June 2012


The Likely Impacts on Health Care

An academic panel discusses the consequences of he Affordable Care Act. Although some time – especially at the start is squandered discussing the politics and legalities, the Q & A session is generally worth a listen. Cue to these segments for discussion of the prospective impact of the ACA on U.S. healthcare:

  •  24:00: What is the liklihood that states will embrace Medicaid expansion?
  • 33:00: Who are the principle beneficiaries of Medicaid expansion?
  • 36:30: How will the ACA impact quality of care?
  • 40:00: Who will pay Mandate penalties?
  • 41:45: Do deductibles and copay lower costs or discourage participation?
  • 44:00: Will there be physician and nurse shortages?
  • 48:00: Who won’t be covered under the ACA?
  • 53:00: What would be the repercussions if the states do not embrace Medicaid expansion?

Key Takeaways

  • After November elections, there will be huge pressure on state governors to adopt the expanded eligibility standards for Medicaid.
  • The principle beneficiaries of the Medicaid expansion are the ones that most oppose it on partisan ideological grounds, particularly Texas, Louisiana and Florida.
  • The Mandate Penalty is not a tax. It is a nonenforceable tax penalty, and in Massachusetts has impacted about 1% of citizens.
  • High deductible plans are coupled with savings accounts that cover preventive care.
  • The ACA has numerous subsidies to create a structure to expand coverage availability.
  • Massachusetts has the nation’s highest number of physicians per capita.
  • After 2016, the CBO suggests that there will still be 24 million uncovered. either because they
    •  opt out,
    • are undocumented aliens (33%)
    • are eligible for medicaid but don’t enroll – but are entitled to on-the- spot enrollment(25%)
    •  have no affordable coverage available due to their employment (25%)
  • The vision of Medicaid as an integrated national program has been dealt a slight setback by the Court decision, but it’s too early to know how the individual states respond.

Beyond the Politics: Red States Need Medicaid Expansion Most

Many wavering politicians represented districts that had much to gain from the new lawNPR’s Peter Overby noted that 53 of the 100 congressional districts with the highest uninsurance rates were represented “either by Republican lawmakers who are fighting the overhaul, or by conservative Blue Dog Democrats who have slowed down and diluted the overhaul proposals.”

Many red-state governors and representatives rail against the evils of Medicaid and other programs while quietly accepting billions of dollars in subsidies to their districts and states. If Mitt Romney does not ascend to the presidency and enact “repeal and replace,” conservative politicians will face some genuine  pressure to “put-up or shut-up.”

Thousands of Texas and Mississippi hospitals, nursing homes, and physicians need the money to care for literally millions of people. Other local constituents need this money, too, particularly during our current period of economic distress. Between 2014 and 2019, Texas is slated to receive more than $50 billion in additional federal funds for ACA’s Medicaid expansion, with the federal government picking up more than 95% of total costs.

Although states can turn down the money, judging by this chart, the ideological activists will likely lose out to a much larger group of service providers, low-income, elderly, and disabled citizens.

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A first for this blog, I reproduce this article in its entirety from the one by Jocelyn K. Glei’s article on the 99%.com!

A recent happiness study from Matthew Killingsworth and Daniel Gilbert found that the more our minds wander, the less happy we are. Summing the research, the New York Timeswrote, “Whatever people were doing, whether it was having sex or reading or shopping, they tended to be happier if they focused on the activity instead of thinking about something else.” In short, being mentally “present” and focused on the task at hand really does matter – quite a lot, in fact.
If only finding focus were so simple. With a tidal wave of information coming at us daily, focus is rapidly becoming the scarcest commodity of the 21st century. With this in mind, I’ve rounded up a handful of the best apps for fighting back against the constant distractions of our digital lives.

1. Self-Control – Block out distracting websites for a set amount of time.
If you find yourself slipping into a Twitter sinkhole when you should be updating your business plan, Self-Control may be the app you need. Set it for 4 hours, for instance, and your browser will behave as if it’s offline for that period of time. No amount of browser restarts or computer reboots will stop it. Before you have heart palpitations, know that you can whitelist or blacklist certain sites. So, rather than completely disabling the entire Internet, you can selectively decide which sites are OK, or not OK, to visit during your focus period. For Macs only. PC users can try Freedom, a similar app.

2. TrackTime – Audit how you’re spending your time on your computer.
This good-looking app tracks everything you do on your computer, spitting back out a sort of “attention audit.” How much time are you spending in Firefox? How many hours a day in your email client? What are listening to on iTunes? If you let TrackTime run in the background, it builds these patterns into a lovely rainbow-colored timeline of your online life. Its most effective use is as a sort of  wake-up call: If your daily timeline shows you shifting between apps and tasks every 2 minutes or less, you know there’s a problem. For Macs only.

3. Concentrate – Maximize focus while shifting between different tasks.
Concentrate is great for shifting between tasks that require different mindsets. I have a variety of recurring tasks that require different tools: 1) Writing, 2) Social Media Management, 3) Event Planning. Concentrate lets me configure a different set of tools for each task. When I activate “Writing,” the app automatically closes my email client and Internet Browser; blocks me from Twitter, Facebook, and YouTube; launches Microsoft Word; and sets my instant messaging status to “away”. Then, when I want to concentrate on “Social Media Management,” I can customize a completely different set of actions to happen relevant to that activity. There’s also a handy “concentration” timer. For Macs only.

