HSAs in the Medicare Bill – Better Than Ever

IN THIS ISSUE:


? HSAs in the Medicare Bill – Better Than Ever

? Highlights of the CDHCC Conference in Nashville

? Cash & Counseling Proves its Merits

? More Physicians Dropping Insurance for Cash


HSAs in the Medicare Bill – Better Than Ever


We haven’t seen the Medicare language yet, and have to rely on summary descriptions from the conference committee. Grace-Marie Turner will write more extensively about the whole bill in this week’s “Health Policy Matters,” but I want to touch on a couple of the smaller provisions that will impact the benefits community.


HSAs (expanded MSAs) are still in the bill. They have been changed from the original proposal. Maximum allowable deductibles have been raised to $10,000 for families and $5,000 for individuals, and the penalty for non-medical withdrawals has been reduced from the existing 15% to 10% on top of taxes being paid. We hear that Treasury officials are objecting to the lower penalty, fearing people could use the HSA to dodge their full tax obligation (the 15% is meant to approximate the payroll taxes that were avoided when the money was contributed).


Some conservatives feel this is important enough to justify support for what is at bottom a large expansion of an entitlement program. In my view, it’s a toss-up and can be argued both ways. The HSAs could help bring about fundamental changes in how health care is financed for 250 million non-elderly Americans and ultimately force more profound changes in Medicare itself when HSA owners become eligible for Medicare. I doubt if many large self-funded employers will sign-up for HSAs, preferring to stay with the HRA approach, but HSAs could be very attractive in the fully insured mid-market. Expect a whole lot of product development and marketing activity in 2004 around the HSAs.


The proposed FSA rollover has apparently been dropped, though it isn’t clear if it is still included in the HSA language. Originally, up to $500 of unspent FSA money could be deposited into the HSA, but I believe a rollover was allowed even without an HSA. This provision would have super-charged FSAs and encouraged much wider use of the vehicle, which is why it was scored as quite expensive.

Finally, employers providing retiree coverage will be eligible for a subsidy of 28% of the cost of drugs between $250 and $5,000. This subsidy will be excluded from taxation. I haven’t seen a revenue estimate on this, but it is probably pretty costly. On the other hand, the tax loss estimate would need to be offset by the cost to Medicare if these employers dropped coverage altogether and simply put their retirees in the Medicare drug benefit.


I’m sorry to be so vague on these provisions, but without seeing the legislative language we are forced to rely on third-hand reports and summaries. To get closer to the sources, please contact Laura Trueman of the Coalition for Affordable Health Coverage at ltrueman@jeffersongr.com or Dan Perrin with the Archer MSA Coalition at dbperrin01@aol.com You may also want to subscribe to the White House bulletins on health care by sending an e-mail to public.liaison@whitehouse.gov with HEALTH CARE in the subject heading.



Highlights of the CDHCC Conference in Nashville


I skipped last week’s newsletter because I was tied up at the Consumer Driven Health Care Conference in Nashville. I gave one talk, moderated several panels, and participated in a few related meetings while I was there. Some impressions:


? The most popular presentations were the ones that included CD vendors and employers talking about their own experiences. These sessions attracted a lot of human resource people and benefits managers who are actively considering adopting CD programs with their own companies. The questions were very specific and knowledgeable. There is no substitute for peer-to-peer discussions.


? An underlying thread at this conference involved the health care establishment trying to figure out how to use the terminology of consumerism to justify continuing business-as-usual — employers who want to enforce behavioral changes on their workers trying to position such paternalism as “consumer centered” without ever giving actual consumers the power to make choices, hospitals that are still wedded to PPO “discounts” and unwilling to consider changing their billing structure to accommodate cash-paying patients, academics who try to police physician behavior from on-high in the name of “consumerism.” There is a lot of work to do.


? It was heartening, however, to hear how the pioneers of this movement (specifically, Tony Miller of Definity, Ken Linde of Destiny, Doug Kronenberg of Lumenos, and Lee Newcomer of Vivius) understand this “Empire Strikes Back” dynamic and are ready to keep pushing the envelope to achieve real empowerment for patients.


