Sunday, July 20, 2014

Health-Care Supply: About Those Certificate-of-Need [CON] Statutes

by Thomas Stratmann and Jacob W. Russ

Many states have certificate-of-need regulations, which prohibit hospitals, nursing homes, and ambulatory surgical centers from entering new markets or making changes to the existing capacity of medical facilities without first gaining approval from certificate-of-need regulators. These regulations purport to limit the supply of medical services and to induce regulated institutions to use the resulting economic profits to cross-subsidize indigent care. We document that these regulations do limit supply. However, we do not find strong evidence of higher levels of indigent-care provision in states that have certificate-of-need regulations as opposed to those that do not.

Discussion and Conclusion
This paper analyzes the connection between CON laws and cross-subsidization in the health care industry. We consider CON laws as a mechanism for financing a subsidy to the medically indigent.

The theory of cross-subsidization requires that CON programs do two things: First, they must act as an entry barrier to reduce the competitiveness of regulated medical sectors and increase the profitability of existing providers. Accomplishing that, these regulations must also force firms to provide the cross-subsidy. CON laws must provide incentives for the regulated to
use their profits to provide more indigent services than they otherwise would.

We investigated indigent care with state-level hospital data and put together the most comprehensive CON-regulation database to date. We do not find any evidence of an increase in indigent care. Our coefficients are small in magnitude, not statistically different from zero, and the direction of the effect changes across specifications. Our evidence is consistent with previous studies in showing that CON programs are effective at restricting the supply of regulated medical services. It appears, however, that CON programs do not induce cross-subsidization. Since we lack measures of hospital profitability, our data do not allow us to make conclusions about whether this is because supply restrictions have not increased hospital profits, or because indigent care provision is not sufficiently enforced by the states that have these provisions.

Link to the entire paper appears below:



Monday, July 14, 2014

ACA/Obamacare: Fuzzy Funding -or- Here Comes The Funding Cliffs!

“Fasten your seat belts. Turbulence lies ahead for ObamaCare as funding streams for three programs are set to nose-dive.

Millions of children could lose coverage, and millions more insured via Medicaid or ObamaCare plans could have an even tougher time finding a doctor.

These funding cliffs weren't driven by policy but by politics: Provide short-term funding to get ObamaCare off the ground, then cut it off — at least on paper — to make the budget forecasts look better over 10 years

Now, with the money set to dry up next year, a push has begun to save funding for all three programs at an annual cost approaching $13 billion.

The first bumps could be felt at the start of 2015, when the Affordable Care Act's boost in funding for Medicaid primary care doctors is set to expire.

The law temporarily provided funds to lift Medicaid's reimbursement rates, putting them on par with Medicare's for 2013 and 2014 at a cost of $11 billion.”

“Access problems could intensify in September 2015. ObamaCare provided $11 billion over five years to boost the capacity of community health centers, a key source of care in low-income, medically underserved areas. Most of the money goes to clinics where reimbursements and co-pays often don't cover the cost of care.

The 2015 funding cliff would leave health centers unable to sustain current caseloads, sharply damaging primary-care access for the insured and uninsured alike and potentially leading to more costly increases in specialty, emergency and inpatient care," warned researchers at George Washington University's Milken Institute School of Public Health.”

“A third upcoming cliff would see funding for the Children's Health Insurance Program, or CHIP, sink from $12.5 billion in fiscal 2015 to $9.1 billion the next year and $5.7 billion thereafter.” -
3 ObamaCare Funding Cliffs Imperil Coverage, Access, Investors Business Daily, 07/07/2014

Link to the entire article appears below:

Sunday, July 13, 2014

ACA/Obamacare: Where Web Security is Job 57

‘A Romanian attacker hacked the Vermont health exchange’s development server last December, gaining access at least 15 times and going undetected for a month, according to records obtained by National Review Online.

CGI Group, the tech firm hired to build Vermont Health Connect, described the risk as “high” in a report about the attack. It also found possible evidence of sophisticated “counter-forensics activity performed by the attacker to cover his/her tracks.” ‘ - Another Security Breach for Obamacare, NRO, 07/01/2014

Link to entire article appears below:

Monday, July 7, 2014

ACA/Obamacare: Subsidies Challenged in Multiple Law Suits

'Now, a bigger and more fundamental problem may lie ahead for Obamacare. As early as this week, a D.C. appellate court could rule against the administration on the most basic question: Are the massive premium subsidies flowing to low-income people through the federal insurance exchanges legal, or should that money be cut off?

