Excise Tax on Medical Devices Should Not Be Repealed — Center on Budget and Policy Priorities

 

By Paul N. Van de Water

Updated May 31, 2012

The House will soon consider legislation to repeal the excise tax on medical devices that was enacted to help pay for health reform.  The provision is sound, however, and the industry lobbying campaign aimed at repealing it is based on misinformation and exaggeration.

• The medical device industry is not being singled out.  The excise tax is one of several new levies on sectors that will gain business due to health reform. The expansion of health coverage will increase the demand for medical devices and could offset the effect of the tax.
• The tax will not cause manufacturers to shift production overseas.  The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt.
• The tax will have little effect on innovation in the medical device industry.  To the contrary, health reform may well spur medical device innovation by promoting more cost-effective ways of delivering care.

The Joint Committee on Taxation estimates that repealing the excise tax would cost $29 billion over the 2013-2022 period.[1]   Repealing the tax would undercut health reform in at least two ways.  Pay-as-you-go procedures would require Congress to offset the cost of repeal by increasing other taxes or reducing spending; one likely target would be the provisions of the Affordable Care Act (ACA) that expand health coverage to 33 million more Americans.  Also, repealing the tax would encourage efforts to repeal other revenue-raising provisions of the ACA, which in turn would either require still more painful offsets or increase the budget deficit (if Congress failed to offset the cost).

Excise Tax on Medical Devices Should Not Be Repealed — Center on Budget and Policy Priorities

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Remarks on Medicaid Expansion

I had the privilege of testifying in favor of Medicaid expansion for Pennsylvania at a hearing of the PA House Democratic Policy Committee, chaired by Rep. Dan Frankel of Allegheny County. (Follow the link for the agenda and other speakers.)

Good morning. I am Dr. Chris Hughes, state director for Doctors for America, a nation-wide group of physicians advocating for high quality, affordable health care. I have been an intensive care physician for my entire career, now approaching 25 years, and within the past year I have also begun practicing hospice and palliative medicine. I am a former Trustee of the Pennsylvania Medical Society and Chair of the Patient Safety Committee. I have completed graduate studies in health policy at Thomas Jefferson University, and I am now teaching there as well in the Graduate School of Population Health.

I tell you this to let you know that I can get down in the weeds with you about the nuts and bolts of implementation of the Affordable Care Act, and I know a fair amount about health care financing, access, cost shifting, and all the rest. But you have a fine panel assembled here today who can do that for you, and I know you all know your way around these topics as well.

I am here as a physician and a representative of my profession. Every doctor you know, and every nurse and pharmacist and social worker and everyone in the front lines of health care, for that matter, can tell you stories of how our health care system has failed someone. Our system fails people regularly, and often spectacularly, and often cruelly, day in, day out.

I've had patients who work full time in jobs that fall far short of the American dream. They get by, but they can't afford health insurance.

I'll give you a few of my patients’ stories here, not just to point out the obvious- that we are mistreating our fellow human beings – but that we are misspending countless dollars on the wrong end of the system.

There's the cabbie who recognizes his diabetes and determines to work harder and longer so he can buy insurance before he is stricken with the label even worse than diabetes: preexisting condition! He doesn't make it and ends up in the ICU with diabetic ketoacidosis.

There's the construction worker who has a controllable seizure disorder that goes uncontrolled because he can’t afford to go to the doctor. He ends up in the ICU multiple times.

There's the woman who stays home to care for her dying mother and loses her insurance along with her job. When she finally gets to a doctor for herself, her own cancer is far advanced.

The laid-off engineer whose cough turns bloody for months and months before he “accesses” the health care system – through the ED and my ICU with already far advanced cancer.

These are people who are doing the right thing – working, caring for family members – and still have to go begging for health care. How many hours does an American have to work to “deserve” health care? 40? 50? 60? I’ve seen all of these.

