YOUR SOURCE FOR RELIABLE RESEARCH


What You’ll Find

For example:


Citation Generator
X
APA
MLA
Chicago (for footnotes)
Chicago (for bibliographies)

Spending, Prices, and Costs

NOTE: The data below differentiates 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 particular healthcare services and products to patients. This is equivalent to prices minus profits or losses.

* Between 1960 and 2014, healthcare spending in the United States increased:

  • from an average of $146/person per year to $9,532 (by 65 times).
  • from an inflation-adjusted average of $1,176/person per year to $9,544 (by 8 times).
  • from 5.0% of the nation’s economy (gross domestic product) to 17.5% (by 3.5 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]

* In 1980, the average price for a typical hospital room in the U.S. was $127 per day.[6] Adjusting for inflation, this amounts to $368 in 2015 dollars.[7]

* In 1988, Mutual of Omaha insurance company paid an average of $270 per day for all types of hospital rooms (such as medical/surgical, intensive care, maternity, etc.). Adjusting for inflation, this amounts to $545 in 2015 dollars.[8] [9] [10]

* In 2002, Mutual of Omaha paid an average of $748 per day for all types of hospital rooms. Adjusting for inflation, this amounts to $992.22 in 2015 dollars.[11] [12]

* A 2015 survey of twelve hospitals in Ohio (where state law requires hospitals to publish their prices) found that the daily price of a typical hospital room ranged from $887 to $3,165, with the average being $1,822 and the median $1,612.[13]


Third-Party Payments

NOTE: Third-party payments refer to 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 typically do not deliver or receive the healthcare (i.e., they are not the patients or doctors).

* Between 1960 and 2014, the portion of U.S. healthcare expenses paid:

  • directly by consumers decreased from 48% to 11%.
  • by government increased from 24% to 49%.
  • by private insurance increased from 21% to 33%.[14]

* 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.[15]

* 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 percentages of their income. (Accounting for inflation, $1,000 during the timeframe of this study equates to about $3,700 in 2015 dollars.[16])

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

  • Families with 100% coverage spent an average of 16% more on healthcare than families with 75% coverage, 22% more than families with 50% coverage, and 58% more than families with 5% coverage.
  • Using mathematical “techniques better suited to such data,” families with 100% coverage were predicted to spend 24% more than families with 75% coverage, 49% more than families with 50% coverage, and 45% more than families with 5% coverage.[17]
  • The increased spending that occurred under the plans with higher coverage had “little or no” effect on health outcomes except for the poorest 6% of the population.[18]
  • In hospital settings (where costs typically exceeded the maximum out-of-pocket costs that the patients had to pay), the plans had no effect on spending. Per the study:
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….[19]

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

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

* Prior to 2014, U.S. law 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 7.5% of adjusted gross income.[21]
  • providing health insurance through the Medicare program for almost all Americans aged 65 and older in addition to younger people who are permanently disabled (52 million people in 2013, or 16% of the population).[22] [23]
  • paying for healthcare services through the Medicaid program for people with generally low incomes (72 million people in 2013, or 23% of the population).[24] [25] [26]
  • subsidizing health insurance through the Children’s Health Insurance Program for children in families with incomes as high as 400% of the federal poverty guideline and unlimited financial assets (8 million people in 2013, or 3% of the population).[27] [28] [29] [30]

* Since 2014, the Affordable Care Act[31] (a.k.a. Obamacare) has further incentivized and subsidized third-party payments by:

  • requiring most Americans to carry some form of health insurance or pay a monthly fine.[32] [33] [34] [35] [36]
  • expanding Medicaid eligibility to all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines (for example, a family of four with income below $33,534 in 2016) without regard for any assets they have. This expansion, along with other measures in this act, are projected by the U.S. Department of Health and Human Services to increase Medicaid enrollment above previous estimates by about 11.6 million people in 2014 and 20 million people by 2019.[37] [38] [39]
  • subsidizing certain health insurance plans for individuals with incomes up to 400% of federal poverty guidelines (for example, $80,640 for a family of three in 2016 or $113,760 for a family of five). The U.S. Department of Health and Human Services has projected that 25 million people will be receiving these subsidies in 2019.[40] [41] [42]
  • subsidizing certain health insurance plans for certain small businesses.[43] [44]
  • increasing the threshold at which medical expenses paid directly by consumers become tax deductible from 7.5% of adjusted gross income to generally 10%.[45] [46]

Wealth

* Among developed nations, greater wealth is generally associated with higher healthcare spending until gross domestic product (GDP) reaches about $60,000 to $70,000 per person. The graph below shows healthcare spending (as a portion of GDP) in nations that are members of the Organization for Economic Cooperation and Development (OECD). The OECD is an international organization of 34 developed countries such as Australia, Canada, Germany, Japan, and the U.S.[47] [48]

Healthcare Spending of OECD Nations Except the U.S.

[49]

* 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….”[50] [51]


Age

* Personal healthcare expenditures consist of monies directly spent to “treat individuals with specific medical conditions.”[52]

* In the U.S. during 2010, the average annual per capita personal healthcare spending for 65-84 year-olds was 3.6 times higher than that of 19-44 year-olds:

Age Group (Years)

Annual Personal Healthcare

Spending Per Person

0-18

$3,628

19-44

$4,422

45-64

$8,370

65-84

$15,857

85+

$34,783

All ages

$7,097

[53]

* 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 one by 2020 and to 2.8 to one by 2030.[54] [55] [56]


Preventative Care

* Cancer, cardiovascular disease, and diabetes are responsible for the majority of deaths and healthcare costs in the United States.[57]

* 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.[58]

* 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 health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses.
 
To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. … Judging the overall effect on medical spending requires analysts to calculate not just the savings from the relatively few individuals who would avoid more expensive treatment later, but also the costs for the many who would make greater use of preventive care.[59]

* 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.

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.[60]

* 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.[61]

Profits and Salaries

 

* In 1993 through 2014, the annual operating profit margin (i.e., profit margin before interest expenses and taxes[62]) for all companies in the S&P 500 averaged 14.1%. For healthcare companies in the S&P 500, it averaged 14.8%:

S&P 500 and Healthcare Earnings Before Interest & Tax Margins

[63] [64]

* As of August 27, 2015, the net profit margins (after taxes[65]) for various industries within the healthcare sector are as follows:

Industry

Net Profit Margin

Medical Practitioners

-11.5%

Drugs – Generic

-4.4%

Long-Term Care Facilities

-2%

Home Health Care

-0.5%

Drug Related Products

1.7%

Health Care 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%

Drug Manufacturers – Other

17.6%

Biotechnology

19.5%

Drug Manufacturers – Major

21.6%

[66]

* In May 2014, the mean hourly wage for nonfarm workers in the United States was $22.71 (not including benefits), and the mean hourly wage for various healthcare occupations was as follows:

Occupation Title

Mean Hourly Wage

Pharmacy Technicians

$14.95

EMTs and Paramedics

$16.88

Dietitians and Nutritionists

$27.62

Registered Nurses

$33.55

Chiropractors

$38.35

Physical Therapists

$40.35

Physician Assistants

$46.77

Pharmacists

$56.96

Dentists

$82.20

Pediatricians

$84.33

Psychiatrists

$87.84

Family and General Practitioners

$89.58

Obstetricians and Gynecologists

$103.25

Surgeons

$115.60

Anesthesiologists

$118.42

[67] [68]

* 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.[69]

Waste, Fraud, and 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….[70]

* Per the U.S. Government Accountability Office (GAO):

  • “Once fraudulent or improper payments are made, the government is likely to only recover pennies on the dollar.”[71]
  • “We have designated Medicare and Medicaid as high-risk programs because their size, scope, and complexity make them particularly vulnerable to fraud and abuse.”[72]
  • There “are no reliable estimates” for amount of fraud in the Medicare and Medicaid programs “or across the health care industry generally.”[73]

* In 2014, the Children’s Health Insurance Program made $600 million in improper payments (as estimated by the federal government). This amounts to 6.5% of the program’s total outlays.[74]

* In 2014, the Medicaid program made $17.5 billion in improper payments. This amounts to 6.7% of the program’s total outlays.[75]

* In 2014, the Medicare program made about $60 billion in improper payments. This amounts to:

  • 9.9% of all Medicare outlays.
  • 48% of all improper payments reported by 124 federal programs.
  • $487 per U.S. household.[76]

* Per the U.S. Centers for Disease Control:

  • “About 12 million Americans (age 12 or older) reported nonmedical use of prescription painkillers” in 2010.
  • “Prescription painkiller overdoses killed nearly 15,000 people in the U.S.” during 2008.[77] (For comparison, roughly 16,272 murders were committed in the U.S. that year.[78])

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

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.[79]

* In 2008, GAO reported that their investigators were able to “easily set up two fictitious” medical supply companies that were “approved for Medicare billing privileges despite having no clients and no inventory.”[80]

* 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.[81]

* 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.[82]

* In New Jersey, Medicaid and the Children’s Health Insurance Program are administered by a program called NJ FamilyCare.[83] In 2007, at least 873 families with gross annual income above $85,000 received benefits from NJ FamilyCare. Three of these families had gross incomes above $700,000.[84]

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

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.[85]

Government Shifting Costs to Private Sector

* In 2013, Medicare and Medicaid paid hospitals a combined total of $51 billion dollars less than hospitals’ costs of caring for Medicare and Medicaid patients. Medicare paid hospitals an average of 12% below their costs of car­ing for Medicare patients, and Medicaid paid hospitals an average of 10% below their costs of caring for Medicaid patients.[86]

* As of October 2011, four states limit the number of days that Medicaid will pay for hospital stays: 45 days in Florida, 30 days in Mississippi, 24 days in Arkansas, and 16 days in Alabama. Arizona and Hawaii are planning to limit the number of days to 25 and 10 respectively. Spokesmen for hospital associations in Alabama and Arizona have stated that hospitals generally will care for Medicaid patients beyond these time limits regardless of Medicaid’s willingness to pay.[87]

* 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).[88] [89] [90]

* In 2001, emergency room physicians spent about half of their patient-care time providing treatment mandated under EMTALA.[91]

* 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.[92]


Uncompensated Care

* “Uncompensated care” is defined as the total cost to healthcare providers of both charity care and bad debt.[93]

* In 2003, the Federal Reserve reported that approximately 52% of all collection actions by collection agencies and creditors were associated with medical bills.[94]

* In 2013, hospitals provided $46.4 billion of uncompensated care, amounting to 5.9% of hospitals’ total costs.[95]


Lawsuits and Defensive Medicine

* 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.[96] [97] (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.[98] As examples:

  • In 2012, the lowest-price malpractice insurance provider for OB/GYNs in:
    • Los Angeles County, California (the nation’s most populous county[99]) charged an average of $49,804 per policy.[100]
    • Cook County, Illinois (the nation’s second-most populous county[101]) charged an average of $127,748 per policy.[102]
    • San Francisco County, California charged an average of $29,635 per policy.[103]
    • Adams County, Illinois charged an average of $60,042 per policy.[104] [105]
  • In 2010, the average payout per medical malpractice claim for MDs [medical doctors] and DOs [doctors of osteopathic medicine] ranged from a low of $109,000 in West Virginia to a high of $1,258,000 in Wisconsin.[106]

* “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.”[107]

* 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.[108]

* A 2010 paper in the journal Health Affairs estimated that the costs of defensive medicine in the U.S. during 2008 were $38.8 billion for hospitals and $6.8 billion for physician and clinical services.[109] The authors of this paper arrived at the $38.8 billion estimate for hospitals by:

  • extrapolating the results of a study that estimated the cost savings of lawsuit reforms (such as caps on noneconomic damages) for Medicare patients who had heart attacks or heart disease. The authors noted that “two other studies could not replicate these findings for other health conditions.”[110]
  • assuming that the following unquantified factors “probably serve as counterweights to one another”: (1) all costs of defensive medicine that were not eliminated by the legal reforms in the study they extrapolated (2) physicians’ perceptions that Medicare patients may be less likely to sue or to receive large payouts because they are older than the general population (3) physicians’ perceptions that the threat of liability with cardiac patients may be greater than with other patients. (4) physicians’ perceptions that the threat of liability with Medicare patients may be greater “because higher levels of managed care outside of Medicare reduce physicians’ discretion.”[111]

The authors arrived at the $6.8 billion estimate for physician/clinical services by assuming that the cost of malpractice payments are equivalent to the costs of defensive medicine.[112] (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.[113])

The authors did not account for defensive medicine costs outside of hospitals and physician/clinical services,[114] which accounted for 50% of U.S. healthcare spending in 2008.[115] The costs of defensive medicine for all other categories of healthcare spending such as prescription drugs were not quantified.[116]

Using the above-described methodologies and others, the authors estimated that total “medical liability system costs” in the U.S. during 2008 were $55.6 billion or about 2.4% of total healthcare spending.[117] These figures have been uncritically cited by Reuters,[118] Bloomberg,[119] CBS,[120] the Chicago Tribune,[121] and U.S. News & World Report.[122]

* As of December 2011, Just Facts has been unable to find a defensible estimate for the system-wide costs of defensive medicine in the U.S.[123]


Administration and Regulations

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

  • paperwork and billing procedures required by private insurers and government programs.[124] [125]
  • government directives and reporting requirements.[126] [127]
  • mandates that require insurers to cover the cost of specific treatments and practitioners.[128]
  • mandates that prohibit insurers from charging copayments for certain classes of services and drugs.[129]
  • FDA drug and medical device approval processes.[130] [131]
  • a Medicare/Medicaid requirement that requires hospitals to provide translators for patients who don’t speak English under certain circumstances.[132] [133]
  • mandates that require insurers to pay for health conditions that existed before customers purchased insurance.[134]
  • state regulations that prohibit residents from buying health insurance in other states.[135]
  • mandates that restrict insurers from setting premiums based upon certain risk factors that drive healthcare spending.[136] [137]
  • accreditation, licensure, certification, review, and audit requirements for healthcare facilities and professionals.[138] [139] [140] [141]

* 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.[142] 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.[143]
  • “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.”[144]
  • “Many forms … must be completed daily by clinical staff to submit to the government to justify the care provided to skilled nursing facility patients.”[145]
  • 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.[146]
  • “A Medicare patient arriving at the emergency department is required to review and sign eight different forms—just for Medicare alone.”[147]
  • “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.”[148]
  • In addition to regulation by state and local agencies and private accrediting organizations, hospitals are regulated by nearly 30 federal agencies.[149]

Government Programs

Mandatory Spending

* During 2013, federal, state, and local governments in the U.S. spent $1.2 trillion on healthcare. This amounts to 7.3% of the U.S. gross domestic product, 22% of government current expenditures, and $9,953 for every household in the U.S.[150] [151]

* Relative to other types of government spending in 2013, healthcare spending was:

  • 9% lower than spending for income security (such as Social Security, unemployment, and cash welfare).
  • 47% higher than spending for education.
  • 61% higher than spending for national defense.
  • 3.5 times higher than spending for public order and safety (including law enforcement, courts, prisons, fire protection, and immigration enforcement).[152]

* Mandatory programs are those that can spend taxpayer money without Congress passing annual spending bills. 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.[153] [154]

* In 2014, 27% of all federal government spending (except interest on the national debt) and 29% of all federal revenues were spent on mandatory healthcare programs.[155]

* Under the federal government’s current policies,[156] [157] the Congressional Budget Office estimates that the share of federal revenues spent on mandatory healthcare programs will increase from 5% in 1970 and 16% in 2000—to 41% in 2030, 60% in 2015, and 77% in 2090:

Mandatory Federal Healthcare Spending Under Current Policies

[158]

* Data from the graph above:

Year

Portion of
Federal Revenues

Portion of Federal Spending
Except Interest on the Debt

1970

5%

5%

1980

9%

9%

1990

14%

14%

2000

16%

21%

2010

35%

24%

2020

34%

31%

2030

41%

34%

2040

48%

36%

2050

54%

40%

2060

60%

43%

2070

65%

45%

2080

72%

48%

2090

77%

50%


Medicare

* 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.[159] [160]

* In 2013, Medicare provided health insurance for almost all Americans aged 65 and over (roughly 43 million people) and about nine million permanently disabled individuals under the age of 65.[161] In total, these Medicare enrollees represent about 16% of the U.S. population.[162]

* Medicare provides coverage for:

  • hospital inpatient services, skilled nursing facility care (not custodial care[163]), 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.[164] [165] [166]

* In 2011 (latest available data), Medicare covered 65% of healthcare expenses for traditional Medicare beneficiaries not living in institutions such as nursing homes. The remainder of beneficiaries’ healthcare expenses were paid by private supplemental insurance (15%), direct out-of-pocket spending (13%), and other government programs such as Medicaid and the Department of Veterans Affairs (6%).[167] [168]

* In 2014, Medicare spent about $613 billion.[169] This amounts to 15% of all federal expenditures and 18% of all federal revenues.[170]

* Medicare expenditures in 2014 were funded by:

Portion[171]

Source

Source

41%

General revenues[172]

Federal income, corporate, excise, and other taxes.[173] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[174]

37%

Payroll taxes

A 2.9% payroll tax on all workers’ wages and another 0.9% payroll tax (imposed by Obamacare) on wages above $200,000 for singles and $250,000 for couples.[175] [176] [177]

13%

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.[178] [179][180]

4%

Trust fund redemptions[181]

Primarily Medicare payroll taxes that were previously loaned to the general fund of the U.S. Treasury.[182] [183]

3%

Taxes on Social Security benefits

Taxes paid by Social Security beneficiaries whose incomes exceed certain thresholds.[184]

1%

Transfers

State governments.[185]

1%

Miscellaneous

Fines, penalties, and gifts.[186]

* In 2013, Medicare payment rates for inpatient hospital services were 63% of private health insurance payment rates,[187] and Medicare paid hospitals an average of 12% below their costs of caring for Medicare patients.[188]

* People who are aged 20-64 are known as the “primary working-age population.”[189] When Medicare began funding healthcare for seniors in 1966, there were 5.5 Americans in their primary working years for every American aged 65 or older. By 2014, this ratio had declined by 24%. As the baby-boom generation matures and projected life expectancy increases,[190] the Social Security Administration projects that this ratio will decline by 36% by 2020 and 50% by 2030:

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

[191]

* When Medicare was established in 1965, the period life expectancy for 65-year-old Americans was 12.9 years for males and 16.3 years for females. By 2014, these figures had risen to 18.1 years for males and 20.6 years for females. This amounts to a 40% increase in the time spent collecting Medicare benefits for males and a 26% increase for females.[192] As these life expectancies have increased, the age at which people become eligible for Medicare has not increased.[193]

* According to Social Security Administration projections, by 2030 the period life expectancy for 65-year-old Americans will rise to 19.5 years for males and 21.7 years for females. This would amount to a 51% increase in the time spent collecting Medicare benefits for males and a 33% increase for females.[194]

* The 2015 Medicare Trustees Report projects the future finances of the Medicare program based upon high, low, and intermediate-cost assumptions.[195] Per the intermediate assumptions, the Medicare program faces a $27.6 trillion ($27,600,000,000,000) actuarial deficit over the next 75 years (in 2015 dollars). The report states that the resources needed to cover this deficit “would be in addition to the payroll taxes, benefit taxes, and premium payments.”[196]

* This actuarial deficit approximates how much money must be immediately added to the Medicare program to cover the projected shortfall between the program’s dedicated funding sources and its costs for the next 75 years.[197] It is equivalent to 45 times the total spending for Medicare in 2014.[198]

* The Medicare Trustees have stated that measures 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.”[199] [200]

* 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).[201] This amounts to $28.5 trillion or an additional $110,555 from every U.S. resident aged 15 or older.[202] [203] [204] This measure approximates the method by which publicly traded companies are required by law to report the finances of their pension and retirement plans.[205] [206] [207] [208]

* The annual Medicare Trustees Report makes financial projections based primarily on current law.[209] Per the 2015 report:

  • Medicare projections “could be substantially understated as a result of other potentially unsustainable elements of current law.”
  • Medicare’s payments are “not expected to keep up with underlying physician costs, resulting in a large and growing problem over the long range.”
  • Because of cuts in the 2010 Affordable Care Act (i.e., Obamacare), “the prices paid by Medicare for most health services will fall increasingly short of the cost of providing such services. If this issue is not addressed by subsequent legislation, it is likely that access to, and quality of, physicians’ services would deteriorate over time for beneficiaries.” Overriding these cuts “would lead to substantially higher costs for Medicare in the long range than those projected in this report.”[210]

* In 2015, U.S. Centers for Medicare and Medicaid Services published an alternative projection to estimate the potential costs of Medicare given the practical realities listed above.[211] Per this estimate, actual Medicare costs will exceed the costs shown in the Trustees Report by 3% per year by 2030, 9% per year by 2040, 20% per year by 2060, and 30% per year by 2080.[212]

* In 2015, 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 30% higher under the alternative projection than it is under current law.[213]


Medicaid

* The Medicaid program was founded in 1965 to pay for healthcare services for “certain low-income persons in the United States and its Territories.”[214] [215]

* In 2013, about 72.5 million people in the U.S. and its territories received Medicaid benefits at some point in the year. This represents about 23% of the population.[216] [217]

* In 2013, an average of 58.9 million people in the U.S. were enrolled in Medicaid during the entire year. This represents about 19% of the U.S. population.[218] [219]

* In 2013, Medicaid enrollment and spending was divided as follows:

Category

Portion of

Beneficiaries

Cost Per Full-Year

Enrollee

Portion of

Medicaid Spending

Children

48%

$2,807

20%

Adults

25%

$4,931

16%

Disabled

17%

$17,352

44%

Aged

9%

$15,483

20%

[220]

* In 2013, an average of one million people in five U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) were enrolled in Medicaid over the course of the entire year.[221] This represents about 22% of their population.[222] [223]

* 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.[224] [225]

* 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.[226]

* Starting in 2014, the 2010 Affordable Care Act (a.k.a. Obamacare) required all states to provide Medicaid coverage for all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines, without regard for any assets they have.[227] [228] In 2016, 138% of the federal poverty guideline was $33,534 for a family of four.[229]

* A provision of Obamacare stripped all federal Medicaid funds from any state that refused to comply with this expansion of Medicaid.[230]

* 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.[231]

* As of January 2016, 30 states and the District of Columbia have expanded Medicaid in accord with Obamacare. In these states, all adults under the age of 65 in families with 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.[232]

* Among the 20 states that have not expanded Medicaid in accord with Obamacare:

  • 19 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 42% of federal poverty guidelines.[233]

* In 2013, 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.[234]

* 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. 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 found that the Medicaid recipients 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.”[235] [236] [237]

* The U.S. Department of Health and Human Services projects that the Affordable Care Act will increase Medicaid enrollment above previous estimates by about 20 million people by 2019.[238] [239]

* Federal actuaries project that the portion of the U.S. population receiving Medicaid benefits for the entire year will increase from 2% in 1966 to 23% in 2023:

Portion of Population Receiving Medicaid Benefits

[240]

* 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.”[241]

* 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.[242] [243]

* 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 services for Medicaid enrollees.[244]

* 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.[245]

* Medicaid expenditures are funded by federal and state general revenues.[246] Federal general revenues are comprised of income, corporate, excise, and other taxes.[247] [248] In total, these taxes are progressive so that higher-income households pay higher effective tax rates.[249]

* 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.[250]

* 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.[251] [252] [253]

* Due to various “stimulus” bills and the Affordable Care Act, the share of Medicaid spending paid by the federal government (versus the states) has risen from 57% in 2005 through 2008—to 65% in 2009, 67% in 2010, 63% in 2011, 58% in 2013, and 60% in 2014. Medicare’s actuaries estimate that this rate will remain around 60% through 2023.[254] [255]

* In 2014, Medicaid spent about $487 billion. This amounts to:

  • 8% of all federal, state, and local government spending combined.
  • 10% of all federal, state, and local government revenues combined.[256]

* 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 (1) placing the patient’s health in serious jeopardy, (2) serious impairment to bodily functions, or (3) serious dysfunction of any body part or organ.” This does not include organ transplants but does include pregnancy-related treatment, such as prenatal care, childbirths, and postpartum care.[257] [258]

* In 2009, 74% of all babies delivered at Parkland Memorial Hospital in Dallas, Texas were born to women who were noncitizens.[259]

* In 2010, Medicaid paid for 48% of all childbirths in the U.S.[260]

* In 2013, Medicaid paid for:

  • 15% of all healthcare spending in the U.S.
  • 7% of all dental spending
  • 8% of all spending on drugs
  • 8% of all spending on physicians and clinics
  • 18% of all hospital spending
  • 30% of all nursing home spending
  • 36% all home health spending.[261] [262]

* Depending upon the state of residence, as of 2016, Medicaid will pay 100% of nursing home costs for individuals who have up to:

  • $828,000 in home equity (or unlimited equity if a spouse or dependent relative lives in the home),
  • one car (regardless of value),
  • $119,220 in other financial assets, and
  • $35,766 per year in personal income (or unlimited spousal income).[263]

* In 2013, Medicaid paid hospitals an average of 10% below their costs of caring for Medicaid patients.[264]

* In 2013, Medicaid payment rates for inpatient hospital services were 61% of private health insurance payment rates.[265]

* In 2015, Medicaid payment rates for physician services were roughly 58% of private health insurance payment rates.[266]

* Per the 2011 Medicare Trustees Report, low Medicaid payment rates for healthcare services “have already led to access problems for Medicaid enrollees.”[267] [268]

* 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….”[269]

* 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.”[270]

* To facilitate its Medicaid expansion, in 2013 and 2014 Obamacare temporarily increased Medicaid payment rates for physician services from 58% of private health insurance levels to around the same level paid by Medicare (73% in 2013 and to 77% in 2014).[271]

* In 2013, 69% of primary care physicians accepted new Medicaid patients, as compared to 84% for new Medicare patients and 85% for new privately insured patients.[272]


CHIP

* The Children’s Health Insurance Program (CHIP) was established via federal law in 1997 to help states provide health insurance to uninsured, low-income children living in families with income above Medicaid eligibility limits.[273]

* Like Medicaid, the federal and state governments share in the cost for CHIP, and states have latitude in setting eligibility criteria and deciding which healthcare services to cover. Depending upon the state, the federal government paid between 65% to 82% of CHIP costs in 2015.[274] [275]

* 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%.[276]

* 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.[277] In 2016, 200% of the federal poverty level for a family of four was $48,600.[278]

* In 2014, states had income eligibility limits for CHIP ranging from 175% of the federal poverty level ($41,737 for a family of four) in North Dakota to 405% of the federal poverty level ($96,592 for a family of four) in New York. [279] [280]

* In 2015, the median income eligibility limit for CHIP was 255% of the federal poverty level or $61,837 for a family of four.[281] [282]

* Since 2014, Obamacare has mandated that families can have unlimited financial assets and still be eligible for CHIP.[283] [284]

* All sources of household income are not counted when determining eligibility for CHIP. For example, Pennsylvania states the following in its list of frequently asked questions about CHIP:

I live with my boyfriend - do I have to include his income?
 
