The New Year and Obamacare- a sick system!


As the New Year begins it is interesting to look at a number of facts regarding the Affordable Care Act (ACA), which are evidence of the “sickness” of the program.

We discussed the numbers regarding the Affordable Care Act(ACA) or Obamacare and the problems with these numbers. But let us not forget that even with the enrollment restatement that the Department of Health and Human Services issued in November, the program lost approximately 1 million enrollees due to lack of payment of their premiums between April 1, 2014 and Oct. 15, 2-15. The first question is will this happen again in 2015?

Sean Williams continues with a look at the consumers. While most consumers would prefer to have health insurance than not have health insurance, the monthly premium payment combined with copay and deductible costs may be too much for some individuals and families to bear. Remember our discussion regarding premiums increasing by double digits as well as the deductibles increasing by the thousands of dollars. A recent Gallup survey showed that a third of respondents had put off a medical procedure due to cost, which demonstrates to me that health care costs still put medical care out of the reach of some consumers — even those who are insured.

In other words, just because they’re enrolled doesn’t mean these individuals will remain enrolled throughout all of 2015.

A second consideration is an even bigger challenge for the program, which looms in June with the Supreme Court deciding whether or not federal subsidies are legal. The case revolves around language in the ACA, which essentially notes that states can hand out subsidies to eligible individuals, but since the federal government is involved in running the online exchanges for 37 states, those citizens may be ineligible for subsidies.

If the Supreme Court finds against the plaintiffs, a big cloud hanging over Obamacare will be lifted. But, if the Supreme Court finds in favor of the plaintiffs, Obamacare could be in big trouble. Last year 87% of enrollees via received a subsidy, meaning a proportionate amount of this year’s enrollees would see their subsidies disappear. My suspicion is most of these enrollees would be unable to continue paying for their health insurance and could drop out. If this ruling were to be made, the solution would be for states to set up their own individual exchanges. However, states whose lawmakers hold opposing views of the law may be less inclined to make that move. Other states would likely take a year or longer to get their exchange up and running. Needless to say, it’s a very tricky scenario that’s just months from playing out.

Consider the insurer roulette.
Without question, better-than-expected early enrollment has to be exciting insurers, but we don’t yet know how many of these re-enrolled members switched plans, whether or not they’ll stay the full year, and how the Supreme Court will rule. In short, betting on the insurance sector here could be akin to spinning the roulette wheel and hoping your number hits.

Now consider the case of Vermont. Vermont Gov. Peter Shumlin is canceling his dream plan to create a single-payer health system in the state, he announced Wednesday.

“I am not going to undermine the hope of achieving critically important health care reforms for this state by pushing prematurely for single payer when it is not the right time for Vermont,” Shumlin said in a statement Wednesday. “In my judgment, now is not the right time to ask our legislature to take the step of passing a financing plan for Green Mountain Care.”

The problem is, of course, how to pay for it. Even while plans were moving forward for a 2017 launch of the single-payer system, to be called Green Mountain Care, Shumlin had held off on releasing a plan for how to pay for the system, waiting until his announcement Wednesday.

Tax hikes required to pay for the system would include a 11.5 percent payroll tax as well as an additional income tax ranging all the way up to 9.5 percent. Shumlin admitted that in the current climate, such a precipitous hike would be disastrous for Vermont’s economy.

“Pushing for single payer health care when the time isn’t right and it might hurt our economy would not be good for Vermont and it would not be good for true health care reform,” Shumlin said. “It could set back for years all of our hard work toward the important goal of universal, publicly-financed health care for all.”

Shumlin’s office released a slideshow with more details about financing for the plan which fell through. The state had been anticipating $267 million in federal funding to revamp its system, courtesy of a 2013 Obamacare waiver — but the current estimate has fallen to $106 million. Vermont also overestimated by $150 million in federal Medicaid funding.

But beyond federal funding, the report also admits that the single-payer system won’t save money as Vermont officials had planned. While both previous reports on Green Mountain Care had assumed “hundreds of millions of dollars” in savings in the very first year of operation, Shumlin’s office is now admitting that’s “not practical to achieve.”

“State government and providers need to partner to bend cost curve over time,” the report concluded. And the state admitted that while it would need to “ease the transition” for Vermont’s businesses, it would be “extremely expensive” to do so.

Shumlin also cited slow economic recovery in Vermont as reason to delay, and hopes to try again in the future. But its failure, especially on economic grounds, is a resounding defeat for single-payer advocates.

Many opponents of Obamacare continue to maintain that national health reform didn’t go far enough. Retiring Sen. Tom Harkin, who helped author Obamacare, recently expressed his regret that the health care law passed at all because it didn’t create single-payer.

Shumlin’s admission that the shift to single-payer won’t alleviate rising health care costs — and that it’ll add a bundle of tax hikes — buttresses single-payer’s political opposition.

Another very important aspect for the New Year is that high on the agenda for most Americans–right up there with New Year’s resolutions–are taxes. Around 80-85 percent of the 140-150 million taxpayers filing returns each year look forward to their refunds from the IRS, but starting this year, the Affordable Care Act could make that refund a little more unpredictable.