A three-judge panel of the U.S. Court of Appeals is expected to rule on a suit claiming that only those who signed up for coverage through the 14 state insurance marketplaces are entitled to subsidies. The suit, Halbig vs. Burwell, argues that the subsidies can’t be provided to people in states that signed up for the federal exchange. The impact could be huge: Only 14 states set up their own insurance marketplaces, while 36 others opted to let the federal government create and operate their exchanges. If the subsidies are ruled illegal for the federal exchanges, that could torpedo the Affordable Care Act by making insurance unaffordable for millions of people relying on the subsidies to lower the cost of their premiums.

In essence, after years of conflict over the controversial health care law, the courts could end up doing what congressional Republicans have repeatedly tried and failed to do: Dismantle Obamacare.

Roughly 8 million people signed up for Obamacare through the state and federal exchanges in the first six-month enrollment period, which ended this spring. Eighty-seven percent of those who signed up for insurance in the federal exchanges received subsidies – or about 5.4 million people, according to analyses.

Ron Pollack, executive director of Families USA and a major booster of Obamacare, has been widely quoted as calling the legal challenge to the subsidies “the greatest existential threat” to the survival of the Affordable Care Act.

In an email on Sunday, Pollack said that without the subsidies, “The vast majority would be unable to afford the premiums and would re-join or join the ranks of the uninsured.”

He added, “The loss of the subsidies would make it very difficult to enroll additional low- to moderate-income people in coverage – largely because affordability is the key issue for people when they consider whether or not to enroll in coverage.”

The legal argument, at its root, is over what Congress intended when it wrote the health law back in 2010.

Four cases, including Halbig vs. Burwell, have been brought by employers and individuals in various courts. The cases are challenging the government’s contention that Congress wanted individuals in both state and federally operated exchanges to qualify for subsidies.

On March 25, a three-judge panel of the D.C. Circuit heard oral arguments in the Halbig case. Another panel in the Fourth Circuit Court of Appeals in Richmond, Virginia, heard arguments in a similar case, King vs. Burwell, on May 14. (Burwell refers to the new Health and Human Services Secretary, Sylvia Mathews Burwell.)

Michael Cannon of the Cato Institute and Jonathan Adler of Case Western Reserve University contend in a recent analysis in Health Affairs that statutory eligibility rules for the ACA’s premium-assistance tax credits “clearly say” that eligibility “depends on the applicant being enrolled in a qualified health plan ‘through an Exchange established by the State.’”

“The rules employ that restrictive phrase nine times, without deviation,” the two scholars write. “Since the Act explicitly ties its cost-sharing subsidies, employer-mandate penalties, and (in many cases) individual-mandate penalties to the availability of these tax credits, it therefore also authorizes those provisions only in states that establish Exchanges.”

They added, “This condition was not a fluke or a drafting error.”' - Court Challenges to Subsidies Threaten Obamacare, The Fiscal Times, 07/07/2014

Link to the entire article appears below:

Update: Get ready for an even bigger threat to Obamacare, Jonathan Turley, 06/30/2014,

Friday, July 4, 2014

ACA/Obamacare: “Inconsistencies”, Reverse Tax Cliffs and 04/15/2015 Tax Day Disaster This Way Comes

“The Obama administration is struggling to resolve data discrepancies that could jeopardize coverage for millions who sought health insurance on the federal exchange, according to a watchdog report on the still-rocky implementation of ObamaCare.

Though the system's troubles have faded from the headlines since the problem-plagued launch last October, a report from the health department inspector general provided the first independent look at widespread issues the government is having effectively fact-checking the information applicants are putting in the system.

According to the report, the administration was unable to resolve 2.6 million so-called "inconsistencies" out of a total of 2.9 million such problems from October through December 2013.

The government needs to determine applicants' eligibility in order to verify they can enroll and, in some cases, get government subsidies. Without that step, coverage could be jeopardized. Critics fear these issues also could cause chaos during the 2015 tax-filing season, as many would have to pay back subsidy money they were not entitled to.- ObamaCare coverage for millions in jeopardy as watchdog finds widespread data flaws, fox news, 07/01/2014


Keeping the above news report in mind for a moment, consider the following:

“Many of the inequities present in Obamacare stem from Section 1401 of the law, which establishes eligibility for subsidized insurance in government-run exchanges.[5] Obamacare’s formulae for allocating federal premium and cost-sharing subsidies include several “cliffs.” At these cliffs, individuals and families will actually benefit more by working less because additional earnings could cause them to lose thousands of dollars in taxpayer-funded subsidies.

For example, Obamacare subsidizes insurance premiums for individuals with incomes of up to 400 percent of the federal poverty level (FPL), which is just over $62,000 for a couple in 2013.[6] According to the Kaiser Family Foundation’s subsidy calculator, a married couple, each 50 years old, making a combined $60,000 per year would receive a taxpayer-funded insurance subsidy of up to $5,081.[7] The couple would qualify for this subsidy because their combined income would be just below 400 percent of the FPL. However, if the couple earned an additional $2,500—raising their income just above 400 percent of the FPL—they would receive no subsidy at all. Even though they receive $2,500 more in cash compensation, the couple would actually be worse off financially because they would lose more than $5,000 in federal insurance subsidies.