[E]ven though you report income for your boyfriend, it would not be used to determine if your child is eligible, unless your boyfriend is the father of your child. …
 
My baby and I live with my parents - do I have to include my parent’s income?
 
[Y]our 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.[285] [286]

* In 2014, 8.1 million children were enrolled in CHIP during some point in the year.[287] [288]

* Laws passed in 2009 and 2010 reauthorize and increase CHIP funding for the years through 2015.[289] The 2009 law also made legal immigrants immediately eligible for CHIP, overriding a previous requirement of a five-year waiting period.[290]

* The original CHIP legislation appropriated between $3.1 billion and $5.0 billion of federal funding per year during 1998-2007.[291] [292]

* The Children’s Health Insurance Program Reauthorization Act of 2009 appropriated $10.6 billion of federal funding for CHIP in 2009, $12.5 billion in 2010, $13.5 billion in 2011, and $15.0 billion in 2012.[293] [294] [295] [296]


* In 2013, the federal government appropriated $17.4 billion for CHIP.[297] Under the Affordable Care Act, federal funding for increased to $19.1 billion 2014 and $21.1 billion in 2015.[298]

Politics

1990s

* Medicare payroll taxes (which amount to 2.9% of workers’ wages[299] [300]) 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.[301] [302] That year, Congress and Democratic President Bill Clinton passed a law that removed the threshold, thus making all earnings subject to Medicare payroll taxes.[303] The bill passed with 85% of Democrats voting for it and 100% of Republicans voting against it.[304]

* 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).[305] [306] This threshold is not indexed for inflation or wage growth.[307]

* In 1997, Congress and President Clinton passed a law that created the Children’s Health Insurance Program (CHIP). The legislation appropriated between $3.1 billion and $5.0 billion per year for the program during 1998-2007.[308] [309] The bill passed with 84% of Republicans and 78% of Democrats voting for it.[310]


2000s

* In 2003, Congress and Republican President George W. Bush passed a law adding a prescription drug benefit to the Medicare program.[311] [312] The bill passed with 88% of Republicans voting for it and 89% of Democrats voting against it.[313] The Congressional Budget Office (CBO) estimated it would add $395 billion to the deficit over the following ten years.[314]

* The Democratic Congressional Campaign Committee later described the Republican-passed Medicare prescription drug benefit as “costly.”[315] When this bill was being debated, 86% of House Democrats voted for a competing plan that the CBO estimated would add $969 billion to the deficit over the following ten years, or 2.4 times more than the Republican plan.[316] [317]

* In 2009, Congress and Democratic President Barack Obama passed a law that:

  • appropriated $10.6 billion of federal funding for CHIP in 2009, $12.5 billion in 2010, $13.5 billion in 2011, and $15.0 billion in 2012.[318] [319] [320]
  • made legal immigrants immediately eligible for CHIP, overriding a previous requirement of a five-year waiting period.[321]
  • financially incentivized states to eliminate or streamline asset tests for CHIP eligibility.[322] [323]
  • increased taxes on tobacco products.[324]

* The bill passed Congress with 99% of Democrats voting for it and 77% of Republicans voting against it.[325]


2010 Affordable Care Act

* In 2010, the 111th Congress and President Obama passed two laws that are collectively known as the Affordable Care Act (ACA). Formally, these bills are called the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act. Informally, these bills are called Obamacare. The bills were passed separately for the political/procedural reasons detailed in these footnotes.[326] [327]

* These bills passed Congress with 79-89% of Democrats voting for them and 100% of Republicans voting against them.[328] [329] Together, the bills contain 1,935 pages.[330] [331]

* The Affordable Act (ACA):

  • expands Medicaid eligibility to all individuals under the age of 65 in families with incomes below 138% of federal poverty guidelines (for example, a family of four with income below $33,534 in 2016) without regard for any assets they have. This expansion, along with other measures in the act, are projected by the U.S. Department of Health and Human Services to increase Medicaid enrollment above previous estimates by about 11.6 million people in 2014 and 20 million people by 2019. This provision became effective in 2014.[332] [333] [334]
  • temporarily raises Medicaid payment rates for physician services from 58% of private health insurance payment rates to 73% in 2013 and 77% in 2014. In 2015, Obamacare reduces Medicaid payment back to 58% of private health insurance payment rates.[335] [336]
  • cuts Medicaid payment rates for inpatient hospital services in accord with the Medicare cuts detailed in the next bullet point.
  • incrementally cuts Medicare prices “for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services” over the next 75 years to “less than half of their level under the prior law.” The U.S. Centers for Medicare and Medicaid Services projects that by 2085, Medicare payment rates for inpatient hospital services will be roughly 33% of private health insurance payment rates. The Medicare Trustees Report explains that these cuts will likely cause “withdrawal of providers from the Medicare market” and “severe problems with beneficiary access to care….”[337] [338]
  • establishes a board of 15 Senate-confirmed Presidential appointees that is required to limit Medicare spending for years in which the Medicare chief actuary projects that the program will not meet its cost-savings targets.[339] [340] This board is called the “Independent Payment Advisory Board” (IPAB),[341] and the law states that:
    • the board’s proposals automatically acquire the force of law unless Congress passes bills to override these proposals, and the president signs the bills.[342] [343] 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.[344]
    • the board can function with only one of its 15 seats filled,[345] and if the board does not submit a proposal by the required deadline, the Secretary of Health and Human Services (a presidential appointee[346]) has the power to submit a proposal in its place.[347]
    • 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.[348]
    • the President has the power to remove board members for “neglect of duty or malfeasance in office, but for no other cause.”[349]
    • the board cannot “ration health care,”[350] [351] [352] 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.[353] [354]
  • expands funding for the Children’s Health Insurance Program by $29 billion dollars over 2012-2015.[355]
  • 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, $80,640 for a family of three in 2016, $97,200 for a family of four, and $113,760 for a family of five).[356] [357] [358] Regarding this:
    • The U.S. Department of Health and Human Services projects that 25 million people will be receiving these subsidies by 2019.[359]
    • Subsidy levels are based upon income, and in 2014, the average subsidy per enrollee was $2,890.[360]
    • 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.”[361]
  • subsidizes certain health insurance plans for businesses with 25 or less full-time-equivalent employees who earn an average of less than $50,000 per year in 2014 (indexed for inflation thereafter).[362] [363] These subsidies take the form of a tax credit, which cost $541 million in 2014.[364] 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.”[365]
  • 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 began in 2014.[366] [367] [368] [369]
  • requires most Americans to carry some form of health insurance or pay a monthly fine. The maximum fine increases over time, and in 2016, it was $2,484 for individuals and $12,420 for families with three or more children. People who are exempt from this fine include:
    • illegal immigrants.
    • people with low incomes.
    • members of Indian tribes.
    • members of healthcare sharing ministries.[370] [371] [372] [373] [374]
  • requires health insurers to enroll all applicants regardless of their preexisting conditions and to charge them the same rates as healthy individuals 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.[375] [376] Per a 2016 report by the Blue Cross Blue Shield (BCBS) Association:
    • “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.”[377]
  • 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]
  • gives presidential appointees, such as the Secretary of Health and Human Services,[381] at least 40 regulatory powers that have the force of law.[382] [383] 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.”[384] [385] [386]
    • mandate the types of benefits that health plans must cover.[387] [388]
    • mandate “mechanisms to improve health care quality” that health care providers must implement in order to receive payments through qualified health plans.[389]
    • define what constitutes “unreasonable increases in premiums for health insurance coverage” and “establish a process for the annual review” of such increases.[390] [391]
    • “develop and impose appropriate penalties” on health insurers companies for non-compliance with certain provisions of the act.[392]
    • waive various provisions of the law.[393]
  • 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.[394]
  • imposes or increases 10 types of taxes, fees, and penalties (not including the fines described above for not having or providing health insurance). Congress’s Joint Committee on Taxation projects that these provisions will increase tax collections by $361 billion during 2010-2019.[395] The largest of these are:
    • a 3.8% tax on investments (such as interest, dividends, and rent) imposed on singles with income above $200,00 and couples with income above $250,000. This began in 2013.[396] [397]
    • an added 0.9% Medicare payroll tax on earnings above $200,00 for singles and $250,00 for couples. This began in 2013.[398] [399]
    • a 40% tax imposed on high-cost health insurance plans. This begins in 2018.[400]
    • an annual fee imposed on health insurance providers. This began in 2014.[401]
    • an annual fee imposed on manufacturers and importers of pharmaceuticals. This began in 2010.[402]
    • a 2.3% tax imposed on manufacturers and importers of certain medical devices. This began in 2013.[403]
  • eliminates or reduces 6 types of targeted tax deductions and credits starting in 2010 through 2013. The Joint Committee on Taxation projects that these provisions will increase tax collections by $62 billion during 2010-2019.[404]
  • 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.[405]

* 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.[406] Examples of rejected amendments include:

  • making health insurance tax-deductible for individuals (like it is for businesses) and making other healthcare expenses tax deductible.[407]
  • repealing the Independent Payment Advisory Board.[408]
  • requiring recipients of federally funded healthcare benefits to demonstrate their identity and citizenship.[409]
  • repealing the mandate that forces people to purchase health insurance or to pay a fine.[410]
  • allowing consumers to purchase health insurance across state lines.[411]
  • a provision that states, “Nothing in this Act shall be construed to prevent or limit individuals from keeping their current health coverage.”[412]

* During the 2008 presidential election campaign, Barack Obama promised at least nine times that his healthcare plan would save families an average of $2,500 per year on insurance premiums.[413] For example, he stated:

I also have a healthcare plan that would save the average family $2,500 on their premiums.[414]
We’ll work with your employer to lower your premiums by $2,500 per family per year.[415]

* Between 2010 (when the Affordable Care Act passed) and 2015, the average cost of employer-provided health insurance increased by 17% above the rate of inflation. Between 2005 and 2010, the average cost of employer-provided health insurance increased by 15% above the rate of inflation.[416]


* 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.[417] 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.[418]

* 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.[419] [420] [421]

* Some of the people who lost their health insurance were eligible to purchase federally-subsidized insurance through the Obamacare exchanges.[422]

* 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.”[423]

* Some of the people who lost their health insurance because of Obamacare were eligible to enroll in Medicaid.[424]

* Per the 2011 Medicare Trustees Report, low Medicaid payment rates for healthcare services cause “access problems for Medicaid enrollees.”[425] [426]

* 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….”[427]

* Per data from Congress’s Joint Committee on Taxation and the U.S. Centers for Medicare and Medicaid Services, the following changes in federal spending and revenues are projected to occur during 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.[428]

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

[429]

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

[430] [431]

* The totals above net to a $141 billion improvement in the federal government’s finances over 2010-2019.[432] This assumes Congress and the President don’t override the Medicare cuts, as they have done with Medicare cuts required under a 1997 law.[433] [434] [435] This improvement in federal finances also assumes the CLASS Act is operational.

* The CLASS Act is a long-term care insurance program that was championed by Democratic Senator Ted Kennedy and included in the Affordable Care Act.[436] The program is voluntary and financed by participant premiums, not federal subsidies.[437]

* 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.[438]

* 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.[439] [440]

* 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.[441] [442]

* 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.[443]

* 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.[444] [445] [446]

Media

Health Insurance Profits

* From 2007 through 2013, the annual portion of total private health insurance company revenues paid out in healthcare benefits for customers ranged from 86.5% to 88.0%.[447] [448] 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.[449] [450] [451]

* 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 margin 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%

[452] [453] [454]

* EBITDA or “earnings before interest, taxes, depreciation and amortization,” is “an important standard measure” of company and industry profitability.[455] [456]

* During 1995–2014, 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 over the same period, EBITDA margins were as follows:

Industry

EBITDA Margin

Auto Parts & Equipment

8%

Automobile Manufacturers

13%

Retail Apparel

13%

Advertising

14%

Information Technology

20%

Brewers

22%

Publishing

23%

Movies & Entertainment

25%

Health Care Equipment

30%

Pharmaceuticals

31%

Telecom Services

33%

Systems Software

39%

[457] [458]

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

There is no business in America that makes more money than the insurance industry.[459]

* 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.[460] [461]

* From 1995 through 2014, the following industries (and others) in the S&P 500 had continually higher EBITDA margins than the health insurance/managed care industry: Movies & Entertainment, Systems Software, and Information Technology:

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

[462] [463]

* 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.[464]

* In January 2012 (earlier data not available), health insurance companies had a 4.5% quarterly net profit margin, as compared to 6.9% for electric utilities, 8.2% for gas utilities, and 12.0% for water utilities.[465]

* EBITDA margins for utilities are not available.[466]

* 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.[467]

* In January 2012 (earlier data not available) health insurance companies had a 4.5% quarterly net profit margin, as compared to 2.9% for major auto manufacturers, 5.9% for auto parts, 9.9% for restaurants, 20.3% for beverage brewers, and 23.2% for application software.[468]

* In 2010, the average EBITDA margin for health insurance/managed care companies in the S&P 500 was 37% lower 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

[469] [470]

* In May 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.[471]

* In January 2012 (earlier data not available), health insurance companies had a 4.5% quarterly net profit margin, as compared to 2.9% for the New York Times Company,[472] 5.2% for music & video stores, 9.7% for toys & games, 14.0% for wireless communications, and 53.1% for periodical publishers.[473]

* In 2011, the average EBITDA margin for health insurance/managed care companies in the S&P 500 was 31% 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

[474] [475]


Uninsured Americans

* In September 2011:

  • American Medical News (a publication of the American Medical Association), published an article by Doug Trapp stating:
The number of uninsured Americans grew by nearly 1 million between 2009 and 2010 to reach 49.9 million.[476]
  • 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.[477]
  • the New Jersey Star Ledger published an article stating:
The number of uninsured Americans grew by nearly 1 million between 2009 and 2010 to reach 49.9 million.[478]
  • 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.[479]

* 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% had annual household income above $50,000,
  • 19% had annual household income above $75,000,[480] and
  • “underreporting of health insurance coverage appears to be a larger problem” in this survey “than in other national surveys that ask about insurance.”[481]

* A study that cross-checked respondents from the above-referenced survey with data from the Centers for Medicare and Medicaid Services found that in 2005, about 18% of the “uninsured” in this survey actually had insurance through Medicaid.[482] [483]

Footnotes

[1] Calculated with data from:

a) Dataset: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

b) “CPI Detailed Report Data for December 2015.” U.S. Department of Labor, Bureau of Labor Statistics, January 27, 2016. <www.bls.gov>

“Table 24. Historical Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, all items (1982-84=100, unless otherwise noted)”

c) Table 1.1.5: “Gross Domestic Product.” United States Department of Commerce, Bureau of Economic Analysis, February 26, 2016. <www.bea.gov>

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 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

b) Dataset: “Consumer Price Index, All Urban Consumers (CPI-U), U.S. City Average, All items.” U.S. Department of Labor, Bureau of Labor Statistics. Accessed August 18, 2015 at <data.bls.gov>

c) Table 1.1.5: “Gross Domestic Product.” United States Department of Commerce, Bureau of Economic Analysis, July 20, 2015. <www.bea.gov>

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] “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: 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] 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.

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

“$127.00 in 1980 has the same buying power as $367.80 in 2015”

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

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

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

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

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

[10] “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed October 31, 2011 at <www.bls.gov>

“$270 in 1988 has the same buying power as $544.65 in 2015”

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

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

[12] “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed October 31, 2011 at <www.bls.gov>

“$748 in 2002 has the same buying power as $992.22 in 2015”

[13] Calculated with data from:

a) Webpage: “Annual Ohio Hospital Price Disclosure Reports.” Ohio Department of Health. Updated May 24, 2013. <www.odh.ohio.gov>

b) Webpage: “Data Transparency: Educating policymakers.” Health Policy Institute of Ohio. Updated June 5, 2015. <www.healthpolicyohio.org>

Ohio Hospital Price Disclosure Reports

In compliance with state law, each Ohio hospital provides a price list containing its charges for room and board, emergency department, operating room, delivery, physical therapy as well as the 60 most common inpatient procedures (called diagnosis-related groups) and 50 most common outpatient procedures.

NOTE: Just Facts used a random number generator (<www.randomizer.org>) to select 15 of the 200 hospitals listed on this webpage. We found price lists for 12 of these 15 hospitals. Several hospitals had their price lists located in obscure locations on their websites.

Hospital

Price

Type of Room

Mercy Willard Hospital

N/A

Mount Carmel St. Ann’s

$1,994

Routine care

Mercy St. Anne Hospital

N/A

Trumbull Memorial Hospital

$1,269

Medical/surgical (semi-private)

Bay Park Community Hospital

$2,848

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

Upper Valley Medical Center

$2,442

Surgical/rehab (no option for routine care or semi-private)

Parma Community General Hospital

$1,108

Routine care (multiple patient room)

Fairview Hospital

N/A

University Hospitals Rainbow Babies & Children’s Hospital

$3,165

Medical/surgical/CF (semi-private)

Springfield Regional Medical Center

$900

Routine care

Grady Memorial Hospital

$1,528

Medical/surgical

Fisher-Titus Medical Center

$887

Routine care (private room)

Greene Memorial Hospital

$1,695

Routine care (semi-private)

The Toledo Hospital

$2,848

Medical/surgical (semi-private)

Southern Ohio Medical Center

$1,182

General medical surgical

Average

$1,822

Median

$1,612

[14] Calculated with the dataset: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

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

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

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

[16] “CPI Inflation Calculator.” Bureau of Labor Statistics. Accessed August 19, 2015 at <www.bls.gov>

“$1,000 in 1974 has the same buying power as $4,841 in 2015”

“$1,000 in 1982 has the same buying power as $2,473 in 2015.”

CALCULATION (to obtain an average of the figures above): ($4,841 + $2,473)/2 = $3,657

[17] 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-eprcent coinsurance plans (Table 3).

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

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

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

[19] 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).

[20] 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. <www.naic.org>

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.

[21] Publication 502: “Medical and Dental Expenses.” U.S. Internal Revenue Service, 2010. <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 7.5% of your AGI (Form 1040, line 38).

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

Example.

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

[22] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, January 31, 2013. <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.”

Page 1: “Medicare serves approximately one in six Americans and virtually all of the population aged 65 and over. In 2013, the program will cover an estimated 52 million persons (43 million aged and 9 million disabled).”

Page 5: “Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Persons under age 65 who receive cash disability benefits from Social Security or the Railroad Retirement systems for at least 24 months are also entitled to Part A.”

[23] Dataset: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

“Population (Millions) … 2013 [=] 316”

CALCULATION: (43,000,000 aged people + 9,000,000 million disabled people) / 316,000,000  population = 16%

[24] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Summary:

In existence for 45 years, Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care….

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

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

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

[25] “2014 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, June 2015. <www.medicaid.gov>

Page 16: “Enrollment is measured in two ways: (i) ‘person-year equivalents’ (PYE), or the average enrollment over the course of a year, and (ii) ‘ever-enrolled’ persons, or the number of people covered by Medicaid for any period of time during the year. In 2013, Medicaid enrollment was estimated to be 58.9 million PYE (including enrollment in the U.S. territories). An estimated 72.5 million people, or slightly more than one in five in the U.S. or U.S. Territories, were ever-enrolled.”

[26] Dataset: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

“Population (Millions) … 2013 [=] 316”

CALCULATION: 72,500,000 people / 316,000,000  population = 23%

[27] 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. <hpac.dasa.ncsu.edu>

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.”

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

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

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

[29] Dataset: “FY 2013 Number Of Children Ever Enrolled In Medicaid And Chip.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, September 24, 2014. <www.medicaid.gov>

“CHIP … Totals … FY 2013 [=] 8,093,927”

[30] Dataset: “National Health Expenditures by Type of Service and Source of Funds, Calendar Years 1960-2014.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, November 5, 2015. <www.cms.gov>

“Population (Millions) … 2013 [=] 316”

CALCULATION: 8,093,927 people / 316,000,000  population = 2.6%

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

† Report: “The Long-Term Budget Outlook.” Congressional Budget Office, June 2010 (Revised August 2010). <www.cbo.gov>

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

‡ 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].

[32] 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 (or, in certain instances, by growth in income) and would normally increase more slowly than health care costs.”

[33] Report: “The Cost of the Individual Mandate Penalty for the Remaining Uninsured.” Kaiser Family Foundation, December 9, 2015. <kff.org>

[34] Article: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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, 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. ...

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.

[35] 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 (in 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)).

[36] Some examples of healthcare sharing ministries include:

Full disclosure: Some Just Facts employees are members of Christian Healthcare Ministries.

[37] “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).22 … 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.

[38] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $24,300 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $24,300 × 138% = $33,534

[39] 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 (in 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.

[40] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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

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

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

[42] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 3 … 48 Contiguous States and the District Of Columbia [=] $20,160 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $20,160 × 400% = $80,640

“2016 Poverty Guidelines … Persons in family/household [=] 5 … 48 Contiguous States and the District Of Columbia [=] $28,440 … … Alaska [=] $35,560 … Hawaii [=] $32,710”

CALCULATION: $28,440 × 400% = $113,760

[43] 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 credits after that date and their carryback.

[44] Webpage: “Small Business Health Care Tax Credit and the SHOP Marketplace.” Internal Revenue Service, January 6, 2016. <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 an average wage of less than $50,000 a year

• pay at least half of employee health insurance premiums

To be eligible for this credit, you must have purchased coverage through the small business health options program, also known as the SHOP marketplace.

For information about insurance plans offered through the SHOP Marketplace, visit Healthcare.gov.

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there are changes to the credit:

• The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.

• To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement.

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

If you pay $50,000 a year toward employees’ health care premiums—and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

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.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you 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. …

Can you claim the credit?

To be eligible, you must cover at least 50 percent of the cost of employee-only (not family or dependent) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace (or qualify for an exception to this requirement) to be eligible for the credit for tax years 2014 and beyond. …

What IS an FTE? Basically, two half-time employees count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

If you pay total average annual wages of $200,000 and have 10 FTEs. To figure average annual wages you divide $200,000 by 10 — the number of FTEs — and the result is your average annual wage. The average annual wage would be $20,000.

The amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less. …

[45] 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 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.”

[46] Publication 502: “Medical and Dental Expenses.” U.S. Internal Revenue Service, 2014. <www.irs.gov>

Page 3: “Generally, 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. But if either you or your spouse was born before January 2, 1950, you can deduct the amount of your medical and dental expenses that is more than 7.5% of your AGI.”

[47] Webpage: “List of OECD Member countries - Ratification of the Convention on the OECD.” Organization for Economic Cooperation and Development. Accessed May 8, 2013 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], Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States”

[48] Book: Beyond Economic Growth: An Introduction to Sustainable Development, Second 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. According to the World Bank classification, these include all high-income economies except Hong Kong (China), Israel, Kuwait, Singapore, and the United Arab Emirates. Depending on who defines them, developed countries may also include middle-income countries with transition economies, because these countries are highly industrialized. Developed countries contain about 15 percent of the world’s population. They are also sometimes referred to as “the North.”

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.

[49] Graph constructed with data from:

a) Dataset: “Health expenditure, total (% of GDP).” World Health Organization. Accessed August 25, 2015 at <data.worldbank.org>

b) Dataset: “GDP per capita (current U.S.$).” World Bank and OECD. Accessed August 25, 2015 at <data.worldbank.org>

GDP per capita is gross domestic product divided by midyear population. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars.

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

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

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 in not included in the expenditure for Denmark nor for Sweden after 1985, but it is included in the expenditure for Finland, Iceland and Norway. Another difference is that local nursing homes are not included in the Danish statistics, whereas they were included in Finland, Iceland, Norway and Sweden before 1992…. Thus heterogeneous definitions are present even if one selects apparently similar countries such as the Nordic countries…. Taken together, these problems indicate that results obtained with international comparisons should be treated with considerable caution.

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

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>]

[51] Book: Health Economics: Theories, Insights, and Industry Studies, Fifth 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 are falls to zero, then the average individual is going to consume health care regardless of income. The income elasticity in the extreme equals zero. The country, as a whole, however, must face the entire burden of the cost of health care and, as a result, is going to be much more sensitive to price and income.

[52] 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).”

[53] Report: “Health Expenditures by Age and Gender.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, April 29, 2014. <www.cms.gov>

“Table 7. Total Personal Health Care Per-capita Spending by Gender and Age Group, Calendar Years 2002, 2004, 2006, 2008, 2010 Level (dollars)”

NOTE: This data is originally from the paper: “U.S. Health Spending Trends by Age and Gender, Selected Years 2002–10.” By David Lassman and others. Health Affairs, May 2014. <content.healthaffairs.org>

[54] 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).”

[55] Report: “CBO’s 2015 Long-Term Budget Outlook.” Congressional Budget Office, June 2015. <www.cbo.gov>

Page 21:

The retirement of members of the baby-boom generation portends a long-lasting shift in the age profile of the U.S. population—a change that will substantially alter the balance between working-age and retirement-age groups. During the next decade alone, the number of people age 65 or older is expected to rise by more than one-third, and the share of the population age 65 or older is projected to grow from the current 15 percent to 21 percent in 2040. By contrast, the share of the population between the ages of 20 and 64 is expected to drop from 59 percent to 54 percent.

Page 46: “Benefits will be a larger share of lifetime earnings for members of later generations, primarily because of the growth of health care spending per person but also because of increases in life expectancy, which will allow those people to receive benefits for longer periods, on average.”

[56] Calculated with data from Table V.A2: “Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1941-2090.” United States Social Security Administration, Office of the Chief Actuary, July 22, 2015. <www.ssa.gov>

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

[57] Paper: “The Impact of Prevention on Reducing the Burden of Cardiovascular Disease.” By Richard Kahn and others. Circulation (Journal of the American Heart Association), July 7, 2008. Pages 576-585. <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.”

[58] Paper: “The Impact of Prevention on Reducing the Burden of Cardiovascular Disease.” By Richard Kahn and others. Circulation (Journal of the American Heart Association), July 7, 2008. Pages 576-585. <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%).

[59] 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>

[60] 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 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%

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

Page 26:

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).

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.”

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>]

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

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

[63] Dataset: “S&P 500 and Healthcare Earnings Before Interest & Tax [EBIT] Margins.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on September 2, 2015.

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

[64] Webpage: “S&P 500.” Standard and Poors. Accessed August 27, 2015 at <www.spindices.com>

“The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.”

[65] 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”

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

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

[67] Dataset: “May 2014 National Occupational Employment and Wage Estimates.” U.S. Department of Labor, Bureau of Labor Statistics. Last Modified March 25, 2015. <www.bls.gov>

[68] Webpage: “Technical Notes for May 2014 OES Estimates.” U.S. Department of Labor, Bureau of Labor Statistics. Last modified March 25, 2015. <www.bls.gov>

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

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

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

Chapter 5: “Factors Affecting the Supply and Prices of Health Care Services.”

[70] “2010 Financial Report of the United States Government.” U.S. Department of the Treasury, December 21, 2010. <www.fms.treas.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

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

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

[71] 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 (General Accounting Office comments on the Social Security Administration’s letter dated May 28, 2010):

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

[72] 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.”

[73] 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.”

