Say Goodbye to Your Local Hospital?

I was at a small gathering discussing healthcare and one of the people walked up to me and said “I don’t understand why President Obama wants me dead. He doesn’t even know me.” At first I thought this was funny until I realized he was serious.

It turns out that this was a response to the discussion we were having about the future of hospitals in smaller urban/suburban areas and hospitals in rural areas. The future isn’t too bright. Where you have a large volume of patients, the administrative costs can be spread over a large number and the cost per patient is low. That’s all well and good for New York City, San Francisco, for LA, but what about hospitals that serve the average suburban, rural area? The answer is simple, there will be no hospitals in those areas; they are going to have to close because they can’t afford to stay open. In smaller hospitals, while the costs for investment in quality personnel and equipment keep going up, the number of patients being seen over which these costs can be spread is small. High overhead burden make the ability to operate these facilities profitably impossible. Ezekiel Emanuel, a White House health policy special advisor who helped shape the Affordable Care Act forecasts that ,as a result of increases in the cost of doing business, one in five hospitals, over 1,000, will close by 2020 . The administration understood that the burden of requiring marginally profitable regional and rural hospitals to acquire new technology, to automate their record keeping systems and to provide additional compliance reporting would drive them out of business. With 20 percent of all American hospitals forecast to close, where are you going to go for care when that hospital is yours?

While it has always been true that in some states the nearest hospital has been as much as 150 miles away, or even more. Such facilities, like hospitals in the Dakotas or in Alaska, have in place infrastructure to transport emergency patients over long distances. Helicopter services in the Dakotas and airplane services in Alaska are part of the emergency response landscape.

With smaller hospitals closing, larger facilities will see their service area responsibility for delivering emergency services expand. Expanding ones service area over significant distances poses new problems, especially in states like Georgia and Alabama and in areas like rural New York. Hospital who take on this burden don’t have infrastructure to quickly deliver emergent care to those people. These hospitals have no helicopters, no heliport on their roof. It’s the ambulance which drives 20, 30, 50, 75 or even 150 miles. If you live in one of those areas and you call 911, if you are having a heart attack, you can’t breathe; you have been deeply cut; or you have been severely injured in a way that requires emergency surgery, by the time the ambulance drives to you and then brings you to back to the hospital, even averaging 80 to 100 miles an hour, YOU WILL BE DEAD.

Perhaps it was this thought was caused his outburst or perhaps it was the idea that, in addition to no longer having access to a hospital that’s local, he may not have access to a doctor, any doctor, who would take his insurance.

The networks offered by insurance are so small. It is amazing how much profit is being made and how little care can be delivered. It used to be most patients had out of network coverage and you could see an out of network physician. Today, there is not a single product offered in New York which offers out of network reimbursements based on usual and customary. The best you can get is out of network benefits based on Medicare, which is 50 to 60 percent difference in what doctors charge for out of network services. Not a single Obamacare exchange product offered in New York state offers out of Network coverage. This is true in most states.

What this means to you is that if you only have one doctor in your local area that accepts your insurance because your insurance company wants to keep its network small, you may not have access to your doctor for a very long time. If things get so bad and you feel you must look elsewhere for care, the financial burden of that treatment is going to be borne by you. If you can’t pay for it; and it turns out you waited too long or what you have is life threatening, you are back to looking at two options: death or bankruptcy. It is as if you are uninsured. Even if you go to the emergency room for treatment, your emergency room treatment will probably be covered, though out of network physicians who treat you and bill separately will not be. If you need hospitalization or further treatment and the hospital you go to is out of network, even if it’s the closest hospital to you that is 75 miles from your home, the cost of treatment is on you.

People have forgotten that it is really doctors who are the ones who are interested in taking care of you, not politicians. For doctors, making a good living would be nice; but that is not what they think about. First and foremost on their mind is patient care. Like you, doctors don’t understand how they could be so outside the loop. They don’t understand, as a group, that issues like right and wrong and putting the patient first have nothing to do with what happens in Washington DC or in their state capital. The truth is for doctors and for you the current state of healthcare reflects what works for the politicians in a political sense and what works for businesses in a business sense. It is really not about giving patients the best care. In fact, it has NOTHING to do with it.

When your small town doctor folds up his tent because he can no longer afford to practice medicine and there is no one to provide you with adequate medical care, are you, too going to think that this was all some kind of plot?

What Happens When You Take Away the Incentive for Innovation

There is no incentive for innovation: all new technologies are generally more expensive than traditional methods, and, because of their cost, they are unlikely to be used. Innovation breeds advancement. It also provides income enhancing opportunities for neurosurgeons who develop new instruments and new procedures. No more.

