an organization—

(I) which is described in section 501(c)(3) and is exempt from taxation under section 501(a),

(II) members of which share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the State in which a member resides or is employed,

(III) members of which retain membership even after they develop a medical condition,

(IV) which (or a predecessor of which) has been in existence at all times since December 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least December 31, 1999, and

(V) which conducts an annual audit which is performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and which is made available to the public upon request.

(3) Individuals not lawfully present.—Such term shall not include an individual for any month if for the month the individual is not a citizen or national of the United States or an alien lawfully present in the United States.

(4) Incarcerated individuals.—Such term shall not include an individual for any month if for the month the individual is incarcerated, other than incarceration pending the disposition of charges.

(e) Exemptions.—No penalty shall be imposed under subsection (a) with respect to—

(1) Individuals who cannot afford coverage.—

(A) In general—Any applicable individual for any month if the applicable individual’s required contribution (determined on an annual basis) for coverage for the month exceeds 8 percent of such individual’s household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act. For purposes of applying this subparagraph, the taxpayer’s household income shall be increased by any exclusion from gross income for any portion of the required contribution made through a salary reduction arrangement.

(B) Required contribution—For purposes of this paragraph, the term “required contribution” means—

(i) in the case of an individual eligible to purchase minimum essential coverage consisting of coverage through an eligible-employer-sponsored plan, the portion of the annual premium which would be paid by the individual (without regard to whether paid through salary reduction or otherwise) for self-only coverage, or

(ii) in the case of an individual eligible only to purchase minimum essential coverage described in subsection (f)(1)(C), the annual premium for the lowest cost bronze plan available in the individual market through the Exchange in the State in the rating area in which the individual resides (without regard to whether the individual purchased a qualified health plan through the Exchange), reduced by the amount of the credit allowable under section 36B for the taxable year (determined as if the individual was covered by a qualified health plan offered through the Exchange for the entire taxable year).

(C) Special rules for individuals related to employees.—For purposes of subparagraph (B)(i), if an applicable individual is eligible for minimum essential coverage through an employer by reason of a relationship to an employee, the determination under subparagraph (A) shall be made by reference to [1] required contribution of the employee.

(D) Indexing.—In the case of plan years beginning in any calendar year after 2014, subparagraph (A) shall be applied by substituting for “8 percent” the percentage the Secretary of Health and Human Services determines reflects the excess of the rate of premium growth between the preceding calendar year and 2013 over the rate of income growth for such period.

(2) Taxpayers with income below filing threshold.—Any applicable individual for any month during a calendar year if the individual’s household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act is less than the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.

(3) Members of Indian tribes.—Any applicable individual for any month during which the individual is a member of an Indian tribe (as defined in section 45A(c)(6)).

[394] Some examples of healthcare sharing ministries include:

[395] Report: “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, April 22, 2019. <www.cms.gov>

Page 6:

As shown in figure 1, Medicaid payment rates equal Medicare payment rates in 2018, and both decline in tandem relative to private health insurance payment rates over the next 75 years. 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 during the period 2010 through 2019 that are specified by the ACA [Affordable Care Act] 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 [2093], Medicare and Medicaid payment rates for inpatient hospital services would both represent roughly 39 percent of the average level for private health insurance.

[396] “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. <www.cms.gov>

Pages 265–266:

Statement of Actuarial Opinion

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. …

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.

[397] “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. <www.cms.gov>

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.

Page 28:

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.

Page iv:

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.

[398] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“Persons in Family/Household [=] 4 … 2019 Poverty Guidelines for the 48 Contiguous States and the District of Columbia [=] $25,750 … 2019 Poverty Guidelines for Alaska [=] $32,190 … 2019 Poverty Guidelines for Hawaii [=] $29,620”

CALCULATION: $25,750 × 138% = $35,535

[399] 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). <www.gpo.gov>

Page 162 (of PDF):

Title II—Role of Public Programs

Subtitle A—Improved Access to Medicaid …

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.