[74] Webpage: “Historical Improper Payment Rates for Children’s Health Insurance Program (CHIP).” Payment Accuracy (An Official Website of the United States Government). Accessed August 31, 2015 at <paymentaccuracy.gov>

“Fiscal Reporting Year [=] 2014 … Improper Amount (in Billions) [=] $0.6 … Actual Rate [=] 6.5%”

[75] Report: “Government Efficiency and Effectiveness: Opportunities to Reduce Fragmentation, Overlap, Duplication, and Improper Payments and Achieve Other Financial Benefits.” By Gene L. Dodaro. United States Government Accountability Office, March 4, 2015. <www.gao.gov>

Page 26: “Table 5: Programs with Improper Payment Estimates Exceeding $1 Billion in Fiscal Year 2014 … Medicaid … Fiscal year 2014 reported improper payment estimates … Dollars (in millions) [=] 17,492 … Error rate (percentage of outlays) [=] 6.7%”

Page 32: “In fiscal year 2014, the federal share of estimated Medicaid outlays was $304 billion, and HHS reported approximately $17.5 billion in estimated Medicaid improper payments. The size and diversity of the Medicaid program make it particularly vulnerable to improper payments—including payments made for people not eligible for Medicaid or for services not actually provided.”

[76] Calculated with data from:

a) Dataset: “Average Number of People per Household, by Race and Hispanic Origin, Marital Status, Age, and Education of Householder: 2014.” U.S. Census Bureau, January 2015. <www.census.gov>

“Total households (In Thousands) … All [=] 123,229”

b) Report: “Government Efficiency and Effectiveness: Opportunities to Reduce Fragmentation, Overlap, Duplication, and Improper Payments and Achieve Other Financial Benefits.” By Gene L. Dodaro. United States Government Accountability Office, March 4, 2015. <www.gao.gov>

Pages 25–26:

Agency improper payment estimates totaled $124.7 billion in fiscal year 2014, a significant increase ($19 billion) from the prior year’s estimate of $105.8 billion. The estimated improper payments for fiscal year 2014 were attributable to 124 programs spread among 22 agencies. Table 5 shows the 12 programs with reported improper payment estimates Table 5 shows the 12 programs with reported improper payment estimates exceeding $1 billion for fiscal year 2014, which accounted for approximately 93 percent of the government-wide estimate.

Fiscal year 2014 reported improper payment estimates

Program

Dollars

(in millions)

Error Rate

Medicare

$59,914

Medicare Fee-for-Service
(Parts A and B)

$45,754

12.7%

Medicare Advantage
(Part C)

$12,229

9.0%

Medicare Prescription Drug
(Part D)

$1,931

3.3%

Page 28:

Figure 2: Government-Wide Improper Payment Estimates by Program for Fiscal Year 2014 … 48.0% ($59.9 billion) Medicare … 14.0% ($17.5 billion) Medicaid … 14.2% ($17.7 billion) Earned Income Tax Credit … 23.7% ($29.6 billion) All other programs …

In fiscal year 2014, Medicare financed health services for approximately 54 million elderly and disabled beneficiaries at a cost of $603 billion and reported an estimated $60 billion in improper payments. Medicare spending generally has grown faster than the economy, and in the coming years, continued growth in the number of Medicare beneficiaries and in program spending will create increased challenges for the federal government.

CALCULATIONS:

$60 billion in improper Medicare payments / $603 billion in Medicare outlays = 9.9% improper payment rate

$60,000,000,000 in improper payments / 123,229,000 households = $486.90 in improper payments per household

[77] Webpage: “Prescription Painkiller Overdoses in the US.” Centers for Disease Control and Prevention, November 1, 2011. <www.cdc.gov>

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

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

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

[78] Report: “2008 Crime in the United States, Murder.” Federal Bureau of Investigation, U.S. Department of Justice, September 2009. <www2.fbi.gov>

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

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

[79] 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>

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

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

[81] Article: “Medicare Fraud: A $60 Billion Crime.” CBS News, September 5, 2010. <www.cbsnews.com>

NOTES:

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

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

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

[83] 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.

[84] “Annual Report of the New Jersey Office of Legislative Services, Office of the State Auditor, For the Calendar Year Ended December 31, 2009.” By Richard L. Fair. NJ Office of the State Auditor, February 13, 2009. <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.

[85] “2009 Financial Crimes Report.” Federal Bureau of Investigation. <www.fbi.gov>

[86] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, 2015. <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.

Page 2:

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.

• Combined underpayments were $51 billion in 2013. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid.

• For Medicare, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013.

• For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2013.

• In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[87] Article: “More states limiting Medicaid hospital stays.” By Phil Galewitz. USA Today. Updated October 31, 2011. <www.usatoday.com>

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

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

[88] 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).

[89] Report: “EMTALA: Access to Emergency Medical Care.” By Edward C. Liu. Congressional Research Service, July 1, 2010. <aging.senate.gov>

Summary:

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.

[90] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, 2015. <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 58 percent of all care provided by hospitals. Consequently, very few hospitals can elect not to participate in Medicare and Medicaid.”

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

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

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

Pages 2-3:

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

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

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].

[93] Fact sheet: “Uncompensated Hospital Care Cost.” American Hospital Association, December, 2010. <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 charity care it provides. Charity care is care for which hospitals never expected to be reimbursed. A hospital incurs bad debt when it cannot obtain reimbursement for care provided; this happens when patients are unable to pay their bills, but do not apply for charity care, or are unwilling to pay their bills.

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

[94] Report: “An Overview of Consumer Data and Credit Reporting.” By Robert B. Avery and others. United States Federal Reserve, February 2003. <www.federalreserve.gov>

Page 47:

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

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

Page 50:

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

Page 69:

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

[95] Fact sheet: “Uncompensated Hospital Care Cost.” American Hospital Association, January, 2015. <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 4: “National Uncompensated Care Based on Cost*: 1980-2009 (in Billions), Registered Community Hospitals”

Year

Hospitals

Uncompensated Care Cost

Portion of Total Expenses

2009

5008

$39.1

6.0%

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

<www.towerswatson.com>

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.”

- Towers Watson informed Just Facts that an updated study to this report has not been conducted as of September 8, 2015.

[97] 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%

[98] 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.”

[99] Dataset: “Annual Estimates of the Resident Population for Counties: April 1, 2010 to July 1, 2014.” U.S. Census Bureau. Accessed March 23, 2016 at <www.census.gov>

“Population Estimate (as of July 1) … 2012 … [Rank 1] … Los Angeles County, California [=] 9,974,868”

[100] Webpage: “California Medical Malpractice Insurance.” MyMedicalMalpracticeInsurance.com (a division of Cunningham Group). Accessed September 1, 2015 at <www.cunninghamgroupins.com>

“2012 … The Doctors Company … County … Kern, Los Angeles, Orange, Ventura Counties … OB/GYN [=] $49,804”

[101] Dataset: “Annual Estimates of the Resident Population for Counties: April 1, 2010 to July 1, 2014.” U.S. Census Bureau. Accessed March 23, 2016 at <www.census.gov>

“Population Estimate (as of July 1) … 2012 … [Rank 2] … Cook County, Illinois [=] 5,232,340”

[102] Webpage: “Illinois Medical Malpractice Insurance.” MyMedicalMalpracticeInsurance.com (a division of Cunningham Group). Accessed September 1, 2015 at <www.cunninghamgroupins.com>

“2012 … The Doctors Company … County … Cook, Madison and St. Clair Counties … OB/GYN [=] $127,748”

[103] Webpage: “California Medical Malpractice Insurance.” MyMedicalMalpracticeInsurance.com (a division of Cunningham Group). Accessed September 1, 2015 at <www.cunninghamgroupins.com>

“2012 … The Doctors Company … County … Alameda, Contra Costa, Madera, Mariposa, Merced, Monterey, San Benito, San Francisco, San Luis Obispo, San Mateo, Santa Clara and Santa Cruz Counties … OB/GYN [=] $29,635”

[104] Webpage: “Illinois Medical Malpractice Insurance.” MyMedicalMalpracticeInsurance.com (a division of Cunningham Group). Accessed September 1, 2015 at <www.cunninghamgroupins.com>

“2012 … The Doctors Company … County … Adams, Knox, Peoria and Rock Island Counties [=] $60,042”

[105] 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.

[106] Dataset: “Payments on Medical Malpractice Claims, 2010.” Statehealthfacts.org, a project of the Henry J. Kaiser Family Foundation. Accessed December 8, 2011 at <kff.org>

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

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

[107] 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

[108] “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.”

[109] 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.”

[110] 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>

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.

[111] 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:

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.

[112] 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>

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.

[113] 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

[114] 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 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.”

[115] 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%

[116] 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, For Types of Services and Goods … Hospital Care … Physician and Clinical Services … Other Professional Services … Dental Services … Other Health, Residential, and Personal Care … Home Health … Nursing Care Facilities and Continuing Care Retirement Communities … Prescription Drugs … Durable Medical Equipment … Other Non-durable Medical Products”

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

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

[117] 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 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.”

[118] 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.

[119] 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.”

[120] 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%.”

[121] 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.”

[122] 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.”

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

• 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.

† Paper: “Response Rates to Mail Surveys Published in Medical Journals.” By David A. Asch and others. Journal of Clinical Epidemiology, 1997. Pages 1129-1136. <christakis.med.harvard.edu>

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.

[124] 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.

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.

[125] 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 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 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.

[126] 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 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.

[127] 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.

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

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. Between the federal government and the states there are upwards of 2000 health insurance mandates.

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

Mandated Health Insurance 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 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.

[129] 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.

[130] Paper: “The price of innovation: new estimates of drug development costs.” By Joseph A. DiMasi and others. 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.

[131] 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.”

[132] 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 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.

[133] “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. <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 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.(4)

[134] 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.

[135] 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.

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

Page 1 (in 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.

[137] 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 (in 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.

[138] 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.

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

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.”

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

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

[141] 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 and MD’s; other states administer separate licensing exams. …

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

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

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

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

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

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.

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

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

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

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.”

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

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.”

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

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.)”

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

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

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

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.”

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

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.”

[150] Calculated with data from:

a) Dataset: “Table 3.16. Government Current Expenditures by Function.” U.S. Bureau of Economic Analysis, September 17, 2014. <www.bea.gov>

b) Dataset: “Table 3.1. Government Current Receipts and Expenditures.” U.S. Bureau of Economic Analysis, February 27, 2015. <www.bea.gov>

c) Dataset: “Table 1.1.5. Gross Domestic Product.” U.S. Bureau of Economic Analysis, January 30, 2015. <www.bea.gov>

d) Dataset: “HH-1. Households by Type: 1940 to Present.” U.S. Census Bureau, Current Population Survey, January 2015. <www.census.gov>

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

[151] 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>

“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[Φ ψ]).”

NOTES:

† Per correspondence with BEA, data for education total expenditures is unavailable, because “BEA does not produce an estimate of government total expenditures by function as defined by the national income and product accounts (NIPAs).” [Email from BEA to Just Facts, March 18, 2015.] Searches for this data through other federal agencies also proved futile.

‡ “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.” [Webpage: “FAQ: BEA seems to have several different measures of government spending. What are they for and what do they measure?” BEA, May 28, 2010. <www.bea.gov>]

§ “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.” [Report: “A Primer on BEA’s Government Accounts.” By Bruce E. Baker and Pamela A. Kelly. BEA, March 2008. <www.bea.gov>. Page 34.]

# “Interest payments. These represent the cost of borrowing by governments to finance their capital and operational costs.” [Report: “A Primer on BEA’s Government Accounts.” By Bruce E. Baker and Pamela A. Kelly. BEA, March 2008. <www.bea.gov>. Page 34.]

£ “Subsidies. These are payments to businesses, including homeowners and government enterprises at another level of government.” [Report: “A Primer on BEA’s Government Accounts.” By Bruce E. Baker and Pamela A. Kelly. BEA, March 2008. <www.bea.gov>. Page 34.]

Φ “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. This adjustment was related to the timing of wage payments due to things like pay days. Pensions benefits are captured in the national accounts on an accrual basis as the net present value of the estimated future benefits. So the estimates of consumption expenditures would include the accrual based cost of pensions.” [Email from BEA to Just Facts, March 18, 2015.]

ψ “BEA will change its recording of the transactions of defined benefit pension plans from a cash accounting basis to an accrual accounting basis as part of the comprehensive revision. … Accrual accounting is the preferred method for compiling national accounts because it matches incomes earned from production with the corresponding productive activity and records both in the same period.31 The recording of defined benefit pension plan transactions on an accrual basis will better align pension-related compensation with the timing of when employees earned the benefit entitlements and will avoid the volatility that arises if sporadic cash payments made by employers into defined benefit pension plans are used to measure compensation.32 In cases when defined benefit pension plans are underfunded or overfunded, the employers’ pension plan expenses also will be measured more accurately under the accrual approach.” [Report: “Preview of the 2013 Comprehensive Revision of the National Income and Product Accounts: Changes in Definitions and Presentations: Changes in Definitions and Presentations.” By Shelly Smith and others. BEA, March 2013. <www.bea.gov>. Pages 21-22.]

[152] Calculated with data from:

a) Table 3.16: “Government Current Expenditures by Function.” U.S. Department of Commerce, Bureau of Economic Analysis, September 17, 2014. <www.bea.gov>

b) Report: “Fiscal Year 2015 Historical Tables: Budget Of The U.S. Government.” White House Office of Management and Budget, February 26, 2014. <www.whitehouse.gov>

“Table 3.1—Outlays by Superfunction and Function: 1940–2018.”

Accessed October 24, 2014 at <www.whitehouse.gov>

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

[153] 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.”

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

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

[154] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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

[155] Calculated with: “Supplemental Data for the CBO’s 2015 Long-Term Budget Outlook.” Congressional Budget Office, June 16, 2015. <www.cbo.gov>

“Figure 1-2. Federal Debt, Spending, and Revenues”

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

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

Page 1:

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

[157] Report: “The 2015 Long-Term Budget Outlook.” Congressional Budget Office, June 16, 2015. <www.cbo.gov>

Page 4:

Under the extended alternative fiscal scenario, certain policies that are now in place but that are scheduled to change under current law are assumed to continue; some provisions of law that might be difficult to sustain for a long period are assumed to be modified; and federal revenues and certain kinds of federal spending are assumed to be maintained at or near their historical shares of GDP.

Page 85:

The extended alternative fiscal scenario incorporates these assumptions: Certain policies that have been in place for a number of years but that are scheduled to change will be continued, some provisions of law that might be difficult to sustain for a long period will be modified, and federal revenues and certain categories of federal spending measured as shares of gross domestic product will be maintained at or near their historical averages over the long term.

[158] Calculated with:

a) “Supplemental Data for the CBO’s 2015 Long-Term Budget Outlook.” Congressional Budget Office, June 16, 2015. <www.cbo.gov>

Tab 5: “Summary Data for the Extended Alternative Fiscal Scenario, Without Macroeconomic Feedback”

“Figure 1-2. Federal Debt, Spending, and Revenues”

“Figure 2-2. Federal Spending on the Major Health Care Programs, by Category”

“Figure 2-4. Medicare’s Dedicated Taxes and Offsetting Receipts as a Share of Medicare Spending”

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

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

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

[159] Report: “Medicare Primer.” By Patricia A. Davis. Congressional Research Service, July 1, 2010. <aging.senate.gov>

Page 2:

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

[160] Report: “Medicare Primer.” By Patricia A. Davis. Congressional Research Service, July 1, 2010. <aging.senate.gov>

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

[161] Report: “Medicare Primer.” By Patricia A. Davis and others. Congressional Research Service, January 31, 2013. <www.fas.org>

Summary: “In FY2013, the program will cover approximately 52 million persons (43 million aged and 9 million disabled) at a total cost of about $606 billion, accounting for approximately 3.7% of GDP.”

[162] “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2015.” U.S. Census Bureau,  December 2015. <www.census.gov>

“Resident Population… 2013 … July 1 [=] 316,427,395”

CALCULATION: 52,000,000 Medical enrollees / 316,427,395 population = 16.4%

[163] Booklet: “Medicare Coverage of Skilled Nursing Facility Care.” Centers for Medicare and Medicaid Services, September 2007. <www.medicare.gov>

Page 1:

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

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

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

[164] “2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.” United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2011. <www.cms.gov>

Page 1:

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

Pages 18-19:

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

[165] Report: “Medicare Primer.” By Patricia A. Davis. Congressional Research Service, July 1, 2010. <aging.senate.gov>

Page 1:

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

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

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

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

Page 3: “In 2003, Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173),3 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….”

Page 4:

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

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

Page 5:

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

[166] 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.

[167] Report: “Health Care Spending and the Medicare Program.” U.S. Congress, Medicare Payment Advisory Commission, June 2015. <www.medpac.gov>

Page 29:

Chart 3-3. Total Spending on health care services for noninstitutionalized FFS† Medicare beneficiaries, by source of payment, 2011

Per capita total spending = $13,935 … Medicare - 65% … Public supplements - 6% … Private supplements - 15% … Beneficiaries’ direct spending - 13% …

“Private supplements” include employer-sponsored plans and individually purchased coverage. “Public supplements” include Medicaid, Department of Veterans Affairs, and other public coverage. “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.

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>]

[168] “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 57: “About 9 million Medicare beneficiaries receive supplemental coverage through the Medicaid program; Medicaid costs for these ‘dual beneficiaries’ are not reflected in the growth rates for either Medicare or private health insurance.”

[169] “2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and “2015 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 22, 2015. <www.cms.gov>

Page 9: “Total Medicare expenditures were $613 billion in 2014.”

[170] Calculated with data from:

a) Table 3.12: “Government Social Benefits.” United States Department of Commerce, Bureau of Economic Analysis, August 6, 2015. <www.bea.gov>

“2014 … Medicare (billions $) [=] 597.8”

b) Table 3.2: “Federal Government Current Receipts and Expenditures.” United States Department of Commerce, Bureau of Economic Analysis, August 27, 2015. <www.bea.gov>

“2014 … Total receipts (billions $) [=] 3,284 … Total expenditures [=] 3,965.4.”

CALCULATIONS:

$597.8 billion Medicare expenditures / $3,965.4 billion total expenditures = 15.1%

$597.8 billion Medicare expenditures / $3,284 billion total receipts = 18.2%

[171] Calculated with data from the “2015 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 22, 2015. <www.cms.gov>

Page 11: “Table II.B1.—Medicare Data for Calendar Year 2014.”

Page 186: “Dedicated Medicare financing sources include HI [Hospital Insurance, a.k.a. Part A] payroll taxes; income from taxation of Social Security benefits; State transfers for the prescription drug benefit; premiums paid under Parts A, B, and D; fees on brand-name prescription drugs paid to Part B; fines and penalties collected as a result of program integrity efforts; and any gifts received by the Medicare trust funds.”

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

[172] “Internal Revenue Manual.” Internal Revenue Service. Accessed January 11, 2011 at <www.irs.gov>

Part 1, Chapter 34, Section 1 (<www.irs.gov>): “The main financing component of the Federal funds group is referred to as the General Fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program and consists of all collections not earmarked by law to finance other funds.”

[173] 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.”

[174] The table below shows the average federal general revenue taxes paid by various income groups in 2011:

Average Federal General Revenue Taxes (2011)

Household Income Group

Before-Tax Income

Effective Tax Rate

Taxes Per Household

Lowest 20%

$24,600

-6.4%

-$1,582

Second 20%

$45,300

-0.4%

-$175

Middle 20%

$66,400

3.5%

$2,298

Fourth 20%

$97,500

6.9%

$6,736

Highest 20%

$245,700

17.2%

$42,336

81st–90th%

$138,800

10.1%

$13,995

91st–95th%

$186,700

13.0%

$24,190

96th–99th%

$299,000

17.8%

$53,313

Top 1%

$1,453,100

26.8%

$388,737

The figures above were calculated with data from:

a) Report: “The Distribution of Household Income and Federal Taxes, 2011.” Congressional Budget Office, November 12, 2014. <www.cbo.gov>

Page 5: “For this analysis, federal taxes include individual income taxes, payroll taxes, corporate income taxes, and excise taxes, which together accounted for approximately 92 percent of all federal revenues in fiscal year 2011. Revenues from states’ deposits for unemployment insurance, estate and gift taxes, miscellaneous fees and fines, and net income earned by the Federal Reserve, which make up the remaining 8 percent, are not allocated to households in this analysis, mainly because it is uncertain to which households those revenue sources should be attributed.”

Pages 9–10: “An income quintile has a negative average income tax rate if refundable tax credits in that quintile exceed other income tax liabilities.”

Pages 32–33: “Before-tax income is market income plus government transfers. Market income consists of labor income, business income, capital gains (profits realized from the sale of assets), capital income excluding capital gains, income received in retirement for past services, and other sources of income. … Government transfers consist of the cost of two types of benefits: Cash. Payments from Social Security, unemployment insurance, Supplemental Security Income, Temporary Assistance for Needy Families (and its predecessor, Aid to Families With Dependent Children), veterans’ programs, workers’ compensation, and state and local government assistance programs. In-Kind Benefits. The cost of Supplemental Nutrition Assistance Program vouchers (popularly known as food stamps); school lunches and breakfasts; housing assistance; energy assistance; and benefits provided by Medicare, Medicaid, and the Children’s Health Insurance Program.”

b) Dataset: “The Distribution of Household Income and Federal Taxes, 2011.” Congressional Budget Office, November 12, 2014. <www.cbo.gov>

“Table 1. Average Federal Tax Rates for All Households, by Before-Tax Income Group, 1979 to 2011 (Percent)”

“Table 3. Number of Households, Average Income, and Shares of Income for All Households, by Before-Tax Income Group, 1979 to 2011. Average Before-Tax Income (2011 dollars) … 2011.”

c) 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.”

d) Report: “Fiscal Year 2013 Analytical Perspectives, Budget of the U.S. Government.” Executive Office of the President of the United States, Office of Management and Budget, 2012. <www.gpo.gov>

Page 224: “Table 15–5. Receipts by Source—Continued (In millions of dollars).”

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

[175] “2015 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 22, 2015. <www.cms.gov>

Page 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 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).”

[176] 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 and most economists, the employers’ share of payroll taxes is passed on to employees in the form of lower wages.”

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

[177] 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 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 tax on self-employment income in excess of the threshold amount. Thus, an additional tax of 0.9 percent is imposed on every self-employed individual on self-employment income in excess of the threshold amount.23 22 Sec, 3101(b), as amended by the Patient Protection and Affordable Care Act (“PPACA”), Pub. L. No. 111-148. 23 Sec.

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

23 Sec. 1402(b).

[178] “2015 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 22, 2015. <www.cms.gov>

Page 38:

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, Part B beneficiaries with high incomes have been required to pay a higher income-related premium since 2007, and Part D enrollees have been required to pay an income-related premium since 2011.

[179] Report: “Medicare Primer.” By Patricia A. Davis. Congressional Research Service, July 1, 2010. <aging.senate.gov>

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

[180] 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.

[181] 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.

[182] Report: “Medicare Primer.” By Patricia A. Davis. Congressional Research Service, July 1, 2010. <aging.senate.gov>

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

[183] “2015 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 22, 2015. <www.cms.gov>

Page 252: “For the HI [Hospital Insurance, i.e., Part A] and SMI [Supplementary Medical Insurance, i.e., Parts B and D] trust funds, monies not withdrawn for current benefit payments and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds.”

Pages 7–8: “In 2014, $8.1 billion in [Hospital Insurance, i.e., Part A] trust fund assets were redeemed to cover the shortfall of income relative to expenditures. … The SMI trust fund is adequately financed over the next 10 years and beyond because premium and general revenue income for Parts B and D are reset each year to cover expected costs and ensure a reserve for Part B contingencies.”

[184] “2015 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 22, 2015. <www.cms.gov>

Page 47: “Up to 85 percent of an individual’s or couple’s … [Social Security] benefits may be subject to Federal income taxation if their income exceeds certain thresholds.† The income tax revenue attributable to the first 50 percent of … [Social Security] benefits is allocated to the … [Social Security] trust funds. The revenue associated with the amount between 50 and 85 percent of benefits is allocated to the HI [Hospital Insurance, a.k.a. Medicare Part A] trust fund.”

NOTE: † These thresholds are exceeded if the “total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).” [Publication No. 915: “Social Security and Equivalent Railroad Retirement Benefits for Use in Preparing 2014 Returns.” United States Department of the Treasury, Internal Revenue Service, January 29, 2015. <www.irs.gov>]

[185] “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 53: “Dedicated Medicare financing sources include … State transfers for the prescription drug benefit….”

[186] “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 53: “Dedicated Medicare financing sources include … fines and penalties collected as a result of program integrity efforts; and any gifts received by the Medicare trust funds.”

[187] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <www.cms.gov>

Page 6: “For inpatient hospital services, Medicare payment rates in 2013 were about 63 percent, and Medicaid payment rates were about 61 percent, of private health insurance payment rates (including Medicaid disproportionate share hospital, or DSH, payments).11

[188] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, 2015. <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.

Page 2:

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.

• Combined underpayments were $51 billion in 2013. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid.

• For Medicare, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013.

• For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2013.

• In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[189] 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>

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

[190] Report: “CBO’s 2015 Long-Term Budget Outlook.” Congressional Budget Office, June 2015. <www.cbo.gov>

Page 21:

The retirement of members of the baby-boom generation portends a long-lasting shift in the age profile of the U.S. population—a change that will substantially alter the balance between working-age and retirement-age groups. During the next decade alone, the number of people age 65 or older is expected to rise by more than one-third, and the share of the population age 65 or older is projected to grow from the current 15 percent to 21 percent in 2040. By contrast, the share of the population between the ages of 20 and 64 is expected to drop from 59 percent to 54 percent.

[191] Calculated with data from Table V.A2: “Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1941-2090.” United States Social Security Administration, Office of the Chief Actuary, July 22, 2015. <www.ssa.gov>

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

[192] Table V.A3: “Period Life Expectancy.” United States Social Security Administration, Office of the Chief Actuary, July 22, 2015. <www.ssa.gov>

“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.”

NOTE: Data from 2014 is estimated but is within 0.4 years (for both males and females) of the latest year for which the data is not estimated (2011).

CALCULATIONS:

(18.1 – 12.9) / 12.9 = 40% increase for males

(20.6 – 16.3) / 16.3 = 26% increase for females

[193] 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.

[194] Table V.A3: “Period Life Expectancy.” United States Social Security Administration, Office of the Chief Actuary, July 22, 2015. <www.ssa.gov>

“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:

(19.5 – 12.9) / 12.9 = 51% increase for males

(21.7 – 16.3) / 16.3 = 33% increase for females

[195] “2015 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 22, 2015. <www.cms.gov>

Page 13: “To illustrate the uncertainty and sensitivity inherent in estimates of future Medicare trust fund operations, the Board has prepared projections under a low-cost and a high-cost set of economic and demographic assumptions as well as under an intermediate set.”