4. Notational Velocity – Centralize and sync all of your scattered notes.
If you’re anything like me, one primarily challenge for focusing is getting all your notes in one place. Before Notational Velocity, I would write some notes on paper, some on text files on my desktop, some on my iPhone notes app when on the go. Notational Velocity organizes all of your notes on your desktop in a centralized, searchable location and syncs with Simplenote or WriteRoom on your iPhone. This seems like a little thing, but it really makes life so much easier. (More nerdy detailshere.) For Macs only.

5. FocusBooster – Focus on single tasks for 25 minutes apiece.
This app is based on the principles of the Pomodoro Technique, a time management system that challenges you to focus on a single task for 25 minutes and then give yourself a 5-minute break. Combining the features of a to-do list and a time-management coach, FocusBooster allows you to list out your daily tasks, and then it tracks your time as you work through them. When 25 minutes are up, an alarm sounds and you get a break. It’s an easy way to practice expanding your attention span without going overboard. For Macs and PCs.

6. Think – Limit your attention to a single application at a time.
This is an extremely simple app that’s akin to “Spaces” on a Mac. When activated, Think allows you to bring just one application into the foreground on your computer, while everything else is hidden underneath a nearly opaque backdrop. While you can easily shift between other applications when you need to, it creates a clean space for focusing on the task at hand. (It also works well in tandem with FocusBooster.) For Macs only.

7. FocusWriter – Create a distraction-free environment for writing. 
If writing is something that you do on a regular basis, it’s incredibly useful to have an easy way to create a distraction-free setting. FocusWriter re-creates a word processor-like environment, blocking out absolutely everything on your screen except for the words you type on a simple grey background – all menus (date, timer, dock, etc) are tucked away until rollover. Despite its pristine appearance, FocusWriter does have the usual rich text editor features, such as spellcheck and word count. Plus a few bonuses like a daily writing goal (word count or writing time) and very gratifying typewriter sounds for each keystroke. For Macs and PCs.

8. Anti-Social – Block the social websites that are killing your focus.
Anti-Social is like a light version of full-scale Internet-blocker Freedom. Rather than blocking the Internet in its entirety, Anti-Social automatically blocks all of the known timesinks for a set period of time. Sites that are off-limits include Twitter, Facebook, Flickr, Digg, Reddit, YouTube, Hulu, Vimeo, and all standard web email programs. It’s not that different from Self-Control (see above), except that it comes pre-equipped with a blacklist (which you can add to, of course). If you can’t handle your Internet abstinence, you can turn Anti-Social off by rebooting your computer. For Macs and PCs.

9. StayFocusd – Curb the time you spend browsing time-wasting sites.
This extension, for users of Google’s Chrome browser, works in the reverse manner to Anti-Social or Self-Control. Rather than setting a period of time for which you CANNOT use the Internet, it allows you to set a period of time to indulge in time-wasting sites. Only want to give yourself 60 minutes a day for Twitter, vanity Googling, and updating your Netflix queue? This is your app. Rather like when you were a kid and only allowed to watch 2 hours of TV a day. For Firefox users,LeechBlock performs a similar function. For Macs and PCs.

10. Time Out – Take regular breaks to keep your focus sharp.
For optimal focus, we need to take regular time-outs to relax and rebuild our energy. Time Out is a super-simple application that runs in the background while you work. At set intervals (say, every 90 minutes), it fades in and gently reminds you to take a 5-10 minute break. You can also use it to remind you to take 1-minute “micro-breaks” to avoid eye strain from staring at your computer like a zombie for hours on end. For Macs only.

How Do You Stay Focused?
What apps are you using to keep yourself on track? (We’d love more PC-friendly suggestions as well.)

You’re probably well aware that Facebook changed the email address on your timeline to @facebook.com without asking you first.  Now there’s an app for that!

Social Fixer

Almost every problem or general complaint you have about Facebook can be fixed with one browser extension called Social Fixer. Some examples of what it can do:
  • Change the look and feel of the site
  • Disable the lightbox-style photo viewer.
  • Hide the news ticker.
  • Track who’s unfriending you.
  • Get rid of timeline.

 Audit Your Approved Apps

Get Your Facebook Account Under Control This Weekend

If you audit your approved app, you may be surprised to find things you never knew about. This is because many apps subtly ask you for access to your personal information and you may approve an app without realizing it. To audit the access you give third parties and help ensure your privacy, visit your applications settings page and remove apps you don’t want or recognize. It only takes a couple of minutes and it .

Audit Your Facebook Privacy Settings

Facebook makes frequent changes. always up-to-date guide to managing your Facebook privacy. Use it to go through all the various settings and make sure your profile/timeline is as open or locked down as you want it to be. I’m not going to lie—this is pretty tedious, but very worth it. Spending an hour on your privacy settings while you watch a movie or listen to a podcast is a lot more fun than accidentally allowing your boss to see embarrassing, drunken photos you thought were only for a select group of friends.