[400] Ruling: National Federation of Independent Business v. Sebelius. U.S. Supreme Court, June 28, 2012. <www.law.cornell.edu>

Partly decided 7–2: Majority: Alito, Breyer, Kagan, Kennedy, Roberts, Scalia, Thomas. Dissenting: Ginsburg, Sotomayor.

Partly decided 5–4: Majority: Breyer, Ginsburg, Kagan, Roberts, Sotomayor. Dissenting: Alito, Kennedy, Scalia, Thomas.

Pages 4–6:

5. Chief Justice Roberts, joined by Justice Breyer and Justice Kagan, concluded in Part IV that the Medicaid expansion violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. Pp. 45–58.

(a) The Spending Clause grants Congress the power “to pay the Debts and provide for the … general Welfare of the United States.” Art. I, §8, cl. 1. Congress may use this power to establish cooperative state-federal Spending Clause programs. The legitimacy of Spending Clause legislation, however, depends on whether a State voluntarily and knowingly accepts the terms of such programs. Pennhurst State School and Hospital v. Halderman, 451 U. S. 1. “[T]he Constitution simply does not give Congress the authority to require the States to regulate.” New York v. United States, 505 U. S. 144. When Congress threatens to terminate other grants as a means of pressuring the States to accept a Spending Clause program, the legislation runs counter to this Nation’s system of federalism. Cf. South Dakota v. Dole, 483 U. S. 203. Pp. 45–51.

(b) Section 1396c gives the Secretary of Health and Human Services the authority to penalize States that choose not to participate in the Medicaid expansion by taking away their existing Medicaid funding. 42 U. S. C. §1396c. The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the “right to alter, amend, or repeal any provision” of Medicaid. §1304. But the expansion accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically. The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. Pp. 51–55.

(c) The constitutional violation is fully remedied by precluding the Secretary from applying §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. See §1303. The other provisions of the Affordable Care Act are not affected. Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the Medicaid expansion. Pp. 55–58.

6. Justice Ginsburg, joined by Justice Sotomayor, is of the view that the Spending Clause does not preclude the Secretary from withholding Medicaid funds based on a State’s refusal to comply with the expanded Medicaid program. But given the majority view, she agrees with The Chief Justice’s conclusion in Part IV-B that the Medicaid Act’s severability clause, 42 U. S. C. §1303, determines the appropriate remedy. Because The Chief Justice finds the withholding—not the granting—of federal funds incompatible with the Spending Clause, Congress’ extension of Medicaid remains available to any State that affirms its willingness to participate. Even absent §1303’s command, the Court would have no warrant to invalidate the funding offered by the Medicaid expansion, and surely no basis to tear down the ACA [Affordable Care Act] in its entirety. When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislation. See, e.g., Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320 –330. Pp. 60–61.

Roberts, C. J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, and III-C, in which Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined; an opinion with respect to Part IV, in which Breyer and Kagan, JJ., joined; and an opinion with respect to Parts III-A, III-B, and III-D. Ginsburg, J., filed an opinion concurring in part, concurring in the judgment in part, and dissenting in part, in which Sotomayor, J., joined, and in which Breyer and Kagan, JJ., joined as to Parts I, II, III, and IV. Scalia, Kennedy, Thomas, and Alito, JJ., filed a dissenting opinion. Thomas, J., filed a dissenting opinion.