[196] Calculated with data from the “2015 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 22, 2015. <www.cms.gov>

Pages 213–214:

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 $41.4 trillion.102 To put this very large figure in perspective, it would represent 3.9 percent of the present value of projected GDP over the same period ($1,048 trillion). The components of the $41.4-trillion total are as follows:

Unfunded Medicare [Part A] and OASDI [Social Security] obligations103

$13.7 trillion

(1.3% of GDP)

HI, SMI, and OASDI asset [trust fund] redemptions

$3.1 trillion

(0.3% of GDP)

SMI [Parts B and D] general revenue financing

$24.6 trillion

(2.4% 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.

102As 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.

103Additional revenues and/or expenditure reductions totaling $13.7 trillion, together with $3.1 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 69: “As noted previously, over the full 75-year period, the [HI trust] fund has a projected present value unfunded obligation of $3.0 trillion. This unfunded obligation indicates that if $3.0 trillion were added to the trust fund at the beginning of 2015, 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.”

CALCULATION: $3.0 trillion in unfunded obligations for the HI Trust Fund (Part A) + $24.6 trillion in general revenue financing needed to fund SMI (Parts B and D) = $27.6 trillion

[197] See footnote above.

[198] Calculated with data from the footnotes above.

CALCULATION: $27,600 billion in unfunded obligations and general revenue financing / $613 billion in Medicare spending during 2014 = 45.0

[199] “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.

[200] “2015 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 22, 2015. <www.cms.gov>

Page 215: “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.”

[201] “2014 Financial Report of the United States Government.” U.S. Department of the Treasury, February 26, 2015. <www.fiscal.treasury.gov>

Page 185: “[W]hen calculating unfunded obligations, a 75-year horizon includes revenue from some future workers but only a fraction of their future benefits.”

Page 186: “The shorter [75-year open group] 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.”

Page 128: “Current participants in the Social Security and Medicare programs form the ‘closed group’ of taxpayers and/or beneficiaries who are at least age 15 at the start of the projection period. Since the projection period … consists of 75 years, the period covers virtually all of the current participants’ working and retirement years, a period that could be greater than 75 years in a relatively small number of instances.”

[202] 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….” [“Internal Revenue Manual.” Internal Revenue Service. Accessed January 11, 2011 at <www.irs.gov>. Part 1, Chapter 34, Section 1 (<www.irs.gov>)]
  • 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 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.

[203] “2015 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 22, 2015. <www.cms.gov>

Page 216: “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 $8.6 trillion.”

Page 219: “Table V.G4.—Unfunded Part B Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2015; dollar amounts in trillions] … Equals unfunded obligations for past and current participants … General revenue contributions [=] 14.7”

Page 221: “Table V.G6.—Unfunded Part D Obligations for Current and Future Program Participants through the Infinite Horizon [Present values as of January 1, 2015; dollar amounts in trillions] … Equals unfunded obligations for past and current participants … General revenue contributions [=] 5.2.”

CALCULATION: $8.6 trillion in closed-group unfunded obligations for Medicare Part A + $14.7 in closed-group unfunded obligations for Part B + $5.2 in closed-group unfunded obligations for Part D = $28.5 trillion in closed-group unfunded obligations for the Medicare program

[204] Calculated with data from the previous two footnotes and the dataset: “Annual Estimates of the Resident Population by Single Year of Age and Sex for the United States: April 1, 2010 to July 1, 2014.” U.S. Census Bureau. Accessed March 23, 2016 at <www.census.gov>

NOTE: Simple addition with this dataset shows there were 257,789,101 Americans aged 15 or older in 2014. An Excel file containing the data and calculation is available upon request.

CALCULATION: $28,500,000,000,000 closed group deficit / 257,789,101 Americans aged 15 or older = $110,555

[205] Report: “Enron: Selected Securities, Accounting, and Pension Laws Possibly Implicated in its Collapse.” By Michael V. Seitzinger, Marie B. Morris, and Mark Jickling. Congressional Research Service, Library of Congress, January 16, 2002. <fpc.state.gov>

Page 2:

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

[206] 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.

[207] 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.

[208] 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.

[209] “2015 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 22, 2015. <www.cms.gov>

Page 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 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 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 serve its essential purpose, 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.

[210] “2015 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 22, 2015. <www.cms.gov>

Page 214:

As discussed throughout this report, the Medicare projections shown here could be substantially understated as a result of other potentially unsustainable elements of current law. Although this issue does not affect the nature of the budget and trust fund perspectives described in this appendix, it is important to note that actual long-range present values for HI expenditures and SMI expenditures and revenues could exceed the amounts shown in table V.F2 by a substantial margin.

Pages 258–259:

STATEMENT OF ACTUARIAL OPINION …

The recently enacted Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 permanently replaces the sustainable growth rate (SGR) formula, which was used for physician fee schedule payments, with a new method for determining annual payment rate updates. The changes specified in MACRA avoid the substantial reductions in physician payments that were required under the SGR formula and establish payment updates that are related to participation in alternative payment models or are subject to adjustments based on the quality of care provided. While the scheduled updates for the next several years provide a much more plausible expectation for current-law physician payments than under the SGR, the specified rate updates are not expected to keep up with underlying physician costs, resulting in a large and growing problem over the long range.

The ACA has been successful in reducing many Medicare expenditures to date. Although early indications from some of the alternative payment model demonstrations have been encouraging, there is a strong possibility that certain payment 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. 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.

Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for most health services will fall increasingly short of the cost of providing such services. If this issue is not addressed by subsequent legislation, it is likely that access to, and quality of, physicians’ services would deteriorate over time for beneficiaries. Overriding the price updates specified in current law, as lawmakers repeatedly did in the case of physician payment rates under the SGR formula, would lead to substantially higher costs for Medicare in the long range than those projected in this report.

[211] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <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.

[212] Calculated with data from “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <www.cms.gov>

Page 15: “Table 4. Projected total Medicare expenditures as a percentage of Gross Domestic Product (GDP) under current law and the illustrative alternative, selected years 2014–2080”

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

[213] Calculated with data from the “2014 Financial Report of the United States Government.” U.S. Department of the Treasury, February 26, 2015. <www.fiscal.treasury.gov>

Page 17: “ ‘Open Group’ totals reflect all current and projected program participants during the 75-year projection period.”

Pages 184–185:

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 $3,823 billion in present value terms which is the additional amount needed in order to pay scheduled benefits over the next 75 years.22 From the trust fund perspective, the amount needed is $3,618 billion in present value after subtracting the value of the existing trust fund balances (an asset to the trust fund account but an intragovernmental transfer to the overall budget). For SMI, revenues from the public for Part B and D combined are estimated to be $24,659 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.

22 Interest income is not a factor in this table as dollar amounts are in present value terms.

Pages 130–131:

The SOSI [Statement of Social Insurance] projections are based on current law, with exceptions in regard to (1) the sustainable growth rate (SGR) formula for physician fee schedule payment under Part B, where current law requires a reduction in Medicare payment rates for physician services of 21 percent in April 2015, and (2) payment reductions that would result from the projected depletion of the Medicare Hospital Insurance (Part A) trust fund; under current law, payments would be reduced to levels that could be covered by tax revenues when the Medicare Hospital Insurance (Part A) trust funds are depleted. It is a virtual certainty that lawmakers will override the required reduction in Medicare physician payment rates as they have for every year beginning with 2003. For this reason, the income, expenditures, and assets for Part B reflect a projected baseline, which includes an override of the provisions of the SGR and an assumed annual increase in the physician fee schedule equal to the average SGR override over the 10-year period ending with March 31, 2015.

The extent to which actual future Part A and Part B costs exceed the projected amounts due to changes to the productivity adjustments depends on what specific changes might be legislated and whether Congress would pass further provisions to help offset such costs. However, 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. As noted, these examples reflect only hypothetical changes to provider payment rates.

To help illustrate and quantify the potential magnitude of the cost understatement, the Trustees asked the Office of the Actuary at CMS to prepare an illustrative Medicare trust fund projection under a hypothetical alternative that assumes that, starting in 2020, the economy-wide productivity adjustments gradually phase down to 0.4 percent. 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 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 the projected baseline with those under current law—including the 21 percent scheduled reduction in physician payment rates under the SGR formula—and the illustrative alternative scenario.

Page 132: “Medicare Present Values (in billions) (Unaudited) … Excess of Expenditures over Income … 2014 Consolidated SOSI Current Law [=] $26,719 … Illustrative Alternative Scenario [=] $35,232”

CALCULATION: (35,232 – 26,719) / 26,719 = 31.8%

[214] “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.”

[215] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Page 1: “Medicaid was enacted in 1965 in the same legislation that created the Medicare program (i.e., the Social Security Amendments of 1965; P.L. 89-97). It grew out of and replaced two earlier programs of federal grants to states that provided medical care to welfare recipients and the elderly.”

[216] “2014 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, June 2015. <www.medicaid.gov>

Page 16:

Enrollment is measured in two ways: (i) “person-year equivalents” (PYE), or the average enrollment over the course of a year, and (ii) “ever-enrolled” persons, or the number of people covered by Medicaid for any period of time during the year. In 2013, Medicaid enrollment was estimated to be 58.9 million PYE (including enrollment in the U.S. Territories). An estimated 72.5 million people, or slightly more than one in five in the U.S. or U.S. Territories, were ever-enrolled.

[217] Calculated with data from the footnote above and

a) Dataset: “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2015.” U.S. Census Bureau,  December 2015. <www.census.gov>

“Population Estimate (as of July 1) … 2013 [=] 316,427,39”

b) Report: “Statistical Abstract of the United States: 2012.” U.S. Census Bureau, August 31, 2015. Section 29: “Puerto Rico and the Island Areas.” <www.census.gov>

Page 817: “Table 1313. Estimated Resident Population With Projections: 1990 to 2025 [In thousands (3,537 represents 3,537,000). Population as of July 1. Population data generally are de-facto figures for the present territory. Data for 1990 to 2000 are adjusted to the 2000 Census of Population for Puerto Rico only. See text, Section 30, for general comments regarding the data. For details of methodology, coverage, and reliability, see source] … Projected … 2015 … Puerto Rico [=] 4,024 … American Samoa [=] 71 … Guam [=] 193 … Virgin Islands [=] 109 … Northern Mariana Islands [=] 44”

CALCULATION: 72,500,000 Medicaid enrollees / (316,427,395 U.S. population + 4,024,000 Puerto Rico + 71,000 American Samoa + 193,000 Guam + 109,000 Virgin Islands + 44,000 Northern Mariana Islands) = 22.6%

[218] “2014 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, June 2015. <www.medicaid.gov>

Page 16:

Enrollment is measured in two ways: (i) “person-year equivalents” (PYE), or the average enrollment over the course of a year, and (ii) “ever-enrolled” persons, or the number of people covered by Medicaid for any period of time during the year. In 2013, Medicaid enrollment was estimated to be 58.9 million PYE (including enrollment in the U.S. Territories). An estimated 72.5 million people, or slightly more than one in five in the U.S. or U.S. Territories, were ever-enrolled.

[219] Calculated with data from the footnote above and “Annual Estimates of the Resident Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2015.” U.S. Census Bureau,  December 2015. <www.census.gov>

“Population Estimate (as of July 1) … 2013 [=] 316,427,39”

CALCULATION: 58,900,000 Medicaid enrollees / 316,427,395 population = 18.7%

[220] “2014 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, June 2015. <www.medicaid.gov>

Page 16–18:

Table 2 shows estimated enrollment by eligibility group for 2013 (excluding Territory programs). …

Table 2—2013 Estimated Enrollment, Expenditures, and Estimated Per Enrollee Expenditures, by Enrollment Group …

Figure 1 shows each enrollment group’s relative share of enrollment and expenditures in Medicaid in 2013. …

Figure 1—Estimated Medicaid Enrollment and Expenditures by Enrollment Group, as a Share of Total, Fiscal Year 2013

[221] “2014 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, June 2015. <www.medicaid.gov>

Page 17: “Another 1 million enrollees were estimated for the five U.S. Territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands).”

[222] “2014 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, June 2015. <www.medicaid.gov>

Page 16:

Enrollment is measured in two ways: (i) “person-year equivalents” (PYE), or the average enrollment over the course of a year, and (ii) “ever-enrolled” persons, or the number of people covered by Medicaid for any period of time during the year. In 2013, Medicaid enrollment was estimated to be 58.9 million PYE (including enrollment in the U.S. Territories). An estimated 72.5 million people, or slightly more than one in five in the U.S. or U.S. Territories, were ever-enrolled.

[223] Calculated with data from the footnote above and the report: “Statistical Abstract of the United States: 2012.” U.S. Census Bureau, August 31, 2015. Section 29: “Puerto Rico and the Island Areas.” <www.census.gov>

Page 817: “Table 1313. Estimated Resident Population With Projections: 1990 to 2025 [In thousands (3,537 represents 3,537,000). Population as of July 1. Population data generally are de-facto figures for the present territory. Data for 1990 to 2000 are adjusted to the 2000 Census of Population for Puerto Rico only. See text, Section 30, for general comments regarding the data. For details of methodology, coverage, and reliability, see source] … Projected … 2015 … Puerto Rico [=] 4,024 … American Samoa [=] 71 … Guam [=] 193 … Virgin Islands [=] 109 … Northern Mariana Islands [=] 44”

CALCULATION: 1,000,000 Medicaid enrollees / (4,024,000 Puerto Rico population + 71,000 American Samoa + 193,000 Guam + 109,000 Virgin Islands + 44,000 Northern Mariana Islands) = 22.5%

[224] “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.1

The Federal government establishes certain requirements for each State’s Medicaid program. The States then administer their own programs, determining the eligibility of applicants, deciding which health services to cover, setting provider reimbursement rates, paying for a portion of the total program, and processing claims.

Eligibility for enrollment in Medicaid is determined by both Federal and State law. Title XIX specifies which groups of people must be eligible, and States have considerable flexibility to extend coverage to additional groups. In addition to income, eligibility is typically based on several other factors, including financial resources (or assets), age, disability status, other government assistance, and other health or medical conditions such as pregnancy. Beginning in 2014, the Affordable Care Act expands Medicaid eligibility to all individuals under age 65 in families with income below 138 percent of the Federal Poverty Level (FPL).2

2 … The Affordable Care Act technically specifies an upper income threshold of 133 percent of the FPL but also allows a 5-percent income disregard, making the effective threshold 138 percent.

[225] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

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

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

Pages 1-2:

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

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

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

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

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

[226] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

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 SSI3), 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 [Aid to Families with Dependent Children] cash assistance program,5 [5 AFDC income standards are well below the federal poverty level, but states can modify (liberalize or potentially further restrict) these criteria. Although TANF [Temporary Assistance for Needy Families] recipients are not automatically eligible for Medicaid, some states have aligned income rules for TANF and Medicaid, thus facilitating Medicaid coverage for some TANF recipients.]

• families losing Medicaid eligibility due to increased earnings from work who receive up to 12 months of Medicaid coverage,

• pregnant women and children through age 18 with family income below 133% of the federal poverty level (FPL),6 [6 For example, in 2010, the FPL for a family of four is $22,050—133% of FPL for such a family would equal $29,326.50. See <aspe.hhs.gov>.]

• poor individuals with disabilities or poor individuals over age 64 who qualify for cash assistance under the SSI [Supplemental Security Income] program,7 [7 Some states use income, resource and disability standards that differ from current SSI standards.]

• certain groups of legal permanent resident immigrants (e.g., refugees for the first seven years after entry into the U.S.; asylees for the first seven years after asylum is granted; lawful permanent aliens with 40 quarters of creditable coverage under Social Security; immigrants who are honorably discharged U.S. military veterans) who meet all other financial and categorical Medicaid eligibility requirements….

[227] “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).22 … 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.”

[228] 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 (in 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.

[229] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $24,300 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $24,300 × 138% = $33,534

[230] Ruling 11 U.S. 393: 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.

[231] Ruling 11 U.S. 393: 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 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.

[232] Report: “Medicaid and CHIP Eligibility, January 2016 Enrollment, Renewal, and Cost-Sharing Policies as of January 2016: Findings from a 50-State Survey.” By Tricia Brooks and others. Kaiser Commission on Medicaid and the Uninsured, January 2016. <files.kff.org>

Page 8:

As of January 2016, 31 states, including the District of Columbia, have expanded Medicaid eligibility to parents and other non-disabled adults with incomes up to at least 138% FPL. This finding reflects adoption of the ACA Medicaid expansion to low-income adults in three states during 2015– Indiana, Alaska, and, most recently, Montana, where the expansion went into effect on January 1, 2016. Indiana and Montana joined four other states (Arkansas, Iowa, Michigan, and New Hampshire) that expanded Medicaid for adults under Section 1115 waiver authority, allowing them to implement the expansion in ways that extend beyond the flexibility provided by the law.3 During 2015, Pennsylvania moved from implementing its expansion through a waiver to regular expansion coverage, while New Hampshire moved from a regular expansion to a waiver as of January 2016. There is no deadline for states to adopt the Medicaid expansion, and additional states may expand in the future. Medicaid eligibility extends to parents and other adults with incomes up to at least 138% FPL in all 31 expansion states (Figures 7 and 8). Additionally, the District of Columbia covers parents up to 221% FPL and other adults up to 215% FPL. Connecticut reduced parent eligibility during 2015, lowering eligibility from 201% to 155% FPL. However, parent eligibility remains above the 138% FPL minimum, and many parents who lost Medicaid eligibility are likely eligible for subsidies to purchase Marketplace coverage.

[233] Report: “Medicaid and CHIP Eligibility, January 2016 Enrollment, Renewal, and Cost-Sharing Policies as of January 2016: Findings from a 50-State Survey.” By Tricia Brooks and others. Kaiser Commission on Medicaid and the Uninsured, January 2016. <files.kff.org>

Page 9:

In the 20 states that have not expanded Medicaid, the median eligibility level for parents is 42% FPL; other adults remain ineligible regardless of income in all of these states except Wisconsin. Among the 20 non-expansion states, parent eligibility levels range from 18% FPL in Alabama and Texas to 105% FPL in Maine (Figure 9). Only 3 of these states—Maine, Tennessee, and Wisconsin—cover parents at or above 100% FPL, while 13 states limit parent eligibility to less than half the poverty level ($10,045 for a family of three as of 2015). Wisconsin is the only non-expansion state that provides full Medicaid coverage to other non-disabled adults, although its 100% FPL eligibility limit is lower than the ACA expansion level. While this study reports eligibility based on a percentage of the FPL, it also is important to note that 13 non-expansion states base eligibility for parents on dollar thresholds (which have been converted to an FPL equivalent in this report). Of those states, 12 do not routinely update the standards, resulting in eligibility levels that erode over time relative to the cost of living. Other analysis shows that three million poor adults fall into a coverage gap as a result of these low Medicaid eligibility levels in non-expansion states.5 These adults earn too much to qualify for Medicaid, but not enough to qualify for subsidies for Marketplace coverage, which are available only to those with incomes at or above 100% of FPL.

[234] Transcript: “Remarks by the President on the Economy—Port of New Orleans.” The White House, Office of the Press Secretary, November 8, 2013. <www.whitehouse.gov>

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.

[235] Article: “Medicaid Increases Emergency-Department Use: Evidence from Oregon’s Health Insurance Experiment.” By 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.

[236] 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.

[237] “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.”

[238] “2010 Actuarial Report on the Financial Outlook for Medicaid.” By Christopher J. Truffer and others. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, December 21, 2010. <www.cms.gov>

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.

[239] Report: “Holding Steady, Looking Ahead: Annual Findings of a 50-State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost Sharing Practices in Medicaid and CHIP, 2010-2011.” By Martha Heberlein and others. Kaiser Commission on Medicaid and the Uninsured, January 2011. <www.kff.org>

Page 3: “As part of creating a seamless enrollment system, the ACA [Affordable Care Act] makes significant changes in Medicaid rules for many beneficiaries, including eliminating the asset test and evaluating eligibility using an IRS-based definition of income (i.e., “Modified Adjusted Gross Income” or “MAGI”), which will also be used to determine eligibility for Exchange subsidies.”

[240] Calculated with data from:

a) Table V.A2: “Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1941–2090.” United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified July 22, 2015. <www.ssa.gov>

b) “2014 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, June 2015. <www.medicaid.gov>

Page 16: “Enrollment is measured in two ways: (i) ‘person-year equivalents’ (PYE), or the average enrollment over the course of a year, and (ii) ‘ever-enrolled’ persons, or the number of people covered by Medicaid for any period of time during the year. In 2013, Medicaid enrollment was estimated to be 58.9 million PYE (including enrollment in the U.S. territories). An estimated 72.5 million people, or slightly more than one in five in the U.S. or U.S. Territories, were ever-enrolled.”

Page 24: “Table 3—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.

[241] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Page 13: “[T]raditional Medicaid … compared to both Medicare and employer-sponsored health care plans, offers the broadest array of medical care and related services available in the United States today.”

[242] 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

[243] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Summary: “Each state designs and administers its own version of Medicaid under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. The new health reform law makes both mandatory and optional changes along these dimensions for the Medicaid program.”

[244] “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 3: “Beneficiary cost sharing, such as deductibles or co-payments, and beneficiary premiums are very limited in Medicaid and do not represent a significant share of the total cost of health care services for Medicaid enrollees.”

Page 14: “In particular, Medicaid pays almost all health care costs for enrolled children and non-disabled non-aged adults. However, many aged or disabled beneficiaries are also enrolled in Medicare, which is the primary payer of benefits before Medicaid; thus,15: these per enrollee Medicaid estimates are less than the total cost of such beneficiaries’ annual health care across all payers.”

[245] Article: “You Paid For It: Ambulance Rides, Health Care Reform.” By Michael Wooten. WGRZ (Local NBC affiliate in Buffalo NY), Jul 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.

[246] “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 3: “Medicaid costs are met by Federal and State general revenues, on an as-needed basis. The Federal financing is authorized through an annual appropriation by Congress.”

[247] “Internal Revenue Manual.” Internal Revenue Service. Accessed January 11, 2011 at <www.irs.gov>

Part 1, Chapter 34, Section 1 (<www.irs.gov>): “The main financing component of the Federal funds group is referred to as the General Fund, which is used to carry out the general purposes of Government rather than being restricted by law to a specific program and consists of all collections not earmarked by law to finance other funds.”

[248] 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.”

[249] The table below shows the average federal general revenue taxes paid by various income groups in 2011:

Average Federal General Revenue Taxes (2011)

Household Income Group

Before-Tax Income

Effective Tax Rate

Taxes Per Household

Lowest 20%

$24,600

-6.4%

-$1,582

Second 20%

$45,300

-0.4%

-$175

Middle 20%

$66,400

3.5%

$2,298

Fourth 20%

$97,500

6.9%

$6,736

Highest 20%

$245,700

17.2%

$42,336

81st–90th%

$138,800

10.1%

$13,995

91st–95th%

$186,700

13.0%

$24,190

96th–99th%

$299,000

17.8%

$53,313

Top 1%

$1,453,100

26.8%

$388,737

The figures above were calculated with data from:

a) Report: “The Distribution of Household Income and Federal Taxes, 2011.” Congressional Budget Office, November 12, 2014. <www.cbo.gov>

Page 5: “For this analysis, federal taxes include individual income taxes, payroll taxes, corporate income taxes, and excise taxes, which together accounted for approximately 92 percent of all federal revenues in fiscal year 2011. Revenues from states’ deposits for unemployment insurance, estate and gift taxes, miscellaneous fees and fines, and net income earned by the Federal Reserve, which make up the remaining 8 percent, are not allocated to households in this analysis, mainly because it is uncertain to which households those revenue sources should be attributed.”

Pages 9–10: “An income quintile has a negative average income tax rate if refundable tax credits in that quintile exceed other income tax liabilities.”

Pages 32–33: “Before-tax income is market income plus government transfers. Market income consists of labor income, business income, capital gains (profits realized from the sale of assets), capital income excluding capital gains, income received in retirement for past services, and other sources of income. … Government transfers consist of the cost of two types of benefits: Cash. Payments from Social Security, unemployment insurance, Supplemental Security Income, Temporary Assistance for Needy Families (and its predecessor, Aid to Families With Dependent Children), veterans’ programs, workers’ compensation, and state and local government assistance programs. In-Kind Benefits. The cost of Supplemental Nutrition Assistance Program vouchers (popularly known as food stamps); school lunches and breakfasts; housing assistance; energy assistance; and benefits provided by Medicare, Medicaid, and the Children’s Health Insurance Program.”

b) Dataset: “The Distribution of Household Income and Federal Taxes, 2011.” Congressional Budget Office, November 12, 2014. <www.cbo.gov>

“Table 1. Average Federal Tax Rates for All Households, by Before-Tax Income Group, 1979 to 2011 (Percent)”

“Table 3. Number of Households, Average Income, and Shares of Income for All Households, by Before-Tax Income Group, 1979 to 2011. Average Before-Tax Income (2011 dollars) … 2011.”

c) 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.”

d) Report: “Fiscal Year 2013 Analytical Perspectives, Budget of the U.S. Government.” Executive Office of the President of the United States, Office of Management and Budget, 2012. <www.gpo.gov>

Page 224: “Table 15–5. Receipts by Source—Continued (In millions of dollars).”

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

[250] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Page 8:

The state-specific federal share for benefit costs is determined by a formula set in law that establishes higher federal shares for states with per capita personal income levels lower than the national average (and vice versa for states with per capita personal income levels that are higher than the national average).17 The federal share, called the federal medical assistance percentage (FMAP), is at least 50% and can be as high as 83% (statutory maximum). For FY2011 (excluding the temporary increase in FMAP currently in effect through December 2010) [via the American Recovery and Reinvestment Act of 2009, a.k.a. the “Obama stimulus”], the federal share for benefit costs ranges from 50% (in 13 states) up to 74.73% (in one state, Mississippi).

[251] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Page 8:

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.

[252] 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.”

[253] Commentary: “Medicaid bailout will hurt Georgia.” By Brian Blase. Atlanta Journal Constitution, August 26, 2010. <www.ajc.com>

For instance, New York spends more than $18,000 on Medicaid for each person in poverty.

In Georgia, Medicaid spending per person in poverty is less than $6,000, which is a more sustainable and fiscally responsible amount. Only 18 percent of Georgians are enrolled in Medicaid as opposed to 26 percent in New York, with its more generous eligibility rules.

[254] “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 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.

[255] “2014 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, June 2015. <www.medicaid.gov>

Page 25:

In recent 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. The average Federal share was 57.7 percent in 2013. It is estimated to have risen in 2014 due mainly to the higher FMAP for newly eligible Medicaid beneficiaries as required in the Affordable Care Act. The average Federal share is estimated to have increased to about 60 percent in 2014 and is projected to remain at that level through 2023.

[256] Calculated with data from:

a) Table 3.12: “Government Social Benefits.” United States Department of Commerce, Bureau of Economic Analysis. Last Revised August 06, 2015. <www.bea.gov>

“2014 … Medicaid (billions $) [=] 487.4”

b) Table 3.1: “Government Current Receipts and Expenditures.” United States Department of Commerce, Bureau of Economic Analysis. Last Revised August 27, 2015. <www.bea.gov>

“2014 … Total receipts (billions $) [=] 5,019.2 … Total expenditures [=] 5,892.4.”