Not long ago, expanding access to health care was a nonpartisan goal. As recently as 2007, a bipartisan group of U.S. senators, including Republicans Jim DeMint and Trent Lott, ( let me repeat that, “Jim DeMint and Trent Lott” ) wrote a letter to then-President George W. Bush pointing out that our health care system was in urgent need of repair. "Further delay is unacceptable as costs continue to skyrocket, our population ages and chronic illness increases. In addition, our businesses are at a severe disadvantage when their competitors in the global market get health care for 'free.' "

Their No. 1 priority? It was to "Ensure that all Americans would have affordable, quality, private health coverage, while protecting current government programs. We believe the health care system cannot be fixed without providing solutions for everyone. Otherwise, the costs of those without insurance will continue to be shifted to those who do have coverage."

Medicaid expansion and the Affordable Care Act will get us closer to this than at any time in our history.

You will hear some physicians speak out against all of this. But what you generally will not hear is their leadership and organizations speaking out against it, except perhaps in the deep south. There is a reason for this. As leaders of our profession, we have to come to terms that we are not just in it for ourselves. We are in it for our profession as well, and that means we have to put our patients’ interests above our own, and that means we have to do our best to ensure that everyone has access to high quality, affordable health care. Don’t just take my word for it. The American Board of Internal Medicine Foundation and other organizations put together a Charter on Medical Professionalism about ten years ago, specifically making this part of our professional responsibility. If you go to their website, you will find that virtually every physician organization you can think of has endorsed it. That means the anesthesiologists and orthopedic surgeons as well as the pediatricians and the family practitioners.

For Medicaid expansion specifically, we should note here that the major national physician organizations, including the AMA, and the organizations representing internists, family practice, pediatricians, psychiatry and more, all endorse Medicaid expansion. On the state level, all of these organizations state chapters endorse it as well, with the exception of the Pennsylvania Medical Society, who have endorsed general terms of expansion only.

But this concept is really not controversial among physicians and health care providers. We see everything from the catastrophes to the small indignities. They are tragic, unnecessary, and we are on the road to ending them.

Some in the provider community have expressed concerns about Medicaid in particular as the way we are providing access, so I would like to take a moment to address the concerns we hear most often.

First, that Medicaid is “bad” insurance. What is bad about Medicaid is largely fixed in the ACA. Namely, it is very poorly reimbursed for providers. You’ve already heard [I assume] from HCWP why hospitals want it, but for providers in primary care, the frontlines of health care, they get a massive boost in reimbursement under the new law. Pennsylvania has historically had awful reimbursement in the Medicaid program, among the worst in the nation. Now, reimbursement will go to par with Medicare reimbursement, a huge incentive for providers to take on Medicaid patients whom they may have been reluctant to see previously. There are other new innovations such as Patient Centered Medical Homes and others, coming down the pike, that should really give people who previously had no chance at excellent care, a chance to avoid complications, avoid the ER and avoid the hospital.

I’ve also heard the strange claim that having Medicaid is worse than having no insurance. I suppose that in a vacuum where there is no good data, and where one sees, like I do, patients with no insurance or Medicaid, who don’t know how or aren’t able to access a doctor – you’d be amazed at how often this happens – you could look at patients who get very sick and attribute that to Medicaid, but we do have data now. In Oregon, due to a fairly bizarre set of circumstances a few years ago, Medicaid eligibility was determined by lottery, creating a natural experiment of haves and have-nots. In the first year, those who were enrolled were 70 percent more likely to have a usual source of care, were 55 percent more likely to see the same doctor over time, received 30 percent more hospital care and received 35 percent more outpatient care, and much more.

People often ask me why I am so passionate about this, and I always tell them, “I blame the nuns.” Growing up Catholic, there was nothing so drilled into me as Matthew 25. We used to sing a hymn based on it, “Whatsoever you do to the least of my brothers,” on a regular basis at Mass. And we went to Mass before school every day!

It turns out this is a pretty universal sentiment. I checked. Go to the websites of every mainstream Christian denomination in America and it will be in there somewhere: The Social Gospel and Social Justice. Dignity of the individual. Our duties to the less fortunate. It is a component of every major religion and philosophy in the world, with one notable exception – Ayn Rand’s. And I mention Ayn Rand and her most famous book, Atlas Shrugged, because it is perennially listed as the second most influential book in America after the Bible. A damning fact for us.

