The Palmetto Insider

The blog of the South Carolina Policy Council

Archive for the ‘Healthcare’ Category

Health Care Law Already Hitting Home for HSA Consumers

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Even as foes of Obamacare celebrate their recent victories at the polls, more and more of the regulations mandated by the federal health care takeover (otherwise known as the Patient Protection and Affordable Care Act) are hitting their start date, and the reality is setting in quickly – we are all going to be affected by this law, and most of us for the worse.

Take HSAs, for example, which we have previously extolled as a tool to bring down health care costs. HSAs provide greater cost-saving incentives to consumers, who may roll over unused health care dollars from year-to-year and even use remaining dollars for retirement. But Health Savings Accounts are being marginalized by the new healthcare law.

The way HSAs work is like this. Imagine if you had insurance with which to buy a new car – much like we have health insurance to cover health-related expenditures. Well, if the new car is covered by insurance – and you pay a hefty premium to have this insurance – you will likely want to maximize the “benefits” you receive. So does everyone else in the insurance program.  Eventually, your choice and the collective choice under this plan will eventually jack up the cost and the price of your “car purchase insurance”. So when the next insurance bill comes in, everyone is complaining that their “car purchase insurance” is ridiculously expensive.

In short, you’ll buy the most expensive new car your plan allows and it is not secret that there is a price hike. But if instead you have a “car HSA” plan, you might think to yourself: “Should I spend all of my allotted car dollars on this one purchase? Or should I save some of that money in case I want to buy a second car later – or if this first car breaks and I need a new one?”

Based on these incentives, consumers with HSAs tend to only use the health care they need. Instead of over-consuming health care (which sometimes happens with regular insurance plans), HSA consumers weigh the costs and benefits of their health care decisions.

Unfortunately, the utility of HSAs is quickly deteriorating. As of January 1, 2011, over-the-counter purchases will no longer be HSA eligible. Consumers who don’t want to pay out-of-pocket for these items (about 15,000 in total, according to Fox News) will need a doctor’s note.

As Max Borders writes in the Washington Examiner, we have lobbyists to thank for this stomach punch to consumers:

First, Big Pharma (drugs) and the AMA (doctors) were both mixed up with writing Obamacare. This was clear from the start, but the progressives looked the other way. So, an army of lobbyists made sure that if a bunch of people were going to be forced by the feds to buy health insurance, they’d want to get some goodies out of all these newly minted HSA holders. How could all those lobbyists find a way to divert all those new customers into more expensive drugs and make them to go to the doctor more? Take them out of the driver’s seat. It has nothing to do with primary care paternalism. This is good old fashioned rent-seeking at its finest.

Additionally, this is another one of the ways the government has proposed paying for Obamacare. Which in essence, makes it a tax increase.

Other mandates are also making HSAs less affordable.

  • Covering children: Several major health insurers have dropped child-only policies because of the intense mandates that have gone into effect.
  • HSAs must cover 60 percent of actuarial benefit: According to the Heritage Foundation, only the Health and Human Services Department Secretary Kathleen Sebelius can know whether HSAs are viable under this plan. Will contributions count? If not, then HSAs will “no longer be viable.” Why is that? Because the HSAs revenue/expense system functions in exactly the opposite manner of traditional health insurance products. In traditional health insurance plans, premiums are the major revenue stream and deductible and co/pay are supplementary to cover the medical expense. In HSAs, contribution from members (function similar as deductible) is the major revenue stream while premium serves as a supplementary to cover the cost.
  • Medical loss ratio (MLR): Obamacare has mandated the health insurance companies spend at least 80 percent (85 for bigger companies) on “your health care.” What this does is limit choice in the market, by forcing some companies out of business who don’t meet this 80 percent level. It will also discourage spending on fraud prevention, because that will not be counted in the 80 percent. So every dollar spent on fraud prevention hurts an insurance company’s ability to hit the 80 percent level. Fewer choices in the market means fewer HSA plans. Fewer HSA plans means more expensive HSA plans. Either way, it’s bad for consumers.

