Medicare Spending on Children Results is Good for Income, New York Times Reports

Recently, Margot Sanger-Katz wrote the following article outlining a study that showed providing government health care to children correllated with a boost in future earnings that may result in the government recouping some of the funds used to provide the medical care with income taxes.

The article follows:

"When advocates talk about the advantages of government health care, they often talk about a moral obligation to ensure equal access. Or they describe the immediate health and economic rewards of giving people a way to pay for their care.

Now a novel study presents another argument for the medical safety net, at least for children: Giving them health coverage may boost their future earnings for decades. And the taxes they pay on those higher incomes may help pay the government back for some of its investment.

The study used newly available tax records measured over decades to examine the effects of providing Medicaid insurance to children. Instead of looking at the program’s immediate impact on those children and their families, it followed them once they became adults and began paying federal taxes.

People who had been eligible for Medicaid as children, as a group, earned higher wages and paid higher federal taxes than their peers who were not eligible for the federal-state health insurance program. And the more years they were eligible for the program, the larger the difference in earnings.

“If we examine kids that were eligible for different amounts of Medicaid over the course of their childhood, we see that the ones that were eligible for more Medicaid ended up paying more taxes through income and payroll taxes later in life,” said Amanda Kowalski, an assistant professor of economics at Yale and one of the study’s authors.

The results mean that the government’s investment in the children’s health care may not have cost as much as budget analysts expected. The study, by a team that included economists from the Treasury Department, was able to calculate a return on investment in the form of tax revenue.

The return wasn’t high enough to pay the government back for its investment in health insurance by the time the children reached age 28, when the researchers stopped tracking the subjects. By that age, the Treasury had earned back about 14 cents for every dollar that the federal and state governments had spent on insurance. But it did suggest that, if the subjects’ wages continued to follow typical trajectories as they aged, the federal government would earn back about what it spent on its half of the program by the time the children reached 60 — about 56 cents on the dollar, calculated using a formula that took into account the time value of money.

The split in spending between the federal and state governments for Medicaid varies by state, but, on average, federal taxpayers pay 57 cents of each dollar. There may also be some return on investment for states that collect income taxes, but the researchers didn’t measure that.

Here’s what that means in real numbers: The average person in the study with no Medicaid earned a total of $149,000 by age 28. For each year a person was eligible for Medicaid, that income went up by $250, and the taxes the person paid went up accordingly.

“What’s exciting about this is how good the outcome variables that they can look at,” said Janet Currie, a professor of economics and public affairs at Princeton. A few studies have tracked the health outcomes of children who were eligible for Medicaid over time, including one Ms. Currie wrote, but the study’s measures of economic outcomes are new.

The new paper was made possible by a series of policy changes throughout the 1980s and 1990s that slowly expanded Medicaid to cover more and more American children. The changes essentially happened in two phases: First, the federal government allowed the program to include older children, and then individual states approved expansion to those groups. The slow, state-by-state spread of the policy enabled the researchers to compare children who were eligible for Medicaid with a control group of similar children of the same age and family income level who were not eligible for the program. The study looked at children who were eligible for Medicaid, even though not every eligible child actually signed up.

Ms. Currie said that earlier studies of children’s health outcomes also suggest that children with serious illnesses often go on to be sick as adults as well — meaning they are more likely to miss work or have limited career options. Medicaid supports and funds a lot of important preventive health care for very young children. She said the lesson could be that “an ounce of prevention is worth a pound of cure.”

Now that the earlier expansions have had a chance to spread, nearly every low-income child in the country is eligible for Medicaid, and more than a third of all American children are currently enrolled in either Medicaid or a closely related federal-state program, called the Children’s Health Insurance Program.

“If this is right, then we’re going to be seeing a lot more impact for the kids that are born now and in the future,” said Judy Solomon, a vice president for health policy at the left-leaning Center on Budget and Policy Priorities."

Polls Show Number of Uninsured Adults Lowest Since Obama Took Office

The deadline to enroll on the new insurance exchanges is quickly approaching, with just three weeks remaining. The deadline seems to be spurring a dramatic up-tick in the number of adults enrolling in health insurance plans. Acording to the Gallup-Healthways Well-Being Index released Monday the number of Americans with no health insurance has dropped to the lowest levels since President Obama was sworn in. The index found that the percent of uninsured adults dropped from 17.1-percent in the last quarter of 2013 to 15.9-percent in 2014. Experts attribute the increasing number of insured adults to the insurance plans made available by the Affordable Care Act.

The increase in enrollment was found across all demographic groups examined by the index. Hoewver, enrollment throughout the Latino demographic lagged behind other demographic groups. This is notable because the Obama Administration is actively reaching out to the relatively young Hispanic community to encourage enrollment. 

A significant drop in the rate of uninsured adults occurred among African-Americans with a 2.6 percentage point decline. The rate declined 1percentage point among white adults, but only eight-tenths of a percentage point for Latinos. The largest drop in the uninsured rate was a 2.8 percentage point difference for households with an annual income of less than $36,000.

CMS Looks to Limit Estate Recovery Actions for New Medicaid Recipients

Commentators on both sides of the Affordable Care Act (ACA) debate have pointed out that lower-income Americans may be deterred from enrolling in the expanded Medicaid program because of the currently estate recovery actions are allowed. An estate recovery action is a legal collection method that allow states to recover the amount of payments for long-term Medicaid services from patients after their death to repay the state for the cost of their medical care. 

This practice stems from a 1993 federal law that requires states to recoup the costs spent on long-term Medicaid services from the estates of deceased recipients. The 1993 law also gives states the option of recovering all Medicaid costs incurred from the age of 55 until death, even if they are not related to long-term care. In practice this often results in states placing a lien on the deceased's home after being notified of the death. However, states generally try not to collect the debt immediately in instances where a surviving spouse or dependent is living in the home. 

Last week the Centers for Medicare and Medicaid Services (CMS) issued a letter to state medicaid directors providing guidance that seek to limit estate recovery actions for Medicaid recipients that qualify under the ACA's Medicaid expansion program. While the letter does not compel states to follow the conditions set forth in the letter, experts say it will likely serve as a deterrent for states considering estate recovery actions against expanded Medicaid recipients. 


More discussion on Medicaid Estate Recovery and the CMS letter can be found at the following sources:

•  Asbury Park Press, Feds: Don't try to bill new Medicaid recipients after their death.
• National Senior Citizens Law Center, MAGI Medicaid and Estate Recovery: CMS Issues State Medicaid Director Letter.
• Modern Healthcare, Reform Update: Medicaid estate-recovery law may hamper enrollment efforts.

Obama Administration Announces Health Insurance Mandate Delay and Reduction of Percentage of Workers Covered Requirements

The Obama Administration announced changes in the implementation of the Affordable Care Act provisions related to the employer mandate for "medium-sized" businesses.  The provisions were originally drafted to go into effect this year. 

The changes in implementation deadlines do not affect most businesses. Companies with fewer than 50 workers remain exempt from the mandate. 

First, the deadline to meet the coverage requirements under the mandate for medium-sized businesses, companies that employ between 50 and 99 workers, has been delayed until January 1, 2016. The delay is conditional and requires companies to promise that the employer will neither cut an employees' hours nor let go of employees for the purpose of making their business qualify as a "medium-sized" business with 50-99 workers. Officials describe the verification process of this promise as "self-attestation" and the IRS has not provided information on how it will determine the companies' veracity. 

White House advisor Phil Schiliro explained the reasoning behind the change, "For the two-percent of American businesses that have between 50 and 99 employees, the Treasury Department concluded that a phase-in was the most common-sense way to implement the law." 

The employer provisions will go into effect for companies that do fall into categories covered by the employer mandate that do not have 50-99 workers. However, the requirement that the employers offer coverage to 95% of their full-time employees by January 1, 2015 has been reduced by 25%. The employers will now be required to offer coverage to 70% of their full-time employees by January 1, 2015. The Treasury Department's final rules state that the requirement for employers to offer coverage to 95% of their full-time employees has been delayed until 2016. 

Other changes affect seasonal workforces, adjunct faculty and volunteer firefighters and paramedics. Seasonal workers that work less than six months will not be considered full-time employees. The changes include a method for estimating the hours of adjunct faculty that accounts for hours spent working outside the classroom. The Administration's promise that volunteer firefighters and paramedics would not be considered full-time employees was formally implemented in the most recent changes. 

Many commentators are suggesting that the adjustments in implementation deadlines and requirements for businesses will increase pressure on the Obama Administration to extend deadlines for individuals so that they are not subject to the $95 or 1% of income fine for failing to purchase health insurance this year. Other experts counter that extending the deadline for individuals would result in fewer healthy individuals signing up now which could drastically shift the ratio of sick-to-healthy individuals enrolled. If too many individuals with significant health problems enroll without the balance of healthy individuals it could make the price of coverage more expensive. 

Enrollment of Young Adults in Healthcare Exchanges

The Obama Administration announced Monday that young adults comprise nearly a quarter of the health plan enrollees. The Administration hopes to reach the goal that 38-40% of enrolled individuals will be young adults by the end of the enrollment period on March 31. 

The enrollment of 18-35 year olds is seen as crucial to the success of the healthcare plans. Politico reports that without young adult enrollment healthcare premiums could rise considerably and the healthcare market could become unstable. 

Despite doubts from some insurance companies, director of the Office of Health Reform of HHS, Mike Hash, expressed confidence that the newest numbers would result in "an appropriate mix" of young, healthy registrants and those with more expensive healthcare needs. Another senior official explained that a Kaiser Family Foundation report showed that only a quarter of the enrollees needed to be young adults to avoid the so-called death spiral to unstable healthcare markets. 

Affordable Care Act and Emergency Rooms: Enrollment Opportunity and Visits

NPR and Kaiser Health News reported Tuesday that California hospitals are beginning to provide emergency room patients with information on signing up for health insurance plans, expanded Medicaid programs, and possible subsidies to lower the cost of health insurance for those who qualify. Hospitals such as O’Connor Hospital are hiring more staff dedicated to health benefits and insurance coverage to reach out to the 5,000 uninsured patients their emergency department treats each year.

Benefits coordinators Araceli Martinez reports more uninsured patients view health insurance as an affordable possibility after Martinez provides them with information on coverage options. However, most uninsured that pass through her door find the process of purchasing insurance on their own for the first time daunting and confusing. About half of poor uninsured adults are unaware that they would qualify for Medicaid.

There is an economic motivation for hospitals to sign patients up. Increasing the number of patients with private insurance increases reimbursement rates. This is especially appealing at a time when hospitals are facing Medicare cuts. The expansion of Medicaid allows hospitals to receive payment retroactively for medical treatments if the patient enrolls in Medicaid. The retroactive payments may be applied to treatment received up to three months prior to the patient’s enrollment.

Jim Dover, president and CEO of O’Connor Hospital, explains that dedicating resources to enrolling patients in healthcare insurance plans is also a worthy goal because the newly insured patients “don’t have to come to the ER for common problems.” This is a common argument for increasing Medicaid enrollment.

The argument came under fire recently when Science published a study that concluded emergency room visits increased with the expansion of Medicaid. The study found that people recently enrolled in Medicaid went to the emergency room 40-percent more frequently than others, even when the conditions could be treated less expensively in a doctor’s office.

"Increasing coverage and seeing people use more medical care isn't necessarily a bad thing," said Dr. Renee Hsia, an associate professor of emergency medicine at University of California San Francisco and a health policy researcher who wasn't involved in the study but reviewed it for Science. "The outcome that we desire is not that we don't have people going to see their doctors anymore. The outcome is that we have people who feel protected from (financial problems and) seeking care when they feel they need it."

