IN THIS ISSUE:
? Perils of Pauline (continued)
? Business Insurance Spotlight on the Health Care Crisis
? Portland Business Journal Report on Health Care
? “Jury In, Case Closed” – Consumerism Works
? AMA – Replace Medicaid with Tax Credits
The Perils of Pauline (continued)
Okay. When we last left our intrepid heroes (in Episode 21), they were figuring out what to do with income limits on “Health Savings Accounts,” and other intricate finaglings. Now, in the wink of an eye, all of that has been resolved, the bill has passed the House, is now in Conference with the Senate, and may soon become the Law of the Land. But don’t be surprised if more dangers lie ahead in our ongoing saga.
More specifically, the House of Representatives did indeed enact HR 2596 (changed from HR 2351 last week) as an amendment to the humongous Medicare prescription drug bill, though by only a one-vote margin. In fact, it is likely that the only thing that saved the Medicare bill in the House was Chairman Thomas’ addition of HSAs and HSSAs to the package. This assuaged some Republican doubts about “the greatest expansion of Medicare since 1965.”
The final bill is essentially what we reported last week. There are two provisions. One (Section 224) is a plain vanilla expansion of medical savings accounts, which are now named Health Savings Accounts (HSAs). The allowable deductible is lowered to $1,000/$2,000 (individual and family), and the maximum deductible is $2,250/$4,500. Total out-of-pocket may not exceed $3,000/$5,500 for in-network services. Additional cost-sharing for out-of-network services are not included in the OOP maximum. First dollar coverage for preventive services is allowed. Up to $500 in unspent FSA balances may be deposited to the HSA every year and will be treated as employer contributions (and therefore excluded from income.) Contributions may equal 100% of the deductible and may come from both employers and account holders. There are no employer size limits, or limits on total enrollments. HSA funds may be used for any qualified medical expense except insurance premiums. Insurance premiums may be paid only for COBRA premiums, long-term care insurance premiums, or other premiums while the account holder is receiving unemployment benefits.
It is the other part (Section 223) that gets confusing. This creates a new program called a Health Savings Security Account (HSSA). Anyone who is uninsured or has insurance with deductibles of at least $500/$1,000 (which is virtually everybody) may set up an HSSA. They may deposit up to $2,000/$4,000 into the account every year, provided their adjusted gross income is $75K/$150K or less. The contribution phases down for incomes above those limits. Additional “catch-up” contributions are allowed for people aged 55 or older.
I was mistaken last week in reporting the income limits apply only to personal contributions. The income limits apply to the total contribution, whether made personally, by an employer, by a family member, or rolled-over from an FSA.
In addition to the other medical expenses, regular insurance premiums may be paid from the HSSA (if they meet the deductible requirements). This would enable people who do not get coverage from their employer to pay for insurance coverage on a tax-favored basis.
Ways and Means estimates that 40 million people would take advantage of one or the other of these provisions within 10 years, and the Joint Tax Committee estimates a revenue loss of $174 billion over that time. Of this total, $163 billion is attributed to the HSSA, only $5.7 billion to the HSA, and $8.6 billion to the FSA rollover (it doesn’t add up because there is an overlap in eligibility).
Prospects? Who knows? Bill Thomas will probably be chairing the Conference committee, and he can be a pretty persuasive fellow. On the other hand, the price tag of the HSSA makes it easy to dump it out of the final report. Plus there isn’t the organized support for the HSSA that there is for the HSA (MSA expansion). If nothing else, the presence of the HSSA provision makes the HSA expansion seem tame and moderate in comparison. If I had to guess, I would say in the next episode the HSSA gets tied to the railroad tracks, while the HSA gets free to ride off into the sunrise.
Go to: http://thomas.loc.gov/ and search for HR 2596.
Also see: http://waysandmeans.house.gov/
More about the Medicare bill: http://www.galen.org
And “Business Insurance” had one of the more focused news reports on the bill. See: http://www.businessinsurance.com/cgi-bin/article.pl?articleId=13016
Business Insurance – Spotlight on the Health Care Crisis
Speaking of “Business Insurance,” they ran a “Spotlight Report” on the “Health Care Crisis” last week, including quotes from various mucky-mucks responding to such questions as “Who’s to blame for cost increases? What should be government’s role to ensure health coverage and keep costs down? How will health care plan design change in the future? What are the most important steps that can be taken to control costs?” Of all the quotees, I think I was the only think-tanker on the list, responding to the question about government’s role. There are a lot of other interesting articles as well, including one on past governmental mistakes and an article on growing choices in health care financing.
Portland Business Journal – In Depth Report on Health Care
The “Business Journal” of Portland (Oregon) also had an “In Depth” report on health care in its June 30, 2003 edition. It includes three articles on consumer driven health care. In the first, staff writer Robin Moody asks whether it is “A tonic for rising costs?” The article cites Welch Allyn, which is mentioned as “Fortune Magazine’s 98th best company to work for and a pioneer in implementing a consumer-directed health plan in Portland.” Company benefits manager Jeffrey Viviano reports that use of prescription drugs has dropped and the company’s spending went from a 15% increase in 2001 to a 1.4% decrease in 2002, though some of that change is attributable to a consolidation of vendors. The average age of workers choosing the consumer driven plan is only one year younger than people who don’t. The company says that “the plans should be used in conjunction with health education and wellness programs.”
The series includes an article about the critics of consumerism including such “consumer advocates” as Families USA’s Ron Pollack, who says, “It is such a misnomer. They are consumer-costly health plans, not consumer-driven plans.” The rest is all very predictable. Instead of having millions of buyers shopping for the best deal, the opponents want one giant purchaser to dole out the services to everybody (yawn).
But in a commentary, Spencer Swalm tries to “make sense of health care’s alphabet soup.” He explains the differences between FSAs, MSAs, and HRAs, and discusses the weaknesses of each. He concludes, “If politicians could bring themselves to get out of the way, FSAs, MSAs, and HRAs might show us the way out of the health care cost wilderness.”
“Jury In, Case Closed” – Consumerism Works
In Wisconsin, John Torinus says the debate is over, “Jury in, case closed.” He’s referring to Humana’s experience where costs for the consumer driven plan were held down to 4.9% instead of the projected 19.2% for traditional plans. “Demonstrating that it was not a one-year fluke,” he says, the second year cost increases were held to 3.7% versus 17% under traditional plans. An Humana representative says two-thirds of the difference is due to changes in consumer behavior. “The Humana approach aligns economic incentives with systematic and proactive chronic disease management, with online consumer information? and with prevention and wellness programs.” A Milliman USA spokesman says, “We believe that consumer driven health care products have the potential to substantially change consumer and provider behavior.” He adds that a critical mass will be reached when “health care providers are facing an army of consumers asking for the same kind of transparent and cost effective treatment offered in just about every other sector of business.”
AMA – Replace Medicaid with Tax Credits
Finally, the American Medical Association is calling for replacing Medicaid with a system of tax credits “that allow low-income Americans to choose and own their own coverage,” according to Joel Finkelstein in AMNews. Texas physician Bohn Allen, MD, said, “Tax credits? appear to be a road map out of this morass of the uninsured, the underinsured, the disabled, and so forth.” Some physicians disagreed, noting that Medicaid pays for things private plans do not, such as transportation to see a doctor. But the policy was adopted by the House of Delegates.
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