Clean Up Your Friends

How many of your Facebook friends do you actually still want? When you add someone, you’re allowing them access to your information on some level. While Facebook provides friend groups to help you better-manage which information is shown to whom, as your friend list grows, it’s easy to miss details.

The easiest option is to just make regular posts for a couple of weeks explaining that you’re pruning your friends and ask that everyone who wants to stay on as one of your friends send you a message. After the two weeks, delete non responders. Alternatively, a GreaseMonkey script called FacebookDeletes can help you delete batches of people and save time.

Ask FB Friends!

When you’ve got a Facebook problem, Facebook might be the best place to go for an answer. Just ask your friends for help with the solution by describing the problem in a status update, and you might have a solution a few minutes later.

Visit Lifehacker.com

Internet Explorer’s Lifehacker.com is a source of tips and downloads that tracks and reports common problems, and provides a wealth of useful information on numerous topics. also has Open Forums where approved commenters can invent a #hashtag to host their own threads. You can follow it on Twitter and Facebook.

So the Supreme Court voted in favor of the Individual Mandate, but against the expansion of Medicaid, which Forbes’ Matthew Herper called a Solomonic decision about the future of health care in America that splits the baby.

What does this mean for healthcare delivery?

What Medicaid Expansion Means

One way the Affordable Care Act plans to expand health insurance coverage is by getting states to swell their Medicaid coverage to 133% of the federal poverty level in 2014, paid for mostly by the federal government in the beginning. The new nationwide eligibility threshold of 133% of the poverty level raises eligibility to $14,400 for a single adult or $29,300 for a family of four.

The potential impact:

  • 16 million people would be covered under Medicaid expansion.
  • That’s 50% of the 32 million predicted increase in coverage under the ACA.
  • A disproportionate share of new enrollees live in states in the South and West where there are more stringent eligibility rules.

Current Medicaid rules vary widely. In many Northeastern and Midwestern states, parents are eligible if they have incomes up to double the poverty level, or sometimes above, whereas in other states, such as Texas, Virginia and Missouri, only the disabled or truly indigent are eligible. The expansion of Medicaid would have helped these needy citizens the most.

The Potential Impact of the Court Decision

The court ruled that the federal government can pay for the Medicaid expansions, but can’t yank funding back if states don’t participate. This could impact states where legislators have generally shunned implementation of the law. 26 states currently oppose the expansion.

So what will the impact of the Medicaid provisions be? Since the ACA’s real impact derives from its expansion of Medicaid, the Supreme Court’s decision is worrisome. By limiting the federal government’s power to expand Medicaid in many states, the Supreme Court has seriously damaged the outcomes of universal health coverage.

First, almost half of all people who qualify for free health insurance never sign up, especially in the Southern states where the highest number of uninsured people live because those states create all kinds of barriers to Medicaid enrollment, since they have to assume some of the costs. The Supreme Court’s decision leaves the federal government without a stick to force states like Texas, Florida, and Mississippi to expand Medicaid, leaving it powerless to make sure that poor people get their coverage.

How Medicaid Expansion Really Impacts the States

States that had strict eligibility will make out well, since much of their Medicaid population will be covered at the high federal match rates for newly eligible people, whereas most of the Medicaid recipients in the other states will be covered under the existing lower rates. In Texas, the overall federal match rate will go from 60% to 67%, while in New York it will remain at about 50%. That means that medicaid expansion is a very good deal for states that need it most.

A Kaiser study released Wednesday predicts that the increase in states’ spending would be relatively small when weighed against the broad expansion of health coverage for their residents and the huge influx of federal dollars they will receive. Further, the small increase in state costs may be canceled out by savings from no longer having to subsidize the care of uninsured people.

The federal government currently shares the cost of Medicaid with the states, from splitting it 50-50 in wealthy states to picking up 75% in poor states. Under the new law, the federal government will cover 100% of the cost for all newly eligible people through 2016, stepping down to 90% in 2020 and beyond – paying for this through industry fees, cuts elsewhere in the health-care system and higher taxes on the wealthy.

Overall, the federal share of the expansion cost will be:

  • between 92% and 95% from 2014 through 2019.
  • By 2019, state spending will increase 1.4% and federal spending will increase by 22%.
  • Higher participation means relatively small increases in state spending.

A Very Good Deal for States That Need It Most

There would likely be a huge jump in enrollment with very insignificant expected increases in state spending. The report predicts how it would impact needy states:

  • Washington DC: 16% enrollment increase; 1% cost incease.
  • Maryland: 32% enrollment increase; 2% cost increase.
  • Virginia: 42% enrollment increase; 2% cost increase.
  • Texas: 45% enrollment increase; 3% cost increase.

Little Effect In States That Are Doing a Good Job

In states that have invested most in expanding Medicaid to low-income adults, the law will have relatively little effect. In New York, for example, the Medicaid population is expected to increase by only 6% by 2019, and the cost impact is expected to be negligible.

Medicaid is a Low Cost Program

Growth in Medicaid Spending vs. Private Insurance Spending

According to the Kaiser Foundation, the average cost growth from 2000-03 was:

  • 6.9%: the average growth of per enrollee Medicaid costs for acute care.
  • 9%  the increase in per enrollee costs for the privately insured.
  • 12.6%: the growth in employer-sponsored insurance premiums.