[401] Report: “Medicaid and CHIP Eligibility [Children’s Health Insurance Program], Enrollment, and Cost-Sharing Policies as of January 2019: Findings From a 50-State Survey.” By Tricia Brooks, Lauren Roygardner, and Samantha Artiga. Kaiser Family Foundation, March 2019. <files.kff.org>

Page 2:

Under the Affordable Care Act (ACA), most states have expanded Medicaid to low-income adults, helping to fill longstanding gaps in coverage. In the past year, there was an uptick in state activity to expand Medicaid, with five additional states taking steps forward. With this state action, 37 states, including DC, had adopted the ACA Medicaid expansion as of January 2019. Eligibility remains very restricted for adults in the 14 states that have not yet adopted the expansion, with the median eligibility level for parents at 40% FPL [federal poverty level] ($8,532 per year for a family of three as of 2019) and other adults remaining ineligible regardless of their income in all of these states, except Wisconsin.

Pages 8–9:

Under the ACA, most states have expanded Medicaid to low-income adults. As of January 2019, 34 states, including DC, had implemented the Medicaid expansion, extending eligibility to parents and other adults with incomes up to 138% FPL ($29,435 for a family of three or $17,236 for an individual as of 2019) (Figures 4 and 5). Connecticut and DC provide eligibility to higher levels. DC covers parents to 221% FPL and other adults to 215% FPL, and Connecticut restored parent eligibility to 155% FPL in 2018, after it had been reduced to 138% FPL in 2017. …

There was an uptick in state action to expand in the past year, with five additional states taking steps forward. In January 2019, Maine and Virginia implemented the Medicaid expansion, significantly increasing eligibility for parents and other adults (Figure 6). Through ballot initiatives in November 2018, Idaho, Nebraska, and Utah voters adopted the expansion, although it had not yet been implemented as of January 2019, and Utah and Idaho are seeking to add restrictions to their expansions. With this state action, 37 states, including DC, had adopted the expansion as of January 2019.

In the 14 states that have not yet adopted or implemented the Medicaid expansion, eligibility levels remain limited to very low-income parents, and other adults are largely ineligible. In these states, the median eligibility level for parents was 40% FPL, or $8,532 for a family of three, with ten states limiting parent eligibility to less than half of the poverty level. Other adults remain ineligible for Medicaid regardless of their income in all of these states, except Wisconsin. Moreover, in 10 of these 14 states, the parent eligibility level has been eroding over time as a percent of the FPL (from 42% FPL to 39% FPL between January 2014 and January 2019), because it is tied to a static dollar threshold, while the FPL generally increases each year. This erosion further widens the disparity in coverage available for adults in expansion states versus those that have not yet adopted the expansion.

[402] Webpage: “Medicaid Expansion Enrollment.” Kaiser Family Foundation. Accessed August 26, 2019. <www.kff.org>

“Timeframe: FY 2017 … Location [=] United States … Expansion Group Enrollment [=] 17,090,600 … Expansion Group Enrollment: Total number of adults who have enrolled in Medicaid as a result of the ACA [Affordable Care Act] expansion of the program.”

[403] 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. <kaiserfamilyfoundation.files.wordpress.com>

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.

[404] Report: “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, July 13, 2017. <www.cms.gov>

Pages 7–8:

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 2014 were about 78 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent. In this illustration, Medicaid payment rates increase to 73 percent of private health insurance levels in 2013 and to 77 percent in 2014 before returning to 58 percent. Medicare physician payment rates would decline steadily through the projection period relative to private health insurance payment rates.

[405] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 2 (of PDF):

[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.

[406] 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. <www.cms.gov>

Page 5:

The refundable premium tax credits in section 1401 of the PPACA [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 [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. 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 [gross domestic product], 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.

[407] Calculated with data from the webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, February 1, 2019. <aspe.hhs.gov>

“2019 Poverty Guidelines … Persons in family/household [=] 3 … 48 Contiguous States and the District Of Columbia [=] $21,330 … Alaska [=] $26,660 … Hawaii [=] $24,540”

CALCULATION: $20,420 × 400% = $85,320

“2019 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $25,750 … Alaska [=] $32,190 … Hawaii [=] $29,620”

CALCULATION: $25,750 × 400% = $103,000

“2019 Poverty Guidelines … Persons in family/household [=] 5 … 48 Contiguous States and the District Of Columbia [=] $30,170 … Alaska [=] $37,720 … Hawaii [=] $34,700”