Similar cliffs occur elsewhere in Obamacare’s subsidy structure. As income approaches 400 percent of the FPL, the percentage of income that households are expected to devote to insurance premiums rises, and the premium subsidies under Section 1401 fall. Individuals with rising income also face the loss of federal cost-sharing subsidies established under Section 1402 of the law, which reduce out-of-pocket expenses including co-payments and deductibles. These effects are particularly acute at certain cliffs established in the statute—for instance, 150 percent, 200 percent, and 250 percent of the FPL—but they also pervade the entire subsidy structure. Overall, University of Chicago economist Casey Mulligan has concluded that Obamacare will help raise effective marginal tax rates by more than 10 percentage points.[8]

The subsidy formulae in Obamacare and the disincentives to work compound an existing system of tax credits and welfare programs that places families of low and modest incomes in a “poverty trap.” Testifying before two subcommittees of the House Ways and Means Committee in June 2012, Urban Institute fellow Gene Steuerle explained how the phaseouts of various income-linked programs—such as food stamps, housing assistance, and cash welfare benefits under the Temporary Assistance to Needy Families program—create very high effective marginal tax rates.” - How Obamacare Undermines American Values: Penalizing Work, Marriage, Citizenship, and the Disabled, Chris Jacobs,, 11/21/2013


Upon Further Review

The reverse tax cliffs of Obamacare would likely work the same as marginal income tax cliffs in regards to tax avoidance. Tax avoidance techniques are well known. There are legal tax avoidance techniques and there are illegal tax avoidance techniques. The point being, individuals will rationally avoid tax.

For instance, James and Jane Goodfellow face/approach a marginal income tax cliff. The Goodfellow’s could merely take the months of November and December off and earn zero income during those months and avoid the tax cliff. The Goodfellow’s could continue earning income and deploy legal tax avoidance techniques. Finally the Goodfellow’s could continue earning income and deploy illegal tax avoidance techniques such as underreporting of income.

Meanwhile, John and Mary Public face/approach a reverse tax cliff regarding Obamacare. The Public’s could merely take the months of November and December off and earn zero income during those months and avoid the reverse tax cliff. The Public’s could continue earning income and deploy legal tax avoidance techniques. Finally the Public’s could continue earning income and deploy illegal tax avoidance techniques such as underreporting of income.

Returning to the 2.6 million unresolved “inconsistencies” in Obamacare applications and the 04/15/2015 tax day disaster of many subsidy payments needing returned by Obamacare subsidy recipients: Did Obamacare applicants put the cart before the horse regarding tax avoidance techniques? How so?

On the ACA/Obamacare web site it asks a very vague question regarding income: “What is your household's expected income for 2014?” If one answers the preceding question assuming tax avoidance techniques deployed one would give a different answer than if one answers the preceding question assuming no tax avoidance techniques deployed.

Consider for a moment that a clever person experiments regarding changing the answer to “income” upon the ACA/Obamacare web site (regardless of the anticipation of tax avoidance techniques deployed and consequential reportable income). By changing the income the person will see the subsidy rise or fall and hence the consequential price required to be paid for a particular insurance plan rise or fall. Is it possible the clever person tells other clever people of their experiment?

In the final analysis, are the “inconsistencies” really inconsistencies or merely a product of the ACA application design? Stated alternatively, if one turns loose Johnny Insurance Applicant on a malfunctioning web site with no verification of data input, would one expect “inconsistencies”?


Tuesday, July 1, 2014

ACA/Obamacare: “Sticker Shock”, Pauly, Harrington and Leive

The paper It All Depends: “Sticker Shock” in Health Insurance Reform, Pauly, Harrington and Leive, Wharton School, 01/04/2014 the conclusion is as follows:


"This analysis of the change in total expected payment for those to be covered in post-ACA exchanges tells rather different stories about "sticker shock." On the one hand, among those who previously bought individual coverage, premiums generally increase only modestly if they choose the plans with the lowest bronze or silver premiums. While bronze premiums are lower than what was paid before, however, estimated out of pocket payments are higher, so the net effect is a moderate increase in TEP. If people choose to pay the median silver premium, the increase will be larger, but (at 25-30%) is still much lower than some of the estimates from the informal literature.