HSAs are still a viable option for state-based reform. The South Carolina General Assembly could create a better tax environment for consumers who choose these health plans.

One example of a bill that was already introduced is S 998 from last session, which never made it out of committee. This bill – sponsored by Sen. Mike Rose and Sen. Shane Martin — would have allowed a 100 percent tax deduction or HSA premiums and created a fast-track approval process for new HSA plans that have already been approved by other states. Both of these items would add up to more choices for consumers.

Another way the state could counteract federal burdens on HSAs would be to create state-level exemptions. For example, the federal government removed tax-exemption from over-the-counter purchases. But there’s nothing stopping the state legislature from enacting a state-level exemption for South Carolinians.

South Carolina has at times been at the forefront of HSA legislation. The damage done to HSA plans by Obamacare opens the door for more state-based reform.


Written by SCPC

November 24, 2010 at 12:47 pm

Federal Health Care Legislation: We Really Don’t Know What’s In It

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Everyone already knows the Patient Protection and Affordable Care Act, also known as Obamacare, is more than 2,000 pages long. (2,562 pages and 511,520 words when

both the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are combined, notes Michael Tanner.)

But what isn’t publicized much is that through July 31, 2010, there were already 3,833 new pages of regulations added to the Federal Register directly relating to the new law’s implementation.

That means that a bill that was signed into law on March 30, 2010, generated almost 4,000 pages of new regulations in four months. 1,000 pages a month – and counting.

Here are some examples:

1)      Medicare: Updated rules regarding Medicare payments to hospitals. This 95-page section pertains to the policies and price levels for hospitals seeking reimbursement for Medicare patients. So instead of focusing on providing high quality of care to patients, hospitals must devote significant resources to reading and understanding these new rules.

2)      Hospice care: This rule, among other things, updates payment rates and capitalization requirements for hospice and home health agencies. The rule is 106 pages long.

3)      Electronic medical records (EMR): Most doctors will likely tell you that EMR improves patient care. It cuts down on paperwork, and reduces the likelihood of errors (ever heard of a doctor with good handwriting?). But this rule adopts standards, specifications, and certification criteria for health care facilities to implement EMR in their facilities. In other words, 153 pages of new regulations and rules to facilitate a process that is supposed to reduce compliance costs and paperwork. Huh? On top of that, the rule adds new regulations and requirements for offices that already have EMR. These early adapters now need to obtain government certification in order to receive reimbursements for Medicare/Medicaid. But what if the EMR system they have is already working fine? Why force them to switch? This rule could also stifle market innovation in this area by locking in all health care facilities to the module that the government requires.

No doubt, this is just the start of literally entire libraries of rules that are going to dictate everything from how much health care providers charge to how many x-ray machines are found in each hospital.

And we wonder why lawyers love Obamacare.

Written by Geoff Pallay

November 19, 2010 at 7:47 am

Florida Case Proceeding

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Great blog from Heritage on the Florida decision to allow the legal challenge to Obamacare to proceed. Check out this quote:

“Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check.”

South Carolina is one of 20 states suing the federal government because Obamacare arguably violates the Constitution, going far beyond the Commerce Clause’s intended meaning.

Written by Jameson Taylor

October 15, 2010 at 8:43 am

Posted in Healthcare

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1099: The Trojan Horse within Obamacare

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The new federally mandated healthcare experiment continues to be the gift that keeps on giving – only we wish it would just stop rearing its ugly head in our daily lives.

Last week we reported on the regulatory problems facing Medicaid reimbursement – and the coming $1 billion increase in costs for South Carolina.

Now, comes the 1099 fiasco. Earlier this month, the Senate failed to repeal a provision of Obamacare that adds a major compliance burden to small businesses and independent business owners.

Buried within the federal health care mandate is an unnoticed provision that requires all businesses to report to the Internal Revenue Service any purchase from a vendor for goods and services amounting to $600 or more per year.

What does that mean? Well, if you work from home and purchase a computer for more than $600, prepare to send a 1099 tax form to Apple. Did you buy more than $600 worth of office products this year? Better prepare that 1099 for Staples.