CALCULATIONS:

$487.4 Medicaid expenditures / $5,892.4 total expenditures = 8.3%

$487.4 Medicaid expenditures / $5,019.2 total receipts = 9.7%

[257] Report: “Medicaid Primer.” By Elicia J. Herz. Congressional Research Service, July 15, 2010. <aging.senate.gov>

Page 6: “Unauthorized aliens (i.e., illegal aliens, foreign nationals who are not lawfully present in the United States) are ineligible for Medicaid. Such individuals who meet the eligibility requirements for Medicaid, but are ineligible due to immigration status, may receive Medicaid coverage for emergency conditions (i.e., emergency Medicaid) only, which includes costs associated with emergency labor and delivery for pregnant women and excludes costs for organ transplants.”

[258] 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.

[259] 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.”

[260] Article: “Medicaid Covered Births, 2008 Through 2010, in the Context of the Implementation of Health Reform.” By Anne Rossier Markus and others. Women’s Health Issues, September–October 2013. <www.whijournal.com>

Abstract: “In 2010, Medicaid financed 48% of all births, an increase of 19% in the proportion of all births covered by Medicaid in 2008. Percentages varied among states.”

[261] “2014 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, June 2015. <www.medicaid.gov>

Page 44: “Figure 8—Medicaid Expenditures as Percentage of Total U.S. Health Expenditures, by Service Category, CY [calendar year] 2013 … Total [=] 15.4% … Dental [=] 6.8% … Drugs [=] 7.8% … Physicians and Clinics [=] 8.5% … Hospital [=] 17.5% … Nursing Home [=] 30.1% … Home Health [=] 36.5%”

Page 43:

Among the different types of health care services, Medicaid plays the largest role in the funding of long-term care. According to the 2013 NHE, Medicaid is estimated to have paid for 36.5 percent of all freestanding home health care and 30.1 percent of all freestanding† nursing home care in the U.S. In addition, Medicaid covered an estimated 55.7 percent of other health, personal, and residential care in 2013, including payments for intermediate care facilities and for home and community-based waivers.63 Medicaid has a major responsibility for providing long-term care because the program covers some aged and many persons with disabilities, who tend to be the most frequent and most costly users of such care, and because private health insurance and Medicare often furnish only limited coverage for these benefits, particularly for nursing homes. Many people who pay for nursing home care privately become impoverished due to the expense; as a result, these people eventually become eligible for Medicaid.

† See the next footnote for the definition of “freestanding” in this context.

[262] 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.”

[263] NOTE: Just Facts has verified all of the information quoted below with official government sources but is citing this particular source because it is clearly worded and succinct.

a) Webpage: “Medicaid Rules.” ElderLawAnswers. Accessed March 21, 2016 at <www.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, March 16, 2016. <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 $119,220 (in 2016) 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 $23,844 (in 2016). …

Some states, however, are more generous toward the community spouse. In these states, the community spouse may keep up to $119,220 (in 2016), 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 $552,000, with the states having the option of raising this limit to $828,000 (in 2016). 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, March 16, 2016. <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 $1,991.25 to a high of $2,980.50 a month (in 2016). 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: $2,980.50 a month personal income × 12 months per year = $35,766

[264] Fact sheet: “Underpayment by Medicare and Medicaid.” American Hospital Association, 2015. <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.

Page 2:

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.

• Combined underpayments were $51 billion in 2013. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid.

• For Medicare, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013.

• For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2013.

• In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

[265] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <www.cms.gov>

Page 6: “For inpatient hospital services, Medicare payment rates in 2013 were about 63 percent, and Medicaid payment rates were about 61 percent, of private health insurance payment rates (including Medicaid disproportionate share hospital, or DSH, payments).11

[266] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <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 2013 were about 79 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent.13 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.

[267] “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 …

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.

[268] Article: “Republican Matt Bevin elected governor of Kentucky.” By Adam Beam. Associated Press, November 4, 2015. <bigstory.ap.org>

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.

[269] 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 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).

[270] 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 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.

[271] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <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 2013 were about 79 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent.13 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.

[272] Data Brief: “Acceptance of New Patients With Public and Private Insurance by Office-based Physicians: United States, 2013.” By Esther Hing and others. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, March 2015. <www.cdc.gov>

Page 1:

Physician acceptance of new Medicaid patients has shown to be lower than

acceptance of new Medicare patients or new privately insured patients (1).

Acceptance of new Medicaid patients also has shown to be lower in states

with lower Medicaid payment rates to physicians (2). Using the 2013 National

Electronic Health Records Survey (NEHRS), this report summarizes physician

acceptance of new patients with Medicaid, Medicare, and private insurance.

It also summarizes information on how these acceptance rates vary by select

physician characteristics and by state.

How did acceptance of new patients by office-based physicians vary by the patient’s source of payment?

• In 2013, 95.3% of physicians were accepting new patients (Figure 1).

• The percentage of physicians accepting new privately insured patients

(84.7%) was greater than the percentage accepting new Medicaid

patients (68.9%).

[273] 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.”

[274] 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.)”

[275] Report: “State Children’s Health Insurance Program: An Overview.” By Evelyne P. Baumrucker and Alison Mitchell. Congressional Research Service, March 20, 2015. <www.fas.org>

Pages 16–17:

The federal government pays about 70% of CHIP expenditures, and 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 rate is derived each year by the HHS Secretary using a set formula, and it varies by state.65 By statute, the EFMAP (or federal matching rate) can range from 65% to 85%, and in FY2015, the E-FMAP ranges from 65% (13 states) to 82% (Mississippi).

65 The E-FMAP is calculated by reducing the state share under the FMAP rate (which is the federal matching rate for most Medicaid expenditures) by 30%. For more information about the FMAP rate and how it is calculated, see CRS Report R43847, Medicaids Federal Medical Assistance Percentage (FMAP), FY2016, by Alison Mitchell.

[276] Report: “Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA.” By Julie Stone and others. Congressional Research Service, April 28, 2010. <www.oacbdd.org>

Page 49: “Under P.L. 111-148 [the Patient Protection and Affordable Care Act of 2010, a.k.a. Obamacare], states will receive a 23 percentage point increase in the CHIP match rate (EFMAP), subject to a cap of 100%, for FY2016 through FY2019 (although no CHIP appropriations are provided for those years). The 23 percentage point increase will not apply to certain expenditures.”

[277] 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 (in pdf): “Subtitle J—State Children’s Health Insurance Program … Section 201 (a) PURPOSE.—The purpose of this title is to provide funds to States to enable them to initiate and expand the provision of child health assistance to uninsured, low-income children in an effective and efficient manner that is coordinated with other sources of health benefits coverage for children.”

Pages 319-320 (in pdf): “Section 2110 (c) ADDITIONAL DEFINITIONS.—For purposes of this title: (1) CHILD.—The term ‘child’ means an individual under 19 years of age. … (4) LOW-INCOME.—The term ‘low-income child’ means a child whose family income is at or below 200 percent of the poverty line for a family of the size involved.”

[278] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $24,300 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $24,300 × 200% = $48,600

[279] Report: “State Children’s Health Insurance Program: An overview.” By Evelyne P. Baumrucker and Alison Mitchell. Congressional Research Service, March 20, 2015. <www.fas.org>

Page 8: “Statewide upper income eligibility thresholds for CHIP-funded child coverage vary substantially across states, ranging from a low of 175% FPL [Federal Poverty Level] to a high of 405% FPL.”

Pages 27–28: “Table A-1. CHIP Program Type, Income Eligibility and Enrollment Information, by State.”

“State and Program Type as of July 1, 2014 … North Dakota (C) … Reported Upper Income Level for Children (% FPL) [=] 175 … State and Program Type as of July 1, 2014 … New York (C) … Reported Upper Income Level for Children (% FPL) [=] 405.”

[280] Webpage: “2014 Poverty Guidelines.” U.S. Department of Health & Human Services, December 1, 2014. <aspe.hhs.gov>

“2014 Poverty Guidelines for the 48 Contiguous States and the District of Columbia … Persons in Family/Household [=] 4 … Poverty Guideline [=] $23,850 ”

CALCULATIONS:

$23,850 × 175% = $41,737

$23,850 × 405% = $96,592

[281] 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 7: “Coverage for children in Medicaid and CHIP remains strong and steady with the median income eligibility limit at 255 percent of the FPL. As of January 1, 2015, 28 states cover children with family incomes at or above 250 percent of the FPL, with 19 extending coverage to 300 percent of the FPL or higher….”

[282] Webpage: “2015 Poverty Guidelines.” U.S. Department of Health & Human Services, September 3, 2015. <aspe.hhs.gov>

“2015 Poverty Guidelines for the 48 Contiguous States and the District of Columbia … Persons in Family/Household [=] 4 … Poverty Guideline [=] $24,250”

CALCULATION:

$24,250 × 255% = $61,837

[283] 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 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.

Page 21:

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.

[284] Federal Register: “Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010; Final Rule.” Vol. 77, No. 57, Part III, U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, March 23, 2012. <www.gpo.gov>

Page 17156:

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. 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 methods. We do not have the flexibility to issue regulations to the contrary and are finalizing the regulation at § 435.603(g) as proposed.

[285] Webpage: “CHIP: Pennsylvania Children’s Health Insurance Program, FAQ: Eligibility Criteria & Benefits.” Accessed September 21, 2015 at <www.chipcoverspakids.com>

I live with my boyfriend - do I have to include his income?

The CHIP application requires that you provide information including income for anyone who lives with you and anyone 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 and is not included when determining eligibility. For example, even though you report income for your boyfriend, it would not be used to determine if you [sic] child is eligible, unless your boyfriend is the father of your child.

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 anyone who lives with you and anyone 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 and 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.

NOTE: See next footnote for another example.

[286] Webpage: “MaineCare Eligibility Guide.” Maine Equal Justice Partners, July 16, 2013. <www.mejp.org>

Pages 1–2:

1.1 What is countable income for MaineCare? …

What 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 out family size. These individuals may be eligible for MaineCare in a different category and as a separate household.

[287] Report: “Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA.” By Julie Stone and others. Congressional Research Service, April 28, 2010. <www.oacbdd.org>

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

[288] Dataset: “FY 2014 Unduplicated Number of Children Ever Enrolled in Medicaid and CHIP.” United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, May 13, 2015. <www.medicaid.gov>

“Unduplicated Number of Children Ever Enrolled … CHIP … FY 2014 … TOTALS [=] 8,129,426.”

[289] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 154: “The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (P.L. 111-3) reauthorized CHIP from April 2009 through September 30, 2013 and increased funding by $44 billion through FY 2013 to maintain State programs and to cover more insured children. More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline.”

[290] Article: “Obama Signs Children’s Health Insurance Bill.” By Robert Pear. New York Times, February 5, 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.

[291] 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 308 in pdf:

SEC. 2104. ALLOTMENTS.

(a) APPROPRIATION; TOTAL ALLOTMENT.—For the purpose of providing allotments to States under this section, there is appropriated, out of any money in the Treasury not otherwise appropriated—

(1) for fiscal year 1998, $4,275,000,000;

(2) for fiscal year 1999, $4,275,000,000;

(3) for fiscal year 2000, $4,275,000,000;

(4) for fiscal year 2001, $4,275,000,000;

(5) for fiscal year 2002, $3,150,000,000;

(6) for fiscal year 2003, $3,150,000,000;

(7) for fiscal year 2004, $3,150,000,000;

(8) for fiscal year 2005, $4,050,000,000;

(9) for fiscal year 2006, $4,050,000,000; and

(10) for fiscal year 2007, $5,000,000,000.

[292] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 157: “From FY 1998 through FY 2007, the Balanced Budget Act of 1997 (BBA) (P.L. 105-33) authorized and appropriated $40 billion for CHIP allotments to States, Territories, Commonwealths, and the District of Columbia. The Balanced Budget Refinement Act of 1999 (BBRA) (P.L. 106-113) authorized and appropriated additional funding for CHIP allotments to Commonwealths and Territories.”

[293] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 154: “The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (P.L. 111-3) reauthorized CHIP from April 2009 through September 30, 2013 and increased funding by $44 billion through FY 2013 to maintain State programs and to cover more insured children.”

[294] Bill: “Children’s Health Insurance Program Reauthorization Act of 2009.” Signed into law by Barack Obama on February 4, 2009 (became Public Law No: 111-003). <www.gpo.gov>

Page 4 (in pdf):

TITLE I—FINANCING, Subtitle A—Funding, SEC. 101. EXTENSION OF CHIP…

… for fiscal year 2009, $10,562,000,000;

… for fiscal year 2010, $12,520,000,000;

… for fiscal year 2011, $13,459,000,000;

… for fiscal year 2012, $14,982,000,000; and

… for fiscal year 2013, for purposes of making 2 semiannual allotments—

(A) $2,850,000,000 for the period beginning on October 1, 2012, and ending on March 31, 2013, and

(B) $2,850,000,000 for the period beginning on April 1, 2013, and ending on September 30, 2013.

NOTE: The anomalous appropriations for fiscal year 2013 were set to game the budget scoring process of the CBO. See next footnote for details.

[295] Letter to Paul Ryan (Ranking Member, Committee on the Budget, U.S. House of Representatives) from Robert A. Sunshine (Acting Director, Congressional Budget Office), January 14, 2009. <www.cbo.gov>

The introduced version of H.R. 2 would authorize CHIP through 2013 and would provide significant funding increases over the next few years, leading up to a total funding level of $17.4 billion in 2013. The program’s funding for the second half of fiscal year 2013 would be $3 billion. Under baseline rules, that amount annualized—$6 billion—would be projected for each subsequent year. The estimated cost of the bill assumes that funding level for CHIP for fiscal years 2014 through 2019. On that basis, CBO estimates that the introduced version of H.R. 2 would increase federal direct spending by $73.3 billion through 2019, including the costs of other provisions in the bill. (That spending would be offset by increases in federal tax revenues totaling $73.6 billion over the same period, primarily from increases in the excise taxes levied on tobacco products.)

As an alternative to the introduced version of H.R. 2, you requested that CBO assume the CHIP rules and structure as currently delineated in H.R. 2 would remain unchanged through 2019 and that sufficient funding would be made available after 2013 to accommodate projected enrollment growth. The projected enrollment growth is based on expected growth in the total population, as well as changes in the health insurance market and the economy as a whole. Under those assumptions, CBO estimates that average monthly enrollment in CHIP would rise from about 9 million in 2013 to about 12 million in 2019.

Based on the assumptions you specified, CBO estimates total changes in direct spending of $115.2 billion, as compared with the $73.3 billion increase we estimate for the introduced version of H.R. 2. (Revenue increases would remain unchanged.) Thus, the net budget impact of a modified version of H.R. 2, as you specified, would be an increase in deficits totaling $41.6 billion over the 2009-2019 period.

[296] NOTE: The appropriations for the years not mentioned (2008 and 2013) are given in the report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 157: “State Allotment Funding History … FY2008 [=] $6,640,000,000 … FY 2013 [=] $17,406,000,000”

[297] Report: “State Children’s Health Insurance Program: An Overview.” By Evelyne P. Baumrucker and Alison Mitchell. Congressional Research Service, March 20, 2015. <www.fas.org>

Page 17: “[I]n FY2013, the federal appropriation for CHIP was $17.4 billion, the CHIP allotments to states totaled $8.9 billion, and CHIP federal expenditures totaled $9.2 billion.”

[298] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 154: “More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline.”

Page 157: “[T]he Affordable Care Act extends Federal funding for CHIP through FY 2015, appropriating $19.1 billion in FY 2014 and $21.1 billion in FY 2015.”

[299] “2014 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 28, 2014. <www.cms.gov>

Page 11–12:

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.

[300] Report: “Reducing the Deficit: Spending and Revenue Options.” Congressional Budget Office, March 2011. <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 and most economists, the employers’ share of payroll taxes is passed on to employees in the form of lower wages.”

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

[301] Webpage: “Contribution and Benefit Base.” United States Social Security Administration, Office of the Chief Actuary. Accessed September 22, 2015 at <www.ssa.gov>

“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.”

[302] 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.”

[303] 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.”

[304] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

0

 0%

221

100%

Democrat

267

85%

47

15%

Independent

1

100%

0

0%

NOTE: Results do not include those not voting or those who voted “Present.”

[305] “2015 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 22, 2015. <www.cms.gov>

Page 47: “Up to 85 percent of an individual’s or couple’s … [Social Security] benefits may be subject to Federal income taxation if their income exceeds certain thresholds.† The income tax revenue attributable to the first 50 percent of … [Social Security] benefits is allocated to the … [Social Security] trust funds. The revenue associated with the amount between 50 and 85 percent of benefits is allocated to the HI [Hospital Insurance, a.k.a. Medicare Part A] trust fund.”

NOTE: † These thresholds are exceeded if the “total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).” [Publication No. 915: “Social Security and Equivalent Railroad Retirement Benefits for Use in Preparing 2014 Returns.” United States Department of the Treasury, Internal Revenue Service, January 29, 2015. <www.irs.gov>]

[306] 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 Trust Fund. Effective for taxable years beginning after 1993.

[307] “2015 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.” Board of Trustees of the Federal OASDI Trust Funds, July 22, 2015. <www.ssa.gov>

Page 56: “Increases in income from taxation of benefits reflect … the increasing share of individual benefits that will be subject to taxation because benefit taxation threshold amounts are not indexed.”

[308] 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 308 in pdf:

SEC. 2104. ALLOTMENTS.

(a) APPROPRIATION; TOTAL ALLOTMENT.—For the purpose of providing allotments to States under this section, there is appropriated, out of any money in the Treasury not otherwise appropriated—

(1) for fiscal year 1998, $4,275,000,000;

(2) for fiscal year 1999, $4,275,000,000;

(3) for fiscal year 2000, $4,275,000,000;

(4) for fiscal year 2001, $4,275,000,000;

(5) for fiscal year 2002, $3,150,000,000;

(6) for fiscal year 2003, $3,150,000,000;

(7) for fiscal year 2004, $3,150,000,000;

(8) for fiscal year 2005, $4,050,000,000;

(9) for fiscal year 2006, $4,050,000,000; and

(10) for fiscal year 2007, $5,000,000,000.

[309] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 157: “From FY 1998 through FY 2007, the Balanced Budget Act of 1997 (BBA) (P.L. 105-33) authorized and appropriated $40 billion for CHIP allotments to States, Territories, Commonwealths, and the District of Columbia. The Balanced Budget Refinement Act of 1999 (BBRA) (P.L. 106-113) authorized and appropriated additional funding for CHIP allotments to Commonwealths and Territories.”

[310] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

235

84%

44

16%

Democrat

196

78%

55

22%

Independent

0

0%

1

100%

NOTE: Results do not include those not voting or those who voted “Present.”

[311] 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 <thomas.loc.gov>

“12/8/2003 Signed by President … 12/8/2003 Became Public Law No: 108-173.”

[312] 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.”

[313] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

246

88%

34

12%

Democrat

27

11%

224

89%

Independent

1

50%

1

50%

NOTE: Results do not include those not voting or those who voted “Present.”

[314] Cost Estimate: “H.R. 1, Medicare Prescription Drug, Improvement, and Modernization Act of 2003.” Congressional Budget Office, November 20, 2003. <www.cbo.gov>

“CBO estimates that enacting this legislation would result in direct spending outlays totaling $395 billion over the 2004-2013 period. It would also lead to an increase in federal revenues totaling $0.5 billion over that 10-year period.”

[315] Press release: “Michael Steele: Republicans’ Glass House is Shattering.” Democratic Congressional Campaign Committee, March 10, 2010. <dccc.org>

“The Republican culture of corruption under Tom DeLay and Republican leadership had devastating consequences that the American people are still paying the price for: a complex and costly prescription drug bill written by drug companies, an energy policy written by the Big Oil companies, and record deficits to pay for tax breaks for their most wealthy friends.”

[316] 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

Republican

 0

0%

226

100%

Democrat

174

86%

29

14%

Independent

1

50%

1

50%

NOTE: Results do not include those not voting or those who voted “Present.”

[317] 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>

“The net effect of the bill, we estimate, would be an increase in the deficit of $0.4 billion in 2003, $5.1 billion in 2003, $255.0 billion over the 2004-2008 period, and $968.7 billion over the 2004-2013 period. These estimates are preliminary and subject to revision after we have had an opportunity to carefully review the legislative language. CBO has not yet completed its estimate of the discretionary costs of the bill.”

CALCULATION: $969 billion / $395 billion = 2.45

[318] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 154: “The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (P.L. 111-3) reauthorized CHIP from April 2009 through September 30, 2013 and increased funding by $44 billion through FY 2013 to maintain State programs and to cover more insured children.”

[319] Bill: “Children’s Health Insurance Program Reauthorization Act of 2009.” Signed into law by Barack Obama on February 4, 2009 (became Public Law No: 111-003). <www.gpo.gov>

Page 4 (in pdf):

TITLE I—FINANCING, Subtitle A—Funding, SEC. 101. EXTENSION OF CHIP…

… for fiscal year 2009, $10,562,000,000;

… for fiscal year 2010, $12,520,000,000;

… for fiscal year 2011, $13,459,000,000;

… for fiscal year 2012, $14,982,000,000; and

… for fiscal year 2013, for purposes of making 2 semiannual allotments—

(A) $2,850,000,000 for the period beginning on October 1, 2012, and ending on March 31, 2013, and

(B) $2,850,000,000 for the period beginning on April 1, 2013, and ending on September 30, 2013.

NOTE: The anomalous appropriations for fiscal year 2013 were set to game the budget scoring process of the CBO. See next footnote for details.

[320] Letter to Paul Ryan (Ranking Member, Committee on the Budget, U.S. House of Representatives) from Robert A. Sunshine (Acting Director, Congressional Budget Office), January 14, 2009. <www.cbo.gov>

The introduced version of H.R. 2 would authorize CHIP through 2013 and would provide significant funding increases over the next few years, leading up to a total funding level of $17.4 billion in 2013. The program’s funding for the second half of fiscal year 2013 would be $3 billion. Under baseline rules, that amount annualized—$6 billion—would be projected for each subsequent year. The estimated cost of the bill assumes that funding level for CHIP for fiscal years 2014 through 2019. On that basis, CBO estimates that the introduced version of H.R. 2 would increase federal direct spending by $73.3 billion through 2019, including the costs of other provisions in the bill. (That spending would be offset by increases in federal tax revenues totaling $73.6 billion over the same period, primarily from increases in the excise taxes levied on tobacco products.)

As an alternative to the introduced version of H.R. 2, you requested that CBO assume the CHIP rules and structure as currently delineated in H.R. 2 would remain unchanged through 2019 and that sufficient funding would be made available after 2013 to accommodate projected enrollment growth. The projected enrollment growth is based on expected growth in the total population, as well as changes in the health insurance market and the economy as a whole. Under those assumptions, CBO estimates that average monthly enrollment in CHIP would rise from about 9 million in 2013 to about 12 million in 2019.

Based on the assumptions you specified, CBO estimates total changes in direct spending of $115.2 billion, as compared with the $73.3 billion increase we estimate for the introduced version of H.R. 2. (Revenue increases would remain unchanged.) Thus, the net budget impact of a modified version of H.R. 2, as you specified, would be an increase in deficits totaling $41.6 billion over the 2009-2019 period.

[321] Article: “Obama Signs Children’s Health Insurance Bill.” By Robert Pear. New York Times, February 5, 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.

[322] “2009 CHIPRA Annual Report.” U.S. Department of Health & Human Services, February 4, 2010. <www.insurekidsnow.gov>

Page 10:

Performance Bonus Payments. CHIPRA established new incentive payments for states that adopt specific policies and procedures in Medicaid and CHIP and that were successful in enrolling already eligible children in Medicaid. CMS issued guidance on the bonus payment criteria on December 17, 2009.21 States need to meet two sets of criteria in order to qualify for a performance bonus payment. They need to have in place at least five eligibility and enrollment improvements known to promote coverage and retention, and demonstrate significant increases in Medicaid enrollment among children.22

22 The eight qualifying program features are 12-months continuous eligibility, liberalization of assets tests, eliminating the in-person interview requirement, using the same application and renewal forms for both Medicaid and CHIP, administrative or automatic renewals, presumptive eligibility, Express Lane Eligibility, and the new premium assistance option specified in CHIPRA.

[323] Bill: “Children’s Health Insurance Program Reauthorization Act of 2009.” Signed into law by Barack Obama on February 4, 2009 (became Public Law No: 111-003). <www.gpo.gov>

Pages 10-15 (in pdf):

SEC. 104. CHIP PERFORMANCE BONUS PAYMENT TO OFFSET ADDITIONAL ENROLLMENT COSTS RESULTING FROM ENROLLMENT AND RETENTION EFFORTS.

Section 2105(a) (42 U.S.C. 1397ee(a)) is amended by adding at the end the following new paragraphs:

(3) PERFORMANCE BONUS PAYMENT TO OFFSET ADDITIONAL MEDICAID AND CHIP CHILD ENROLLMENT COSTS RESULTING FROM ENROLLMENT AND RETENTION EFFORTS.—

(A) IN GENERAL.—In addition to the payments made under paragraph (1), for each fiscal year (beginning with fiscal year 2009 and ending with fiscal year 2013), the Secretary shall pay from amounts made available under subparagraph (E), to each State that meets the condition under paragraph (4) for the fiscal year, an amount equal to the amount described in subparagraph (B) for the State and fiscal year. …

(4) ENROLLMENT AND RETENTION PROVISIONS FOR CHILDREN.— For purposes of paragraph (3)(A), a State meets the condition of this paragraph for a fiscal year if it is implementing at least 5 of the following enrollment and retention provisions (treating each subparagraph as a separate enrollment and retention provision) throughout the entire fiscal year: …

(B) LIBERALIZATION OF ASSET REQUIREMENTS.—The State meets the requirement specified in either of the following clauses:

(i) ELIMINATION OF ASSET TEST.—The State does not apply any asset or resource test for eligibility for children under title XIX or this title.

(ii) ADMINISTRATIVE VERIFICATION OF ASSETS.— The State—

(I) permits a parent or caretaker relative who is applying on behalf of a child for medical assistance under title XIX or child health assistance under this title to declare and certify by signature under penalty of perjury information relating to family assets for purposes of determining and redetermining financial eligibility; and

(II) takes steps to verify assets through means other than by requiring documentation from parents and applicants except in individual cases of discrepancies or where otherwise justified.

[324] Bill: “Children’s Health Insurance Program Reauthorization Act of 2009.” Signed into law by Barack Obama on February 4, 2009 (became Public Law No: 111-003). <www.gpo.gov>

Page 99 (in pdf):

TITLE VII—REVENUE PROVISIONS

SEC. 701. INCREASE IN EXCISE TAX RATE ON TOBACCO PRODUCTS.

(a) CIGARS.—Section 5701(a) of the Internal Revenue Code of 1986 is amended—

(1) by striking “$1.828 cents per thousand ($1.594 cents per thousand on cigars removed during 2000 or 2001)” in paragraph (1) and inserting “$50.33 per thousand”,

(2) by striking “20.719 percent (18.063 percent on cigars removed during 2000 or 2001)” in paragraph (2) and inserting “52.75 percent”, and

(3) by striking “$48.75 per thousand ($42.50 per thousand on cigars removed during 2000 or 2001)” in paragraph (2) and inserting “40.26 cents per cigar”.

