Healing Health Care: Surprises in the health-care law

Posted on Oct 8, 2010 in Uncategorized

Published: Saturday, October 2, 2010 4:26 PM MST

As I’ve written throughout the last year, fraud represents the single biggest avoidable portion of health care.

From Eric Holder’s $60 billion Medicare fraud estimate to the $200 billion estimates for all insurance fraud estimates, it is huge.

The health-care law provides for $350 million over the next decade for additional resources. This is a pitiful number. We need to declare war on fraud in the system.

The Recovery Audit Contractor program is enlarged but it only focuses on errors, not fraud.

For those who steal over $1million, the penalties rise by 20 to 50 percent.

Other measures included will do something right.

The secretary of Health and Human Services is now empowered to withhold payments to providers if an active investigation reveals fraud.

In the past, even if a provider was suspected of fraud, he was paid his submitted claims in a short time.

But I don’t have much faith that the fraud problem, which costs us about $1 trillion over 10 years, will be significantly changed.

And with the new insurance mandates (no-charge preventive services and various counseling programs), a whole new source of fraud and abuse will arise.

Then my other favorite target, the pharmaceutical industry, will still have the protections that allow it to use the system at will.

The only concession to change is a tax on companies that import drugs, which will be passed on to the consumers.

The Medicare part D provision that prevented Medicare from negotiating with Pharma is allowed to continue.

The Democrats passed the necessary changes to the law last year in the House but Republicans in the Senate managed to block a measure to allow it to come to the floor. Between fraud and the hold that the drug industry has over our government, not much has changed.

There’s more

Now the other things we can expect.

As I wrote last week, the new private insurance mandates that have already raised premiums and lowered many benefits are in effect.

•The Early Retirees Reinsurance subsidy went into effect. The public will help pay the costs of young retirees — from mostly profitable companies, state and local employees, and major union workers — to better help them retire at 55.

•The Small Business Health Tax credit is in effect. This is a government subsidy for small businesses to help them pay for health insurance.

Basically, very small businesses (under 25 employees) that pay employees less than $25,000 per year will be eligible for a 50 percent tax credit, and only for a brief period after the insurance exchanges go into effect.

The subsidy diminishes on a scale based on number the of employees and their salaries.

•Next year, employers will be required to show the value of employees health benefits on their W-2.

The IRS will then have an accurate handle on how much tax income is lost by the tax exemption of employer-paid insurance.

•The CLASS Act, which I wrote about two weeks ago, goes into effect in 2011. This program may look good on paper for about 5 to 8 years, but will become a huge, underfunded entitlement after that.

•In 2012, a little-discussed provision goes into effect. IRS Form 1099 will now be required for every business-to-business transaction of $600, creating a huge burden on businesses.

Now, only payments to individuals need a Form 1099.

•The beginning of the end of Medicare Advantage will begin, when a new payment formula will go into effect (in 2011 payments are frozen).

As I wrote before, new limits are placed on the deductibility of medical expenses on individual income tax returns.

This provision raises the 7.5 percent AGI floor on medical expenses deductions to 10 percent.

•The new Medicare payroll tax that I discussed recently goes into effect.

•A 2.3 percent excise tax on manufacturers and importers of certain medical devices will begin. These costs will ultimately be borne by the consumer.

• In 2014, the government defines essential benefits package. All qualified health plans must offer the essential health benefits package, increasing the cost of these policies.

•All legal residents must have qualifying health coverage or pay penalties. Businesses are also required to provide coverage or pay a fine.

•The federal government begins subsidizing individuals up to 400 percent of the federal poverty line, creating a huge cost.

•A really big provision also goes into effect. The income level for Medicaid eligibility rises, bringing millions new people into Medicaid.

This expansion will place considerable new financial pressures on states, with higher state taxes a likely response.

•Annual fees on all health care providers will bring in $8 billion in 2014; $11.3 billion in 2015 and 2016; $13.9 billion in 2017; $14.3 billion in 2018; and indexed to medical cost growth thereafter.

Other features go into effect later.

Was this what you thought it was?

Charles Barta retired to Green Valley after 10 years as a medical director for several health care insurers. Before that, he was physician-in-charge of Kaiser Permanente of Colorado and a private internist in Las Cruces, N.M. He had previously held a management position in the Medical Systems Division of Pfizer. His column is published Sundays. He can be reached at Cbar52@aol.com.