? One of the rump events was a small dinner I attended with Tennessee Governor Phil Bredesen, Nashville Mayor Bill Purcell, HCA’s Dr. Tommy Frist, Vanderbilt Medical School’s Dr. Harry Jacobson and other local luminaries, sponsored by the Nashville Health Care Council. It was a very classy event with the sole purpose of trying to get health care companies to relocate to Nashville. I’ve never seen anything quite like it. Nashville is determined to become one of the centers of gravity in the health care system.


? Perhaps the most revealing sessions of the conference were back-to-back speeches by former Speaker of the House Newt Gingrich and Congressman Jim Cooper (D-TN). Mr. Gingrich has been out of politics for a few years now and was energetic, forward looking, and enthusiastic. He has little patience with business-as-usual in healthcare and said the entire system is archaic and needs to “catch up with the past.” He sees technology as enabling higher quality at lower costs, but argues that governmental interference is the main impediment to change. Jim Cooper had been a major player in the health care battles of the early 1990s. He lost his seat when he ran unsuccessfully for the Senate, but returned to the House in last year’s election. He agrees with the need to bring market economics to health care and cited third-party payment and first dollar coverage as one of the big problems that prevents patients from understanding risk. But he is appalled at how political gridlock in Congress prevents progress. He ticked off a laundry list of all the things Congress is failing to do and saw very little hope for changing the dynamics. His conclusion was grim and the outlook dismal.


SOURCE: Audio tapes of all the sessions are available by going to http://www.actsconferenceproducts.com/merchant/em.asp. And I believe most of the slides from the talks are available at the CDHCC web site http://www.cdhcc.com




Cash & Counseling Proves its Merits


We have mentioned before that the “Cash & Counseling” demonstrations are the most powerful argument against the “healthy and wealthy” slam on consumer choice health plans (that is, they might be fine for the healthy and wealthy, but everyone else will suffer). Cash & Counseling programs allow poor, elderly, disabled people to control their own resources and shop for their own services under Medicaid. Now a study in “Health Affairs” confirms the value of this approach. The C&C program in Arkansas randomly assigned 2,008 adult applicants to either treatment or control groups. The experience was monitored by a team of researchers from Mathematica Policy Research headed by Sally Dale. The study finds that C&C enrollees had higher personal care expenditures than the control group, but by the second year those expenses were more than offset by lower spending on nursing homes and other Medicaid services. Prior work by the same team of researchers also found greatly increased consumer satisfaction and a reduction in unmet needs for a variety of services.

SOURCE: http://content.healthaffairs.org/cgi/reprint/hlthaff.w3.566v1.pdf




More Physicians Dropping Insurance for Cash


Another theme we come back to frequently is the growing trend of physicians opting out of insurance and setting up cash-only practices. Examples include SimpleCare in Washington state (and elsewhere), INDOC in California, and Dr. Robert Berry’s independent clinic in Tennessee that was written up in the “Wall Street Journal” recently. Now from Columbia, Missouri comes another example of three physicians who have gradually been dropping their insurance contracts. The article by Christi Nies in the Columbia “Daily Tribune” tells of George and Hana Solomon, a husband and wife team of physicians who say, “After 13 years of trying to work within the current insurance-driven health care system, we have come to believe that it is so deeply flawed that incremental improvements cannot possibly save it.” Now that they’ve stopped taking insurance payments they say they have twice as much time available to actually care for patients. The article also cites Dr. Laura Walters, an obstetrician who has canceled her insurance contracts, saying, “I don’t think people realize how bad it is. I think this is the only approach that can make a difference.” The article says, “For patients who can’t afford the pay-as-you-go health care method, the Solomons propose an alternative – cancel your standard health insurance, buy a catastrophic health insurance policy and pay for day-to-day medical care out of pocket.”

SOURCE: http://archive.columbiatribune.com/2003/nov/20031111busi001.asp




Please send all comments/questions directly to me at gmscan@aol.com.


“Consumer Choice Matters” is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.



If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.