When a smart, talented young person is thinking about their future and they know they have a love of science, part of their decision making process involves the lifestyle they can provide for themselves and their family. So chances are they will not choose the path towards practicing medicine. But if medicine does not suit them, and they are interested in technology, they might have previously chosen to work on medical devices or pharmacology. No more though. Because when a company is looking to develop new technology and there is no American market for that technology since they cannot sell into the U.S. at a profit, that advancement will not become available here. That being the case, there will be no big salaries for Americans interested in working for those companies.

Doctor Flight

According to Jeff Goldsmith, University of Virginia, Public Health Science Professor, the trend of doctors who participate in independent medical practices to either close their practices or become part of hospital practices is accelerating. Hospitals receive a higher reimbursement rate for the same service, if performed by an independent physician. Though the overhead for a hospital is generally higher than the overhead for an independent practice, this burden is no longer borne by the doctor. They become an employee of the hospital and, thus, are relieved of their administrative burden.

The move of independent doctors to hospitals poses two problems. Cost are higher because we pay more for the same service. The other problem is more subtle. Once doctors become employees of large institutions, they lose their ability to control how they practice medicine. Hospitals set standards, including mandating the number of patients a doctor must see in an hour. Once the doctor loses his independence and the patients disperse, it is a difficult task to rebuild a practice once the practice has been dismantled.

The Goodness of Their Heart – The True Cost of Making Benefit Payments on Behalf of Your Employees

I have been speaking with a great number of small business owners who have looked at the exchange as an alternative vehicle for providing health care for their employees.  Because their employees are eligible for subsidies, employers have requested that they sign up for coverage and have agreed to pay the cost of the coverage.  Since January, they have been writing checks to providers to pay their employees’ premiums. 

The problem is, by doing this, business owners and their employees can get into serious trouble.  Not just pay the fine and walk away trouble, serious trouble.  In reality, this payment is considered employee compensation.  Payroll taxes, from the employer and the employee are required to be paid.  For the employer, failure to pay payroll taxes can become criminal. 

What should you do?  The amount paid to the exchange is taxable income for the employee. You must add it to the income the employee receives and taxes must be withheld.  Some employers gross up the number so the total compensation paid to the employee minus their taxes due equals the amount the employer pays to the exchange on their behalf.  In addition, the employer must pay their portion of taxes due,  social security, disablilty, etc.

In addition to interest, penalties are assessed on delinquent taxes.  Better to pay the money when due.

Fact or Fiction?

This month I thought I would answer the question, fact or fiction:

  1. Sign Ups Will Close on March 31, 2014 for policies offered during the 2014 Calendar year:  FACTYou will not be able to sign up for polices after the 31st; unless, of course they decide to extend the deadline.  With less than a month to go to sign up for health insurance, the web sites are still having problems.  This means that you should sign up before the deadline.  If you sign up at the last minute and there is a problem transmitting your data, you will NOT be covered.  Remember, too, you are not covered until your payment has been received and processed.  After March 31st, you cannot sign up for insurance for 2014 unless you meet one of the exceptions: Divorce, losing your job. 
  2. College Students will be able to get insurance after graduation: FICTIONThis is a serious problem for graduating college students who were on their college plans.  If they don’t sign up on the exchange now and begin paying, they will not be able to obtain individual coverage until 2015.  Typically if they get a job, they can get coverage through their employer; but this coverage doesn’t go into effect immediately.  One typically waits up to 90 days after starting work before they are covered.
  3. 70% of People Signed Up for Covered California Have Not Paid: FICTIONWhile the numbers are high, they are not this high.  REMEMBER: YOU ARE NOT COVERD UNLESS YOUR FIRST PAYMENT HAS BEEN RECEIVED BY THE INSURANCE COMPANY AND PROCESSED.  For those who have signed up, It is important for people to verify coverage at their nearby facility before purchasing a policy. The best way to avoid unexpected medical bills was to be proactive, not reactive.
  4. Once Your Have Insurance, All Services You Use are Covered.  FICTIONBelieving this can be dangerous for your and your family.  Only services from doctors and hospitals that contract with the provider you have are covered.  For example UCLA Health has only contracted with the following exchange plans: Healthnet Bronze Catastrophic Plan and Anthem Blue Cross EPO Plan.  They are out of network for all other plans offered on the exchange.  If you don’t have one of these plans you will not be covered for services you receive there. 
  5. Fewer People Are Covered by Insurance.  PART FACT PART FICTIONMore people have signed up than expected; but because premiums have not been collected from all these people, it is unclear what the results will be.  As to young people, the big increase in coverage has been the inclusion of young people on their parents policies.  If you count these people as uninsured people that are now insured, this makes the statement above Fiction. 
  6. There is a 10% Chance Your Doctor will either not accept insurance and/or leave the practice of medicine all together.  FACT.  The pressure is on Doctors is also mounting.  Reimbursement rates have been significantly cut.  According to a Kaiser study, the average income for a primary care physician is approximately $130,000.  This sounds like a lot of money but when you graduate with $800,000 of loans to pay back for your medical education, it’s tough to make a living.    Reimbursements are going to be cut.  They are also reducing doctor’s income by “bundling”.   A typical doctor’s practice has over 4000 patients.  This number is likely to increase.   Doctors who can’t afford to remain in private practice, are giving up their practices and becoming employees.  The corporations they work for defines their work rules.  The day of personalized service are going away.  This makes medicine a less attractive option for doctors, many of whom went into the profession to help people.  If they want to stay independent, the decision that they have to make is to accept only cash or charge additional fees for services.  The more successful the doctor, the more likely the above statement will be true for them.
  7. If You Are Covered by an Exchange Plan, You Will Have Insurance Coverage Even if You Don’t Pay Your Premium.  FICTIONIf you don’t pay your premium, after the first month, the insurance company will no longer pay your bills.  You can reinstate your policy if you pay by the end of month three.  The problem for you is doctors who call to verify coverage will not be informed that your coverage has been terminated until the end of month 3. Therefore, in month 2 and in month 3, if you get medical services, you may be on the hook for significant medical bills.