Every American taxpayer will have to check a box on their tax returns verifying they have qualifying health care coverage, and for them, that’ll be the extent of Obamacare’s impact. But millions of other Americans who don’t rely on health insurance from their employers will see bigger changes to their taxes.

“People are likely to be surprised,” said Kathy Pickering, the head of the H & R Block Tax Institute, in an interview with CBS News. Americans who signed up for health care on the state or federal exchanges will have to reconcile their premium subsidies with their income, and their lives may have changed since they signed up. “They were estimating, and now, when they’re filing their taxes, they have what their actual income was, and there’s often a discrepancy,” Pickering said.

Headlines: Small businesses showing little interest in Obamacare.

That discrepancy could mean that their refund check from the IRS is smaller than expected, which would be an unpleasant surprise. “If people swing from a refund to owing taxes, they’re going to be rather grumpy,” Henry Aaron, a senior fellow in Economic Studies at the Brookings Institution, told CBS News.

There are life events that might have changed a taxpayer’s situation. Pickering said, “We’ve all seen the economy is improving. Say you got a bonus you didn’t expect–people don’t think, ‘I should go back to the exchange to adjust my premium subsidy.'” If your income rises, and you forget to reflect that raise, you’ll owe the IRS.

Aaron, who is a member of the executive board for Washington, D.C.’s health exchange, said that individuals signing up in DC were told to be conservative and claim just 85 percent of the tax credit they believed they were entitled to because “the shock of having to pay back is greater than the deferred pleasure of getting back more than you were expecting.”

Pickering also pointed out that Americans who signed up for health care might have had a misconception about what the subsidies were: “For people who got the premium tax credit, they may have thought about it as a discount [on their health insurance premiums] and not something that they would have to pay back if there was a discrepancy.”

And then, there are the people who didn’t sign up for 2014 coverage. “People think the penalty is $95, but it varies, depending on the tax filer’s situation,” said Pickering. The variation here is the other part–those who declined to enroll face either a $95 per unenrolled family member fee or a fee equal to one percent of household income, above a minimum filing threshold, whichever amount is higher (although the maximum is capped at the national average premium for a bronze plan, which was $2,448 in 2014, according to the Tax Policy Center).

And there are other ways of failing to comply with the individual mandate, too. Pickering pointed out “the example of a couple that filed jointly, whose household income is $65,000, and one spouse has insurance and one doesn’t. They could end up owing a penalty of $447. That’s one percent of $44,700–their income minus the minimum filing threshold for a couple, which is $15,300 ($10,000 for individuals).”

For those getting insurance from the exchanges for the first time, Pickering predicted there would be a learning curve on the tax filing, but “as this becomes part of the normal tax filing, people will be able to plan and adapt accordingly.”

And for those who don’t comply with the individual mandate and decide not to buy compliant health insurance in 2015, the penalties will go up for next year’s tax filing. That one percent of household income doubles, to a two-percent penalty, though it will again be capped at the national average premium for a bronze health care plan. And the alternate, $95 per uninsured person per household goes up to $325 per person (half that for children under 18). The maximum penalty under that scenario is $975. The Tax Policy Center has a calculator to help taxpayers calculate their penalties.

Last to consider is what will be happening to the physicians and their reimbursements or payment for their services. A flurry of pay cuts for doctors hit today as physicians struggle to implement electronic health records, deal with new measurements to improve quality and deal with myriad changes in Medicare and Medicaid reimbursement formulas.

The biggest pay decrease will be a return to the old rates paid by the Medicaid program for poor Americans when a two-year pay bump under the Affordable Care Act that increased reimbursement 40 percent or more expires. Under the health law, a primary care doctor – a family physician, a pediatrician or an internist – who treats Medicaid patients has been reimbursed to the generally higher level of the Medicare health insurance program for the elderly for scores of primary care services but only for 2013 and 2014.

“The Medicaid cuts are going to have an important impact on family physicians, particularly those who have increased the number of Medicaid beneficiaries in response to the parity with Medicare payment,” Dr. Robert Wergin, president of the American Academy of Family Physicians said in a statement to Forbes. “We took a quick snapshot of what our members were seeing and learned that nearly half of the survey respondents saw in increase in appointment requests from new Medicaid patients and nearly three in 10 saw an increase from their current patients whose coverage changed due to Medicaid expansion.” Although not as steep as the Medicaid pay cut, many more doctors will be hit with a barrage of reimbursement reductions implemented by the Centers for Medicare and Medicaid Services such as cost and quality measurements and mandates related to treating Medicare patients. Hospitals and medical centers will also feel the negative effect.

Doctors will also be grappling with the 2% pay reduction from the sequester. It is predicted that by 2019 physicians could be subjected to a set of penalties that reduce Medicare payments by 13%. Wow. “No other segment of the health care industry will face penalties as steep as these and no other segment faces such challenging implementation logistics,” Dr. James Madara, of the AMA’s CEO wrote to the Obama administration.

The physicians and patients will suffer the most in the New Year with this healthcare system unless the GOP finds a way to fix the ACA without ruffling the feathers, too much, of President Obama.

This could be an interesting year.

Let’s look at making the healthcare system a wellness care system.

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