In spite of that, I am glad that social justice and a commitment to the fair distribution of our health care resources is integral to the sense of duty of my profession, the nursing profession and all health professions.

I encourage debate about how we get to universal health care, but I refuse to accept that America, alone among all modern nations, and Pennsylvania in particular, will reject the idea that we need to get there. And right now, Medicaid expansion, the Health Insurance Exchanges and many other components of the Affordable Care Act are our best hope. Let’s not squander it.

Thank You.

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What influences specialty choice?

The income gap between primary care and subspecialists has an impressively negative impact on choice of primary care specialties and of practicing in rural or underserved settings. At the high end of the range, radiologist and orthopedic surgeon incomes are nearly three times that of a primary care physician. Over  a 35-40 year career, this payment disparity produces a $3.5 million gap in return on investment between primary care physicians and the midpoint of income for subspecialist physicians. 

Phillips RL Jr, et al.; Robert Graham Center. Specialty and geographic distribution of the physician workforce: what influences medical student and resident choices? March 2009. http://www.graham-center.org/online/graham/home/publications/monographs-books/2009/rgcmo-specialty-geographic.html. 

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One more thing for premed students to freak out about

(Not Enough Residency Slots!)

Some medical students refer to it, per Kaiser Health News’s Ankita Rao, as the “jaws of death.” What it shows are the number of medical student graduates going up and up — as the number of residencies stays relatively stagnant.

Who is to blame for the gap between medical school graduates and residency slots? As with many things these days, it’s largely Congress. When legislators passed the balanced budget amendment in 1996, it capped the number of residencies that Medicare can fund. Since then, hospitals’ slots have been tethered to 1996 levels.

The Affordable Care Act did take some steps to address this: It  has put $167 million toward funding about 1,000 new residency slots under a new Primary Care Residency Expansion program (you can read more about that here). While those new slots do expand the overall pool of residencies, when you put them in the context of a 15,000 residency slot gap, some describe the program as a “drop in the bucket.”

In the health policy world, there tend to be two schools of thought about how to address this problem. One, perhaps the most intuitive, is to fund more residency slots. This is what legislation from Rep. Allyson Schwartz (D-Penn.) and Rep. Aaron Schock (R-Ill.) would have done. The Resident Physician Shortage Reduction and Graduate Medical Education Accountability and Transparency Act would have eliminated the cap on residency funding altogether.

Another way to close the gap: Bring down the the number of medical school graduates, and look for other health-care workers who can provide many of the most basic services. This is an idea that was advanced by Linda Green, a mathematician at Columbia University who recently published a Health Affairs study on the topic.

One more thing for premed students to freak out about

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Sen. Kirk says stroke changed perspective on Medicaid - The Hill's Healthwatch

 

"Had I been limited to that I would have had no chance to recover like I did. So unlike before suffering the stroke, I’m much more focused on Medicaid and what my fellow citizens face," Kirk told the Chicago Sun Times.

"I will look much more carefully at the Illinois Medicaid program to see how my fellow citizens are being cared for who have no income and if they suffer from a stroke," Kirk said.

Sen. Kirk says stroke changed perspective on Medicaid - The Hill's Healthwatch

The Chicago Sun-Times interview is here. He also says he’d support an assault weapons ban.

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Ohio Right to Life comes out in '100 percent' support of Gov. John Kasich's proposed Medicaid expansion

 

After days of criticism from conservatives, Gov. John Kasich snagged a significant endorsement for his Medicaid expansion plan Friday from Ohio Right to Life.

The prominent anti-abortion group's board agreed to back to back the proposal with "100 percent approval," President Mike Gonidakis told The Plain Dealer.

"Our mission is to support life from womb to tomb," Gonidakis said. "In this case minorities will benefit, the poor will benefit. It will cover the parents of young children."

He added: "I think what we're seeing from this governor is a kind and compassionate approach. I would ask our friends in the Tea Party to read the full proposal and see it's not only the most compassionate, but also the most fiscally responsible. You don't have to be a Democrat or a Republican to support this."

Kasich, a Republican up for re-election in 2014, announced he favored the expansion Monday while unveiling his two-year budget proposal. Though he maintains that he is a staunch opponent of President Barack Obama's Affordable Care Act, Kasich said the expansion called for under the law known as Obamacare provides coverage for those in need. With the U.S. Supreme Court upholding the law but giving states the right to opt out of the expansion, Kasich does not want to risk losing federal funds supporting the expansion to other states.

"Without this move Obamacare is likely to increase health insurance premiums even higher in Ohio," Kasich wrote in defense of his decision Wednesday on the conservative website RedState.com. "Worse, it takes $17 billion of Ohioans' federal tax dollars out of our state and gives it to other states -- where it will go to work helping to rev up some other state's economy instead of Ohio's."

http://blog.cleveland.com/open_impact/print.html?entry=/2013/02/ohio_right_to_life_comes_out_i.html

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Take money for Medicaid

Valerie Arkoosh and Marc Stier in Philly.com

If we take the money to expand Medicaid, Pennsylvania will receive $43.3 billion over 10 years from the federal government. And if for any reason the money does not come to Pennsylvania, the governor can cancel the expansion at any time.

Taking federal money to expand Medicaid requires Pennsylvania to spend $4 billion over 10 years. But roughly $2 billion will be saved because federal money will replace funding for General Assistance-related programs. More than $850 million will be saved because the state will not have to compensate hospitals for ER care for the uninsured. And between $800 million and $1.4 billion will be available for county health services, where harsh cuts have already taken place.

Take money for Medicaid

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Do Medicare And Medicaid Payment Rates Really Threaten Physicians with Bankruptcy? – Health Affairs Blog

 

Orthopedists. A 2011 survey revealed that orthopedists enjoy a median salary of $514,000.  This is the net physician income after office overhead has been paid.  Overhead costs averaged 46.3 percent for orthopedic surgeons in 2000  and accounted for 45 percent of revenue in 2012.   (This is slightly better than the 50 percent overhead that my practice averages.)  Therefore, the gross practice revenue per orthopedist currently is just over $934,000 with an average overhead cost of $420,000. According to data provided by the American Academy of Orthopaedic Surgeons, orthopedic patients by payer are as follows:  Medicare/Medicaid—31 percent; the uninsured—17 percent; commercial insurance—34 percent; and other sources, such as worker’s compensation—18 percent.  Essentially, half of the average orthopedist’s payment sources are commercial insurance of some type, one third are Medicare or Medicaid, and one sixth is self-pay; this last category—patients paying for their own care—typically contributes only a small amount to practice revenue.

We can test the claim that physicians lose money on their treatment of Medicare patients or make only $8 an hour treating such patients by substituting Medicare reimbursement for the commercial reimbursements to a doctor’s practice.  Would orthopedists truly make $8 an hour or would their practices be bankrupt if all payers used Medicare’s reimbursement schedule?  Remember, this is the articulated position of much of the orthopedic community and a common defense against reimbursement reductions.

According to a comprehensive analysis by the consulting firm, Milliman, in 2008, on average, commercial insurance paid 130 percent of Medicare’s reimbursement, or, seen a different way, Medicare paid 78 cents for every dollar of commercial reimbursement for physicians’ work.   If we reduce the $467,000 in commercial insurance payments to a typical orthopedist’s practice by 22 percent to reflect lower Medicare payments, we obtain $364,000.  Adding this back to the Medicare/Medicaid and self-pay portion of practice incomes yields a new gross revenue figure of $831,000.  This would be the average orthopedist’s practice income if Medicare’s pay scale were universally used.

Taking out $420,000 in overhead, we see that an orthopedist surviving solely on Medicare reimbursements would receive $411,000 in take-home pay, or approximately $100,000 less than we actually enjoy with the current mix of insurance payers.  While I agree that this is a steep reduction, it is abundantly clear that such reimbursement would by no means bankrupt a practice or yield an hourly wage anywhere close to $8 per hour.  Therefore, such statements are gross hyperbole.