The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

SHARE THIS ARTICLE

About the author

IN THIS ISSUE:


? HSAs in the Medicare Bill – Better Than Ever

? Highlights of the CDHCC Conference in Nashville

? Cash & Counseling Proves its Merits

? More Physicians Dropping Insurance for Cash


HSAs in the Medicare Bill – Better Than Ever


We haven’t seen the Medicare language yet, and have to rely on summary descriptions from the conference committee. Grace-Marie Turner will write more extensively about the whole bill in this week’s “Health Policy Matters,” but I want to touch on a couple of the smaller provisions that will impact the benefits community.


HSAs (expanded MSAs) are still in the bill. They have been changed from the original proposal. Maximum allowable deductibles have been raised to $10,000 for families and $5,000 for individuals, and the penalty for non-medical withdrawals has been reduced from the existing 15% to 10% on top of taxes being paid. We hear that Treasury officials are objecting to the lower penalty, fearing people could use the HSA to dodge their full tax obligation (the 15% is meant to approximate the payroll taxes that were avoided when the money was contributed).


Some conservatives feel this is important enough to justify support for what is at bottom a large expansion of an entitlement program. In my view, it’s a toss-up and can be argued both ways. The HSAs could help bring about fundamental changes in how health care is financed for 250 million non-elderly Americans and ultimately force more profound changes in Medicare itself when HSA owners become eligible for Medicare. I doubt if many large self-funded employers will sign-up for HSAs, preferring to stay with the HRA approach, but HSAs could be very attractive in the fully insured mid-market. Expect a whole lot of product development and marketing activity in 2004 around the HSAs.


The proposed FSA rollover has apparently been dropped, though it isn’t clear if it is still included in the HSA language. Originally, up to $500 of unspent FSA money could be deposited into the HSA, but I believe a rollover was allowed even without an HSA. This provision would have super-charged FSAs and encouraged much wider use of the vehicle, which is why it was scored as quite expensive.

Finally, employers providing retiree coverage will be eligible for a subsidy of 28% of the cost of drugs between $250 and $5,000. This subsidy will be excluded from taxation. I haven’t seen a revenue estimate on this, but it is probably pretty costly. On the other hand, the tax loss estimate would need to be offset by the cost to Medicare if these employers dropped coverage altogether and simply put their retirees in the Medicare drug benefit.


I’m sorry to be so vague on these provisions, but without seeing the legislative language we are forced to rely on third-hand reports and summaries. To get closer to the sources, please contact Laura Trueman of the Coalition for Affordable Health Coverage at ltrueman@jeffersongr.com or Dan Perrin with the Archer MSA Coalition at dbperrin01@aol.com You may also want to subscribe to the White House bulletins on health care by sending an e-mail to public.liaison@whitehouse.gov with HEALTH CARE in the subject heading.



Highlights of the CDHCC Conference in Nashville


I skipped last week’s newsletter because I was tied up at the Consumer Driven Health Care Conference in Nashville. I gave one talk, moderated several panels, and participated in a few related meetings while I was there. Some impressions:


? The most popular presentations were the ones that included CD vendors and employers talking about their own experiences. These sessions attracted a lot of human resource people and benefits managers who are actively considering adopting CD programs with their own companies. The questions were very specific and knowledgeable. There is no substitute for peer-to-peer discussions.


? An underlying thread at this conference involved the health care establishment trying to figure out how to use the terminology of consumerism to justify continuing business-as-usual — employers who want to enforce behavioral changes on their workers trying to position such paternalism as “consumer centered” without ever giving actual consumers the power to make choices, hospitals that are still wedded to PPO “discounts” and unwilling to consider changing their billing structure to accommodate cash-paying patients, academics who try to police physician behavior from on-high in the name of “consumerism.” There is a lot of work to do.


? It was heartening, however, to hear how the pioneers of this movement (specifically, Tony Miller of Definity, Ken Linde of Destiny, Doug Kronenberg of Lumenos, and Lee Newcomer of Vivius) understand this “Empire Strikes Back” dynamic and are ready to keep pushing the envelope to achieve real empowerment for patients.