CALCULATION: $30,170 × 400% = $120,680

[408] Webpage: “Marketplace Effectuated Enrollment and Financial Assistance.” Kaiser Family Foundation. Accessed August 14, 2019 at <www.kff.org>

Timeframe: February 2019 … Location [=] United States … Total Effectuated Marketplace Enrollment [=] 10,579,744 … Marketplace Enrollees Receiving Advance Premium Tax Credits (APTCs) [=] 9,250,423 … Percent of Total Marketplace Enrollees Receiving APTCs [=] 87% …

Marketplace Enrollees Receiving Advance Premium Tax Credits (APTCs): Total number of individuals who had an active policy in February of a given year, who paid their premium (thus effectuating their coverage), and who received an APTC. Consumers with household incomes 100–400% of the federal poverty level may qualify for an APTC, which helps make their coverage more affordable throughout the year by lowering their share of monthly premium costs.

[409] Article: “Many Americans Can’t Afford Obamacare: Aetna CEO.” By Matthew J. Belvedere. CNBC, July 30, 2014. <www.cnbc.com>

‘We have 600,000 … customers as a result of the Affordable Care Act,’ [Aetna Chairman and CEO] Bertolini said. ‘We do know they are sicker. We know 87 percent are subsidized. We know they are older. So we expect they are going to use more health care.’

[410] Report: “CBO’s Record of Projecting Subsidies for Health Insurance Under the Affordable Care Act: 2014 to 2016.” Congressional Budget Office, December 2017. <www.cbo.gov>

Pages 1–2: “To examine the factors that caused CBO [Congressional Budget Office] and JCT’s [Joint Committee on Taxation’s] estimates of those identifiable subsidies to differ from actual amounts during the 2014–2016 period, this document compares projections and subsequent outcomes for the following groups of people … Those receiving subsidies through the marketplaces or the Basic Health Program….”

Page 11: “Federal costs for subsidies for coverage obtained through the marketplaces and the Basic Health Program come from data published by the Office of Management and Budget. Estimates of actual spending per person are the ratios of spending to subsidized enrollment through the health insurance marketplaces or the Basic Health Program in a calendar year.”

[411] Report: “Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2019 to 2029.” Congressional Budget Office, May 2, 2019. <www.cbo.gov>

Page 20:

Per enrollee, subsidies for insurance obtained through the marketplaces and outlays for the Basic Health Program depend on the premiums for benchmark plans used for determining subsidies and on certain characteristics of enrollees, such as age, family size, and income. Combined, subsidies for coverage through the marketplace and the Basic Health Program are projected to average $6,490 per subsidized enrollee in calendar year 2019. That amount rises to about $11,670 in 2029, as subsidies grow with premiums over time. (That proportion increases mainly because the amounts enrollees pay are limited to certain percentages of their income.)

[412] Calculated with data from the webpage: “Estimated Total Premium Tax Credits Received by Marketplace Enrollees.” Henry J. Kaiser Family Foundation. Accessed August 27, 2019 at <www.kff.org>

Timeframe: 2019 … Location [=] United States … Average Monthly Advanced Premium Tax Credit [=] $5141

Data include the number of individuals who had an active Marketplace policy in February of a given year, and who paid their premium (thus effectuating their coverage) as of March 15, 2019.

Consumers with household incomes between 100% and 400% of the Federal Poverty Level (FPL) may qualify for Advanced Premium Tax Credits (APTCs), which help make their coverage more affordable throughout the year by lowering their share of monthly premium costs. Consumers who qualify for APTCs may choose how much of the tax credit to apply to their premiums each month, up to the maximum amount for which they are eligible. The amount of APTC an enrollee may receive depends on household income and the cost of the second lowest silver plan available to enrollees in their local area. …

1 Data reported for the United States represents the national average.

CALCULATION: $514 average monthly subsidy x 12 = $6,168 average annual subsidy

[413] Press release: “Free Exchange Plan Options Are Available in Most Counties for 2019.” By Elizabeth Carpenter, Chris Sloan, and Neil Rosacker. Avalere Health, December 13, 2018. <avalere.com>

New analysis from Avalere finds that over 95% of counties with exchanges operated by HealthCare.gov have free plan options for low-income consumers.

