Chapter 9.A (or 3.A)--Sources of Health Insurance

 

Udates on coverage and spending statistics can be found on the web pages of CMS and the Census Bureau.

 

This page has resources and notes on the following topics:




Here is a supplement devoted to the monumental Patient Protection and Affordable Care Act of 2010.  The legislation’s full name is too lengthy to catch on, and its full abbreviation (PPACA) is so unpleasant sounding that there isn’t even agreement on how to pronounce it.  (Versions include “packa” or “pee-packa” or “puh-PACK-a.”)  For a while the legislation had no name; people just called it the health care reform law.  Then, the White House began to promote the “Affordable Care Act” as a short form.  It remains to be seen whether that, or “ACA,” will stick, so we’ll just continue to call it the new reform law, for now.
        See generally Symposium, 29 Health Aff. 1087 (2010); Symposium 29 Health Aff. 1284 (2010); Theodore Marmor & Jonathan Oberlander, The Health Bill Explained at Last, New York Review of Books, Aug. 19, 2010.

The copious sources of information about health care reform are far more than any normal person can keep up with.  But, a good starting point is the government’s main portal:  
www.healthcare.gov, especially these two sub-pages: www.healthcare.gov/law/about/ and www.healthcare.gov/center/
Links to a series of reports from the Congressional Research Service explaining various provisions of the new law in detail can be found here


For additional information and background, see updates to Chapter 1.C.1



The Public Option that Wasn’t.  An intermediate approach to private insurance and “Medicare for All” would be a “public option” that allowed people to purchase coverage from a government-run insurance plan like Medicare.  A public option or “Medicare buy-in” appeared likely at an earlier point in the Congressional deliberations, and was contained in the House bill that initially passed, but this was dropped as a political compromise.  The primary controversy was whether it is fair for the government to impose the same types of price controls on providers as it does under Medicare when it is competing with private insurers, who lack the same market clout.  Some feared, but others hoped, that if the public option succeeded, then private insurers would be driven out of business and the market would move us toward national health insurance.  Short of that, advocates believed that a public plan would impose strong discipline on market forces, requiring private insurers and providers to reduce their costs substantially. 
For debate, see Jacob Hacker, The Case for Public Plan Choice in National Health Reform (2009); Susan Jaffe, A Public Health Insurance Plan, Health Affairs (Nov. 2009); Victor R. Fuchs, The Proposed Government Health Insurance Company, 360 New Eng. J. Med. 2273 (2009) ; Michael F. Cannon, Fannie Med? Why a "Public Option" Is Hazardous to Your Health (2009); John Holahan, Linda J. Blumberg, Is the Public Plan Option a Necessary Part of Health Reform? (2009).



Insurance Exchanges and States’ Options.  The reform law's major regulatory changes will not take effect until 2014.  In the meantime, states must decide whether to establish their own insurance exchanges or instead to use a federal exchange as a default.  Initially, about 20 states opted to use the federal fallback high risk pools that, in the meantime, cover uninsured people with pre-existing conditions rather than to set up their own high risk pools using federal funds.  Most of these opt-out states are the same ones suing to invalidate the reform law on constitutional grounds.  Is it consistent to claim that the law infringes states’ prerogatives to regulate health insurance, and at the same time abdicate to the federal government any state role in implementing insurance reforms?
In setting up either a federal or states insurance exchange, there are many important issues policy and regulatory issues to resolve.  See Timothy S. Jost, Health Insurance Exchanges and the Affordable Care Act: Key Policy Issues (Commonwealth Fund, July 2010).


Medical Loss Ratio.  Health care reform requires insurers to pay rebates if their “medical loss ratio” (the percent of premiums paid in medical claims) falls below 80% for individual insurance or 85% for small-firm insurance.  How this ratio is calculated is a critically important and controversial policy issue because it entails the proper balance between administrative overhead and medical expenses.  Consider, for instance, whether “wellness incentives” paid to patients for participating in weight reduction or health monitoring programs should count either in the numerator or the denominator.  Are they a medical or administrative expense?  Are they paid out of the premium, or do they instead act more like a premium rebate?  See generally www.naic.org/documents/committees_e_hrsi_hhs_response_mlr_adopted.pdf
        What strategies might emerge under these mandatory caps on overhead expenses?  For a range of possibilities, consider the large fraud investigation of Wellcare, one of the country’s largest for-profit firms specializing in private Medicaid and Medicare plans.  Wellcare agreed to pay almost $100 million to settle charges that (among other things), in order to meet Florida Medicaid’s 80% minimum loss ratio, it hid administrative expenses in an off-shore reinsurance subsidiary and in a wholly-owned mental health subsidiary, and that it manipulated payment rates to providers in order to exaggerate its actual medical expenditures.  See http://securities.stanford.edu/1038/wcg_01/ , http://hcrenewal.blogspot.com/search/label/Wellcare