Sources for this Blog:

Kaiser Health News, “Emergency Rooms Are Front Line for Enrolling New Obamacare Customers” 

NPR, “California Hospital Workers Pitch Obamacare to ER Patients” 

Kaiser Health News, “Medicaid Expansion Boosted Emergency Room Visits in Oregon, Study Finds”

Associated Press story in Seattle Times, “Study finds Medicaid expansion drove up ERvisits”

Affordable Care Act’s Provisions to Reduce Preventable Medicare Patient Hospital Readmissions are a Continued Success

The Affordable Care Act put several programs into place to curb Medicare beneficiaries readmission rates. The readmission rate, a measurement of how many patients are readmitted to the hospital within 30 days of initial discharge, is viewed as an indicator of the quality of care a hospital provides. 

The Centers for Medicare & Medicaid Services (CMS) reported that the average avoidable readmission rate for Medicare beneficiaries under 18% from January - August 2013. This is less than the 19% readmission rate that was the standard for the previous five years.  A 2012 study found that readmission rates were on a decline in 2012. The 2013 preliminary claims data combined with the 2012 data results in an estimated 130,000 fewer hospital readmissions from 2012-2013.

CMS attributes the decline in readmission rates to the improved care programs such as community-based care transition plans and payment incentives such as the Hospital Readmissions Reduction Program helped foster. 

More information on the CMS blog is available here. The study that determined Medicare readmission rates had a meaningful decline is available here. Information on the Hospital Readmissions Reduction Program is available here. 

Enrolling for Coverage in Health Insurance Marketplaces: Tax Credits, Fraud, and the IRS

Many individuals will qualify for tax credits to purchase the required health insurance from the health insurance marketplace in 2014. The Internal Revenue Service is responsible for calculating the tax credits accurately. 

The IRS will use a software program to verify tax credit calculations and assess penalties prior to issuing them to health insurers. However, there is concern about fraud because the agency has not completed a fraud mitigation strategy to prevent people that underestimate their incomes from fraudulently collecting health subsidies. As currently established, the IRS would issue the tax credits prior to verifying income.


The IRS has outlined tax provisions related to the Affordable Care Act here.

The report from the Treasury Inspector General for Tax Administration is available here. 

Keeping Your Healthcare Plan: Complications and Updates

The Obama Administration repeatedly stated “If you like your healthcare plan, you can keep it,” once the Affordable Care Act is enacted. However, millions of people received cancellation notices from their insurance companies because their policies did not meet the minimum requirements of basic coverage mandated by the Affordable Care Act.

The minimum requirements include coverage for preexisting conditions, hospitalization, prescription drugs, emergency services, maternity and newborn care, mental health and substance abuse services, laboratory services, rehabilitative  services and devices, pediatric services including oral and vision, ambulatory patient services and preventative and wellness services and chronic disease management. The plans that were canceled do not offer coverage for one or many of these conditions. All of the plans on the healthcare exchanges will cover these basic conditions.

On November 14^th President Obama held a news conference announcing the decision to allow insurance companies to keep individuals on health insurance plans that do not meet the law’s requirements for an additional year.  The directive does not require insurance companies to allow customers that were already notified of cancellations to come back. It does give insurance companies the discretion to take back customers to offer the non-compliant insurance plans for one more year.

The ‘fix’ caught state insurance regulators by surprise and was not well-received by representatives of some states.  Many states require insurance commissioners to approve policy changes before the insurers will be allowed to reissue the plans. Regulators in six states will not allow consumers with noncompliant insurance plans to renew their coverage for next year. These regulators based their refusal on concerns about the effects on the state health exchanges, the weak benefits the canceled plans offer, and the increased premiums insurance companies were charging individuals that wanted to keep or reenroll in their canceled plans.  

Like many parts of the Health Care Exchange roll out, this aspect is more complicated than advertised. However, the Obama Administration stated that the individuals that lost their plans had ‘subpar’ health insurance and that their coverage would eventually be upgraded to a health insurance plan that includes many more benefits as required under the Affordable Care Act.