While the percentage of counties with free plans declined from 98% to 95% from 2018 to 2019, the vast majority of low-income enrollees (at 150% of the federal poverty level (FPL) or below) in Healthcare.gov states have the option to enroll in a $0 premium bronze plan.

Figure 1: Percentage of Healthcare.gov Counties with Free Subsidized Options by Metal Level, Individual at 150% FPL, Age 50, 2019 … 2019 … Bronze [=] 95% … Silver [=] 32% … Gold [=] 25% …

To conduct the analysis, Avalere utilized the recently released 2019 Individual Market HHS [Health and Human Services] Landscape Files of 2019 exchange plan premiums in 39 Healthcare.gov states and DC. Avalere then calculated the expected advance premium tax credits (APTCs) in each of the 2,721 counties in these states, by income, for a 50-year old non-smoker, using the second lowest silver plan in each region.

[414] Press release: “Most Counties Will Have Free 2018 Exchange Plans for Low-Income Enrollees.” By Caroline F. Pearson, Chris Sloan, and Elizabeth Carpenter. Avalere Health, November 2, 2017. <avalere-health-production.s3.amazonaws.com>

Page 2:

Table 1: Percentage of Healthcare.gov Counties with Free Subsidized Options by Income (As a Percentage of FPL*) and Metal Level, Individual Age 50, 2018

% of Counties

150% FPL

200% FPL

Free Bronze

98%

81%

Free Silver

18%

7%

Free Gold

10%

2%

*Uses the Alaska and Hawaii specific measures of the federal poverty level for plans in Alaska and Hawaii.

Page 3: “To conduct the analysis, Avalere utilized the recently released 2018 Individual Market HHS Landscape Files of 2018 exchange plan premiums in Healthcare.gov states. Avalere then calculated the expected advance premium tax credits (APTCs) in each of the 2,722 counties, by income, for a 50-year old nonsmoker, using the second lowest silver plan in each region.”

[415] 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. <www.deloitte.com>

Page 16:

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 [alternative minimum tax] credits after that date and their carryback.

[416] Webpage: “Small Business Health Care Tax Credit and the SHOP [Small Business Health Options Program] Marketplace.” Internal Revenue Service. Last updated May 3, 2019. <www.irs.gov>

If you are a small employer, there is a tax credit that can put money in your pocket.

The small business health care tax credit benefits employers that:

• Have fewer than 25 full-time equivalent employees

• Pay average wages of less than $50,000 a year per full-time equivalent (indexed annually for inflation beginning in 2014)

– For tax year 2014, the inflation-adjusted amount is $51,000

– For tax year 2015, the inflation-adjusted amount is $52,000

– For tax year 2016, the inflation-adjusted amount is $52,000

– For tax year 2017, the inflation-adjusted amount is $53,000

• Offer a qualified health plan to its employees through a Small Business Health Options Program Marketplace (or qualify for a limited exception to this requirement)

• Pay at least 50 percent of the cost of employee-only—not family or dependent—health care coverage for each employee …

How will the credit make a difference for you?

The maximum credit is:

• 50 percent of premiums paid for small business employers and

• 35 percent of premiums paid for small tax-exempt employers

• The credit is available to eligible employers for two consecutive taxable years

The amount of the credit you receive works on a sliding scale. The smaller the employer, the bigger the credit. So if you have more than 10 full-time equivalent employees or if the average wage is more than $25,000 (as adjusted for inflation), the amount of the credit you receive will be less. For example, if you pay $50,000 a year toward employees’ health care premiums, and if you qualify for a $10,000 credit each year, you can save $20,000 over the course of two years.