Figure2_Average_Annual_Medicaid_Spending

What Drove Medicaid Spending And Enrollment Growth?

Between 2000-03:

  • 68% of the growth in Medicaid spending was attributable to acute care.
  • 30% was attributable to long-term care due to the faster growth in enrollment of children and non-disabled adults into the program during the period.
  • 90% of Medicaid’s total enrollment growth (8.4 million) was from families.
  • Yet families only accounted for 44% of spending growth.
  • 10% of enrollment growth was from the elderly and individuals with disabilities.
  • Elderly and individuals with disabilities were responsible for 56% of spending growth, due to their intensive use of services.

Then Why Are Some States Objecting?

Alan Weil, executive director of the National Academy for State Health Policy, said some states may be protesting nonetheless because they are worried about affording even their small share of the expansion — and because they may be less committed to Medicaid generally. Someone who is offered a $200 pair of shoes for $20, he said, will appreciate that only if he likes the shoes — and if he has $20.

“This is a pretty good deal,” Weil said. But the question is whether “states focus on what they’re going to get versus whether they can afford this smaller amount they have to put in.”

Of course, the more cynical answer is: politics as usual. With the trend of Republican governors moving to the extreme right, and staking their political futures on a platform of resisting Obama’s “socialist agenda,” governors who put their own political careers ahead of the welfare of their neediest constituents will tend to oppose the expansion of medicaid in their states.

What’s Next?

Gail Wilensky, senior fellow at Project HOPE who  directed the Medicare and Medicaid programs from 1990 to 1992 and served as a senior health and welfare adviser to President George H.W. Bush observes in a New York Times article:

The Medicaid expansion will be particularly challenging for some Southern states that have the least generous programs. Louisiana, for example, has estimated that the law will mean that 37% of its entire population will be on Medicaid as of 2014. It is hard to imagine how states that have large populations with no insurance at all, like Texas, will experience the Medicaid expansion.

Challenges ahead

Pressures on the Medical Infrastructure: Wilensky notes that pressures on states, hospitals and doctors will be huge as coverage expands:

It is also hard to imagine the pressures on the physicians, nurses and hospitals that will be trying to provide medical services to all of these newly insured individuals and to do so while taking care of their traditional patient populations.

Before reform Massachusetts had 10% uninsured and now it’s down to 3%. Even with these relatively small increases in the number of insured, there have been reports of stresses on the delivery system, particularly in the western part of the state which is one of the few areas that does not have an abundance of individual and institutional providers.

This is why the law was designed to phase in over several years – to give states the chance to ramp up in preparation for universal coverage.

Increased Costs: State reluctance to expand Medicaid holds that it’s just too expensive and the ACA does little about that. For example, health care costs now consume 54 percent of Massachusetts’s budget, with the lion’s share going to the expanded Medicaid, despite federal subsidies, while the hope that newly insured people will take advantage of more preventive services, often touted as a means to cut costs, hasn’t panned out, according to a new study from Oregon.

 The ACA’s central effort to keep these costs down is to fund several experiments including two Accountable Care Organization pilots—the “Pioneer” and “Shared Savings” programs—which allow private insurers to contract with Medicare to take a fixed budget and take full responsibility for a large block of patients. If the patients’ care costs more, the insurers eat the cost; if the care costs less, the insurers keep the difference. This may or may not work.

Ruling A Net Gain for the Advancement of US Health Care

In the final analysis, the Supreme Court ruling was a net gain since the ACA was the only serious effort any party put forward to tackle the very serious problem of the uninsured. But there’s a lot of hard work to be done in an environment of toxic political polarization.

The Massachusetts experience has shown that there are three important challanges: expanding coverage, curbing spending growth, and improving quality of care. Massachusetts is just beginning to tackle some of these harder challenges. Expanding coverage to 32 million more people means that it’s time to resolutely tackle the hard challenges.

About Policy and Politics:
This blog seeks to examine issues related to financial services marketing, strategy and service in a non partisan manner. To examine the impact of government policy on financial services in a non partisan light, articles of this type will be categorized as “Government Policy” rather than politics.
 
Snap! principle of nonpartisan analysis of government policy:
The optimal way to analyze the impact of government policy on financial services marketing is to move the dialogue beyond partisan polemics to dispassionate discussion.

Forbes’ Matthew Herper raises 5 key question that analysts will be evaluating following the Supreme Court’s decision to uphold the Individual Mandate of the Affordable Care Act.

Roberts Splits the Baby

Chief Justice John Roberts somehow saw his way to rising above partisanship as a conservative Republican to uphold the decision in a Supreme Court that has been tainted by partisanship. It appears there was too much at stake to play politics – how history will regard his stewardship, since he is obviously aware that the Roberts court has been one of the most conservative in history.  Peter Dreier in the Huffington Post sees it this way:

There will be many analyses of the Supreme Court’s ruling, including why Roberts sided with the majority. My own view is that Roberts was looking at history, and was concerned that future generations would look at the “Roberts Court” as simply a partisan, right-wing pro-corporate court, which it has been so far. Polls show that since Roberts became Chief Justice the American public has lost confidence in the Court. Perhaps he was tired of being seen as a clone of right-wing Justice Antonin Scalia, who wrote a wacko dissent attacking the majority ruling.