(b) CIGARETTES.—Section 5701(b) of such Code is amended—

(1) by striking “$19.50 per thousand ($17 per thousand on cigarettes removed during 2000 or 2001)” in paragraph (1) and inserting “$50.33 per thousand”, and

(2) by striking “$40.95 per thousand ($35.70 per thousand on cigarettes removed during 2000 or 2001)” in paragraph (2) and inserting “$105.69 per thousand”.

(c) CIGARETTE PAPERS.—Section 5701(c) of such Code is amended by striking “1.22 cents (1.06 cents on cigarette papers removed during 2000 or 2001)” and inserting “3.15 cents”.

(d) CIGARETTE TUBES.—Section 5701(d) of such Code is amended by striking “2.44 cents (2.13 cents on cigarette tubes removed during 2000 or 2001)” and inserting “6.30 cents”.

(e) SMOKELESS TOBACCO. …

[325] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

49

23%

165

77%

Democrat

305

99%

2

1%

Independent

2

100%

0

0%

NOTE: Results do not include those not voting or those who voted “Present.”

[326] 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].

[327] Report: “The Budget Reconciliation Process: The Senate’s ‘Byrd Rule’.” By Bill Heniff Jr. Congressional Research Service, September 13, 2010. <democrats.budget.house.gov>

Pages 20-22:

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.41

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.42

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.43

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.44 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.

[328] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

0

0%

178

100%

Democrat

277

79%

73

21%

Independent

2

100%

0

0%

NOTE: Results do not include those not voting or those who voted “Present.”

[329] 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>

Combined vote totals from both House of Congress:

Party

Voted YES

Voted NO

Republican

0

0%

215

100%

Democrat

274

89%

35

11%

Independent

2

100%

0

0%

NOTE: Results do not include those not voting or those who voted “Present.”

[330] 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.

[331] 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.

[332] “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).22 … 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.

[333] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $24,300 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $24,300 × 138% = $33,534

[334] 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 (in 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.

[335] 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.”

[336] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <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 2013 were about 79 percent of private health insurance payment rates, and Medicaid payment rates in 2008 were about 58 percent.13 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.

[337] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, May 13, 2011. <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 in 2010-2019 specified by the ACA in addition to the productivity adjustments). The smaller UPL [upper payment limit] established by the Medicare rates forces a similar differential for Medicaid payments. By the end of the long-range projection period [2085], Medicare and Medicaid payment rates for inpatient hospital services would both represent roughly 33 percent of the average level for private health insurance.

[338] “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 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.

[339] 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>

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 …

[340] 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.”

[341] 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 834 (in pdf): “NAME CHANGE.—Any reference in the provisions of, or amendments made by, section 3403 to the ‘Independent Medicare Advisory Board’ shall be deemed to be a reference to the Independent Payment Advisory Board.”

[342] 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: “The recommendations made by IPAB move to the Congress for fast-track consideration. If Congress does not act in the required timeframe, the Secretary is required to implement the Board’s recommendations, also on a fast-track basis.”

[343] 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>

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 net reduction in total Medicare program spending in the implementation year that is less than the applicable savings target established under subsection (c)(7)(B) for such implementation year.

(v) WAIVER AND APPEALS.—This paragraph may be waived or suspended in the Senate only by the affirmative vote of three-fifths of the Members, duly chosen and sworn. An affirmative vote of three-fifths of the Members of the Senate, duly chosen and sworn, shall be required in the Senate to sustain an appeal of the ruling of the Chair on a point of order raised under this section.

(C) CONSIDERATION BY THE OTHER HOUSE.—

(i) IN GENERAL.—The expedited procedures provided in this subsection for the consideration of a bill introduced pursuant to paragraph (1) shall not apply to such a bill that is received by one House from the other House if such a bill was not introduced in the receiving House. …

(F) VETO.—If the President vetoes the bill debate on a veto message in the Senate under this subsection shall be 1 hour equally divided between the majority and minority leaders or their designees.

(5) RULES OF THE SENATE AND HOUSE OF REPRESENTATIVES.—

This subsection and subsection (f)(2) are enacted by Congress—

(A) as an exercise of the rulemaking power of the Senate and the House of Representatives, respectively, and is deemed to be part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in that House in the case of bill under this section, and it supersedes other rules only to the extent that it is inconsistent with such rules; and

(B) with full recognition of the constitutional right of either House to change the rules (so far as they relate to the procedure of that House) at any time, in the same manner, and to the same extent as in the case of any other rule of that House. …

(e) IMPLEMENTATION OF PROPOSAL.—

(1) IN GENERAL.—Notwithstanding any other provision of law, the Secretary shall, except as provided in paragraph (3), implement the recommendations contained in a proposal submitted by the President to Congress pursuant to this section on August 15 of the year in which the proposal is so submitted. …

(3) EXCEPTION.—The Secretary shall not be required to implement the recommendations contained in a proposal submitted in a proposal year by the President to Congress pursuant to this section if—

(A) prior to August 15 of the proposal year, Federal legislation is enacted that includes the following provision: ‘This Act supercedes the recommendations of the Board contained in the proposal submitted, in the year which includes the date of enactment of this Act, to Congress under section 1899A of the Social Security Act. …

[344] Constitution of the United States. Signed September 17, 1787. <justfacts.com>

Article I, Section 7:

[Clause 2] Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law.

[345] 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>

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(h) VACANCIES; QUORUM; SEAL; VICE CHAIRPERSON; VOTING ON REPORTS.—

(1) VACANCIES.—No vacancy on the Board shall impair the right of the remaining members to exercise all the powers of the Board.

(2) QUORUM.—A majority of the appointed members of the Board shall constitute a quorum for the transaction of business, but a lesser number of members may hold hearings.

[346] Article: “Sebelius Confirmed as Secretary of HHS.” 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.”

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

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(c) BOARD PROPOSALS …

(5) CONTINGENT SECRETARIAL DEVELOPMENT OF PROPOSAL.

— If, with respect to a proposal year, the Board is required, to but fails, to submit a proposal to the President by the deadline applicable under paragraph (3)(A)(i), the Secretary shall develop a detailed and specific proposal that satisfies the requirements of subparagraphs (A) and (C) (and, to the extent feasible, subparagraph (B)) of paragraph (2) and contains the information required paragraph (3)(B)).

[348] 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>

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(e) IMPLEMENTATION OF PROPOSAL.— …

(3) EXCEPTION.—The Secretary shall not be required to implement the recommendations contained in a proposal submitted in a proposal year by the President to Congress pursuant to this section if— …

(B) in the case of implementation year 2020 and subsequent implementation years, a joint resolution described in subsection (f)(1) is enacted not later than August 15, 2017. …

(f) JOINT RESOLUTION REQUIRED TO DISCONTINUE THE BOARD.—

(1) IN GENERAL.—For purposes of subsection (e)(3)(B), a joint resolution described in this paragraph means only a joint resolution—

(A) that is introduced in 2017 by not later than February 1 of such year …

(2) PROCEDURE …

(F) MAJORITY REQUIRED FOR ADOPTION.—A joint resolution considered under this subsection shall require an affirmative vote of three-fifths of the Members, duly chosen and sworn, for adoption.

(3) TERMINATION.—If a joint resolution described in paragraph (1) is enacted not later than August 15, 2017—

(A) the Chief Actuary of the Medicare & Medicaid Services shall not—

(i) make any determinations under subsection (c)(6) after May 1, 2017; or

(ii) provide any opinion pursuant to subsection (c)(3)(B)(iii) after January 16, 2018;

(B) the Board shall not submit any proposals or advisory reports to Congress under this section after January 16, 2018; and

(C) the Board and the consumer advisory council under subsection (k) shall terminate on August 16, 2018.

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

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(g) BOARD MEMBERSHIP; TERMS OF OFFICE; CHAIRPERSON; REMOVAL …

(4) REMOVAL.—Any appointed member may be removed by the President for neglect of duty or malfeasance in office, but for no other cause.

[350] 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>

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(c) BOARD PROPOSALS …

(2) PROPOSALS.—

(A) REQUIREMENTS.—Each proposal submitted under this section in a proposal year shall meet each of the following requirements: …

(ii) The proposal shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria. …

(B) ADDITIONAL CONSIDERATIONS.—In developing and submitting each proposal under this section in a proposal year, the Board shall, to the extent feasible—

(i) give priority to recommendations that extend Medicare solvency;

(ii) include recommendations that …

(II) protect and improve Medicare beneficiaries’ access to necessary and evidence-based items and services …

NOTE: “Evidence-based” medicine is sometimes used to ration health care. The term is defined and explicated in the next two footnotes.

[351] Book: Healthcare Management Dictionary. By Annie Phillips. Radcliffe Medical Press, 2003.

Page 58:

Evidence-based medicine

The systematic analysis of data in order to assess the clinical efficacy and cost-effectiveness of treatments. First described in the British Medical Journal in 1996 as ‘the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients’, it is a discipline that aims to invalidate previously accepted diagnostic tests and therapies and replace them with new ones that are more powerful, accurate, efficacious, and safe.

The practice of evidence-based medicine means integrating individual and clinical expertise with the best available external clinical evidence from systematic research.1 This process underpins, for example, the work of the [U.K.’s] National Institute for Clinical Excellence (NICE), which decides the technologies and treatments that should be made available on the NHS [National Health Service].

[352] Book: Rationing of Medical Services in Europe: An Empirical Study. Edited by J.-Matthias Graf von der Schulenburg and Michael Blanke. IOS Press, 2004.

Chapter I: “Rationing Health Care in Europe – Finland.” By Janne Martikainen and Hannu Valtonen.

Page 18: “An unstructured question was used to explore which form of rationing professionals themselves believed to be the most effective in controlling cost escalation, since 78% of them believed that cost escalation can be controlled somehow. The most preferred forms of rationing were priority setting [20.0%], preventative treatments [15.5%] and evidence based medicine [8.9%] (Table 14). In the Finnish publicity, instead of the term ‘rationing’ the term ‘prioritization’ has been used since the beginning of the 90s.”

[353] 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>

TITLE III—IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE … Subtitle E—Ensuring Medicare Sustainability … SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD …

(e) IMPLEMENTATION OF PROPOSAL.—

(5) LIMITATION ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the implementation by the Secretary under this subsection of the recommendations contained in a proposal.

[354] Article: “Obamacare’s Other Unconstitutional Provision.” By Clint Bolick. Hoover Institution, December 16, 2011. <www.hoover.org>

The law directs IPAB—a 15-member commission appointed by the president with Senate confirmation, and whose composition (unlike most other agencies) need not be bipartisan—to make annual “legislative proposals” starting in 2014 that will result in reducing the per capita rate of growth in Medicare. The law says that certain proposals are off-limits, including any that “ration health care, raise revenues or increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility requirements.”

There are three whopping problems with this directive. First, if Medicare beneficiaries cannot be required to pay more and their benefits cannot be reduced, there is only one way to achieve cost-containment: to reduce payments to physicians and hospitals. Those reductions will further diminish the number of Medicare providers and/or reduce the quality of care—in essence, creating precisely the de facto rationing of health-care services the bill supposedly prohibits.

Second, crucial terms such as “rationing” are undefined, and the requirements are confusing and contradictory. Elsewhere, the law directs IPAB to “protect and improve Medicare beneficiaries’ access to necessary and evidence-based items and services.” So IPAB is not allowed to ration health care, but it must decide which services are “necessary and evidence-based”—which, of course, is rationing.

[355] Report: “Justification of Estimates for Appropriations Committees, Fiscal Year 2012.” Centers for Medicare and Medicaid Services, U.S. Department of Health & Human Services. <www.hhs.gov>

Page 154: “More recently, the Affordable Care Act extended funding for CHIP through FY 2015, providing an additional $28.8 billion in budget authority over the baseline.”

Page 157: “[T]he Affordable Care Act extends Federal funding for CHIP through FY 2015, appropriating $19.1 billion in FY 2014 and $21.1 billion in FY 2015.”

[356] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

Summary:

[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.

[357] Report: “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Amended.” By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. <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 to a range of 2.0 to 9.5 percent of their income and would cost an estimated $451 billion through 2019. An estimated 25 million Exchange enrollees (79 percent) would receive these Federal premium subsidies. The cost-sharing credits would reimburse individuals and families with incomes up to 400 percent of the FPL for a portion of the amounts they pay out-of-pocket for health services, as specified in section 1402, as amended. These credits are estimated to cost $55 billion through 2019.

The PPACA establishes the Exchange premium subsidies during 2014-2018 in such a way that the reduced premiums payable by those with incomes below 400 percent of FPL would maintain the same share of total premiums over time. As a result, the Federal premium subsidies for a qualifying individual would grow at the same pace as per capita health care costs during this period. Because the cost-sharing assistance is based on a percentage of health care costs incurred by qualifying individuals and families, average Federal expenditures for this assistance would also increase at the same rate as per capita health care costs. After 2018, if the Federal cost of the premium and cost-sharing subsidies exceeded 0.504 percent of GDP, then the share of Exchange health insurance premiums paid by enrollees below 400 percent of the FPL would increase such that the Federal cost would stay at approximately 0.504 percent of GDP. We estimate that the subsidy costs in 2018 would represent about 0.518 percent of GDP, with the result that the enrollee share of the total premium would generally increase in 2019 and later.

[358] Webpage: “Poverty Guidelines.” U.S. Department of Health & Human Services, January 25, 2016. <aspe.hhs.gov>

“2016 Poverty Guidelines … Persons in family/household [=] 3 … 48 Contiguous States and the District Of Columbia [=] $20,160 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $20,160 × 400% = $80,640

“2016 Poverty Guidelines … Persons in family/household [=] 4 … 48 Contiguous States and the District Of Columbia [=] $24,300 … … Alaska [=] $30,380 … Hawaii [=] $27,950”

CALCULATION: $24,300 × 400% = $97,200

“2016 Poverty Guidelines … Persons in family/household [=] 5 … 48 Contiguous States and the District Of Columbia [=] $28,440 … … Alaska [=] $35,560 … Hawaii [=] $32,710”

CALCULATION: $28,440 × 400% = $113,760

[359] 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 to a range of 2.0 to 9.5 percent of their income and would cost an estimated $451 billion through 2019. An estimated 25 million Exchange enrollees (79 percent) would receive these Federal premium subsidies.

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

[360] Report: “How Much Financial Assistance Are People Receiving Under the Affordable Care Act?” By Larry Levitt and others. Kaiser Family Foundation, March 2014. <kaiserfamilyfoundation.files.wordpress.com>

Page 1:

The table below shows estimates for each state of the total number of people who have selected a marketplace plan as of March 1, 2014, the percentage of enrollees who have qualified for assistance, the number of subsidized enrollees, subsidized enrollees as a percentage of those eligible, the average subsidy per enrollee, and total premium subsidies in the state. Estimates are based on enrollment as of March 1, 2014 as reported by the federal government, and do not account for the fact that some people have selected a plan but have not paid the first month’s premium.

Page 3: “Average Subsidy per Enrollee … Nationwide [=] $2,890”

[361] 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,’ 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.’

[362] 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 credits after that date and their carryback.

[363] Webpage: “Small Business Health Care Tax Credit and the SHOP Marketplace.” Internal Revenue Service, January 6, 2016. <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 an average wage of less than $50,000 a year

• pay at least half of employee health insurance premiums

To be eligible for this credit, you must have purchased coverage through the small business health options program, also known as the SHOP marketplace.

For information about insurance plans offered through the SHOP Marketplace, visit Healthcare.gov.

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there are changes to the credit:

• The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.

• To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement.

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

If you pay $50,000 a year toward employees’ health care premiums—and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

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.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you 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. …

Can you claim the credit?

To be eligible, you must cover at least 50 percent of the cost of employee-only (not family or dependent) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace (or qualify for an exception to this requirement) to be eligible for the credit for tax years 2014 and beyond. …

What IS an FTE? Basically, two half-time employees count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

If you pay total average annual wages of $200,000 and have 10 FTEs. To figure average annual wages you divide $200,000 by 10 — the number of FTEs — and the result is your average annual wage. The average annual wage would be $20,000.

The amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less. …

[364] Report: “Small Employer Health Tax Credit: Limited Use Continues Due to Multiple Reasons.” U.S. Government Accountability Office, March 22, 2016. <www.gao.gov>

Abstract:

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 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. …

[365] Report: “Small Employer Health Tax Credit: Limited Use Continues Due to Multiple Reasons.” U.S. Government Accountability Office, March 22, 2016. <www.gao.gov>

Abstract:

The small employer health tax credit has not been widely claimed for a variety of reasons, as GAO 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.

[366] 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.

[367] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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 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 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.

[368] Fact Sheet: “Final Regulations Implementing Employer Shared Responsibility Under the Affordable Care Act (ACA) for 2015.” U.S. Treasury Department, February 10, 2014. <www.treasury.gov>

Page 1:

The employer responsibility provision will generally apply to larger firms with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in 2016.

To avoid a payment for failing to offer health coverage, employers need to offer coverage to 70 percent of their full-time employees in 2015 and 95 percent in 2016 and beyond, helping employers that, for example, may offer coverage to employees with 35 or more hours, but not yet to that fraction of their employees who work 30 to 34 hours.

[369] 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: “Employer penalties [for not providing employees with health insurance] would be $2,000 per employee in 2014, generally, which is substantially less than the cost of providing health insurance coverage. The relationship between penalties and premiums is much more complicated for individuals than for employers; still, for many individuals the applicable penalty would be considerably smaller than the cost of coverage.”

[370] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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.”

[371] 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 (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.

[372] Article: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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, 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. ...

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.

[373] 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 (in 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)).

[374] Some examples of healthcare sharing ministries include:

Full disclosure: Some Just Facts employees are members of Christian Healthcare Ministries.

[375] 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 (in 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.

[376] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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).

[377] 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 30, 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 took effect, as well as those with employer-based health insurance, the study finds that:

• Members who newly enrolled in BCBS 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%

[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 (in 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 (in 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 (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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] Article: “Sebelius Confirmed as Secretary of HHS.” 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.”

[382] 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.ropesgray.com>

Summary: “The report indicates that PPACA [the Patient Protection and Affordable Care Act the Patient Protection and Affordable Care Act] gives federal agencies substantial responsibility and authority to “fill in the details” of the legislation through subsequent regulations. Although some regulations are required in 2010, it seems likely that other regulations will be issued for years, or even decades to come.”

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.”

[383] Op-ed: “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.

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.”

[384] 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.ropesgray.com>

Pages 4-5:

Subsection (c) of Section 1311 of PPACA (“Affordable Choices of Health Benefit Plans”) states that “The Secretary shall, by regulation, establish criteria for the certification of health plans as qualified health plans.” It goes on to say that the criteria must require that such plans meet eight minimum requirements (e.g., not employ marketing practices that discourage enrollment, ensure a sufficient choice of providers, include health plan networks that serve predominately low-income, medically underserved individuals, and utilize a standard format to present heath [sic] benefits plan options).

[385] 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 55-56:

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…

[386] Report: “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Amended.” By Richard S. Foster. U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, April 22, 2010. <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 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.

[387] Report: “Private Health Insurance Provisions in PPACA (P.L. 111-148).” By Hinda Chaikind and others. Congressional Research Service, April 15, 2010. <www.pdffiller.com>

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.

[388] 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.

[389] 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.ropesgray.com>

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.

[390] 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 21 (in 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. 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.

[391] 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.

[392] 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 18 (in 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. 2717. ENSURING THE QUALITY OF CARE.

(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.

[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>

Page 85 (in 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 (in 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 (in 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 (in 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 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 (in 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 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 (in 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 (in 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 (in 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 (in 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 (in 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 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.

[394] Report: “New Entities Created Pursuant to the Patient Protection and Affordable Care Act.” By Curtis W. Copeland. Congressional Research Service, July 8, 2010. <www.aamc.org>

Summary

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.

[395] Determined with data from:

a) Report: “Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872, The ‘Reconciliation Act Of 2010,’ As Amended, In Combination With The Revenue Effects Of H.R. 3590, The ‘Patient Protection And Affordable Care Act (‘PPACA’),’ As Passed By The Senate, And Scheduled For Consideration By The House Committee On Rules On March 20, 2010.” United States Congress, Joint Committee on Taxation, March 20, 2010. <www.jct.gov>

NOTES:

- Revenue provision # 6 (Require information reporting on payments to corporations) has been repealed and is thus subtracted from the total. [Article: “President Signs Repeal of Expanded 1099 Requirements.” Journal of Accountancy, April 14, 2011. <www.journalofaccountancy.com>]

- Not included in the table below are provisions with a “Negligible Revenue Effect” or a gain or loss of less than $50 million.

b) Report: “Prescription for change ‘filled’: Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010.” By Clint Stretch and others. Deloitte, March 30, 2010. <www.deloitte.com>

NOTE: This report contains plain-language explanations of each provision, which Just Facts used to determine the tax category of each provision. (For example, is a provision considered a tax increase or the elimination of a targeted tax deduction?) There is room for subjectivity in making some of these determinations.

Provision

Becomes effective

Revenue FY 2010-19 (billions)

Deloitte explanation (page #)

40% excise tax on health coverage in excess of $10,200/$27,500 …

2018

$32.0

9

Increase in additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses to 20%

2011

$1.4

21

Impose annual fee on manufacturers and importers of branded drugs …

2010

$27.0

11

Impose 2.3% excise tax on manufacturers and importers of certain medical devices

2013

$20.0

12

Impose annual fee on health insurance providers

2014

$60.1

10

$500,000 deduction limitation on taxable year remuneration to officers, employees, directors, and service providers of covered health insurance providers

2012

$0.6

14

Broaden Medicare Hospital Insurance Tax Base for High-Income Taxpayers…

2013

$210.2

5-7

Impose 10% excise tax on indoor tanning services

2010

$2.7

12

Codify economic substance doctrine and impose penalties for underpayments

2010

$4.5

18

Impose Fee on Insured and Self-Insured Health Plans; Patient-Centered Outcomes Research Trust Fund

2013-2019

$2.6

12

TOTAL

$361.1

[396] 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 7:

The Act includes a proposal offered by President Obama for an unearned income Medicare contribution levied on income from interest, dividends, capital gains, annuities, royalties, and rents, other than such income that is derived in the ordinary course of a trade or business and not treated as a passive activity. The Act taxes this income at a rate of 3.8 percent (up from 2.9 percent in the president’s plan). … These thresholds are set at $200,000 for singles and $250,000 for joint filers. …

The new unearned income Medicare contribution applies to taxable years beginning after December 31, 2012.

[397] “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 20: “The ACA [Affordable Care Act] also specifies that individuals with incomes greater than $200,000 per year and couples above $250,000 will pay an additional “Medicare contribution” of 3.8 percent on some or all of their non-work income (such as investment earnings). However, the revenues from this tax are not allocated to the Medicare trust funds.”

[398] 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 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 tax on self-employment income in excess of the threshold amount. Thus, an additional tax of 0.9 percent is imposed on every self-employed individual on self-employment income in excess of the threshold amount.23 22 Sec, 3101(b), as amended by the Patient Protection and Affordable Care Act (“PPACA”), Pub. L. No. 111-148. 23 Sec.

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

23 Sec. 1402(b).

[399] “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).”

[400] 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 9: “Beginning in 2018, the Act imposes a nondeductible 40 percent excise tax on the “excess benefit” provided in any month under any employer-sponsored health plan. This provision is projected to raise $32 billion through 2019. An excess benefit is a benefit the cost of which, on an annual basis, exceeds $10,200 a year for individuals or $27,500 for families. … Effective date – The high-cost plan excise tax applies to taxable years beginning after 2017.”

[401] 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 10: “An annual fee will be imposed on covered entities providing health insurance with respect to U.S. health risks. … Effective date – The fee will first be payable in 2014 with respect to net premium written in 2013.”

[402] 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 11: “The Act imposes an annual fee on pharmaceutical manufacturers and importers of branded prescription drugs (including certain biological products). … Effective date – The fee will first be payable in 2011 with respect to sales in 2010.”

[403] 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 12: “The Act imposes an excise tax of 2.3 percent on the sale price of any taxable medical device sold by manufacturers and importers beginning in 2013. Covered devices – The Act generally applies to sales for use in the United States of any medical device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans.”

[404] Determined with data from:

a) Report: “Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872, The ‘Reconciliation Act Of 2010,’ As Amended, In Combination With The Revenue Effects Of H.R. 3590, The ‘Patient Protection And Affordable Care Act (‘PPACA’),’ As Passed By The Senate, And Scheduled For Consideration By The House Committee On Rules On March 20, 2010.” United States Congress, Joint Committee on Taxation, March 20, 2010. <www.jct.gov>

NOTES:

- Revenue provision # 6 (Require information reporting on payments to corporations) has been repealed and is thus subtracted from the total. [Article: “President Signs Repeal of Expanded 1099 Requirements.” Journal of Accountancy, April 14, 2011. <www.journalofaccountancy.com>]

- Not included in the table below are provisions with a “Negligible Revenue Effect” or a gain or loss of less than $50 million.

b) Report: “Prescription for change ‘filled’: Tax provisions in the Patient Protection and Affordable Care Act, Updated to reflect changes approved in the Reconciliation Act of 2010.” By Clint Stretch and others. Deloitte, March 30, 2010. <www.deloitte.com>

NOTE: This report contains plain-language explanations of each provision, which Just Facts used to determine the tax category of each provision. (For example, is a provision considered a tax increase or the elimination of a targeted tax deduction?) There is room for subjectivity in making some of these determinations.

 

Effective

Revenue FYs 2010-19 (billions $)

Deloitte explanation (page #)

Conform the definition of medical expenses for health savings accounts … to the definition of the itemized deduction for medical expenses (excluding over-the-counter medicines prescribed by a physician)

2011

$5.0

20

Limit health flexible spending arrangements in cafeteria plans to $2,500; indexed to CPI-U after 2013

2013

$13.0

20

Eliminate deduction for expenses allocable to Medicare Part D subsidy

2013

$4.5

13

Raise 7.5% AGI floor on medical expenses deduction to 10% …

2013

$15.2

21

Modification of section 833 treatment of certain health organizations

2010

$0.4

17

Exclusion of unprocessed fuels from the cellulosic biofuel producer credit

2010

$23.6

17

TOTAL

$61.7

[405] Determined with the sources cited in the footnote above:

Provision

Effective

Revenue FYs 2010-19 (billions $)

Deloitte explanation (page #)

Qualifying therapeutic discovery project credit

2010

-$0.9

16

Exclusion for assistance provided to participants in State student loan repayment programs for certain health professionals

2009

-$0.1

21

Make the adoption credit refundable; increase qualifying expenses threshold, and extend the adoption credit through 2011

2010

-$1.2

21

TOTAL

-$2.2

[406] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Page 2: “No less than 101 amendments were submitted to the Rules Committee, and no less than 10 amendments were submitted to the Budget Committee. As part of the Democrat majority’s plan to silence the Republican minority, none of the following amendments were adopted in the Reconciliation bill.”