Do Medicare And Medicaid Payment Rates Really Threaten Physicians with Bankruptcy? – Health Affairs Blog

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How Medicare Fails the Elderly - NYTimes.com

Yet Medicare, which pays for all of the above, does not, except in rare instances, pay for long-term care in a supervised, safe place for frail or demented old people, or for home aides to help with shopping, transportation, bathing and using the toilet.
Nationwide, the median annual cost of a nursing home in 2010 was $75,000; room and board in an assisted living facility, with no additional help, was $37,500; and the most basic category of home health aide, who can perform no medical tasks, like the dispensing of medication, was $19 an hour. These expenses are left to the elderly (and their adult children) to pay for out of pocket until their pockets are all but empty.
Then they are eligible for Medicaid, the state-run safety net for the poor. While Medicare, a federal program, is financed by payroll taxes, and thus is an “earned” benefit, Medicaid is “charity,” in the minds of the formerly middle class who worked their whole lives and never imagined themselves destitute.
In the case of my mother, who died at 88 in 2003, room and board in various assisted living communities, at $2,000 to $3,500 a month for seven years, was not paid for by Medicare. Yet neurosurgery, which I later learned was not expected to be effective in her case, was fully reimbursed, along with two weeks of in-patient care. Her stay of two years at a nursing home, at $14,000 a month (yes, $14,000) was also not paid for by Medicare. Nor were the additional home health aides she needed because of staffing issues. Or the electric wheelchair after strokes had paralyzed all but the finger that operated the joy stick. Or the gizmo with voice commands so she could tell the staff what she needed after her speech was gone.
She paid for the room. My brother and I paid for the private aides and bought her the chair and the “talking board.” What would her life have been like without the skilled care she required and the ability to get around her floor and communicate her needs? I shudder to think. But none of this was Medicare’s responsibility.
Yet Medicare would pay for “heroic” care for a woman who was dying of old age, not a disease that could be treated: Diagnostic tests. All manner of surgery. Expensive medications. Trips to the emergency room or the hospital — had she not refused all of them, in the last year of her life. So, in less than a decade, by my low-ball estimate, my mother spent $500,000 of her own money and uncalculated sums from her two children before winding up what she considered, with shame, “a welfare queen.”
A recent state-by-state study of long-term care, the first of its kind, by a consortium of researchers, has found that this kind of essential help costs anywhere from 166 percent to 393 percent of the average annual income of America’s elderly.

How Medicare Fails the Elderly - NYTimes.com

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Moving beyond Parity — Mental Health and Addiction Care under the ACA — NEJM

Moving beyond Parity — Mental Health and Addiction Care under the ACA — NEJM

Enactment of the Mental Health Parity and Addiction Equity Act in 2008 was the culmination of a decades-long effort to improve insurance coverage for mental health and addiction treatment. The law's passage constituted a critical first step toward bringing care for people with mental health and addiction disorders — including depression, anxiety, psychoses, and substance abuse and dependence — into the mainstream of the U.S. medical care system by requiring parity in coverage (benefits for mental health and substance abuse, often referred to collectively as “behavioral health,” that are equivalent to all other medical and surgical benefits). Now, the passage of the Affordable Care Act (ACA) has the potential to affect the financing and delivery of mental health and addiction care even more profoundly.

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NHS reforms: Moving care to the community | Healthcare Professionals Network | Guardian Professional

NHS reforms: Moving care to the community | Healthcare Professionals Network | Guardian Professional:

Expanding community services does not simply mean moving care out of hospital – it means developing a whole new way of caring.

"This is not a like-for-like shift," says Nick Goodwin, senior research fellow at the King's Fund. "We're not taking current activities in hospital and placing them into the community. We're creating a capability in the community [to remove some of the demand for] a range of different activities in hospital."

Goodwin predicts that groups of general practices will increasingly work in federations or networks. He sees a "fairly limited" role for the private sector but a significant increase in not-for-profit partnerships with the public sector. Goodwin believes telehealth, whereby health-related services are delivered over the internet, will be "as common as internet banking and hole in the wall cash machines".

Numerous examples exist of diagnostic tests and procedures being moved to the community. NHS Suffolk has transferred echocardiography (which uses ultrasound to investigate the heart), while Cambridgeshire has moved sexual health, musculoskeletal services and minor oral surgery out of hospital.

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