This little gimmick is aimed at raising $2 billion in revenue to help pay for the new health care mandate.

But according to the National Small Business Association, the average business will have to file 85 1099s as a result of this new policy – nearly 9 times the current average of around 10 forms.

There were two amendments proposed in the Senate that would’ve changed the 1099 provision. One was an attempt to raise the threshold from $600 to $5,000 and exempt all businesses with less than 25 employees. That amendment failed, as did a separate amendment to repeal the provision entirely.

Sadly, these amendments seemed to fail because the Senators are trying to make up the $2 billion in revenue needed for the health care bill. So in each amendment, they tried to find the money from elsewhere – and those lobbyists were powerful enough to swing the vote in their favor.

Even President Obama has come out in favor of repealing this 1099 provision. This begs the question – did he even read the bill before he signed it? How come he didn’t know about this 1099 provision before he made it law in such ceremonial fashion back in March?

Remember, as Speaker Nancy Pelosi said, “But we have to pass the bill so that you can find out what is in it.”

Perhaps she was right. After all, you have to open your Christmas present before you can find out what it is. Too bad Obamacare continues to be one giant lump of coal after another.

Written by Geoff Pallay

September 21, 2010 at 8:26 am

New Medicaid Mandates Are Going to Hurt

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Dealing with the fiscal—and physical (in terms of personnel and other needs)—implications of health care mandates is an ongoing battle for Medicaid, the state’s health care agency serving the poor and disadvantaged.  Medicaid’s ability to maintain the integrity of its mission is being jeopardized by a deluge of regulations and ever increasing mandates, while already managing:

  • 800,000 enrollees
  • 3,000-5,000 new participants monthly
  • 19% of the state’s budget (up 10% since 2007)
  • A projected enrollment increase of 61% by 2019

Remaining functional is a juggling act requiring compliance with state mandates and incorporating new, costly and growing numbers of federal regulations from the Patient Protection and Affordable Care Act of 2010 (the new federal health care legislation). The new law includes policies that:

  • Require the least restrictive standards for new Medicaid enrollment
  • Prohibit the state from actively confirming ongoing eligibility

In other words, South Carolina’s Medicaid program is required to take in as many new clients as possible, but not look too hard at whether these and existing clients are actually eligible. These two mandates alone will cost the S.C. Medicaid system hundreds of millions of dollars.

And Medicaid already has a $200 million dollar deficit.

Add to these burdens the new federal purchase-or-be-penalized mandate (for both individuals and businesses) that will drive more people out of private insurance and into government subsidized care.  In short, Medicaid can look forward to a tsunami of additional enrollees.

The cost of new regulations and mandates is projected to be nearly $1 billion by 2019.

That’s less than 10 years away.

In perspective, $1 billion equals $222 for every resident of the state. 

Another ball for Medicaid to juggle is the freeze (since 2008) on provider reimbursement rates.

As reported by The Nerve, South Carolina is the only state in the nation to impose this restriction—even as program costs rise. For every 1 percent increase or decrease in provider rates, Medicaid saves—or loses 1 million dollars.

Thanks also goes to The Nerve (see here and here) for alerting us to a new proviso inserted into the state budget by Rep. Tracy Edge. Pending approval by the Centers for Medicare and Medicaid, this proviso would increase prescription reimbursement rates by 30 percent—to $10 million annually, imposing the highest reimbursement rate in the nation on South Carolina (in a state that has the 47th lowest per capita income in the nation.)

If the challenges weren’t already dizzying, as Medicaid’s enrollment grows, the demand on physicians and hospitals will also increase. With provider reimbursement rates frozen, health care providers will likely respond by refusing new patients, sending many back to the costly care of emergency rooms—one of the “maladies” supposedly remedied by federal health care “reform.”

In short, government seems to have an insatiable appetite for imposing mandates and regulations, requiring more and more sacrifices from taxpayers to support a system that continues to fail. It’s the giving with one hand while taking away with the other trick.