[407] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Page 7:

Summary: … The OPTION Act will extend the tax deduction on health care premiums to all individuals, making health care expenses totally deductible for individuals, and not just businesses. All expenses currently allowed to be purchased with Health Savings Accounts (HSAs) will be tax deductible also. Individuals who have employer health care plans but still incur costs on medical expenses, deductibles, premiums, pharmaceuticals (prescribed, over the counter, etc.), or any medical related expenses would qualify for this deduction. Medicare recipients will also be allowed to deduct their Medicare supplemental insurance premiums.

Action: The amendment was rejected by a vote of 9 to 4. This amendment was previously introduced as stand-alone legislation on October 21, 2009, H.R. 3889, Offering Patients True and Individualized Options Now Act.

Page 8: “Summary: This amendment would allow for 100% deductibility of individual medical expenses. Action: The amendment was rejected by a vote of 9 to 4.”

[408] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Pages 17-18:

Summary: This amendment would repeal the enactment of the Independent Medicare Advisory Board … which was renamed the Independent Payment Advisory Board (IPAB), made up of non-elected government bureaucrats that are empowered to make arbitrary cuts to Medicare providers and make recommendations to non-federal health programs that will limit access to care for seniors. Congress would be required to consider legislation implementing the proposal or alternative proposals with the same budgetary impact on a fast track basis. The recommendations of the board would go into effect automatically unless blocked by subsequent legislative action. …

Action: The amendment was rejected by a vote of 9 to 4. This amendment was introduced in March 2010 as stand-alone legislation, H.R. 4985, the Medicare Decisions Accountability Act of 2010.

[409] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Page 4:

Summary: This amendment would require that all individuals under Medicaid have to demonstrate their identity and citizenship. Currently, there are 11.1 million illegal aliens residing in the United States. This amendment would prevent the crippling burden of providing free health care to these non-citizens from falling on the shoulders of the U.S. taxpayer.

Action: The Democrat majority did not consider this amendment in committee. Rep. Deal introduced a similar amendment in the House Energy & Commerce Committee mark-up of H.R. 3200, which was rejected.

Page 16:

Summary: This amendment would require a valid photo ID when applying for Medicaid or SCHIP. While the bill requires that applicants give a social security number, it contains no requirement that an individual show a valid ID in order to match the individual with the social security number provided—thus creating a vast opportunity for fraud and abuse.

Action: The amendment was rejected by a vote of 9 to 4.

Page 25:

Summary: This amendment would require any individual who wishes to access to a health Exchange or affordability tax credits to provide documentation of citizenship or nationality. The Senate bill contains the same insufficient and ineffective verification methods as the House, causing some to be concerned that it would still allow for illegal immigrants to access the Exchange and subsidies.

Action: The Democrat majority did not consider this amendment in committee.

[410] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Page 8:

Summary: This amendment would repeal the individual mandate. PPACA imposes $17 billion tax increase for non-compliance with the individual mandate. Furthermore, the individual mandate necessitates a government definition of acceptable health care coverage. Because the benefit package found in the Democrats’ health care bills are quite large (or in some cases still to be determined by an unelected bureaucratic board of the Secretary of HHS), it is likely that millions of Americans would be unable to keep their existing health care coverage and be forced to pay for more expensive health insurance or pay a fine. CBO found that 3.9 million Americans would pay $17 billion in taxes

Action: The Democrat majority did not consider this bill in committee.

[411] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Pages 22-23:

Summary: This amendment would add a section on interstate purchasing of health insurance, which was previously introduced as H.R. 3217, Health Care Choice Act of 2009. This Act empowers consumers by giving them the ability to purchase an affordable health insurance policy with a range of options. It will allow consumers to purchase health insurance licensed in other states – expanding choice and increasing affordability. Interstate shopping is vital to bringing prices down through free enterprise. The National Center for Policy Analysis notes that a healthy 25-year-old male could purchase a basic health insurance policy in Kentucky for $960 a year. That same policy in New Jersey, however, would cost $5,880 a year. The Health Care Choice Act would enable the market to mitigate such enormous price differentials.

Action: The amendment was rejected by a vote of 9 to 4. This amendment was previously introduced on July 14, 2009 as stand-alone legislation, H.R. 3217, Health Care Choice Act of 2009.

Pages 33-34: “Summary: This amendment would force health insurance companies to compete across state lines, which expands consumers’ choice and increases affordability. Interstate shopping is vital to bringing down prices down through free enterprise. Action: The Democrat majority did not consider this bill in committee. Rep. John Shadegg introduced similar stand-alone legislation, H.R. 3217, the Health Care Choices Act of 2009.”

[412] Report: “Summary of Republican Amendments Submitted for H.R. 4872—Health Care and Education Reconciliation Act of 2010.” Republican Study Committee, August 2010. <rsc.flores.house.gov>

Page 25:

Summary: This amendment would extend the protection of existing coverage in section 1251, “Preservation of Right to Maintain Existing Coverage,” to those who are enrolled after the date of enactment. This amendment would change the section of the bill entitled “Protecting the Choice to keep Current Coverage” to include appropriate language in keeping with this section’s title. Currently, this section contains language forcing all employer health plans to comply with new mandates from the Secretary of HHS within five years of the bill’s enactment, thus essentially preventing Americans from keeping their current plans. This amendment would replace these provisions with the statement “Nothing in this Act shall be construed to prevent or limit individuals from keeping their current health coverage.” This language far more closely represents the section title’s intent as well as President Obama’s promise to the American people.

Action: The Democrat majority did not consider this amendment in committee. This amendment was previously introduced and rejected in House Energy & Commerce Committee mark-up of H.R. 3200.

[413] Video: “Obama Promises to Lower Health Insurance Premiums by $2,500 Per Year.” Accessed September 28, 2015 at <www.youtube.com>

January 3, 2008: “And if you already have health care, then we’re gonna reduce costs an average of $2,500 per family on premiums.”

February 19, 2008: “And if you already have health insurance, we will lower your premiums by $2,500 per family per year.”

February 23, 2008: “And we will lower premiums for the typical family by $2,500 a year.”

March 1, 2008: “We’ll work with your employer to lower your premiums by $2,500 per family per year.”

March 14, 2008: “And if you’ve got health care, we’re gonna work with your employer to lower your premiums by $2,500 per family per year.”

April 22, 2008: “We’re gonna work with your employer through a catastrophic reinsurance plan to lower premiums by $2,500 per family per year.”

May 3, 2008: “I also have a health care plan that would save the average family $2,500 on their premiums.”

June 27, 2008: “It’s time to bring down the typical family’s premium by about $2,500. And it’s time to bring down the costs for the entire country.”

October 15, 2008: “The only thing we’re gonna try to do is lower costs so that those cost savings are passed on to you. And we estimate we can cut the average family’s premium by about $2,500 a year.”

[414] Video: “Obama Promises to Lower Health Insurance Premiums by $2,500 Per Year.” Accessed September 28, 2015 at <www.youtube.com>

February 19, 2008: “And if you already have health insurance, we will lower your premiums by $2,500 per family per year.”

[415] Video: “Obama Promises to Lower Health Insurance Premiums by $2,500 Per Year.” Accessed September 28, 2015 at <www.youtube.com>

May 3, 2008: “I also have a health care plan that would save the average family $2,500 on their premiums.”

[416] Report: “Employer Health Benefits: 2015 Summary of Findings.” The Kaiser Family Foundation and Health Research & Educational Trust, September 22, 2015. <files.kff.org>

Page 1:

Employer-sponsored insurance covers over half of the non-elderly population, 147 million people in total.1 To provide current information about employer-sponsored health benefits, the Kaiser Family Foundation (Kaiser) and the Health Research & Educational Trust (HRET) conduct an annual survey of private and nonfederal public employers with three or more workers. …

The key findings from the survey, conducted from January through June 2015, include a modest increase (4%) in the average premiums for both single and family coverage in the past year.

Page 2: “Exhibit B: Average Premium Increases for Covered Workers with Family Coverage, 2000–2015. … 2005 to 2010 … Premium Increases [=] 27% … Overall Inflation = 12% … 2010 to 2015 … Premium Increases [=] 27% … Overall Inflation = 9%”

Page 9:

The Kaiser Family Foundation/Health Research & Educational Trust 2015 Annual Employer Health Benefits Survey (Kaiser/HRET) reports findings from a telephone survey of 1,997 randomly selected public and private employers with three or more workers. Researchers at the Health Research & Educational Trust, NORC at the University of Chicago, and the Kaiser Family Foundation designed and analyzed the survey. National Research, LLC conducted the fieldwork between January and June 2015. In 2015, the overall response rate is 42%, which includes firms that offer and do not offer health benefits. Among firms that offer health benefits, the survey’s response rate is also 41%.

Since firms are selected randomly, it is possible to extrapolate from the sample to national, regional, industry, and firm size estimates using statistical weights. In calculating weights, we first determine the basic weight, then apply a nonresponse adjustment, and finally apply a post-stratification adjustment. We use the U.S. Census Bureau’s Statistics of U.S. Businesses as the basis for the stratification and the post-stratification adjustment for firms in the private sector, and we use the Census of Governments as the basis for post-stratification for firms in the public sector.

CALCULATIONS:

2005-2010: 27% - 12% = 15%

2010-2015: 27% - 9% = 17%

[417] Calculated with data from:

a) Video: “36 Times Obama Said You Could Keep Your Health Care Plan.” Accessed September 28, 2015 at <www.youtube.com>

October 7, 2008: “If you’ve got health care already, then you can keep your plan if you are satisfied with it.”

June 5, 2009: “If you like the plan you have, you can keep it.”

June 11, 2009: “I intend to keep this promise. … If you like your health care plan, you’ll be able to keep your health care plan.”

June 12, 2009: “If you like your plan and your doctor, you can keep them.”

June 15, 2009: “You’ll be able to keep your health care plan.”

June 23, 2009: “If you like your plan, you keep your plan.”

July 16, 2009: “You like your doctor; you like your plan. You can keep your doctor; you can keep your plan.”

July 17, 2009: “You like your current insurance, you keep that insurance. Period. End of story.”

July 23, 2009: “If you’ve got health insurance, you can keep it.”

July 27, 2009: “If you have insurance that you like, then you will be able to keep that insurance.”

July 29, 2009: “If you like your health care plan, you keep your health care plan.”

July 29, 2009: “Nobody’s going to force you to leave your health care plan.”

July 29, 2009: “If you like your health care plan, you will keep your plan.”

August 7, 2009: “If you like your health care plan, you can keep your health care plan.”

August 11, 2009: “If you like your health care plan, you can keep your health care plan.”

August 14, 2009: “No matter what you’ve heard. If you like your doctor or health care plan, you can keep it.”

August 14, 2009: “If you like your health care plan, you can keep your health care plan.”

August 20, 2009: “If you like your private health insurance plan, you can keep it.”

August 21, 2009: “If you like your private health insurance plan, you can keep your plan. Period.”

September 9, 2009: “Nothing in this plan will require you or your employer to change the coverage or the doctor you have.”

September 11, 2009: “If you are among the hundreds of millions of Americans who already have insurance … nothing in my plan will require you or your employer to change the coverage or the doctor you have.”

January 29, 2010: “If you wanna keep the health insurance you got, you can keep it.”

March 3, 2010: “If you like your plan, you can keep your plan.”

March 5, 2010: “If you like the insurance plan you have now, you can keep it.”

March 8, 2010: “If you like your plan, you can keep your plan.”

March 15, 2010: “If you like your plan, you can keep your plan.”

March 19, 2010: “If you like your plan, keep your plan.”

March 23, 2010: “If you like your current insurance, you will keep your current insurance.”

April 1, 2010: “If you like your insurance plan, you will keep it.”

September 29, 2010: “If you’re happy with what you’ve got, nobody’s changing it.”

June 28, 2012: “If you are one of the more than 250 million Americans who already have health insurance, you will keep your health insurance.”

July 6, 2012: “If you have health insurance, the only thing that changes for you is: you’re more secure.”

July 13, 2012: “If you already have health care, the only thing this bill does is make sure that it’s even more secure.”

October 3, 2012: “If you’ve got health insurance, you keep your own insurance.”

September 26, 2013: “Today I wanna speak plainly, clearly, honestly … If you already have health care, you don’t have to do anything.”

October 25, 2013: “Everyone who already has health insurance … will keep the benefits and protections this law already has put into place.”

b) Video: “Obama Montage: If you like your doctor you can keep your doctor.” Accessed September 28, 2015 at <www.youtube.com>

June 11, 2009: “If you like the doctor you have, you can keep your doctor.”

August 15, 2009: “If you like your doctor or health care plan, you can keep it.”

August 20, 2009: “If you like your doctor, you can keep your doctor.”

August 22, 2009: “If you like your doctor, you can keep your doctor.”

January 27, 2010: “Our approach would preserve the right of Americans who have insurance to keep their doctor and their plan.”

NOTE: Between October 2008 and October 2013, Barack Obama gave some variation of the following pledge on 39 separate occasions, including the pledge cited in the footnote above: “If you like your health care plan, you can keep your health care plan.” He also gave some variation of the following pledge on 11 separate occasions, including the pledge cited in the footnote above: “If you like your doctor, you can keep your doctor.”

[418] Transcript: “Remarks by the President to the Annual Conference of the American Medical Association.” The White House, Office of the Press Secretary, June 15, 2009. <www.whitehouse.gov>

So let me begin by saying this to you and to the American people: I know that there are millions of Americans who are content with their health care coverage—they like their plan and, most importantly, they value their relationship with their doctor. They trust you. And that means that no matter how we reform health care, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor, period. (Applause.) If you like your health care plan, you’ll be able to keep your health care plan, period. (Applause.) No one will take it away, no matter what. My view is that health care reform should be guided by a simple principle: Fix what’s broken and build on what works.

[419] Article: “Obamacare: More Than 2 Million People Getting Booted From Existing Health Insurance Plans.” CBS News, October 30, 2013. <www.cbsnews.com>

CBS News has learned more than two million Americans have been told they cannot renew their current insurance policies—more than triple the number of people said to be buying insurance under the new Affordable Care Act, commonly known as Obamacare.

There have been estimates about hundreds of thousands of people losing coverage, CBS News’ Jan Crawford reported on “CBS This Morning.” CBS News has reached out to insurance companies across the country to determine some of the real numbers—and this is just the tip of the iceberg, Crawford said. The people who are opening the letters are shocked to learn they can’t keep their insurance policies despite President Obama’s assurances to the contrary.

The White House is on the defensive trying to explain it, after Mr. Obama repeatedly said, “If you like your doctor or health care plan, you can keep it.” …

It’s an unexpected reality of Obamacare being told through anecdotes in local papers and on social media. But the hard numbers reveal the evidence is far more than anecdotal. CBS News has confirmed with insurance companies across the country that more than two million people are getting notices they no longer can keep their existing plans. In California, there are 279,000; in Michigan, 140,000; Florida, 300,000; and in New Jersey, 800,000. And those numbers are certain to go even higher. Some companies who tell CBS News they’ve sent letters won’t say how many.

NOTE: This article and the one below use the term “people,” but the context suggests that these figures may actually refer to people who received cancelation notices. In cases where these insurance policies covered families, the number of people who lost their health insurance would be multiplicatively higher.

[420] Article: “Policy Notifications and Current Status, by State.” Associated Press, December 26, 2013. <news.yahoo.com>

Millions of Americans who buy their own health insurance were informed this fall that their policies would no longer be offered starting in 2014 because they do not meet the higher standards of the federal Affordable Care Act. The actual number of people receiving the notices is unclear, in part because officials in nearly 20 states say they do not have the information or are not tracking it.

Some states tracked the policy notifications through their insurance departments or health care exchanges. In other states, the largest private insurers released the number of discontinuation notices they issued.

President Barack Obama then said insurance companies could allow the older policies to continue, but left that decision to the states and individual insurers. The response has been mixed.

This chart shows that at least 4.7 million Americans received the cancellation notices. It also provides details about what decision has been made in each state since Obama’s announcement (some states had previously decided to allow insurers to continue older policies for a limited time).

It reflects reporting by AP staffers in every state and the District of Columbia and does not include policy cancelations in the small-business insurance market.

[421] Article: “How Many Nongroup Policies Were Canceled? Estimates From December 2013.” By Lisa Clemans-Cope and Nathaniel Anderson. Heath Affairs, March 3, 2014. <healthaffairs.org>

[I]n December 2013, the Health Reform Monitoring Survey (HRMS) asked a sample of adults (age 18–64) the following question: “Did you receive a notice in the past few months from a health insurance company saying that your policy is cancelled or will no longer be offered at the end of 2013?” These survey data are self-reports and thus likely measured with some error. …

The findings from HRMS show that nearly one in five (18.6 percent) of those with nongroup health insurance at the time of the survey report the plan they had in 2013 will no longer be offered to them because it did not meet new coverage requirements. Estimates from the NHIS indicate that approximately 14 million people had non-group coverage at a point in time. Identifying the number of people enrolled in non-group insurance is challenging. Estimates in Abraham et al. (2013) ranged from 9.55 million in the Medical Expenditure Panel Survey to 25.3 million in the American Community Survey. We use the NHIS estimate since it corresponds with more recent estimates based on new NAIC enrollment data reported in the Supplemental Health Care Exhibit (SHCE).

Using this estimate, our findings imply that roughly 2.6 million people would have reported that their plan would no longer be offered due to noncompliance with the ACA. Another 6 percent reported that their plan was cancelled for other reasons, and 75.4 percent reported that they did not receive a notice of cancellation (figure 1).

NOTE: The HRMS has a response rate of 5%.† According to the textbook, Mind On Statistics, even polls with more than six times this response rate are not trustworthy.‡ The Urban Institute, which conducts this poll, argues that its 5% “response rate does not necessarily imply inaccurate estimates” and gives reasons why.‡

† Webpage: “Health Reform Monitoring Survey.” Urban Institute. Accessed March 21, 2016 at <hrms.urban.org>

‡ Textbook: Mind on Statistics (Fourth edition). By Jessica M. Utts and Robert F. Heckard. Brooks/Cole Cengage Learning, 2012. Pages 164-165: “Surveys that simply use those who respond voluntarily are sure to be biased in favor of those with strong opinions or with time on their hands. … According to a poll taken among scientists and reported in the prestigious journal Science … scientists don’t have much faith in either the public or the media. … It isn’t until the end of the article that we learn who responded: ‘The study reported a 34% response rate among scientists….’ With only about a third of those contacted responding, it is inappropriate to generalize these findings and conclude that most scientists have so little faith in the public and the media.”

[422] Memo: “Options Available for Consumers with Cancelled Policies.” Department of Health & Human Services, Centers for Medicare & Medicaid Services, Center for Consumer Information & Insurance Oversight, December 19, 2013. <www.cms.gov>

Page 1:

The Affordable Care Act provides many new consumer protections. In some instances, health insurance issuers in the individual and small group markets are cancelling policies that do not include the new protections for policy or plan years beginning in 2014. Because some consumers were finding other coverage options to be more expensive than their cancelled plans or policies, President Obama announced a transition period allowing for the renewal of cancelled plans and policies between January 1 and October 1, 2014, under certain circumstances. Some states have adopted the transitional policy, enabling health insurance issuers to renew their existing plans and policies. Some health insurance issuers are not renewing cancelled plans or policies. …

If your health insurance policy has been cancelled, a number of options are already available to you: …

• You may shop for coverage through the Health Insurance Marketplace (the Marketplace). Depending on your income and other factors, you may be eligible to receive a premium tax credit that will help cover the cost of purchasing coverage through the Marketplace or cost-sharing reductions for Marketplace coverage. …

NOTE: Click here for more information about “the Marketplace” (a.k.a. Obamacare exchanges).

[423] Report: “Exchange Plans Include 34 Percent Fewer Providers than the Average for Commercial Plans.” By Chris Sloan and Elizabeth Carpenter. Avalere Health, July 15, 2015. <avalere.com>

New analysis from Avalere finds that the average provider networks for plans offered on the health insurance exchanges created by the Affordable Care Act (ACA) include 34 percent fewer providers than the average commercial plan offered outside the exchange. The new data quantifies anecdotal reports that exchange networks contain fewer providers than traditional commercial plans. …

Specifically, the analysis finds that exchange plan networks include 42 percent fewer oncology and cardiology specialists; 32 percent fewer mental health and primary care providers; and 24 percent fewer hospitals.

“Patients should evaluate a plan’s provider network when picking insurance on the exchange,” said Elizabeth Carpenter, vice president at Avalere. “Out-of-network care does not accrue toward out-of-pocket maximums, leaving consumers vulnerable to high costs if they seek care from a provider not included in their plan’s network.”

Avalere examined the largest rating region in the top five states by 2015 exchange effectuated enrollment: Florida, California, Texas, Georgia, and North Carolina. In each of these rating regions, Avalere compared the average number of providers included, for each of the five provider types examined, in exchange networks compared to commercial networks in the same geographic area. Commercial network data includes plans offered in the group and individual markets outside the exchange.

NOTE: Credit for bringing this to the attention of Just Facts belongs to Chris Rauber. [Article: “Just How Narrow Are Obamacare’s ‘Narrow Networks’?” By Chris Rauber. San Francisco Business Times, July 15, 2015. <www.bizjournals.com>]

[424] Health & Human Services, Centers for Medicare & Medicaid Services, Center for Consumer Information & Insurance Oversight, December 19, 2013. <www.cms.gov>

Page 1:

The Affordable Care Act provides many new consumer protections. In some instances, health insurance issuers in the individual and small group markets are cancelling policies that do not include the new protections for policy or plan years beginning in 2014. Because some consumers were finding other coverage options to be more expensive than their cancelled plans or policies, President Obama announced a transition period allowing for the renewal of cancelled plans and policies between January 1 and October 1, 2014, under certain circumstances. Some states have adopted the transitional policy, enabling health insurance issuers to renew their existing plans and policies. Some health insurance issuers are not renewing cancelled plans or policies. …

If your health insurance policy has been cancelled, a number of options are already available to you:

… You may also be eligible for Medicaid. …

[425] “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 …

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.

[426] Article: “Republican Matt Bevin elected governor of Kentucky.” By Adam Beam. Associated Press, November 4, 2015. <bigstory.ap.org>

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.

[427] 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 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).

[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 2:

The estimated costs and savings shown in the table are based on the effective dates specified in the law as enacted. Additionally, we assume that employers and individuals would take roughly 3 to 5 years to fully adapt to the new insurance coverage options and that the enrollment of additional individuals under the Medicaid coverage expansion would be completed by the third year of implementation. Because of these transition effects and the fact that most of the coverage provisions would be in effect for only 6 of the 10 years of the budget period, the cost estimates shown in this memorandum do not represent a full 10-year cost for the new legislation.

[429] 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>

Pages 4-5:

We estimate … $575 billion in net savings for the Medicare provisions, a net cost of $28 billion for the Medicaid/CHIP provisions (excluding the expansion of Medicaid eligibility and the additional CHIP funding), $2 billion in savings from provisions intended to help reduce the rate of growth in health spending … and $10 billion in costs for the immediate insurance reforms. …

… ($410 billion) can be attributed to expanding Medicaid coverage for all adults who live in households with incomes below 133 percent of the FPL. … [A]dditional funding for the CHIP program for 2014 and 2015, which would increase such expenditures by an estimated $29 billion. [R]efundable tax credits and reduced cost-sharing requirements for low-to-middle-income enrollees purchasing health insurance through the Exchanges ($507 billion) and credits for small employers who choose to offer insurance coverage ($31 billion).

[430] 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>

Pages 4-5:

We estimate … $38 billion in net savings from the CLASS program….

The increases in Federal expenditures would be partially offset by the penalties paid by affected individuals who choose to remain uninsured and employers who opt not to offer coverage; such penalties total $120 billion through fiscal year 2019….

[431] Calculated with data from the report: “Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872, The ‘Reconciliation Act Of 2010,’ As Amended, In Combination With The Revenue Effects Of H.R. 3590, The ‘Patient Protection And Affordable Care Act (‘PPACA’),’ As Passed By The Senate, And Scheduled For Consideration By The House Committee On Rules On March 20, 2010.” United States Congress, Joint Committee on Taxation, March 20, 2010. <www.jct.gov>

“Fiscal years 2010-19 … [Billions of Dollars] … 6. Require information reporting on payments to corporations [=] 17.1 … NET TOTAL [=] 437.8”

NOTE: Revenue provision # 6 (Require information reporting on payments to corporations) has been repealed and is thus subtracted from the total. [Article: “President Signs Repeal of Expanded 1099 Requirements.” Journal of Accountancy, April 14, 2011. <www.journalofaccountancy.com>]

CALCULATION: $437.8 net total - $17.1 repeal of revenue provision # 6 = $420.7

[432] This figure of $141 billion, which was calculated by Just Facts using data from the Joint Committee on Taxation and the Centers for Medicare and Medicaid Services, is $17 billion higher than the projection of the Congressional Budget Office.† In keeping with our Standards of Credibility, we are citing the higher of these numbers to give “preferentiality to figures that are contrary to our viewpoints.”

† “CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010.” By Douglas W. Elmendorf. Congressional Budget Office, March 30, 2011. <www.cbo.gov>

Page 2: “Table 1. Estimated Budgetary Effects of the Enactment of PPACA [Patient Protection and Affordable Care Act] and the Health Care Provisions of the Reconciliation Act … (Billions of dollars, by fiscal year) … March 2010 Estimates … Net Increase or Decrease (-) in the Deficit … 2010-2019 [=] -124”

[433] “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>

“Overriding the [Affordable Care Act] productivity adjustments, as Congress has done repeatedly in the case of physician payment rates, would lead to far higher costs for Medicare in the long range than those projected under current law.”

[434] Letter: “Projected Medicare Expenditures under an Illustrative Scenario with Alternative Payment Updates to Medicare Providers.” By John D. Shatto and M. Kent Clemens. United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of the Actuary, July 22, 2015. <www.cms.gov>

Page 2:

The purpose of the SGR [Sustainable Growth Rate] system, which was enacted as part of the Balanced Budget Act of 1997, is to limit growth in spending on physician services to a sustainable rate, roughly in line with the rate of overall economic growth.

Because actual physician-related spending has exceeded the target spending levels for 2001 through 2009, physician payment reductions have been scheduled for every year since 2002. An update of −4.8 percent was required and was allowed to take effect in 2002—the only historical year in which a negative physician update was implemented under the SGR. For the next 9 years (2003-2011), scheduled negative updates of at least −5 percent were overridden by new legislation, which provided updates ranging from 0 percent to 2.2 percent. For 2004 through 2006, these legislative acts not only provided replacement updates and increased the actual physician spending, they also specified that the target level of spending would not be increased to match.5 Thus, the cumulative difference between actual and target spending has increased substantially. Each of the legislative changes to the physician updates for 2007through 2011 increased both actual and target spending, but required that the payment updates for subsequent years be determined as if the updates in the prior years had not been changed.

Page 6: “The increasing differential between Medicare and private payment rates is due to the productivity adjustments in 2012 and later for the Medicare payment updates (and, to a lesser degree, to the other, smaller downward adjustments in 2010-2019 specified by the ACA in addition to the productivity adjustments).”