And perhaps Roberts was taken aback by Obama’s State of the Union attack on the Supreme Court for its outrageous Citizens United decision, which has unleashed a flood of billionaire and corporate money into the current election contests, hijacking democracy in the process.

A Solomonic Decision

According to Herper, John Roberts made a Solomonic decision about the future of health care in America. Faced with the question of whether Congress and President Obama could force individuals to either buy health insurance or pay a penalty, moving even the young and healthy into the insurance market and force the states to expand the patients on Medicaid or else forego membership in the program altogether,  Roberts “threatened to split the baby on both counts.”He decided that:

  • Yes, the law could impose a penalty, because that penalty is fundamentally a tax (although this is not really accurate); and
  • No, you couldn’t force states out of Medicaid, but you can try to expand the program by offering more money to them.

What’s Ahead:  5 Things to Watch

What happens next depends what the various players do within this new landscape. Some key questions. He points to 5 important questions we should be focused on. This blog will try to keep current on developments as they unfold:

  1. Will states expand Medicaid if they don’t have to?
    This is perhaps the key question as to how much ObamaCare will increase the number of people with health insurance. Twenty six states challenged the Medicaid prevision; will any of them actually not try to expand the program, and what will be the political consequences?
  2. Will the law be good for health stocks in general?
    Many investors are assuming that except for hospital stocks like HCA and LifePoint, the upholding of the individual mandate on health insurance is bad news. But health stocks have all been held back by years by the sword of Damocles that the reform law represents. Some analysts are making the argument that knowing what’s going to happen next will be good.
  3. Will the law actually benefit some drug companies?
     Many in the drug business have expressed regret about the decision to back the Affordable Care Act, even blaming former Pfizer chief Jeffrey Kindler, a Democrat, for having pushed a deal through. I think that some of this opposition is based on outdated thinking that says that even though the government already pays for a lion’s share of health care spending through Medicare and Medicaid, giving it even more control will eventually create price controls like in Europe.This made sense when the industry made all of its money selling mass market pills such as Lipitor and Plavix, both now off-patent. But the model for many new cancer drugs (the biggest category in drug company pipelines) and for  drugs for rare diseases is that the companies charge a price no individual can pay, and then try to get insurers and governments to pay for them. This is the basic strategy taken by companies like Alexion, Biomarin, and the Genzyme division of Sanofi, all of which charge hundreds of thousands of dollars per patient per year for their medicines. Getting more people insured is good for these companies. Right now Alexion and Biomarin are down, which makes little sense. Fundamentally, the success of the drug industry depends on inventing new medicines; at most, the law is neutral. (Thanks to David Miller at Biotech Stock Research for helping me think this one through on Twitter.)
  4. Will medical device companies benefit too? Medical device makers likeMedtronic and Boston Scientific are down or trading sideways because they are going to pay a new 2.3% tax on their product. But Lawrence Biegelsen, the medical devices analyst at Wells Fargo, argued in a note to clients that maybe Wall Street is remembering the tax, but neglecting that the fact that the law benefits hospitals could result in higher volumes and less pricing pressure for the medical device industry.
  5. Will the law disrupt the health insurance market? Changing the way health insurance works in the U.S. is one of the biggest and most obvious goals of ObamaCare. It could result in higher premiums. An alternative case is that it will slowly eliminate fee-for-service payment, creating new systems called Affordable Care Organizations that help control costs by paying for patients’ health levels, not their care. But the biggest potential disruption is the idea that the health insurance exchanges created by the law, which are now nebulous, will allow companies other than existing giants such as Wellpoint and Cigna to enter the health insurance market. What if big health systems start offering insurance on their own because the cost of entry has gone down? Nobody knows what these changes will really do, but they represent maybe the biggest potential outgrowth of the law.

It could take years before we really have the answers. In health care, unintended consequences always rule the day.

Stay tuned.

 “Et Tu, Ron?”

Aetna CEO Ron WIlliams

A Huffington Post editorial by  , Analyst at the Center for Public Integrity, titled How Obama and the Democrats Got Played by the Insurance Industry on the Mandate was a quite scathing assessment of the role that the Health Insurance Industry played in the making of the Affordable Health Care Act.Potter cites Aetna CEO Ron Williams’ op-ed in the Wall Street Journal titled “Why I No Longer Support the Health Insurance Mandate,” renouncing his support for this key provision of the health care reform law. Not only does he call it a betrayal but questions its timing, as it was published just days before the Supreme Court was expected to rule on the constitutionality of the mandate.

Intensive Lobbying

According to Potter, it was Ron Williams who possibly more than anyone else had persuaded the President to reconsider his campaign pledge to enact reform without making people buy coverage from a private insurer. Candidate Obama, unlike Hillary Clinton and John Edwards had at first said he didn’t believe it was right for people to be forced to buy somethin they couldn’t afford.

Williams was the industry’s most visible CEO on Capitol Hill during the debate on reform, testifying at numerous congressional hearings about how essential it was to move the millions of uninsured Americans into private health insurance plans and how an individual mandate was necessary to make that happen.  He spoke against a “public option” which President Obama had supported to compete with private insurance companies.to compete with private insurance companies.

