Tuesday, May 19, 2009

Everybody Pays

I just finished reading the Senate Finance Committee’s “Financing Comprehensive Health Care Reform: Proposed Health System Savings and Revenue Options.” It’s an interesting document (from a Propellerhead perspective) in that it provides a fairly comprehensive-yet-understandable look into the confusing mosaic of America’s health-related financing and regulatory system. It was a sobering illustration of how complicated life in big systems of humans can become.

The key take away for me was the size of the bulls-eye on the back of employer sponsored health insurance. A table on page 5 identifies “Exclusion of employer sponsored health care (income)" as representing $132.7 billion of a possible $194.2 billion in annual “lost revenue” for the Federal coffers. For reference, #2 item on the list is “Exclusion of Medicare benefits from income” that total $40.6 billion. You don’t need an advanced degree in applied mathematical theory or public policy to guess what has the pols’ attention when it comes to paying for expanding coverage (and buoying a soon-to-be-bankrupt Medicare Inpatient Trust Fund).

Yes, your memory serves you correctly. President Obama did take Senator McCain to task during the campaign for basing his health reform program on this very principle. During the last debate, Senator Obama referred to such an approach as a new tax on working Americans.

Now, the Senate Finance Committee paper proposes that a progressive approach be taken, only categorizing this benefit as incremental income for people earning $200,000 or above, phasing in the full incremental tax at some yet-unspoken salary level north of $200,000.

[Sidebar for a second…the Administration’s previous conversations around tax rates have targeted people earning $250,000+. Now the bar seems to have quietly slipped down $50,000. Does this represent an alarming trend?]

The compounding factor here lies in the discussion from earlier on the principles of expanding coverage. In a “pay or play” model such as the one the Committee has thrown around, employers will be “fined” for not offering benefits. So…everyone has to have coverage, and that coverage will likely be taxed one way or another. That’s an interesting double whammy (or triple whammy – if you consider the fine for not providing benefits a de-facto tax on employers).

There is also disturbing language in the report that, in essence, suggests providers might earn too much through programs like IME, GME, DSH and mechanical issues like market basket updates to base payment rates. While certainly these formulas have evolved to level of complexity that makes the IRS tax code seem simple, there are surely legitimate opportunities to refine and tighten the programs. The underlying suggestion that providers might be earning too much – the document singles out home health agencies – is scary.

The AHA has released its most recent batch of comments on the Senate Finance Committee’s policy ideas – with cautionary words regarding how much savings are truly possible through delivery system reform in the short term, identifying possible winners and losers along the way. The AHA is providing thoughtful, sound advice.

Essentially, in two words, “Slow Down.”

But alas, it seems the bull is in the china shop. We’re going to have one heck of an aftermath to figure out.

1 comment:

  1. I am new to this blog, but have enjoyed reading previous entries.
    Within the 'Proposed Health System Savings and Revenue Options', I am uneasy with the identification of hospitals as responsible for financial management as CMS moves to the episode of care payment. My understanding of the inpatient portion of the document is that hospitals will be responsible for accepting CMS payment and dividing up the payment to all providers during the 'episode of care'.
    I agree that acute care hospitals can improve many things, including discharge/follow-up care. However, the plan appears to place a very large amount of power (monopoly?) for health care provided 30 days following Medicare admissions.