Consumer Power Report #322
The name of President Barack Obama’s health care law is, of course, the Affordable Care Act. But a major clash has broken out in Washington regarding what that word “affordable” really means--and billions of dollars in subsidies hang in the balance.
As we’ve noted in the past, Richard Burkhauser of Cornell was the first to spot this problem , an error made during the evaluation process of Obama’s law that artificially diminished the cost of its numerous subsidies.
Essentially the problem arose when the Joint Committee on Taxation informed the Congressional Budget Office that it should “ignore family members when determining whether employees actually pay more than 9.5 percent of their household income on insurance.” From the article:
The instruction was included in a correction of a complex, 150 page March 21 document. The correction read: “ERRATA FOR JCX-18-10 … On page 15, Minimum essential coverage and employer offer of health insurance coverage, in the second sentence of the second paragraph, ‘the type of coverage applicable (e.g., individual or family coverage)’ should be replaced with ‘self-only coverage.’”
So essentially, as Burkhauser’s paper here indicates , the administration faces a difficult choice: either you expand affordability to include the cost of family coverage (thereby exploding the costs of the subsidies by billions of dollars), or you keep it where it is, and far fewer people qualify under the “affordability” designation than Congress had expected.
Now, the Washington Post reports, the Treasury Department has released a draft rule to resolve this issue – and it leans toward the original, more restrictive definition. Here’s the story: 
A proposed Treasury Department rule says workers and their families cannot qualify for those subsidies unless their employer’s plan is unaffordable because it exceeds 9.5 percent of their household income. Consumer advocates oppose the rule because it bases affordability on how much employees would pay to cover themselves, not on the cost of covering their entire family. As a result, they say, many workers will be unable to afford family coverage, yet their spouses and children will be ineligible to get help to buy insurance. An estimated 3.9 million dependents would be affected, according to one estimate.
“The proposed rule excludes people Congress intended to cover,” said Bruce Lesley, president of First Focus Campaign for Children, which wrote a letter to Treasury signed by more than100 advocacy groups, including the American Academy of Family Physicians, the Children’s Defense Fund, the March of Dimes and the National Council of La Raza.
The letter calls on the president and congressional leaders to take “administrative action or legislation” to clarify what Congress intended. Treasury officials are reviewing the comment letters as they draft final rules expected to be released in the upcoming weeks.
The timing could hardly be worse for the administration, given the run of bad luck they’ve had of late with the ever-rising pricetag associated with Obama’s law , even if their friends in the media would prefer to keep it off of page one. 
While it remains to be seen whether the administration heeds the outrage among these advocacy groups, the cost of keeping its promises may turn out to be just too high. Which should make them wonder whether it was the right promise to make in the first place.
-- Benjamin Domenech
IN THIS ISSUE:
Isn’t it interesting how temporary costs become permanent?
While the 20 million people who will gain subsidized coverage on the new insurance exchanges have gotten most of the attention, President Obama’s health law also expands Medicaid and the Children’s Health Insurance Program to 17 million low-income families starting in 2014. Medicaid, however, is already straining to care for the more than 58 million already in the program because it doesn’t pay doctors enough to participate.
The law’s expansion “could generate unsustainable pressure on Medicaid’s already taxed network of primary care providers,” the nonprofit Center for Health Care Strategies warned in a report last year.
To alleviate some of the pressure ahead of the law’s expansion, House Democrats included in their version of the bill a provision requiring states to pay primary care physicians no less than 100 percent of Medicare payment rates in 2013 and 2014 for primary care services. The temporary increase would be fully funded by the federal government.
Republicans say the temporary expansion is a “bait and switch” that either hides the true cost of the Medicaid expansion if Congress ends up extending the rate bump indefinitely or promises millions of people coverage that will turn out to be worthless if patients can’t find a doctor.
“There will be calls to extend this after 2014,” a House Republican staffer told The Hill. “And if we extend it, shouldn’t that have been calculated into the overall cost of the bill, or is that just another budget gimmick? And if we don’t extend it, who’s going to take care of the 20 million new Medicaid beneficiaries?”
SOURCE: The Hill 
Avik Roy outlines the bad news about Medicaid.