In an August 2009 article in Forbes, Williams was quoted as saying that he already had met with the President six times. In March of last year Obama appointed Williams to the President’s Management Advisory Board.

Mr. Williams influence is illustrated by Wendell Potter:

I was still head of corporate communications and a member of the public policy team at Cigna when Williams began speaking out about the need for an individual mandate. Many in the industry, including my former CEO, Ed Hanway, were initially skeptical, so Williams set out to convince them he was right. He argued that if Democrats took control of both Congress and the White House, which was looking increasingly likely, they would set their sights on the insurance industry. They most certainly would attempt to ban many of the industry-wide practices that enabled insurers to be so profitable, such as refusing to sell coverage to people with preexisting conditions. If that were to happen, the best way to guarantee that insurers wouldn’t be saddled with just the sickest Americans would be to get the Democrats to agree to a requirement that everybody, including the youngest and healthiest among us, buy private coverage if they weren’t eligible for a public program like Medicare or Medicaid. The government would also have to agree to tax credits or subsidies to help low- and moderate income Americans pay their premiums.

Before long, the CEOs of the other big insurers were indeed on board. They came to realize that if Democrats would agree to an enforceable mandate and premium subsidies, their companies would be getting billions of dollars in new revenue every year — forever. AHIP as a group soon endorsed the mandate, and Williams, who articulated the rationale for it so persuasively, became the industry’s chief emissary to both Congress and the White House.

The Democrats Embrace a Republican Idea

The mandate was in fact a Republican idea, that, in fact, it had been the centerpiece of legislation introduced in both the House and Senate by Republicans as an alternative to Bill and Hillary Clinton’s reform bill back in the early 1990s. Soon after the appointment of Ron Williams to the President’s Management Advisory Board, both the President and Democratic congressional leaders endorsed the mandate, and in a joint address to Congress in September 2009, President Obama said that although the public option was a good idea, it wasn’t essential.

Republicans’ About Face on the Mandate

The GOP leadership’s now famous plan to denounce any reform legislation the Democrats came up with led to their withdrawal of support for their own mandate as they portrayed the ACA as a “government takeover of health care.” They decided to build their legal challenge to the law around the mandate, arguing that it represented an unconstitutional and unprecedented overreach of the federal government.

Why Did Williams Change His Position?

1. Anticipating an Overturn of the Mandate: According to Potter, Williams’ op-ed in the Journal reflected industry leaders nervousness about what the high court will rule, their fear being that the mandate would be struck down whilethe rest of the law would be allowed to stand. That would mean new regulations and consumer protections without the expansion of the market guaranteed by the mandate.  Consequently Williams decided to bet on the Republicans to undo the regulations. He writes:

Williams’ real audience for that op-ed was Republican lawmakers and kingmakers. It was a signal to the GOP that the industry’s brief and often rocky affair with Obama is over and done with, that they were just playing the Democrats all along.

2. The Mandate Has No Teeth: University of Minnesota professor Lawrence Jacobs states that insurers withdrew their support for the bill after learning that the the mandate had no teeth. One concern of the insurance companies is that the law could force insurance companies to extend coverage to tens of millions of uninsured Americans, regardless of pre-existing medical conditions, and, without a mandate, pricing will be difficult, and premium costs could increase.
As I wrote in my post, Health Insurers Rebrand As they Prepare for The Inevitable Reform, pundits like Lawrence O’Donnel on The Last Word, have pointed out that the mandate is not a mandate at all, and that, aside from a small tax penalty of a few hundred dollars, there’s no real enforcement mechanism in it. If the penalty isn’t paid, there are no penalties, civil or criminal. O’Donnell detailed the two ways in which Obama’s law addresses this issue:

“In the section called ‘Waiver of Criminal Penalties,’ it says ‘In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.’” Another key component is the “Limitations on liens and levies.” That reads, “The Secretary shall not file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or levy on any such property with respect to such failure.”

3. Hedging His Bets: It makes sense for Williams to hedge his bets given the difficult position that the Insurance Industry is in in an inevitable climate of change without a mandate. As I explained here without the individual mandate it is very difficult to make universal coverage to work:
One of the important facts of insurance is that people who perceive that they need it less tend not to buy it. The actual fact is, the market has failed to get more young people into the market. The implication of the basic insurance principle of The Law of Large Numbers is that expanding the pool to include healthier participants who are the most likely to opt out of the insurance pool can reduce premiums. This is why the individual mandate is required for universal coverage to work.

The PPACA In Perspective

This reiterates my analysis of the PPACA, what it does and does not do:

The PPACA Model Successfully Expands Coverage: The PPACA, which is based on ex Governor Romney’s Massachusetts model, and in turn, derives from the Swiss model, has been successful in expanding coverage to most people wherever implemented.  In short, it is highly successful in addressing the economic barriers that prevent insurance companies from providing coverage to all individuals.

It is Only The First of a 2-Step Solution: It expands coverage, but it is not a prescription for lowering health care costs.  This must come from reform of the providers who actually drive the costs – the large hospital groups, medical equipment suppliers and pharmaceutical companies.  Piecemeal attempts like Maine’s are flawed from the outset, for this reason, as well as the reason that they are based on the fundamentally disproven premise that age-rated premiums will provide sufficient incentive for the free market to expand the pool of insureds sufficiently to keep premiums low. Such “solutions” overlook the fact that insurers still negotiate service costs with providers who have the market clout to continuously set them higher.