? One of the rump events was a small dinner I attended with Tennessee Governor Phil Bredesen, Nashville Mayor Bill Purcell, HCA’s Dr. Tommy Frist, Vanderbilt Medical School’s Dr. Harry Jacobson and other local luminaries, sponsored by the Nashville Health Care Council. It was a very classy event with the sole purpose of trying to get health care companies to relocate to Nashville. I’ve never seen anything quite like it. Nashville is determined to become one of the centers of gravity in the health care system.


? Perhaps the most revealing sessions of the conference were back-to-back speeches by former Speaker of the House Newt Gingrich and Congressman Jim Cooper (D-TN). Mr. Gingrich has been out of politics for a few years now and was energetic, forward looking, and enthusiastic. He has little patience with business-as-usual in healthcare and said the entire system is archaic and needs to “catch up with the past.” He sees technology as enabling higher quality at lower costs, but argues that governmental interference is the main impediment to change. Jim Cooper had been a major player in the health care battles of the early 1990s. He lost his seat when he ran unsuccessfully for the Senate, but returned to the House in last year’s election. He agrees with the need to bring market economics to health care and cited third-party payment and first dollar coverage as one of the big problems that prevents patients from understanding risk. But he is appalled at how political gridlock in Congress prevents progress. He ticked off a laundry list of all the things Congress is failing to do and saw very little hope for changing the dynamics. His conclusion was grim and the outlook dismal.


SOURCE: Audio tapes of all the sessions are available by going to http://www.actsconferenceproducts.com/merchant/em.asp. And I believe most of the slides from the talks are available at the CDHCC web site http://www.cdhcc.com




Cash & Counseling Proves its Merits


We have mentioned before that the “Cash & Counseling” demonstrations are the most powerful argument against the “healthy and wealthy” slam on consumer choice health plans (that is, they might be fine for the healthy and wealthy, but everyone else will suffer). Cash & Counseling programs allow poor, elderly, disabled people to control their own resources and shop for their own services under Medicaid. Now a study in “Health Affairs” confirms the value of this approach. The C&C program in Arkansas randomly assigned 2,008 adult applicants to either treatment or control groups. The experience was monitored by a team of researchers from Mathematica Policy Research headed by Sally Dale. The study finds that C&C enrollees had higher personal care expenditures than the control group, but by the second year those expenses were more than offset by lower spending on nursing homes and other Medicaid services. Prior work by the same team of researchers also found greatly increased consumer satisfaction and a reduction in unmet needs for a variety of services.

SOURCE: http://content.healthaffairs.org/cgi/reprint/hlthaff.w3.566v1.pdf




More Physicians Dropping Insurance for Cash


Another theme we come back to frequently is the growing trend of physicians opting out of insurance and setting up cash-only practices. Examples include SimpleCare in Washington state (and elsewhere), INDOC in California, and Dr. Robert Berry’s independent clinic in Tennessee that was written up in the “Wall Street Journal” recently. Now from Columbia, Missouri comes another example of three physicians who have gradually been dropping their insurance contracts. The article by Christi Nies in the Columbia “Daily Tribune” tells of George and Hana Solomon, a husband and wife team of physicians who say, “After 13 years of trying to work within the current insurance-driven health care system, we have come to believe that it is so deeply flawed that incremental improvements cannot possibly save it.” Now that they’ve stopped taking insurance payments they say they have twice as much time available to actually care for patients. The article also cites Dr. Laura Walters, an obstetrician who has canceled her insurance contracts, saying, “I don’t think people realize how bad it is. I think this is the only approach that can make a difference.” The article says, “For patients who can’t afford the pay-as-you-go health care method, the Solomons propose an alternative – cancel your standard health insurance, buy a catastrophic health insurance policy and pay for day-to-day medical care out of pocket.”

SOURCE: http://archive.columbiatribune.com/2003/nov/20031111busi001.asp




Please send all comments/questions directly to me at gmscan@aol.com.


“Consumer Choice Matters” is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.



If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.


The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

SHARE THIS ARTICLE

About the author