Thirty-six states that rely on private managed care programs to provide medical services to all or some of their Medicaid recipients are facing an added ObamaCare tax.
According to a report by Milliman consulting actuaries, states that contract with Medicaid managed care plans face up to $15 billion in added costs over 10 years for their share of the law’s tax on private health insurance.
States will pay even if they strongly oppose ObamaCare and are refusing to establish health insurance exchanges or expand Medicaid.
The health law imposes an annual tax on private health insurance plans – a tax designed to recoup what some call their “windfall” from the millions of new customers they could gain because of the law. The tax on health insurers was expected to raise a total of $8 billion in 2014 and as much as $150 billion over the next 10 years. It is one of 20 designed to fund ObamaCare’s expanded coverage.
Most Medicaid managed care organizations (MCOs) are considered private plans and therefore are subject to the new tax. But this punishes states that are trying improve their Medicaid programs: They are working to make Medicaid more efficient and save money by contracting with private managed care plans to provide medical care to recipients. States that stay with the antiquated fee-for-service Medicaid program escape the levy.
Insurers have rightly argued that this tax will be passed along in the form of higher premiums. Milliman calculates the tax will increase Medicaid premiums by up to 2.5%. In recent years, states have allowed premium increases of only 1 or 2% annually, with some states actually cutting payments to plans, according to the report.
If Medicaid HMO plans are required to pay the new tax out of their profits, many would exit the market rather than operate at a loss. Further, the fee is considered an “excise tax” which is not deductible from corporate income taxes, amplifying its impact.
The Milliman report estimates the ObamaCare health insurer fee will increase Medicaid managed care premiums between $37 billion and $42 billion over ten years. Because both the states and the federal government share in funding Medicaid, the states’ collective share is expected to be between $13 and $15 billion.
Milliman explains this means that the federal government is taxing itself as well as state governments. The feds get their money back because all of the revenues from the health insurance tax accrue back to the federal government.
But the states are left to figure out how to pay their share of the ObamaCare bill – either by further clamping down on payments to Medicaid plans or cutting other state services.
Adding to the constraint: A boost in payments to primary care physicians treating Medicaid patients expired January 1, putting added pressure on states to fill the gap. A study by the Urban Institute estimates that primary care doctors who have been receiving the enhanced payments will see their fees for cut by an average of 43%. Millions of new Medicaid enrollees could face provider shortages if fees revert to pre-ACA levels.
The need to allow a boost in payments to account for the new tax as well as pressure to continue the increase in Medicaid primary care rates puts added pressure on already burgeoning state Medicaid budgets.
While Medicaid managed care is a low-margin business, most states allow plan operators a reasonable profit margin to encourage their participation. Joseph Swedish, chief executive officer at WellPoint , explained in a conference call with investors earlier this year that states “understand the need for a sustainable Medicaid program,” and passing along the fee “is part of sustainability.” Most states consider taxes to be reasonable and unavoidable costs of doing business and incorporate them into payments to the plans.
The Obama administration has not provided much-needed guidance to the states about how to handle fee negotiations with managed care plans involving the added taxes.
About 70% of Medicaid managed care premiums were paid to for-profit MCOs in 2010. In 2010, approximately 50% of all Medicaid recipients were enrolled in Medicaid managed care plans, rising to more than 60% this year.
Punishing states for using Medicaid managed care is yet another ObamaCare attack on private health plans.
According to the Milliman report, Florida could face added costs of up to $1.4 billion over the next ten years to fund ObamaCare, Pennsylvania, $1.3 billion, and Texas, $1.1 billion. Tennessee, where Medicaid recipients are fully enrolled in managed care, could face added costs of $731 million over that time. Maryland will need to come up with $680 million, and Louisiana with $787 million. States that don’t contract with Medicaid managed care plans will not have to pay.
The tax is due regardless of whether or not a state decides to expand Medicaid. The worst decision would be to scrap their Medicaid managed care plans to avoid this new ObamaCare tax. This is one more example why the best solution is to eradicate all of the ObamaCare taxes — along with the rest of the law.
As we enter 2015, the politics of the president’s health care law are little changed from last year or the year before, or any year since it was passed. The details change with the calendar, but year after year, the law remains a major drag on President Obama’s popularity and legacy.