The Next Step: The PPACA is only the first step in a continual process of reform that needs to take place. It addresses the problem of universal coverage, and discrimination issues that arise due to the insurer’s need to address the issue of adverse selection.

The Insurance Industry Is Still the “Good Guy”

What’s now needed is an honest look at the real cost drivers of health care in the United States, and a plan to contain these. In the meantime, in a highly polarized political environment, the providers are still pushing hard against step one, the PPACA in order to continue the status quo. By creating ever expanding number of uninsureds, they stand to gain by opening clinics that provide selective care at lower prices at the expense of the quality of service. And the plan is to derail government’s role in healthcare to create a “wild west” in which health care standards will be further eroded.
 Fortunately, the Supreme Court decision helps prevent vultures like Rick Scott  from introducing a new health care treatment model based on discounted clinics that would lower the standards of care while maximizing profit, a business model that requires an uninsured public to exploit.

Preparing for 120 Million New Customers

Politics is a part of the cost of doing business, but it is now time to put them in the past and get busy  serving a large influx of new customers. In fact, Fred Karutz, the general manager of health plan solutions at Silverlink Communications, a health care technology company, said that if the health care overhaul was left intact by the court, as many as 120 million Americans could be in the market for health insurance by the end of the decade.
With Health Insurers anticipating an influx of new customers due to the Supreme Court’s decision to let the mandate stand, insurers have their work cut out. Already, they are busy expanding their offerings into individual products and rebranding themselves to meet a mass consumer market.
You can see some of the new consumer-based messaging that the major health insurers are now producing here.

You Read it Here First

True to my  March 31st prediction, the Supreme Court upheld the Individual Mandate today, July 28, 2012, largely letting stand President Obama’s health care overhaul, in a mixed ruling.
The majority of respondents to a Healthcare Finance News (76%) taken between March 26, 2012 and April 13, 2012, believed the individual mandate would be overturned.
While it is difficult to predict the actions of the Supreme Court, my analysis found the case for the Individual Mandate too compelling to ignore, as summarized at the end of this article.

The Decision

The health care ruling came three months after an extraordinary series of oral arguments in which the differences on the bench, if not the ultimate outcome, were disclosed in sharp relief.  A majority of the court, including the conservative chief justice, John G. Roberts Jr., affirmed the central legislative pillar of Mr. Obama’s term, voting 5 to 4 to uphold the law’s individual mandate provision and thus the entire law, as authorized by Congress’ power to levy taxes.

The court upheld the provision as a tax, but found that it does violate the Commerce Clause. The decision did significantly restrict one portion of the law: the expansion of Medicaid, the government health-insurance program for low-income and sick people, giving states some flexibility not to expand their Medicaid programs without paying the same financial penalties that the law called for. In short, the Court decided that if a state does not expand the Medicaid program, as required by the law, the federal government cannot withhold Medicaid funds.

According to Think Progress:

The entire ACA is upheld, with the exception that the federal government’s power to terminate states’ Medicaid funds is narrowly read.

A Political Split

A Court Tainted by Politics: As many had predicted, the Court continued its long-term trend of splitting by political affiliation and ideology. The four liberal justices, Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor, joined in the decision. Justices Samuel Alito, Anthony Kennedy, Antonin Scalia and Clarence Thomas dissented.

Chief Justice John Roberts joined Justices Sonya Sotomayor, Stephen Breyer, Ruth Bader Ginsburg, and Elena Kagan in the 5 to 4 decision.

Although conservative Justice Anthony Kennedy — who was considered a swing vote on in the case — sided with the conservatives, the swing vote came from conservative Chief Justice, John G. Roberts Jr.

A Tale of Two Judges: Although Thomas’ wife had crusaded against the law, he failed to do the proper thing and recuse himself from the decision. Justice Kennedy’s decision is to be lauded for its political independence.

A Significant Decision

Many observers called the case the most significant before the court since at least the 2000 Bush v. Gore ruling, which decided a presidential election.

The court ruling is a crucial victory for the law passed in 2010 that is intended to end the United States’ status as the only rich country with large numbers of uninsured people, by expanding both the private market and Medicaid.

Tens of millions of people are expected to gain insurance from the law, according to the Congressional Budget Office, as part of a march toward universal coverage, a goal that has eluded legislators and presidents – including Franklin Delano Roosevelt, Harry S. Truman, Lyndon B. Johnson, Richard M. Nixon and Bill Clinton – for generations.

The law’s centrepiece takes effect in 2014, at the same time that the law would prohibit insurance companies from denying coverage to people with existing health problems. Most experts had said the coverage guarantee would balloon costs unless virtually all people joined the insurance pool.

Most Americans already are insured. The law provides subsidies to help uninsured middle-class households pay premiums and expands federal health care for poor people.

The Controversy

The key provision that 26 states opposing the law had challenged – known as the individual mandate – requires virtually all citizens to buy health insurance meeting minimum federal standards or to pay a fine if they refuse.