Even if your small business does not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

The credit is refundable, so if you’re tax-exempt and have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. Refund payments issued to small tax-exempt employers claiming the refundable portion of the credit are subject to sequestration.

[417] Report: “Small Employer Health Tax Credit: Limited Use Continues Due to Multiple Reasons.” By James R. McTigue, Jr. U.S. Government Accountability Office, March 22, 2016. <www.gao.gov>

Page 2 (of PDF):

Claims of the small employer health tax credit have continued to be lower than thought eligible by government agency and small business group estimates, limiting the effect of the credit on expanding health insurance coverage through small employers. In 2014, about 181,000 employers claimed the credit, down somewhat from 2010 (see figure). These numbers are relatively low compared to the number of employers eligible for the credit. In 2012, GAO [U.S. Government Accountability Office] reported that selected estimates of the number of employers eligible ranged from about 1.4 million to 4 million. In 2010, claims totaled $468 million compared to initial estimates of $2 billion by the Congressional Budget Office and the Joint Committee on Taxation. Actual claims for the credit in 2013 and 2014 increased slightly to about $511 million and $541 million, respectively. …

[418] Report: “Small Employer Health Tax Credit: Limited Use Continues Due to Multiple Reasons.” By James R. McTigue, Jr. U.S. Government Accountability Office, March 22, 2016. <www.gao.gov>

Page 2 (of PDF):

The small employer health tax credit has not been widely claimed for a variety of reasons, as GAO [U.S. Government Accountability Office] reported in May 2012. The maximum amount of the credit does not appear to be a large enough incentive for employers to offer or maintain insurance. Also, few small employers qualify for the maximum credit amount. For those employers who do claim the credit, the credit amount “phases out” to zero as employers employ up to 25 full time equivalent (FTE) employees at higher wages. The amount of the credit is also limited if premiums paid by an employer are more than the average premiums for the small group market in the employer’s state. Furthermore, the credit can only be claimed for two consecutive years after 2013. GAO also found that the cost and complexity involved in claiming the tax credit was significant, deterring small employers from claiming it. Many small businesses have also reported that they were unaware of the credit.

[419] 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. <www.deloitte.com>

Page 23:

Employer Penalties and Other Requirements

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.

[420] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Page 7:

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 [Congressional Research Service] Report R41159, Summary of Potential Employer Penalties Under PPACA (P.L. 111-148).

Pages 7–8:

Requirements and Penalties for an Employer Offering Health Insurance

For an employer that chooses to offer health insurance, the following rules would apply:

• Current employment-based plans will be considered grandfathered plans.

• 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.

Requirements and Penalties for an Employer Not Offering Health Insurance

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

Page 9:

Free Choice Vouchers

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 [federal poverty level] 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.

[421] Webpage: “Employer Shared Responsibility Provisions.” Internal Revenue Service, August 5, 2016. Last updated 3/27/19. <www.irs.gov>

All types of employers can be ALEs [applicable large employers], including tax-exempt organizations and government entities. …

… Depending on its decisions about offering minimum essential coverage to its full-time employees and their dependents, an ALE member may be subject to one of two potential employer shared responsibility payments. …

An ALE member will owe the first type of employer shared responsibility payment if it does not offer minimum essential coverage to at least 95 percent of its full-time employees (and their dependents), and at least one full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace. …

Even if an ALE member offers minimum essential coverage to at least 95 percent of its full-time employees (and their dependents), it may owe the second type of employer shared responsibility payment for each full-time employee who receives the premium tax credit for purchasing coverage through the Marketplace. In general, a full-time employee could receive the premium tax credit if: (1) the minimum essential coverage the employer offers to the employee is not affordable; (2) the minimum essential coverage the employer offers to the employee does not provide minimum value; or (3) the employee is not one of the at least 95 percent of full-time employees offered minimum essential coverage.