The sticker shock story is much different for the previously uninsured. The low income previously uninsured will have subsidies to cover much of the higher premiums and cost sharing to which they will be subject. But the previously uninsured who will receive minimal subsidies, who constitute a sizeable fraction of the uninsured population, are estimated to experience a very large increase in financial responsibility. Not only will they have to pay significant premiums but, because of increases in total utilization because of moral hazard or greater willingness of providers to supply care, their responsibility for out of pocket payment will also increase. They will pay a slightly smaller fraction of their total cost of care than when they were uninsured, but the total cost will increase to such an extent that the financial burden will rise.

We have not provided welfare calculations for this population. Such calculations would reduce the change in TEP by an estimate of the value to them of additional care (but by something less than the cost of that care), and by a small reduction in the risk of very high levels of OOP. One reason for this large increase in TEP is the small average OOP for the non-low-income uninsured in the CPS data, and this data may have underestimated the relatively rare event of a high out of pocket payment. Even so, it seems that this is the population that will be subject to the most severe financial shock from health reform."

Note: click the link below then once upon the page which the link leads you to, click the very first link in the column of links and it will take you to the un-gated pdf version of this paper.


A worthy point within the paper is that the previously uninsured taking the largest total expected payment (TEP) increase:

"Given our assumptions, an insurance plan can be evaluated in terms of its "Total Expected Price" (TEP), defined by:

(1) TEP* = P* + OOP*

where P* is the average premium paid by persons in a given subgroup, OOP* is the average expected amount paid out of pocket, and TEP* is the sum of the "average person’s" premium and the average person’s expected value of out of pocket payments."

"The policy exemplar of an uninsured person is one who faces the risk of paying out of pocket for all of their medical care, which means either high financial risk (if care is used) or reduced access (if it is not). But the combination of charity and bad debt care, combined with the effects of incentives to seek out free care at emergency departments of hospitals, mean that the uninsured as a group do not either face or pay the full market price paid by insured patients. Somewhat surprisingly, this use of free or subsidized care even applies to the large minority of uninsured people who have incomes high enough that they could "afford" insurance (Bundorf and Pauly, 2006). So the relevant analysis of the financial consequences (though not the welfare consequences) from health reform that results in insurance purchase for this population compares their actual out of pocket payment when uninsured with the combination of premiums and out of pocket payments they will face under bronze and silver plans after reform."

Upon further review, will the uninsured remain uninsured because they already know how the system works i.e. "combination of charity and bad debt care, combined with the effects of incentives to seek out free care at emergency departments of hospitals". It would be a rational response to a price spike to avoid the price increase and remain at zero price. Further, not only do the uninsured understand how the system works, they may feel comfortable, in that, they have learned what to obtain health-care so why bother learning a new system (if it isn't broke, don't fix it).

Saturday, June 28, 2014

ACA/Obamacare: Unsubsidized Premiums Increased an Average of 49% Across the Nation Under ACA. An Interactive Map To Pin Point Your Local Change in Premium

“There are hundreds of aspects of Obamacare that people argue over. But there’s one question that matters above all others: does the Affordable Care Act live up to its name? Does it make health insurance less expensive? Last November, our team at the Manhattan Institute published a study indicating that Obamacare had increased the underlying cost of individually-purchased health insurance in the average state by 41 percent in 2014, relative to 2013. We’ve now redone the study on a county-by-county basis, complete with a brand-new interactive map. Depending on where you live, the results may surprise you.”

“Women face rate hikes in 82% of U.S. counties; men 91%

Across the country, for men overall, individual-market premiums went up in 91 percent of all counties: 2,844 out of 3,137. For 27-year-old men, the average county faced 91 percent increases; for 40-year-old men, 60 percent; for 64-year-old men, 32 percent.

Women fared slightly better; their premiums “only” went up in 82 percent of all counties: 2,562 out of 3,137. That’s because Obamacare bars insurers from charging different rates to men and women; prior to Obamacare, only 11 states did so. Because women tend to consume more health care than men, the end result of the Obamacare regulation is that men fare somewhat worse.

Relative to men, the average rate increase for women was less extreme: 44 percent for 27-year-olds; 23 percent for 40-year-olds; 42 percent for 64-year-olds.”

“Remember that these figures represent the underlying, unsubsidized health insurance prices. If you’re eligible for a subsidy—if your income is below 400 percent of the Federal Poverty Level—taxpayers will help defray a portion of these costs. Those subsidies will disproportionately help those in their late fifties and early sixties, because of the way the Obamacare exchanges interact with the subsidy formula.

A new report from the Office of the Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services (ASPE HHS) indicates that among those who signed up for Obamacare exchange plans this year, subsidies covered on average 76 percent of the underlying premium. That is to say, the exchanges attracted the low-hanging fruit of those who had the most to gain from taxpayer-funded subsidies." - 3,137-County Analysis: Obamacare Increased 2014 Individual-Market Premiums By Average Of 49%, Forbes, 06/18/2014

Link to the entire article appears below: