Following on my successful series of seminars and webinars for the VSCPA, MaSCPA, MeSCPA and AICPA, I’ve posted a flash version of the slides that deal with the ‘reforms” to health insurance at https://www.cpa.net/resource/slides/
Our condolences to the victims of the terrorist bombing in Boston and their families and friends and to the family and friends of the murdered MIT policeman. Also, our thanks to the law enforcement agencies for their diligent and rapid elimination of the terrorists. Finally, our prayers for the transit officer recovering from gunshot injuries in apprehending the terrorists as well as the many victims recovering from bomb blast injuries.
May justice be resolute, swift, certain and effective.
Today was my 5th annual run in the Greensboro Owl’s Roost Rumble, a now annual father-daughter event. Despite a week characterized by warm days, a storm blew thru Friday night, dumping a lot of rain on the course trails and plunging Saturday AM race time temps to 45 degrees. As the picture below indicates, we were inspired by Team Spirit in custom designed race jerseys of my daughter’s creation, resulting in top three age group finishes for both of us. Our award was an offical race beer glass and the satisfaction that comes from training hard and sharing success together.
As I indicated in my last post, I continue to search the two new sets of regulations on Essential Health Benefits and Insurance Rules. There are, in fact, some factual surprises and at least one that benefits the states with the most “progressive” insurance rating rules and mandated benefits, in sharp contrast to the rest of the ACA that requires those benefit-rich states to fund Medicaid plans out of pocket while other states got a free ride from the feds, and disproportionately taxes those states (e.g., Massachusetts, New York, New Jersey, Connecticut) to pay for the cost of Reform. That Surprise is that the feds will pay for the cost of mandated benefits imposed by the state that exceed the ACA definition of Essential Health Benefits if those mandates were in place on or before December 31, 2011. Thus, things like In Vitro Fertilization, podiatric services, low protein foods, wigs and more importantly the scope of such coverage will be eligible for federal subsidies when purchased through an Exchange. One can be reasonably certain that this was NOT priced in by the CBO in its cost estimates for the ACA, which are understated in any event.
I once asked a family member who is a brilliant scientist to explain Maxwell’s equations of light to me. She obliged, but I must confess I do not understand them sufficiently and thus it would be very difficult for me to challenge someone’s analysis of same or to debate their applicability in a particular circumstance. Here is an example of that from the insurance market regulations taken from Table V.1, called an Accounting Table – apparently by an actuary who did not know what Accounting meant:
* Lower rates for individuals in the individual and small group market who are older and/or in relatively poor health, and women; and potentially higher rates for some young men which will be mitigated by provisions such as premium tax credits, risk stabilization programs, access to catastrophic plans, and the minimum coverage provision.”
I think what they are telling us here is that there might NOT be a free lunch and that young men will have to pick up any unpaid check. Well, that is the gentlemanly thing to do, I guess.
Here is a quote from another such Accounting Table (IV.1) in the Essential Health Benefit regulations and its introduction:
“The approach to defining AV [that is Actuarial Value in regulation-speak] in this proposed rule uses standard assumptions about utilization and prices, and, for most products, directs issuers to use an AV calculator created by the Department to compute AV. This approach will ensure that two plans with the same cost-sharing parameters (that is, deductibles, copayments, and coinsurance features) will have the same AVs. This approach is intended to lower consumer information costs and drive competition in the market by enabling consumers to easily compare the relative generosity of plans, knowing that the AV of each plan has been calculated in the same manner.”
Consumers are going to understand AV? Me thinks not, if anything, they are likely to think it means Audio-Visual, like the Club when you were in High School. Does insurance pay for a 70 inch flat-screen with 3-D?
“(2) Costs due to higher service utilization. As consumers gain additional coverage for benefits that previously did not meet the standards outlined in this proposed rule (for example, pediatric dental or vision coverage), utilization, and thus costs, may increase. A portion of this increased utilization and costs will be economically inefficient, as insurance coverage creates a tendency to overuse health care. Further, there may be incremental costs to consumers associated with greater service utilization.”
Uhhhh, yeah! That is how we got to the place we are at in the first instance! When that Buffet Table line opens up, I’m heading for the lobster tails, king crab legs and filet mignon. Bon Appetit!
More to follow, but it appears that the title of this post, taken from Wikipedia,* sums up the proposed regulations released by CMS yesterday on essential health benefits. Although I would need a textbook rather than a BLOG post to hit them all, as I sit here on the eve of Thanksgiving, this is my favorite Oxymoron:
“The coverage of additional benefits results in a transfer from out-of-pocket payments to premium payments. Increased access to insurance coverage for previously excluded benefits will make medical care for those benefit categories more affordable for consumers by covering a portion of the costs of those services. While out of pocket costs would decline, consumers could purchase benefits and services inefficiently – that is, purchase more than the efficient amount of the previously excluded benefits and services. However, studies of the Medicare program suggest that the costs of this inefficiency are likely more than offset by the benefits of risk reduction.”