[422] Webpage: “Transition Relief.” Internal Revenue Service, March 3, 2016. <www.irs.gov>

“Although the employer shared responsibility provisions originally were to apply in 2014, the Treasury Department and IRS issued guidance, Notice 2013-45, providing that the employer shared responsibility provisions and the corresponding information reporting requirements will first apply in 2015.”

[423] Article: “Sebelius Confirmed as Secretary of HHS [Department of Health and Human Services].” By Shailagh Murray. Washington Post, April 28, 2009. <voices.washingtonpost.com>

“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.”

[424] Report: “Regulations Pursuant to the Patient Protection and Affordable Care Act (P.L. 111-148).” By Curtis W. Copeland, Congressional Research Service, April 13, 2010. <www.ncsl.org>

Page 2 (of PDF):

The report indicates that PPACA [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.

Page 1:

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.”

[425] Commentary: “America’s Most Powerful Woman.” By Merrill Matthews. Investor’s Business Daily, June 8, 2010. <www.investors.com>

And now Congress has handed Ms. Sebelius the authority to implement the Patient Protection and Affordable Care Act (a.k.a. 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 [Department of Health and Human Services].

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.”

[426] Report: “Regulations Pursuant to the Patient Protection and Affordable Care Act (P.L. 111-148).” By Curtis W. Copeland. Congressional Research Service, April 13, 2010. <www.ncsl.org>

Pages 4–5:

Subsection (c) of Section 1311 of PPACA [the Patient Protection and Affordable Care Act] (“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 [sic] benefits plan options).

[427] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.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 …

Sec. 1311. Affordable Choices of Health Benefit Plans. …

(b) American 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—

(A) facilitates the purchase of qualified health plans …

(c) Responsibilities of the Secretary.—

(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….

[428] 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. <www.cms.gov>

Page 5:

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 [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. …

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.

[429] Report: “Private Health Insurance Provisions in PPACA [Patient Protection and Affordable Care Act] (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <coburn.library.okstate.edu>

Pages 11–12:

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: …

• 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

Page 14:

Essential Health Benefits Package

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:

• ambulatory patient services;

• emergency services;

• hospitalization;

• maternity and newborn care;

• mental health and substance use disorder services, including behavioral health treatment;

• prescription drugs;

• rehabilitative and habilitative services and devices;

• laboratory services;

• preventive and wellness and chronic disease management; and

• pediatric services, including oral and vision care.

[430] Article: “Obama Reaffirms Insurers Must Cover Contraception.” By Robert Pear. New York Times, January 20, 2012. <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.

[431] Report: “Regulations Pursuant to the Patient Protection and Affordable Care Act (P.L. 111-148).” By Curtis W. Copeland, Congressional Research Service, April 13, 2010. <www.ncsl.org>

Page 11:

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.

[432] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.gov>

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 …

Sec. 1003. Ensuring That Consumers Get Value for Their Dollars. …

(a) Initial Premium Review Process.—

(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.

[433] Article: “Health Insurers to Be Required to Justify Rate Increases Over 10 Percent.” By Robert Pear. New York Times, December 21, 2010. <www.nytimes.com>

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.

[434] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.gov>

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 …

Sec. 2717. Ensuring the Quality of Care. …

(2) Reporting Requirements.—

(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.

[435] 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). <www.gpo.gov>

Page 85 (of PDF):

Sec. 1332. Waiver for State Innovation.

(a) Application.—

(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—

(A) be filed at such time and in such manner as the Secretary may require;

(B) contain such information as the Secretary may require, including—

(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) provide an assurance that the State has enacted the law described in subsection (b)(2).

Page 206 (of PDF):

(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.

Page 245 (of PDF):

(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.