Web Resources and Notes on Private Insurance, Uncompensated Care, and Health Care Fraud

 

As part of health care reform, the federal government has created this website for navigating various health insurance options:   http://www.healthcare.gov/  (click link for "Explore Your Coverage Options")

 

To get a sense of what health insuarnce costs at different benefit levels, go to EHealthInsurance.Com.  


The Georgetown Institute for Health Care Research and Policy has produced a very useful set of consumer guides that describe in each state all of the various state and federal provisions that affect the availability, pricing, and coverage of private health insurance. These guides can be found at: http://www.healthinsuranceinfo.net/. Although they are very user friendly and clearly written, the dominant impression one takes away from reading them is how incredibly complex the fragmented health insurance system is in the U.S.  See also University of Houston Health Law and Policy Institute, Choosing a Health Care Plan.


Various other resources relating to insurance market regulation are collected at:   Wake Forest University Health Insurance Market Reform Study.

 

Two good sources for learning about state and local obligations to provide or fund care for the indigent are Community Catalyst’s Free Care Compendium, and the National Health Law Program’s State and Local Responsibility for Indigent Care files.  For additional litigation attempting to enforce these provisions, see SAINT ALPHONSUS REGIONAL MEDICAL CENTER v. BOARD OF COUNTY COMMISSIONERS, __ 2008 WL 2404738__ (Idaho 2008) (requiring county to pay some of the $187,000 medical bill incurred by an illegal immigrant); Franklin Memorial Hospital v. Harvey, ___ F.3d ___(1st Cir. 2009) (finding no constitutional infirmity in requiring private hospitals to provide free indigent care).  See generally Gary Jones, Regulatory Takings and Emergency Medical Treatment, 47 San Diego L. Rev. 145 (2010).

 

For additional discussion of consumer-directed health plans and increased patient cost-sharing, see updates to Chapter 1.C.3; Carl Schneider & Mark Hall, The Patient Life: Can Consumers Direct Health Care? 35 Am. J. L. & Med. 7 (2009); Beth Fuchs & Julia A. James, Health Savings Accounts: The Fundamentals (National Health Policy Forum, April 2005);  Mark A. Hall, The legal and historical foundations of patients as medical consumers, 96 Geo. L.J. 583-597 (2008).

 

The Treasury Department has a useful website on Health Savings Accounts, at  http://www.treas.gov/offices/public-affairs/hsa/.
See also  John C. Goodman and Devon M. Herrick, Health Savings Accounts: Answering the Critics (March 21, 2006).;  Paul Fronstin and Sara R. Collins, http://www.ebri.org/pdf/briefspdf/EBRI_IB_03-2008.pdf;  U.S. GAO, First-Year Experience with High-Deductible Health Plans and Health Savings Accounts  (Jan. 2006).


Grappling with the problem that subscribers' ease of movement within the private insurance market negates insurers' incentives to invest in long-term health promotion, see Ronen Avraham &  K. A. D. Camara, The tragedy of the human commons, 29 Cardozo L. Rev. 479-511 (2007).

 

Confronting the problems of an employer-based insurance system, see John Bronsteen, et al., ERISA, agency costs, and the future of health care in the United States, 76 Fordham L. Rev. 2297-2332 (2008).

Arguing, based on experience in other countries, that a legal right to health care is justiciable, see Puneet K. Sandhu, A legal right to health care: what can the United States learn from foreign models of health rights jurisprudence?, 95 Cal. L. Rev. 1151-1192 (2007).

 

 It apparently is a law of nature that every major piece of health care legislation must increase the fight against health care fraud, and this one is certainly no exception.  See John K. Iglehart, The ACA’s New Weapons against Health Care Fraud, New Eng. J. Med., June 30th, 2010 
On the perceived excesses of anti-fraud enforcement by the government, see also Kathleen Boozang & Simone Handler-Hutchinson, “Monitoring” Corporate Corruption: DOJ’s Use of Deferred Prosecution Agreements in Health Care, 35 Am J. L. Med. 89 (2009); A. Kesselheim & D. Studdert, Whistleblower-initiated Enforcement Actions Against Health are Fraud and Abuse in the U.S., 149 Ann. Int. Med. 342 (2008).  See generally Joan Krause, Following the Money in Health Care Fraud, 36 Am. J. L. & Med. 343 (2010).