Many conservatives considered the mandate unconstitutional, arguing that if the federal government could compel people to buy health insurance, it could compel them to buy almost anything, with broccoli becoming the central example in court arguments.

The mandate’s advocates said it was necessary to ensure that not only sick people but also healthy individuals would sign up for coverage, keeping insurance premiums more affordable. The law offers subsidies to poorer and middle-class households, varying with their incomes. It also provides subsidies to some businesses for insuring their workers.

Although there were some exceptions, in the lower courts most judges appointed by Democrats voted to uphold the law, while most appointed by Republicans voted to reject at least part of it.

Why The Decision Was Inevitable

Here is what I wrote about why the Supreme Court was likely to uphold the Individual Mandate

An article by Slate makes the case that mandated coverage is not only consistent with current employer health care practice, but a de facto effective practice already. To understand this, you need to consider the principles of insurance and the history of employer-sponsored health insurance plans.

The history of employer provided health coverage in the U.S. dates back to World War II. During the war, to maximize war production, numerous government controls were put in place, including wage controls, price controls, rationing, and intense social pressure to invest in low-yield war bonds to depress domestic consumption. The idea was to devote as large a share of output as possible to the war cause.  Since wage controls led to windfall profits for some firms, which were then subject to high taxation, employers hit upon the idea of offering workers non-wage benefits including, among other things, health insurance.

in 1943, the IRS ruled  that employer contributions to a health insurance plan didn’t count as taxable income, giving firms an incentive to offer some compensation in the form of insurance.  In 1954, Congress codified this in Section 106 of the Internal Revenue Code, a decision that is one of the two pillars of the current American insurance system.

The second pillar is the rule that employers need to offer health coverage on the same terms to all full-time employees. This is partly risk management, but a tax issue as well.

The insurance principle: A healthy young worker pays the same premium as a middle-aged one with high blood pressure. This ensures that within any given firm there’s considerable cross-subsidy flowing from younger and healthier workers to older and sicker ones. If all the young people dropped out of the plan, then the premiums charged to the remaining members would need to go way up. That’s because the healthier employees are, on average, receiving fewer dollars per year in health care services than they and their employers are paying into the plan in premiums.

The tax principle: If  employers stopped subsidizing employee insurance premiums and just raised their salaries instead,  thousands of dollars of tax-free subsidies would become taxable income.  If an employees opted out of the insurance pool, it would cost them hundreds of dollars in taxes. But without that penalty, people would drop out of employer-provided insurance pools, leading to higher premiums, more dropouts, leading to even higher premiums. The system would become unworkable.  Because this principle operates invisibly in the background, it is mistaken for the operation of a “free market”. But is it, really?

The non-taxation of group health plans is actually a government program that, according to the Congressional Research Service will cost the federal government $164.7 billion in fiscal year 2014.  This is funded by taxes on everyone – including those who don’t benefit from the deduction, including many entrepreneurs, part-timers, freelancers, or small-business owners.

Although we can’t be certain about how the Supreme Court will rule on the Affordable Care Act, the individual mandate is consistent with the principles of insurance and is likely essential to make the Act work to expand coverage to most Americans.

Will Stocks Rise Again On The News?

Immediately after the beginning of the judicial review, on Friday, March 30th, health insurance stocks reached a 52-week high  following three days of review.  UnitedHealth was up 17 cents, WellPoint up 19 cents, Aetna up 59 cents, and Humana Up $1.12. This was partly because the Supreme Court Justices’ original queries and comments, as they discussed the ACA appeared to show that the Justices were more concerned about the welfare of health insurers than the uninsured.  These were small gains in 2% to 3% range, and it seems that investors may well have been reacting to the President’s emphatic endorsement of mandates.  Investors seemed to recognize that the mandate means that a surge in enrollment is coming for health insurers, followed by a flood of new revenue.

Yet, following the Supreme Court announcement, stocks were divided:

  • Hospital stocks rallied: Hospital operators, and companies that own hospitals, celebrated the ruling. “Hospitals are going to be compensated for the uninsured that they cover,” said Robb Granado, senior analyst at Sageworks. “It’s a positive for hospitals. It takes away a lot of uncertainty.” HCA Holdings (HCA,Fortune 500), United Health Services (UHSFortune 500), Community Health Systems (CYH,Fortune 500), Health Management Associates (HMAFortune 500), Tenet Healthcare Corp (THC,Fortune 500)., and Vanguard Health Systems Inc. (VHS,Fortune 500) surged between 5% to 9%.
  • Providers of Medicare and Medicaid also got a substantial lift. Wellcare Health Plans (WCGFortune 500) rose 8% and Amerigroup (AGP,Fortune 500) jumped 5%. Centene Corp. (CNCFortune 500) rose 3% and Molina Healthcare (MOHFortune 500) rose 4%.
  • Health insurances stocks slumped significantly.Wellpoint Inc. (WLPFortune 500), Unitedhealth Group (UNH,Fortune 500), Aetna Group (AETFortune 500), Humana Inc. (HUMFortune 500) and Cigna Health Group (CIFortune 500) dropped between 2% to 5%.

We’ll keep our eyes on the trends to see what develops. Here’s an outlook on how it may affect stocks of the various stakeholders.

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