Who will suffer most? 

No doubt it will be the poor and elderly who are most dependent on Medicaid, as well as physicians and other medical professionals. And, in the end, all of us, as the “ouch” of rising health care costs (and new taxes) continues echoing throughout the state.

Written by Dianna Lightfoot

September 16, 2010 at 2:07 pm

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Health Care Choice for Louisiana and Georgia – But Not South Carolina

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Louisiana has become the first state with a Democrat-controlled legislature to pass the Freedom of Choice in Health Care Act. The law makes it the public policy of Louisiana, “consistent with our constitutionally recognized and inalienable right of liberty, that every person … is and shall be free from governmental intrusion in choosing or declining to choose any mode of securing health insurance coverage without penalty.” The law also prohibits the state from imposing a penalty on persons who choose not to purchase health insurance.

As reported by the Pelican Institute, however, the legislation was amended such that it should not be read to supersede the federal Patient Protection and Affordable Care Act of 2010. That said, the statute bolsters the state’s current lawsuit challenging the constitutionality of ObamaCare. Along with South Carolina, Louisiana is 1 of 20 states suing the federal government over the constitutionality of a new federal law requiring all Americans to purchase health insurance.  

In a recent poll, a majority of Louisiana voters gave George W. Bush higher marks (50 percent) for his handling of Hurricane Katrina than they did Obama’s response (35 percent) to the recent BP oil spill. These numbers may explain why even La. Democrats are wary of opposing voters who are also unhappy about federal health care legislation. 

Here in South Carolina, the state’s Republican-led legislature failed to pass similar legislation. Although lawmakers introduced a variety of measures aimed at protecting the right to purchase health care services, none of these received a vote on the floor of either chamber. (One joint resolution (H 4181) was read on the floor of the House and then contested, with the result that debate was repeatedly adjourned.)

Meanwhile, the law has passed in 4 states, including Georgia and Virginia.

To read more about this legislation, see the testimony the Policy Council provided to the Senate and House subcommittees in March:

Five Things You Need to Know About the S.C. Freedom of Choice in Health Care Act

VIDEO: Policy Council Senate Judiciary Subcommittee Testimony

Written by Jameson Taylor

June 23, 2010 at 10:29 am

Health Insurance is Not Health Care

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Unless you’ve had your head in a ditch these past few days, you know by now that President Obama signed a sweeping health care bill. At a grand total of 2,700 pages – with amendments still being debated even after the bill has already passed.

But that does not mean the South Carolina legislature should simply sit on its hands and wait for the federal legislation to fall on our heads.

As the Policy Council detailed in testimony to the Senate Judiciary subcommittee yesterday and the House Constitutional Laws subcommittee today, the federal takeover of 1/6 of the U.S. economy is arguably unconstitutional.

Some states – like Virginia and Idaho – have already passed legislation that would protect the right to opt out of the federal law’s mandate requiring all Americans to purchase health insurance.

But, so the argument goes, won’t these people need health care at some point? And shouldn’t we thus require those who can afford it to buy health insurance and then subsidize coverage for everyone else? What about the uninsured?

The thing to remember here is that many people in America choose not to purchase health insurance, but are still able to afford to purchase discrete health care services on the free market.

According to economist Keith Hennessey, 10.1 million uninsured are members of families that have income of 300 percent of the federal poverty line or greater and so can afford to purchase health care on the free market.

Similarly, a study by former Congressional Budget Office director June O’Neill concluded that “43 percent of the uninsured have incomes higher than 250 percent of the poverty level ($55,125 for a family of four). And slightly more than a third have incomes in excess of $66,000.”

Those numbers are further corroborated by a study in Health Affairs that found 20 percent of the uninsured can afford coverage.

Several pieces of legislation currently before the S.C. General Assembly would protect those individuals and preserve their right to make a choice not to purchase insurance.

Congress would have you believe the new federal law is meant to help people who want insurance – shouldn’t we also try and help people who don’t want insurance?

Written by Geoff Pallay

March 25, 2010 at 1:45 pm