Web Resources and Notes on Medicare and Medicaid, and Long-term Care

 

A good source for Medicare/Medicaid statutes and regulations is: http://hippo.findlaw.com/hippomed.html

Information about the current status of Medicare and Medicaid can be found on these two government web sites, www.cms.hhs.gov and www.Medicare.gov.  See also  Kaiser Family Foundation, Medicare at a Glance; Eleanor Kinney, ed., Guide to Medicare Coverage Decision-Making and Appeals (2002); Terry Coleman, Medicare Law (AHLA, 2nd ed. 2006).

 

From Tom Mayo on the Health Law Professors blog:  “Kaiser Family Foundation has a slick website to commemorate the 40th anniversary of the passage of Titles XVIII and XIX of the Social Security Act - the Medicare and Medicaid laws.  What caught my eye were video documentaries on the political history of the two programs, from the 1930s to the mid-1960s.  The documentaries (one on Medicare, one on Medicaid, one on both) are quite well done, partly because of some compelling excerpts of interviews with some of the principal players in 1965.  Of course, Wilbur Mills and LBJ are long gone, but there are still some terrific interviews with the president of the AMA at that time, Edward Annis; Joe Califano, a White House staffer at the time; LBJ's chief of staff, Jim Jones, and others.  Best of all, longer (7- to 9-minute) interviews with each of these fellows are available on the same page.  I like the way these videos really make the federal health care programs come alive.”


On the future of Medicare, see Henry Aaron & Jeanne Lambrew, Reforming Medicare: Options, Tradeoffs, and Opportunities (2008).


Excellent information about Medicaid, including a primer, program overview, and detailed fact sheets, can be found on the web site for the Kaiser Family Foundation.  See also Murphy's Unofficial Medicaid Page  and the AHLA's question and answer Guide to Medicaid Basics.

 

Substantial litigation has erupted regarding the availability of private lawsuits to enforce states’ Medicaid obligations (which is mentioned in note 32 of the Perkins article). The 9th Circuit has differed with other circuits in holding that providers and patients can sue the state to challenge the adequacy of payment rates, under the federal standard of making services reasonably available to beneficiaries "to the extent such care and services are available to the general population."  See California Pharmacists Association v. Maxwell-Jolly, ___ F.3d ___ (9th Cir 2010).  Reviewing the litigation, see Comment, 73 U. Chi. L. Rev. 673-704 (2006):

 In deciding those cases, the circuit courts have offered inconsistent interpretations of the Medicaid statute. While the Fifth and Seventh circuits have measured rates' adequacy by reference to access outcomes, the Third, Eighth, and Ninth circuits have measured rates' adequacy by reference to rate-setting methodologies. This Comment analyzes the circuit split that has arisen as courts have confronted challenges to Medicaid payments. Part I provides background on the Medicaid program and the circuit split, and it identifies and explicates two competing rules for measuring adequacy of Medicaid payments: the Fifth and Seventh circuits' “access metric” and the Ninth Circuit‘s “cost metric.” Parts II and III identify problems with these two rules, and criticizes them as inconsistent with the statute's text, purpose, and intent. Part IV proposes a new rule, an “MCO metric,” and explains why that rule is the best interpretation of Medicaid's reimbursement provision.

See also Sara Rosenbaum, Medicaid Payment Rate Lawsuits (Calif. HealthCare Foundation 2009); Brian Dunne, Enforcement of the Medicaid Act under 42 USC sec. 1983 after Gonzaga Univ. v. Doe, 74 U. Chi. L. Rev. 991 (2007); Nicole Huberfeld, Bizarre love triangle: the Spending Clause, section 1983, and Medicaid entitlements. 42 UC Davis L. Rev. 413-470 (2008); Note, 117 Yale L. J. 1498 (2008); Comment, 58 Emory L.J. 791 (2009); Note, 109 Colum. L. Rev. 1440 (2009).