[435] “2015 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 22, 2015. <www.cms.gov>

Page 258:

STATEMENT OF ACTUARIAL OPINION …

The recently enacted Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 permanently replaces the sustainable growth rate (SGR) formula, which was used for physician fee schedule payments, with a new method for determining annual payment rate updates. The changes specified in MACRA avoid the substantial reductions in physician payments that were required under the SGR formula and establish payment updates that are related to participation in alternative payment models or are subject to adjustments based on the quality of care provided. While the scheduled updates for the next several years provide a much more plausible expectation for current-law physician payments than under the SGR, the specified rate updates are not expected to keep up with underlying physician costs, resulting in a large and growing problem over the long range.

[436] “Remarks by the President on 20th Anniversary of the Americans with Disabilities Act South Lawn.” By Barack Obama. The White House, July 26, 2010. <www.whitehouse.gov>

So the Affordable Care Act I signed into law four months ago will give every American more control over their health care—and it will do more to give Americans with disabilities control over their own lives than any legislation since the ADA [Americans with Disabilities Act]. …

… And because Americans with disabilities are living longer and more independently, this law will establish better long-term care choices for Americans with disabilities as a consequence of the CLASS Act, an idea Ted Kennedy championed for years. (Applause.)

[437] 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 14:

CLASS Program

Title VIII of the health reform act establishes a new, voluntary, Federal insurance program providing a cash benefit if a participant is unable to perform at least two or three activities of daily living or has substantial cognitive impairment. The program will be financed by participant premiums, with no Federal subsidy. Participants will have to meet certain modest work requirements during a 5-year vesting period before becoming eligible for benefits. Benefits are intended to be used to help purchase community living assistance services and supports (CLASS) that would help qualifying beneficiaries maintain their personal and financial independence and continue living in the community. Benefits can also be used to help cover the cost of institutional long-term care. …

[438] 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 14:

We estimate that roughly 2.8 million persons will participate in the program by the third year. This level represents about 2 percent of potential participants, compared to a participation rate of 4 percent for private long-term care insurance offered through employers. Factors affecting participation in CLASS include the program’s voluntary nature, the lack of a Federal subsidy, a minimal premium for students and individuals with incomes under 100 percent of the FPL (initially $5 per month), a relatively high premium for all other participants as a result of adverse selection and the effect of subsidizing participants paying the $5 premium, a new and unfamiliar benefit, and the availability of lower-priced private long-term care insurance for many.

[439] Interview: “Meet the senator who killed the CLASS Act.” By Sarah Kliff. Washington Post, October 18, 2011. <www.washingtonpost.com>

If anyone can claim responsibility for the CLASS Act’s demise, it’s probably Sen. Judd Gregg. During the health reform debate, the former Republican senator from New Hampshire secured an amendment requiring the Department of Health and Human Services to certify that the long-term insurance program would be fiscally sound. …

Sen. Judd Gregg: I knew we weren’t going to kill the CLASS Act because it was Sen. Ted Kennedy’s proposal, and he was very sick, and most of us were very sensitive to the fact he was sick. This was his last hurrah, legislatively. I knew we were going to implement it, although I didn’t think the concept was sound. Conceptually, it makes sense to prefund long-term care insurance…. but what this bill did was just the opposite. It was totally unsound.

My thought was, let’s put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.

[440] 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.ropesgray.com>

Page 7:

Section 8002 of the act (“Establishment of a National Voluntary Insurance Program for Purchasing Community Living Assistance Services and Support”) amended the PHSA [Public Health Service Act] by, among other things, adding a new Section 3203 (“CLASS Independence Benefit Plan”) that requires the Secretary to develop at least three “actuarially sound benefit plans as alternatives for consideration for designation by the Secretary as the CLASS Independence Benefit Plan under which eligible beneficiaries shall receive benefits under this title.” Subsection (a)(2) of this new section requires a “CLASS Independence Advisory Council” to evaluate the alternative plans and recommend the one that “best balances price and benefits to meet enrollee’s needs in an actuarially sound manner.” Using this information, Subsection (a)(3) requires the Secretary to designate a benefit plan as the CLASS Independence Benefit Plan, and to do so “along with details of the plan and the reasons for the selection by the Secretary, in a final rule that allows for a period of public comment.”

[441] 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 15:

In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, thereby leading to additional premium increases. This effect has been termed the “classic assessment spiral” or “insurance death spiral.” The problem of adverse selection is intensified by requiring participants to subsidize the $5 premiums for students and low-income enrollees. Although Title VIII includes modest work requirements in lieu of underwriting and specifies that the program is to be “actuarially sound” and based on “an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period,” there is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.13

13 An analysis of the potential adverse selection problems for the CLASS program was performed by a nonpartisan, joint workgroup of the American Academy of Actuaries and the Society of Actuaries. Their report was issued on July 22, 2009 and is available at <www.actuary.org>.

[442] Blog post: “Secretary Sebelius Cannot Fix CLASS.” By Brian Blase and John S. Hoff. Heritage Foundation, March 16, 2011. <heritage.org>

The main problem is that the program’s design will result in a badly skewed pool of participants. This is primarily because health status cannot be a factor used for calculating premiums. This means healthy individuals are less likely to participate because they do not receive credit in the form of a lower premium, like they would if they purchased LTC insurance in the private market. Instead, CLASS participants are likely to be disabled individuals who are able to work part-time and individuals who anticipate future LTC needs.

Moreover, the adverse selection problem is exacerbated because individuals earning below the poverty line are subjected to only a $5 monthly premium, and less healthy people are much more likely to be below the poverty line. The artificially low premium for them means that premiums will have to be much higher for others, which will diminish overall enrollment in the program and worsen its long-run solvency. The poor design of CLASS almost guarantees that the program will collapse or need a bailout.

[443] 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>

Pages 14-15:

CLASS Program …

Participants will have to meet certain modest work requirements during a 5-year vesting period before becoming eligible for benefits. Benefits are intended to be used to help purchase community living assistance services and supports (CLASS) that would help qualifying beneficiaries maintain their personal and financial independence and continue living in the community. Benefits can also be used to help cover the cost of institutional long-term care.

As shown in the table on page 2, we estimate a net Federal savings for the CLASS program of $38 billion during the first 9 years of operations—the first 5 of which are prior to the commencement of benefit payments. After 2015, as benefits are paid, the net savings from this program will decline; in 2025 and later, projected benefits exceed premium revenues, resulting in a net Federal cost in the longer term.12

12 The CLASS program is intended to be financed on a long-range, 75-year basis through participant premiums that would fully fund benefits and administrative expenses. If this goal can be achieved, despite anticipated serious adverse selection problems (described subsequently), then annual expenditures would be met through a combination of premium income and interest earnings on the assets of the CLASS trust fund. The Federal Budget impact would be the net difference between premium receipts and program outlays. Thus, the trust fund would be adequately financed in this scenario, but the Federal Budget would have a net savings each year prior to 2025 and a net cost each year thereafter.

[444] Article: “Health Law to Be Revised by Ending a Program.” By Robert Pear. New York Times, October 14, 2011. <www.nytimes.com>

The Obama administration announced Friday that it was scrapping a long-term care insurance program created by the new health care law because it was too costly and would not work. …

“We have not identified a way to make Class work at this time,” Ms. Sebelius said. She said the program, which had been championed by Senator Edward M. Kennedy, Democrat of Massachusetts, was financially unsustainable.

[445] Interview: “Meet the senator who killed the CLASS Act.” By Sarah Kliff. Washington Post, October 18, 2011. <www.washingtonpost.com>

If anyone can claim responsibility for the CLASS Act’s demise, it’s probably Sen. Judd Gregg. During the health reform debate, the former Republican senator from New Hampshire secured an amendment requiring the Department of Health and Human Services to certify that the long-term insurance program would be fiscally sound. …

Sen. Judd Gregg: I knew we weren’t going to kill the CLASS Act because it was Sen. Ted Kennedy’s proposal, and he was very sick, and most of us were very sensitive to the fact he was sick. This was his last hurrah, legislatively. I knew we were going to implement it, although I didn’t think the concept was sound. Conceptually, it makes sense to prefund long-term care insurance…. but what this bill did was just the opposite. It was totally unsound.

My thought was, let’s put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.

[446] Article: “Obama opposes repeal of healthcare program suspended last week.” By Julian Pecquet. The Hill, October 17, 2011. <thehill.com>

“President Obama is against repealing the health law’s long-term care CLASS Act and might veto Republican efforts to do so, an administration official tells The Hill, despite the government’s announcement Friday that the program was dead in the water.”

[447] Calculated with “National Health Expenditure Data.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services, December 9, 2014. <www.cms.gov>

Table 20: “Private Health Insurance, Benefits and Net Cost; Levels, Annual Percent Change and Percent Distribution, Selected Calendar Years 1960-2013.” Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. <www.cms.gov>

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

[448] Book: Medical Care Output and Productivity. Edited by David M. Cutler and Ernst R. Berndt. University of Chicago Press, 2001.

Chapter 7: “National Health Accounts/National Income and Product Accounts Reconciliation: Hospital Care and Physician Services.” By Arthur Sensenig and Ernest Wilcox.

Page 276: “Since 1964, the U.S. Department of Health and Humans Services has published an annual series of statistics presenting total national health expenditures during each year. … [The] net cost of private health insurance [is] … the difference between premiums earned by insurers and the claims or losses for which insurers become liable….”

[449] Dataset: “National Health Expenditure Web Tables (Calendar Years 1960-2010).” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services. Accessed January 16, 2012 at <www.cms.gov>

Net cost of health insurance is calculated as the difference between CY [calendar year] incurred premiums earned and benefits paid for private health insurance. This includes administrative costs, and in some cases, additions to reserves, rate credits and dividends, premium taxes, and plan profits or losses. Also included in this category is the difference between premiums earned and benefits paid for the private health insurance companies that insure the enrollees of the following programs: Medicare, Medicaid, Children’s Health Insurance Program, and workers’ compensation (health portion only).

[450] “Quick Definitions for National Health Expenditure Accounts (NHEA) Categories.” U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services. Accessed January 16, 2012 at <www.cms.gov>

Private Health Insurance:

Includes premiums paid to traditional managed care, self-insured health plans and indemnity plans. This category also includes the net cost of private health insurance which is the difference between health premiums earned and benefits incurred. The net cost consists of insurers’ costs of paying bills, advertising, sales commissions, and other administrative costs; net additions to reserves; rate credits and dividends; premium taxes; and profits or losses.

[451] Book: Cost Accounting. By V. Rajasekaran & R. Lalitha. Dorling Kindersley, 2011.

Page 189:

Administration overhead … Examples: Salary of administrative-office personnel, rent, taxes of general office, remuneration and sitting fees of directors, lighting, heating and other expenses of general office; all stationary and communication of expenses of office, audit fees, legal fees, insurance premium of office buildings, furniture and fixtures and their respective depreciation and bank changes. …

Selling overhead … Examples: Salary and all incentives offered for sales personnel, travelling expenses of sales personnel, rebates and discounts in the costs of price list, brochures, samples, collections costs for debts, repair and maintenance, insurance premium paid and deprecation with respect to sales office building, sales office equipment, furniture and fixtures.

[452] Calculated with the following data:

a) “Industries, Health Care: Insurance and Managed Care.” Fortune, May 5, 2008. <fortune.com>

b) “Industries, Health Care: Insurance and Managed Care.” Fortune, May 4, 2009. <fortune.com>

c) “Industries, Health Care: Insurance and Managed Care.” Fortune, May 3, 2010. <fortune.com>

d) “Industries, Health Care: Insurance and Managed Care.” Fortune, May 23, 2011. <fortune.com>

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

[453] Book: Essentials of Managed Health Care (Fifth edition). By Peter R. Kongstvedt. Jones & Bartlett Learning, 2007.

Page 20:

A decade ago or longer, the various types of MCOs [managed care organizations] were reasonably distinct. Since then the differences between traditional forms of health insurance and managed care organizations have narrowed to the point where it is very difficult to tell whether an entity is an insurance company or an MCO. In contrast to the situation 20 years ago, when managed care organizations were often referred to as “alternative delivery systems,” managed care in various forms is now the dominant form of health insurance coverage in the United States, and relatively few people receive their health insurance through the once traditional form of indemnity health insurance coverage.

[454] 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 the company’s revenues: the amount of money that resulted from selling products or services to customers. A company may have other revenues as well. In many cases, these additional revenues derive from investments or interest income from the firm’s cash holdings.

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

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

[455] 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, deprecation (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.

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

“EBITDA margins are the cleanest way to do comparisons across different types of industries.”

[457] Dataset: “EBITDA Margins for the S&P 500.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on March 26, 2016.

NOTE: This dataset uses the financial industry’s standard term “Managed Health Care” for what Just Facts and others (like Fortune magazine) call “Health Insurance/Managed Care.” The next footnote explains why these terms are effectively equivalent.

[458] Book: Essentials of Managed Health Care (Fifth edition). By Peter R. Kongstvedt. Jones & Bartlett Learning, 2007.

Page 20:

A decade ago or longer, the various types of MCOs [managed care organizations] were reasonably distinct. Since then the differences between traditional forms of health insurance and managed care organizations have narrowed to the point where it is very difficult to tell whether an entity is an insurance company or an MCO. In contrast to the situation 20 years ago, when managed care organizations were often referred to as “alternative delivery systems,” managed care in various forms is now the dominant form of health insurance coverage in the United States, and relatively few people receive their health insurance through the once traditional form of indemnity health insurance coverage.

[459] Article: “Top Dems blame insurance industry as health care roadblock.” By Deirdre Walsh. CNN, July 30, 2009. <politicalticker.blogs.cnn.com>

As Congress prepares to head into a monthlong August recess, Democratic leaders on Capitol Hill ripped into the insurance industry, framing the health care debate as a battle against insurers. …

Senate Majority Leader Harry Reid also called out insurers at a news conference Thursday.

“I don’t think we should be crying great big tears for the insurance industry,” he said. “There is no business in America that makes more money than the insurance industry. Over the past 10 years their profits have been increased by over 450 percent.

[460] Dataset: “Top industries: Most profitable.” Fortune, May 4, 2009. <money.cnn.com>

[461] Entry: “managed care.” American Heritage Medical Dictionary. Houghton Mifflin, 2007. <medical-dictionary.thefreedictionary.com>

“Any arrangement for health care in which an organization, such as an HMO, another type of doctor-hospital network, or an insurance company, acts as intermediate between the person seeking care and the physician.”

[462] Dataset: “EBITDA Margins for the S&P 500.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on March 26, 2016.

NOTES:

- Some of the other industries in the S&P 500 with continually higher EBITDA margins than the health insurance/managed care industry during this period include publishing, brewers, pharmaceuticals, healthcare equipment, and telecom services.

- This dataset uses the financial industry’s standard term “Managed Health Care” for what Just Facts and others (like Fortune magazine) call “Health Insurance/Managed Care.” The next footnote explains why these terms are effectively equivalent.

[463] Book: Essentials of Managed Health Care (Fifth edition). By Peter R. Kongstvedt. Jones & Bartlett Learning, 2007.

Page 20:

A decade ago or longer, the various types of MCOs [managed care organizations] were reasonably distinct. Since then the differences between traditional forms of health insurance and managed care organizations have narrowed to the point where it is very difficult to tell whether an entity is an insurance company or an MCO. In contrast to the situation 20 years ago, when managed care organizations were often referred to as “alternative delivery systems,” managed care in various forms is now the dominant form of health insurance coverage in the United States, and relatively few people receive their health insurance through the once traditional form of indemnity health insurance coverage.

[464] Article: “Networks Aid Obama’s War on Insurers’ Profits.” By Julia A. Seymour. Business & Media Institute, October 28, 2009. <www.mrc.org>

Chris Matthews showed his distain [sic] for the companies’ profits on NBC Sept. 6 saying: “I’d regulate the insurance companies like public utilities, and squeeze them down to a reasonable profit level.” He asked his guests that day, “Why don’t they do that? That’s the solution.”

Katty Kay, BBC’s Washington correspondent, replied, “Well, you’d stop the insurance companies making outrageous profits.”

[465] Dataset: “Industry Summary.” Yahoo! Finance. Current as of January 13, 2002. <biz.yahoo.com>

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

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

[467] Transcript: “Obama Unveils Compromise Health Care Deal.” By Julie Rovner. NPR, February 22, 2010. <www.npr.org>

[468] Dataset: “Industry Summary.” Yahoo! Finance. Current as of January 13, 2002. <biz.yahoo.com>

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

[469] Dataset: “EBITDA Margins for the S&P 500.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on March 26, 2016.

NOTE: This dataset uses the financial industry’s standard term “Managed Health Care” for what Just Facts and others (like Fortune magazine) call “Health Insurance/Managed Care.” The next footnote explains why these terms are effectively equivalent.

[470] Book: Essentials of Managed Health Care (Fifth edition). By Peter R. Kongstvedt. Jones & Bartlett Learning, 2007.

Page 20:

A decade ago or longer, the various types of MCOs [managed care organizations] were reasonably distinct. Since then the differences between traditional forms of health insurance and managed care organizations have narrowed to the point where it is very difficult to tell whether an entity is an insurance company or an MCO. In contrast to the situation 20 years ago, when managed care organizations were often referred to as “alternative delivery systems,” managed care in various forms is now the dominant form of health insurance coverage in the United States, and relatively few people receive their health insurance through the once traditional form of indemnity health insurance coverage.

[471] Article: “Huge Profits for Health Insurers as Americans Put Off Care” or “Health Insurers Making Record Profits as Many Postpone Care.” By Reed Abelson. New York Times, May 13, 2011. <www.nytimes.com>

[472] Dataset: “Sectors > Services > Publishing - Newspapers.” Yahoo! Finance. Current as of January 13, 2002. <biz.yahoo.com>

“Net Profit Margin % (most recent quarter) … The New York Times Company (NYT) [=] 2.92%”

[473] Dataset: “Industry Summary.” Yahoo! Finance. Current as of January 13, 2002. <biz.yahoo.com>

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

[474] Dataset: “EBITDA Margins for the S&P 500.” Sent to Just Facts by Yardeni Research (<www.yardeni.com>) on March 26, 2016.

NOTE: This dataset uses the financial industry’s standard term “Managed Health Care” for what Just Facts and others (like Fortune magazine) call “Health Insurance/Managed Care.” The next footnote explains why these terms are effectively equivalent.

[475] Book: Essentials of Managed Health Care (Fifth edition). By Peter R. Kongstvedt. Jones & Bartlett Learning, 2007.

Page 20:

A decade ago or longer, the various types of MCOs [managed care organizations] were reasonably distinct. Since then the differences between traditional forms of health insurance and managed care organizations have narrowed to the point where it is very difficult to tell whether an entity is an insurance company or an MCO. In contrast to the situation 20 years ago, when managed care organizations were often referred to as “alternative delivery systems,” managed care in various forms is now the dominant form of health insurance coverage in the United States, and relatively few people receive their health insurance through the once traditional form of indemnity health insurance coverage.

[476] Article: “Uninsured rate remains stable even as incomes drop.” By Doug Trapp. American Medical News, September 26, 2011. <www.ama-assn.org>

[477] Press Release: “New U.S. census data show rise in number of uninsured Americans, underscoring importance of Affordable Care Act.” Statement from Alan Baker (interim executive director), American Public Health Association, September 13, 2011. <www.apha.org>

[478] Article: “Key points of U.S. Census report: Health insurance and poverty.” By Star-Ledger Staff. Star Ledger, September 14, 2011. <www.nj.com>

[479] House editorial: “Bleak News on Health Insurance.” New York Times, September 14, 2011. <www.nytimes.com>

[480] Report: “Income, Poverty, and Health Insurance Coverage in the United States: 2010.” By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. <www.census.gov>

Page 1: “This report presents data on income, poverty, and health insurance coverage in the United States based on information collected in the 2011 and earlier Current Population Survey Annual Social and Economic Supplements (CPS ASEC) conducted by the U.S. Census Bureau.”

Page 26: “Table 8. People Without Health Insurance Coverage by Selected Characteristics: 2009 and 2010”

2009

2010

Uninsured

Number

Portion of
Uninsured

Number

Portion of

Uninsured

Total

48,985

100%

49,904

100.0%

Not a citizen

9,729

20%

9,667

19.4%

Income of $50,000 to $74,999

8,997

18%

8,831

17.7%

Income of $75,000 or more

9,669

20%

9,473

19.0%

Income of $50,00 or more†

18,666

38%

18,304

36.7%

NOTE: † Calculated by Just Facts

[481] Report: “Income, Poverty, and Health Insurance Coverage in the United States: 2010.” By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. <www.census.gov>

Page 75:

APPENDIX C.

ESTIMATES OF HEALTH INSURANCE COVERAGE

Quality of Health Insurance Coverage Estimates

National surveys and health insurance coverage. Health insurance coverage is likely to be underreported on the Current Population Survey (CPS). While underreporting affects most, if not all, surveys, underreporting of health insurance coverage appears to be a larger problem in the Annual Social and Economic Supplement (ASEC) than in other national surveys that ask about insurance. … Compared with other national surveys, the CPS estimate of the number of people without health insurance more closely approximates the number of people who are uninsured at a specific point in time during the year than the number of people uninsured for the entire year.

Reporting of coverage through major federal health insurance programs. The CPS ASEC data underreport Medicare and Medicaid coverage compared with enrollment and participation data from the Centers for Medicare and Medicaid Services (CMS).1 Because the CPS is largely a labor force survey, interviewers receive less training on health insurance concepts than labor concepts. Additionally, many people may not be aware that a health insurance program covers them or their children if they have not used covered services recently. CMS data, on the other hand, represent the actual number of people who have enrolled or participated in these programs. …

1 CMS is the federal agency primarily responsible for administering the Medicare and Medicaid programs at the national level.

NOTE: Credit for bringing attention to the facts in the footnotes above and below belongs to Jeffrey H. Anderson [Op-ed: “The Real Number of Uninsured Americans.” The Weekly Standard, December 29, 2010. <www.weeklystandard.com>]

[482] Report: “Income, Poverty, and Health Insurance Coverage in the United States: 2010.” By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. <www.census.gov>

Pages 75-76:

The State Health Access Data Assistance Center (SHADAC) of the University of Minnesota has worked with the U.S. Census Bureau, CMS, and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) on a research project to evaluate why CPS ASEC [the Current Population Survey Annual Social and Economic Supplement (i.e., this report)] estimates of the number of people with Medicaid are lower than counts of the number of people enrolled in the program from CMS [the Centers for Medicare and Medicaid Services]. Reports from all four phases of the research project are available from the Census Bureau’s Website at <www.census.gov>

During Phase 1, a database of Medicaid and Medicare enrollment was built using the CMS Medicaid Statistical Information System (MSIS) files merged with CMS Medicare Enrollment Database (EDB) files. The quality of the database was evaluated using two Census Bureau files: the Master Address File/Auxiliary Reference File (MAFARF) and the Person Characteristics File (PCF).

… A key finding indicating survey response error in the CPS ASEC was that 16.9 percent of people with an MSIS record indicating Medicaid coverage reported in the CPS ASEC that they were uninsured. …

Phase 4 consisted of repeating the Phase 2 process using the National Health Interview Survey (NHIS) data instead of CPS ASEC data. The purpose of this was twofold: to provide explanations for the differences found between NHIS data and MSIS files and to examine how differing survey designs and methodologies affect the survey data and estimates. The report found that the NHIS Medicaid undercount was 27.3 percent in 2001 and 21.7 percent in 2002, but noted that the NHIS added questions in 2004 and these results may not apply to more recent data.

NOTE: See the next footnote, which shows that the uninsured undercount in 2005 was even greater than 16.9%.

[483] Calculated with data from:

a) Report: “Income, Poverty, and Health Insurance Coverage in the United States: 2010.” By Carmen DeNavas-Walt and others. U.S. Census Bureau, September 2011. <www.census.gov>

Page 77: “Table C-1: Health Insurance Coverage: 1987 to 2010 (Numbers in thousands. People as of March of the following year) … 2005 … Not covered [=] 43,035”

b) Report: “Research Project to Understand the Medicaid Undercount: Phase V Research Results: Extending the Phase II Analysis of Discrepancies between the National Medicaid Statistical Information System (MSIS) and the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) from Calendar Years 2000-2001 to Calendar Years 2002-2005.” By Michael Davern and others. State Health Access Data Assistance Center, January 4, 2010. <www.census.gov>

Page 2:

This paper describes the results of the fifth phase of a multi-phase research project coordinated by the University of Minnesota’s State Health Access Data Assistance Center (SHADAC), Centers for Medicare and Medicaid Services (CMS), Assistant Secretary for Planning and Evaluation (ASPE), National Center for Health Statistics (NCHS), Administration for Healthcare Research and Quality (AHRQ), and U.S. Census Bureau. The research is designed to explain why discrepancies exist between survey estimates of enrollment in Medicaid and the number of enrollees reported in state and national administrative data. …

When measured using raw counts (i.e., counts with no or minimal adjustments), the size of the undercount is about 35 percent (i.e., the CPS ASEC [the Current Population Survey Annual Social and Economic Supplement (i.e., the report cited in (a) above)] shows 35 percent fewer people enrolled in Medicaid than MSIS [Medicaid Statistical Information System] administrative records). Some of this raw undercount can be accounted for by the fact that the two data sources have different concepts of Medicaid coverage as well as different universes. When the counts are fully adjusted to account for these differences, the undercount is reduced by about 3 percentage points to 32 percent. …

Page 3:

The linked file suggests that a predominant part of the adjusted undercount can be accounted for by false negative respondent error (i.e., persons on the CPS ASEC being incorrectly classified as lacking Medicaid coverage). Most of this error comes from cases where enrollment status was explicitly reported (as opposed to cases where the enrollment status was imputed or edited).

Page 7:

Table 3 shows that for all of the years studied, similar conclusions can be drawn regarding the importance of false negative error as a contributor to the undercount.

Table 3: False Negative Survey Errors on the CPS … Calendar Year 2005 … “Other Insurance” status of false negative population … Uninsured [=] 7,800,000

Table 3 also shows the “other insurance” status of the population with false negative errors (i.e. whether or not the person is categorized on the CPS ASEC as having any other insurance coverage, either public or private). This information is useful when considering the impact that the false negative population has on the estimate of the size of the uninsured population. Surveyed persons mistakenly classified as not enrolled in Medicaid will only affect the estimate of the uninsured population if they are not also classified as having any other insurance coverage. Table 3 shows that in all years only about 40% of the false negative population is classified as having no other insurance – i.e. less than half of the population with false negative errors has any impact on the estimate of the uninsured population.

CALCULATION: 7,800,000 uninsured false negatives in 2005 / 43,035,000 uninsured in the Census Bureau’s 2005 Current Population Survey = 18.1%

Just Facts | 641 Shunpike Rd #286 | Chatham, NJ 07928 | Contact Us

Copyright © Just Facts. All rights reserved.
Just Facts is a nonprofit 501(c)3 organization.
Information provided by Just Facts is not legal, tax, or investment advice.
justfacts.com | justfactsdaily.com