Defenders of the law commonly known as Obamacare continue to believe the law will eventually become popular and point to a growing number of people with insurance as proof the law is working. Sooner or later, they reason, those who receive insurance through the healthcare exchanges will express their gratitude in the voting booth..
By Jason D. Fodeman, MD
President Obama recently checked in to Walter Reed hospital with a sore throat. During his visit, it appears he received a suite of treatments to aid in diagnosing his illness, including a CT scan, a fiber optic exam, and ENT consultation. Ultimately, the doctors concluded that he has acid reflux.
As the leader of the free world, Obama certainly deserves top notch medical care. Yet the breadth and quality of medical care that he received starkly contrasts with the diminished care that too many Americans could soon receive thanks to the Affordable Care Act.
As a physician, I strive to give the best medical care to every patient who walks through the door. The ACA has the potential to undermine my ability to do this in a number of ways.
Obamacare has come to Harvard, and the faculty is in a state of shock and dismay.
In what has to be considered an early contender for the most hilarious and enjoyable news story of the year, the New York Times recounts the tumult over Obamacare in Cambridge.
“For years,” the Times writes, “Harvard’s experts on health economics and policy have advised presidents and Congress on how to provide health benefits to the nation at a reasonable cost. But those remedies will now be applied to the Harvard faculty, and the professors are in an uproar.”
By Chris Jacobs
We’ve seen few administrative controversies with Obamacare’s second open-enrollment season, but as a Wall Street Journal article noted last week, the start of the 2014 tax-filing season could bring a new wave of public discontent.
This tax-filing season brings the first enforcement of the Affordable Care Act’s individual mandate–the complexity of which could become a boon for tax-preparation firms. The instructions for completing the mandate exemption form run 12 pages, list 19 types of exemptions (with multiple codes), and include worksheets that may require individuals to go to their state exchange’s Web site to find the monthly premiums that will determine whether they had access to “affordable” coverage.
The outrage was swift and loud. Millions of people were feared to be in danger of losing their health insurance last year because their plans did not comply with the Affordable Care Act..
To keep people covered and quell consumer anger, President Barack Obama and many states allowed people to renew their old plans temporarily — including 73,000 in Maryland.
But that offer has expired and now people like Raymond Liu have been thrust onto health exchanges where they must purchase new plans. Many are finding higher premiums or less coverage, as they worried would happen.
By Megan McArdle: While I was away last week, Vermont decided to scuttle its single-payer health-care plans. I predicted as much six months ago, for one simple reason: A single-payer system would cost too much. When faced with the choice of imposing double-digit payroll taxes or dropping his cherished single-payer plan, the governor of Vermont blinked.
“But Megan!” I hear you cry. “Single-payer systems are cheaper, not more expensive! Look at Europe!”
Sarah Dutton, Jennifer De Pinto, Anthony Salvanto and Fred Backus: Fifty-two percent of Americans say they find basic medical care affordable, but that’s down from 61 percent last December. Today, for 46 percent of Americans, paying for medical care is a hardship, up 10 points.
Similarly, just over half of Americans are at least somewhat satisfied with their health care costs, while 43 percent are dissatisfied.
In November, voters across the country elected new Republican governors and legislators, many of whom campaigned heavily against Obamacare’s Medicaid expansion. Although some of these new leaders (including Governor-elect Asa Hutchinson in Arkansas) will be taking control of states that have opted into Obamacare expansion, there is new hope that these governors and state legislators will work to reduce government dependency and restore the working class.
One idea rapidly gaining currency among legislators and new governors’ transition teams is the possibility of renewing Medicaid expansion on a temporary basis for those who have already signed up, but immediately freezing enrollment going forward. This approach would stop the bleeding, but allow for a more gradual wind down of the program and allow enrollees to keep their plans until they increased their incomes, transitioning out of eligibility.
“The prices of some generic drugs have soared more than 1,000 percent in the last year, and federal officials are demanding that generic drug makers explain the reasons for the increases or potentially face new regulation.
The increased use of generic drugs has been one of the rare success stories in national efforts to curb the nation’s $2.8 trillion medical bill, since generics have historically been far cheaper than name-brand versions. More than eight in 10 prescriptions are filled with generic drugs, according to the Food and Drug Administration. In the 10-year period from the beginning of 2003 through 2012, generic drug use has generated more than $1.2 trillion in savings, according to the Generic Pharmaceutical Association.”