The Stupid People Problem: Healthcare Apps for Old People

The insurance companies have finally started talking about the fact that it is probably cheaper to retain existing customers than recruit new ones. Since there is not much that differentiates one insurance company from another, one policy from another, they have recognized that treating people better might be a good way to keep their customers, or so they say.  

I was at a conference participating in a panel about customer retention.  The woman on the panel with me was there to speak about her project.  She had been hired by the Big Blue Insurance companies to develop healthcare applications for the phone. 

When it came her time to talk, she was so excited.  We were excited.  Everyone is interested in app development.  What new thing was she going to show us?  It turns out the insurance companies had allocated 10s of millions of dollars to develop apps for old people. Yes, you read this correctly.  Seniors were going to be given, for free, apps in order to communicate with their insurance companies and manage their healthcare.  

Many in the audience smiled and nodded, listening intently to the presentation.   The idea seemed rather simple, old people would download apps on their phone and use them to manage their pre-approval process for an upcoming surgery and/or to check things like: Is my doctor a preferred provider? I need a specialist, who accepts my plan?  Why is my doctor billing me for services that I thought were covered?   It would cost millions, but in the end customers would be happy.

To me, it seemed like a bad joke.   Did she really believe my 90 year old father would use his phone to manage his healthcare? Was the concept really that the elderly parents and grandparents of people attending the conference, when in need of help, would rather use their phone than talk to a human being? 

I asked her if there would be some training, how to use the phone and how to use the apps? She looked at me as if I was an insane person who had six heads, each of which had fire shooting out of them, with snakes and pink glitter. She took a long pause and then let me know in no uncertain terms that everyone, yes, everyone, knows how to use apps!  

I was thinking about every person I knew who got calls from their parents asking for help with using their computers; asking them how to set up their answering system on their phones; asking them how to text; asking them how to take, open and forward pictures to their friends.   I was thinking about every child someone I knew whose parents had asked them for help using their phone, asking them some of the same questions that they had been asked by their parents.   I was shocked at the response.  When I took out my flip phone to show it to her, she just glared at me.

Someone else asked her whether or not the apps would be available in large print.  We then saw the same look of incredulity and condescension directed at the person acting the question.  Then came the response;  since everyone already uses apps on their phone there’s no need to make any changes to accommodate larger print other than what phone software already made available.  Old people don’t need things in larger print.

No more questions were asked.  There was lots of applause.  Many of the people from the insurance companies funding this project congratulated her on her excellent presentation. 