Page 351 (of PDF):

(5) Waiver of De Minimis Premiums.—The Secretary shall, under procedures established by the Secretary, permit a prescription drug plan or an MA–PD [Medicare Advantage–prescription drug] 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.

Page 431 (of PDF):

(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.

(e) Waiver of Requirements.—The Secretary may—

(1) under appropriate circumstances, waive the application of all or part of the requirements of this subsection with respect to an SBHC [school-based health center] 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.

Page 432 (of PDF):

(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.

Page 558 (of PDF):

(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.

Page 630 (of PDF):

(iii) Hardship Exception; Waiver for Certain Medicaid Providers.—The Secretary may, on a case-by-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.

Page 734 (of PDF):

(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.

Page 865 (of PDF):

(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 [National Institute of Health] 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.

[436] Report: “New Entities Created Pursuant to the Patient Protection and Affordable Care Act.” By Curtis W. Copeland. Congressional Research Service, July 8, 2010. <thf_media.s3.amazonaws.com>

Page 2 (of PDF):

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.

[437] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.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. …

(c) Board Proposals.—…

(2) Proposals.—…

(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. …

(g) Board Membership; Terms of Office; Chairperson; Removal.—

(1) Membership.—

(A) In General.—The Board shall be composed of—

(i) 15 members appointed by the President, by and with the advice and consent of the Senate….

[438] 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. <www.kff.org>

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.

[439] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.gov>

Sec. 10320. Expansion of the Scope of, and Additional Improvements to, the Independent Medicare Advisory Board. …

(b) 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.”

[440] Public Law 115-123: “Bipartisan Budget Act of 2018.” 115th U.S. Congress. Signed into law by Donald Trump on February 9, 2018. <www.congress.gov>

Title XI—Protecting Seniors’ Access to Medicare Act

Sec. 52001. Repeal of the Independent Payment Advisory Board.

(a) Repeal.—Section 1899A of the Social Security Act (42 U.S.C. 1395kkk) is repealed.

(b) Conforming Amendments.—

(1) Lobbying Cooling-Off Period.—Paragraph (3) of section 207(c) of title 18, United States Code, is repealed.

(2) Gao [Government Accountability Office] Study and Report.—Section 3403(b) of the Patient Protection and Affordable Care Act (42 U.S.C. 1395kkk–1) is repealed.

(3) MedPAC [Medicare Payment Advisory Commission] Review and Comment.—Section 1805(b) of the Social Security Act (42 U.S.C. 1395b–6(b)) is amended—

(A) by striking paragraph (4);

(B) by redesignating paragraphs (5) through (8) as paragraphs (4) through (7), respectively; and

(C) by redesignating the paragraph (9) that was redesignated by section 3403(c)(1) of the Patient Protection and Affordable Care Act (Public Law 111–148) as paragraph (8).

(4) Name Change.—Section 10320(b) of the Patient Protection and Affordable Care Act (Public Law 111–148) is repealed.

(5) Rule of Construction.—Section 10320(c) of the Patient Protection and Affordable Care Act (Public Law 111–148) is repealed.

[441] 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. <www.kff.org>

Page 3: “The recommendations made by IPAB [Independent Payment Advisory Board] 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.”

[442] Public Law 111-148: “Patient Protection and Affordable Care Act.” 111th U.S. Congress. Signed into law by Barack Obama on March 23, 2010. <www.congress.gov>

Title III—Improving the Quality and Efficiency of Health Care …

Subtitle E—Ensuring Medicare Sustainability …

Sec. 3403. Independent Medicare Advisory Board …

(d) Congressional Consideration.—

(1) Introduction.—

(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. …

(3) Limitation on Changes to the Board Recommendations.—

(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). …

(4) Expedited Procedure.—

(A) Consideration.—A motion to proceed to the consideration of the bill in the Senate is not debatable.

(B) Amendment …

(iv) Amendment Not in Order.—It shall not be in order to consider an amendment that would cause the bill to result in a