Huh? So, like I take a previously uninsured service and make it insured, right? And, because it is insured and folks think they do not have to pay for it, it is cheaper. Yeah, I think I get that. People who needed the service used to pay for it but now insurance will pay for it; yeah, OK, that means the users do not pay for it. But wait. If insurance pays for it now, doesn’t that means that everyone is paying for it thru their insurance premiums?
Dear Mr. Fantasy play us a tune
Something to make us all happy
Do anything, take us out of this gloom
Write a regulation, sourced from the Moon
And a tip o’ the hat to Traffic and NASA
We had a question we could not answer definitively at yesterday’s Healthcare Hardball session concerning assignment of Medicare beneficiaries to an ACO when they do not have a Primary Care Physician. The answer is that if a beneficiary does not see a PCP, as defined in the regulations, CMS will then evaluate which specialist physicians the beneficiary sought primary care services from. Presumably, this would be based on CPT and ICD data. Chapter 8 of my book on Healthcare Reform with Greg Anderson is devoted to ACOs.
Someone also had a question about the excise tax on Medical Devices and here is the link to the IRS web page that contains links to the various issuances on the ACA.
The issue of tax-exempt organizations participation in the Medicare Shared Savings Program (ACOs) also came up and I said I would post the link to the IRS position on same. Importantly, the IRS has in no way waived the general rules of 501(c)(3) for participation and the anti-inurement rules still apply – unlike the waivers from Stark, AKS and anti-trust issues provided by CMS and DOJ. As I indicated in my session on Valuation and Reasonable Compensaiton for tax purposes, there is a lack of focus on income tax issues due to the prevailing obsession with Stark and the AKS.
The new BVR/AHLA Guide to Healthcare Compensation and Valuation is out! Edited by Tim Smith and me, it includes substantial contributions by Tim on the discipline of Compensation Valuation as well as a major chapter by me on Reasonable Compensation for Tax Purposes. Other contributions include chapters by members of leading healthcare appraisal firms including PYA, HAI and Horne. Stay tuned for a link to the new web page.
I had a question from an AICPA listener as to whether governmental entities were eligible to claim the small employer tax credit. Eligible entities are those exempt from tax under 501(a) and described in section 501(c). Most governmental entities do not have 501(c)(3) status. The IRS has an in-depth discussion of governmental entities in http://www.irs.gov/pub/irs-tege/eotopice90.pdf.
The small employer tax credit can be claimed starting in 2010; in 2014 it can be claimed for only two years, however if an employer were to start in 2010, it could effectively claim it for 6 years. If one starts in 2014, one can only claim two years.
GAO analysis of the credit: http://www.gao.gov/products/GAO-12-549
IRS “safe harbor” for employers to avoid play or pay penalty on health insurance is in Notice 2012-58: “for all employees, an employer will not be subject to an assessable payment under § 4980H(b) for an employee if the coverage offered to that employee was affordable based on the employee’s Form W-2 wages reported in Box 1.” I believe this responds to a question raised in my seminar of November 1; however, this does not really address the problem for employers since a spouse, for example, could have significant income, or the employee could have other sources of income, putting them over the subsidy threshold the employer is trying to avoid.
I taught 8 hours on reform in Fairfax Thursday and encountered a typical amount of incredulity as I explained the reality of the legislation, which contrasts sharply with common understanding and, more importantly, main stream media reporting. That said, here is a link to one of numerous summaries of the ACA that methodically and honestly debunks the junk we all see in the media.
And, here is one on the “large” (more than 50?!) employer “play or pay” penalty
And, here is one from top benefits consulting firm Milliman on how employers should evaluate their options given Play or Pay
Don’t be duped by by lazy or biased press reports! Read it for yourself.
HCA’s Parkridge Hospital in Chatanooga, TN announced a $16.5 million qui tam settlement with the federal government and state of Tennessee on September 19. The case originated when a real estate appraiser doing work on behalf of the hospital filed a qui tam complaint alleging that Parkridge paid excessive rent to a real estate entity owned by physicians whose practice Parkridge had previously purchased. According to the complaint, the appraiser had been retained in 2008 by Parkridge to determine the fair market rent and concluded a range of $8.10 to $10.10 per usable square foot. The lease ultimately entered into had a rate of $12.59 per foot, based upon “an erroneous fair market value study … from an unlicensed and uncertified appraiser” in order to provide sufficient rental income for the physicians to satisfy bank loan payments on the property.
The total rent based upon the 29,204 square feet leased would have been approximately $367,000 per year; for 4 years it would have been $1,468,000. The excess rent based upon the high end of the whistleblowing appraiser’s range would have been $2.49 per foot or $73,000 per year; for 4 years it would have been $300,000. Comparing this to the fine of $16.5 million gives a sense of the relative risk of violating the Stark law and Anti-Kickback Statute.
The whisteblower received $3.1 million out of the settlement payment.
 Quoting the original complaint filed under seal in the District Court for Eastern Tennessee.