 Federal health care reform reworked two widely criticized aspects of the Medicare Modernization Act:  the law will gradually close the notorious "donut hole"; and it reduces payments to private Medicare plans, which were shown to be substantially excessive. See generally Symposium, 1 St. Louis U.J. Health L. & Pol'y 1-230 (2007); Robert A. Berenson & Melissa A. Goldsteinm Will Medicare wither on the vine? How Congress has advantaged Medicare Advantage--and what's a level playing field anyway? 1 St. Louis U.J. Health L. & Pol'y 5-43 (2007).


For additional discussion of the Part D Prescription Drug Benefit, see the detailed summary by McDermott Will & Emery, and the shorter summary by the Kaiser Family Foundation here.

For analysis of particular legal issues, see Elizabeth A. Weeks, Cooperative federalism and healthcare reform: the Medicare Part D "clawback" example. 1 St. Louis U.J. Health L. & Pol'y 79-129 (2007).

 

Further analyzing the "Kyl Amendent," which restricts physicians' ability to charge Medicare patients extra, see Kent Masterson Brown, The Freedom to Spend Your Own Money on Medical Care, Cato Policy Analysis No. 601 (Oct. 2007).

 

Capturing the maddening complexity of all of this is a diagram, prepared by Yaniv Hanoch & Thomas Rice, Can Limiting Choice Increase Social Welfare? The Elderly and Health Insurance, 84 Milbank Q. 37, 56 (2006). See also Janet Cummings, et al., Who Thinks that Part K Is Too Complicat?, 66 Med. Care Res. & Rev. 97 (2009); Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, ch. 10 (2008).

 

Georgetown University has a very informative website as part of its Long-Term Care Financing Project.


The Patient Protection and Affordable Care Act included a major new provision on long-term care insurance, known as the CLASS Act (for Community Living Assistance Services and Supports).  It creates a public insurance plan that people can contribute to through payroll deduction while they are working, which then will pay fixed amounts for nursing homes, home care, and related services.  Critics claim that premiums will not be sufficient to cover promised benefits, in view of likely adverse selection.

See generally Symposium, 29 Health Aff. 6 (2010); www.actuary.org/pdf/health/class_july09.pdf.


Medicaid rules continue to tighten in order to make "spending down" more difficult.  Now, the look-back period for asset transfers is five years. The following is an example of how Medicaid estate planning could be used to pay for long term care for the middle class elderly. It was prepared by Wake Forest University law student Daren McDonough (class of 1999), so it may not be fully current, but it illustrates the gist of this type of planning. Do you think this use of Medicaid funds is proper, or does this constitute abuse?

 

Example: Medicaid Estate Planning

Widow is a 70 year old woman who has recently been diagnosed with Alzheimer's disease. She owns a lovely home in suburban Charlotte, North Carolina. The home is completely paid off with a fair market value of $250,000. This does not include the value of the half acre garden which is adjacent to the property and which is used to produce vegetables which Widow consumes herself. She has one car, a 1991 Cadillac El Dorado. Widow has never worked, she was supported by her husband, Dirk, who was a pilot for U.S. Air. Dirk owned a restaurant as a tenant in common with two other individuals, and upon his death he transferred his interest in the business to Widow, along with $500,000 in the form of proceeds from a life insurance policy and other cash savings.

Widow has recently used her money to buy a new 1997 Lexus (after trading in her El Dorado), titled in only her name, a new bedroom setting, a new kitchen lay out, as well as three new pieces of jewelry. Upon learning that she has Alzheimer's, Widow contacted a local attorney, Will Mack, who advised Widow she had a number of options concerning her estate. At the time of her meeting with Mr. Mack, Widow received $800/month in social security and $300/month from Dirk's pension fund. Widow has four children, all over 22, one child has severe mental retardation and currently lives in an assisted living home. (This is paid for by a trust set up by Dirk, which has Mercantile Bank as the trustee, and upon the child's death the remainder is to be given to a stated charity.)

Widow is worried about losing her home. She currently has the home willed to one of her children. Widow has over $100,000 dollars invested in stocks and bonds and plans on giving these assets along with proceeds from her full life insurance policy to her three able bodied children at her death.

Mr. Mack informs Widow that there is a way she can keep her home, give away her other assets as she sees fit, and let Medicaid pay for her upcoming nursing home care. Mr. Mack informs Widow that in order to qualify for Medicaid assistance some assets may need to be transferred and some assets may need to change form or be liquidated and invested into other areas. Mr. Mack's proposal sets out:

Once this is done, Widow's assets will be below $2,000. Her income is $1,100/ month and she would be entitled to receive Medicaid reimbursement.


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