Studies consistently show that patients on Medicaid have the worst health outcomes of any group in America--far worse than those with private insurance and, in some cases, worse than those with no insurance at all.
A landmark study published in the Annals of Surgery examined outcomes for 893,658 individuals undergoing major surgical operations from 2003 to 2007. The authors of the study, who hailed from the department of surgery at the University of Virginia, divided their patient population by the type of insurance they held--private, Medicare, Medicaid, and uninsured--and adjusted the database in order to control for age, gender, income, geographic region, operation, and comorbid conditions. That way, they could correct for the obvious differences in the patient populations (for example, older and poorer patients are more likely to have ill health).
They then examined three measurements of surgical outcome quality: the rate of in-hospital mortality; average length of stay in the hospital (longer stays in the hospital are a marker of poorer outcomes); and total costs. The in-hospital death rate for surgical patients with private insurance was 1.3 percent. Medicare, uninsured, and Medicaid patients were 54 percent, 74 percent, and 97 percent, respectively, more likely to die than those with private insurance.
The average length of stay in the hospital was 7.38 days for those with private insurance; on an adjusted basis, those with Medicare stayed 19 percent longer; the uninsured stayed 5 percent shorter; and those with Medicaid stayed 42 percent longer. Total costs per patient were $63,057 for private insurance; Medicare patients cost 10 percent more; uninsured patients 4 percent more; and Medicaid patients 26 percent more.
In summary: Medicaid patients were almost twice as likely to die as those with private insurance; their hospital stays were 42 percent longer and cost 26 percent more. Compared with those without health insurance, Medicaid patients were 13 percent more likely to die, stayed in the hospital for 50 percent longer, and cost 20 percent more.
The fiscal situation is no better – in fact, today Texas Gov. Rick Perry seems to agree, calling Medicaid a “Ticking Time Bomb.” 
SOURCE: Manhattan Institute For Policy Research 
Some disturbing news from Missouri.
Questions surrounding how the state awarded more than $1.1 billion worth of Medicaid contracts have sparked an investigation by the Missouri Senate.
California-based Molina Healthcare discovered in February that it lost its contract to manage health care for Medicaid beneficiaries in Missouri. The company has filed a lawsuit alleging that state officials violated competitive bidding laws and changed the rules to favor another company, Centene Corp., which was a major donor to Gov. Jay Nixon, a Democrat.
Senate President Pro Tem Rob Mayer, a Dexter Republican, has now formally requested that the Senate Government Accountability Committee investigate how the state awards Medicaid contracts.
“Billions of dollars are spent every year on the Medicaid program,” Mayer said. “I think it’s reasonable for the legislature to get a better idea of how those contracts are awarded.”
A spokeswoman for the Office of Administration – the agency that handles purchasing for the state – did not respond to a request for comment.
SOURCE: Kansas City Star 
And little better news from Utah.
A huge proportion of the state’s Medicaid clients – two-thirds of them children – are victims of hackers who broke into an inadequately protected computer server at the Utah Department of Health, officials said Friday.
The cyber invasion started a week ago, with most of the data stolen from 181,604 Medicaid and Children’s Health Insurance Program recipients between Sunday night and Monday morning. Of those clients, 25,096 appear to have had their Social Security numbers compromised. ...
Lincoln Nehring, senior health policy analyst with the nonprofit Voices for Utah’s Children, said he has “all the confidence in the world the state has the expertise ... to make sure this never happens again.”
Nehring said it would be hard to calculate the ongoing effects on children whose Social Security numbers were stolen. But he does have a major concern.
“Medicaid and CHIP already have a negative connotation in the community,” he said. “Even if nothing happens with the stolen [information], I’m just worried this will make families even more reluctant to use these services to protect their health.”
SOURCE: Salt Lake Tribune 
The New Yorker notices medical tourism:
For decades, wealthy people from developing countries have come here for care, but these days medical tourists travel all over the world. And while it’s hard to disentangle the stats from the hype--a number of countries portray themselves as favored destinations--it’s clear that millions of people are now doing this. The Bumrungrad hospital, in Bangkok, treats four hundred thousand foreign patients annually. Malaysia had almost six hundred thousand medical tourists last year. And South Korea had more than a hundred thousand, nearly a third of them American.
For Americans, the attraction is obvious: medical care is a lot cheaper abroad. At CIMA Hospital, in Costa Rica, for instance, hip-replacement surgery costs around fifteen thousand dollars, roughly a sixth of the average here. So far, though, various factors have kept a lid on demand. Logistics can be challenging, and insurance companies have been leery about reimbursements for care overseas: they already get big discounts with U.S. hospitals, and they risk a public-relations disaster anytime something goes wrong abroad. Above all, patients have been wary. We trust the quality of foreign-made televisions and cars, but we haven’t taken that leap when it comes to foreign doctors. People worry about the lack of legal recourse, and the sheer unfamiliarity of medical tourism makes people hesitant to try it. A few years ago, the grocery-store chain Hannaford set up a partnership for the benefit of its employees with a well-accredited Singaporean hospital. Singapore is one of the most prosperous countries in the world, but medical care there is still significantly cheaper than in the U.S., so the arrangement looked like a model for how medical tourism might work. But none of Hannaford’s workers were interested in going to Singapore.
There are a host of forces that could change this. The quality of medical facilities in developing countries has risen dramatically, and the private hospitals that cater to tourists often feature technologies similar to those in American hospitals. (This has its problematic side: many of these high-end hospitals are in countries where citizens struggle to get basic care.) Furthermore, new companies are making treatment abroad easier and more attractive. Blue Cross/Blue Shield has started a company called Companion Global Healthcare, which connects patients with hospitals around the world. Political events could also quickly make medical tourism considerably more attractive. If Obamacare is overturned, forty million Americans without insurance will stay that way. If Medicaid and Medicare are cut sharply, the cost of American health care will eventually become prohibitive to many senior citizens. And if health-care costs keep soaring fewer employers will offer health insurance. That doesn’t mean that Americans are soon going to jet halfway around the world for an ingrown toenail, but it’s easy to envisage regional systems becoming common, with Americans heading to places like Costa Rica and Mexico, and Western Europeans going to places like Hungary and Turkey.
SOURCE: The New Yorker 
From the committee:
On Wednesday, April 18, the Subcommittee on Health will hold a hearing on “FDA User Fees 2012: How Innovation Helps Patients and Jobs.” Wednesday’s legislative hearing will focus on reauthorization of the Prescription Drug User Fee Act (PDUFA) and the Medical Device User Fee Act (MDUFA), which expire at the end of September 2012. PDUFA reauthorization will support the approval and expediting of prescription drugs to the marketplace, while the reauthorization of MDUFA and improvements to medical device regulation will help bring greater predictability, consistency, and transparency to the approval of these important medical products. Both PDUFA and MDUFA play important roles in ensuring patients receive quality care and access to new therapies while promoting innovation and job creation. The hearing will also focus on the new generic drug user fee and biosimilars user fee. These user fees, if enacted by Congress, would help expedite the approval of generic drugs and biosimilars, bringing savings to American patients. A background memo and complete witness list will be posted here when they become available.
SOURCE: Committee On Energy and Commerce 
Health policy expert Chris Jacobs has a new blog--note today’s post on the Buffett Rule on health care:
Even as Democrats invoke Warren Buffett’s name in promoting this afternoon’s tax increase, it’s also worth recalling that in March 2010, Mr. Buffett conducted an interview for CNBC where – asked about the health legislation that was then in the process of being rammed through Congress – he said the bill “really doesn’t attack the cost situation that much” and that “I don’t believe in insuring more people until you attack the cost aspect of this.”
In other words, there is not just a Buffett Rule on taxes – there’s a Buffett Rule on health care too, and it’s this: Obamacare’s coverage expansions should not start until the law is proven to have lowered health care spending levels.
But the real question is, why won’t Democrats accept this Buffett Rule as well? After all, if President Obama is so confident the 2,700-page overhaul will be effective in lowering premiums by $2,500 per family as promised, why doesn’t he believe this condition will be easily met? Conversely, if the President does NOT believe the law will be effective in slowing the growth of health spending, and will instead result in skyrocketing costs to federal taxpayers, what’s the point of even voting on today’s tax increase, seeing as how new spending on Obamacare will quickly overwhelm the $47 billion in supposed savings from this tax hike?
SOURCE: Jim DeMint