When I speak to people over the age of 65 and tell them that the insurance companies are spending millions developing phone apps for them, after the laughter stops, they are curious.  They want to know what it would do that might remotely be of interest to them.   They get very concerned that insurance companies will no longer allow them to speak to a person when they have a questions.  The one response I get almost every time I speak to someone is “Couldn’t they spend those millions of dollars on increasing my benefits?” followed by something like “maybe they could pay for the anesthesia when I get my colonoscopy?” or some equivalent comment about a benefit that they would like to have. In fact, the reaction of people over 65 is remarkably similar to the reaction of the people over 35.  It is the people under 30 who are interested in what the app will do and when they find out they will only be using it if they get sick and use their insurance, they lose interest.

The “Stupid People Problem” is not about stupid people. It’s about very smart people acting like they are idiots.  The division between reality and this woman’s perception of reality was striking. She had no clue about the appetite of older people to learn and embrace new technology, and no clue about the technological aptitudes and abilities of older people.  Nor was she willing to consider that her perception that all people are technologically proficient might be misguided.   Even worse, she failed to consider that older people access the healthcare system when they are sick, often facing the end of their life. Learning how to master an application on their phone is not high on their list of priorities. 

Not only is her inability to think outside her box striking, but it is also amazing to me that the insurance company senior executives that approved this multi-million dollar budget also did not consider these factors.  Can’t you picture the meeting?  “Apps for old people, Yeah, that’s a great idea!  They all are tech savvy already and we could probably save money on phone support for those people.  It will save us millions.”  It could be worse.  The discussion might have been “Great idea!  That will make it harder for older people to access their healthcare benefits.  We will be able to reduce service and save money because we will make them use the apps, deny them access to phone for approvals, and eliminate costs in customer support!”

Maybe they aren’t so stupid after all.

To Insure or Not to Insure? That is the Question!

Lacking health insurance does not necessarily mean you will have to pay a fine.

Under the Affordable Care Act, United States citizens and certain legal residents are required to either obtain health insurance or pay a penalty. That penalty is the greater of two amounts: a flat dollar penalty for each uninsured adult, which will rise from $95 in 2014 to $695 in 2016; or a percentage of a household’s adjusted gross income in excess of the threshold for mandatory tax-filing.  The percentage will be 1.0 percent in 2014 and then rise to 2.5 percent in 2016 and subsequent years (also subject to a cap).

Most Americans who do not have health insurance will not have to pay the penalty for being uninsured.  This is because they fall into one or more of the exempted categories , including:

  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
  • People with income low enough that they are not required to file an income tax return;
  • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
  • People who are incarcerated or are members of Indian tribes.

The Congressional Budget Office working in conjunction with the Joint Committee on Taxation have concluded that of the 30 million Americans estimated to be uninsured by 2016, 23 million people will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, about 3 million people will be granted exemptions from the penalty because of hardship or for other reasons.  This leaves about 4 million people who could be subject to paying a penalty.  However, this 4 million figure is actually less because it includes uninsured dependents of parents who will pay the penalty on their behalf.

The good news is that the government estimates that 2 million less people are projected to pay the penalty than was originally projected in September 2012.   The bad news is that the decrease in the number of people who are projected to pay the penalty largely stems from an increase in the number of people who will be exempt from paying the penalty; not from a rise in the number of people anticipated to be covered by insurance.

Rev. Proc. 2014-30 – Health Savings Account Maximums for 2015

This revenue procedure provides the 2015 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under § 223 of the Internal Revenue Code.

Annual contribution limitation. For calendar year 2015, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,350. For calendar year 2015, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high
deductible health plan is $6,650.  High deductible health plan. For calendar year 2015, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not
premiums) do not exceed $6,450 for self-only coverage or $12,900 for family coverage.

This revenue procedure is effective for calendar year 2015.

Hobby Lobby & President Obama & You – New Insurance Products at a New Cost

When we remove the burden from an employer to provide a benefit, the burden of paying for that benefit will most likely fall to the employee.  President Obama has given insurance companies the right to contact directly employees whose companies opt out.  Since they will not receive certain benefits from their employer, insurance companies can approach those employees directly and offer them the opportunity to privately obtain the benefit no longer included in their employee benefit package.

This creates two significant problems.  The legal requirement that birth control services be free is in conflict with those on corporate policies privately obtaining contraceptive benefits for which they have to pay.  Secondly, the notion of group verses individual policy is now blurred.

Insurance companies feel they are entitled to be compensated for providing contraceptive benefits.   Providing contraceptive benefits was mandatory under the Affordable Care Act. Further, birth control is supposed to be offered without cost to the policy holders.  From the point of view of the insurance company, the corporation which purchases a plan from that insurance company is responsible for paying for the benefits included under the mandate to provide birth control. Since the corporation is opting out of paying for certain contraceptive benefits, and it is highly unlikely that out of the goodness of its heart the insurance company will absorb the cost of providing contraceptive benefits not covered by the corporation, the burden of paying “must” be born by the employee.  But the law says, the employee covered under this group plan should not have to bear the cost of obtaining birth control.  What is the real difference between charging the employee an additional fee for coverage verses having that employee pay directly for birth control.  From the employee’s point of view it is the same amount of money being taken from their pocket only in one case you call it premium and in the other case you call it a copayment.

The problem is lies in the plan the insurance companies ave devised for implementing the Hobby Lobby decision. When a company opts out of offering birth control related servies to their employees, the cost associated with providing those services is deducted from their premiums.  If the employees then individually request this service they must pay under a supplemental policy issued by the insurance company. Are we really naïve enough to think that the insurance companies are going to absorb these costs?  Are the insurance companies going to raise premium costs for everyone to cover the costs of providing birth control to individuals and then charge a surcharge to companies who choose to offer birth control to their employees?  This way insurance companies make even greater profits.  Insurance companies could choose not to solicit employees whose employers opt out of offering birth control and leave them to pay for it as if they are uninsured. This option violates the Affordable Care Act because the policy does not  offer one of my essential health benefits.

The second problem arises when we start making hybrid policies, part group policy, part individual policy.  In order to meet the affordability standards imposed by the Affordable Care Act, corporations will need to drop benefits, increase copays, and impose coverage limits.  Since insurance companies can now directly contact individuals, we are creating a system where corporations will provide only a skinny plan for their employees; providing only those benefits required to meet the legal standard.  Insurance companies will then contact employees directly.  They can now point out the coverage limits and upsell employees increased benefits at, of course, increased costs.  The beauty of this is that, since the insurance company obtained the health history of each employee when the company signed up, the insurance company can pick and choose to whom they will offer richer benefit packages and at what cost.  Insurance companies can offer more robust coverage to a sub group of employees who are healthy and can afford to pay for it.  They can discriminate against those who might most need these additional benefits.

No matter what, it’s all in the implementation. 


Corporations are People, Too! Hobby Lobby, Fed Ex, President Obama & You

Corporations are now acquiring the rights of people. 

In 1844, the Supreme Court first treated corporations as human when, in Louisville, Cincinnati & Charleston R. Co. v. Lesson 43 U.S. 497 (1844), the Court determined that corporations were “Citizens” of the state in which they were incorporated. In the late 1800’s these rights were expanded protecting corporations from ithe unlawful seizure of corporate property.   In 1906, in Hale v. Henkel, like people, corporations needed to be protected from unreasonable searches and seizures under the Fourth Amendment.  More recently, in United States v. Martin Linen Supply Co. (1977), the Supreme Court further expanded the rights of corporations by expanding the double jeopardy rule to include both humans and corporations. 

In Citizens United v. FEC. (2010) the Supreme Court recognized that corporations enjoy the right to free speech.  The Court held that, since corporations and people enjoy the same legal rights, the government can’t limit a corporation’s independent political donations. The Citizens United ruling was the greatest expansion of corporate personhood to date. 

After giving Corporations the right to free speech, in the Hobby Lobby case, the Court held that privately held corporations have religious rights. The government argued that corporations do not “engage” in the exercise of religion.  Corporations don’t pray; they don’t go to church; they don’t practice a religion.  The Supreme Court disagreed.  Corporations can now assert the religious rights, the rights of their owners.

What does it mean if corporations are people?  It means that they have all the legal rights of citizens.  If they have absolute right to free speech, can we regulate advertising?  Can we regulate corporate behaviors?  Can we impose safety standards on them, or like people, can we only react to bad behavior after the fact?

In the alternative, if a corporation commits a crime, are the people who run it exempt from prosecution?  On July 17th, 2014,Federal Express was indicted by a federal grand jury for knowingly trafficking drugs for illegal online pharmacies. It is interesting to note that while the “corporation” knew it was trafficking in illegal drugs, not one of the corporate officers was charged with this crime, even though they too had knowledge of these acts.  The corporation did it, not the people who ran it.  To put this in perspective, if you were charged and convicted of this crime, a first offense of distributing synthetic drugs would carry a 20-year mandatory minimum sentence.  While everyday citizens would be incarcerated for acting in an identical way to Federal Express, businesses, corporations and the people who own and manage them grow increasingly bulletproof.

Ultimately, the more corporations obtain the rights of citizens, the less ability we have to impose regulations upon them that we do not impose upon all our citizens.