This is a series of slides which enumerates why the “market” model is a total false ideology insofar as “patients” cannot in an economic sense be thought of as “consumers.”
Evaluatinmg Obamacare: health reform- January, 2014
THE GOOD, THE BAD, and THE
JEOFFRY B. GORDON,
UCSD: USP 143
The US Health Care System
January 30, 2014
Part 1 – The BIG PICTURE & VALUES
THE GOOD, THE BAD, and the UGLY
JEOFFRY B. GORDON, MD, MPH
It was Ronald Reagan who
said “freedom is always just
one generation away from
extinction. We don’t pass it
to our children in the
bloodstream; we have to
fight for it and protect it, and
then hand it to them so that
they shall do the same, or
we’re going to find ourselves
spending our sunset years
telling our children and our
children’s children about a
time in America, back in the
day, when men and women
How the Supreme Court Ruled on the Health Care Law
Individual mandate upheld as a tax.
Majority opinion by Chief Justice Roberts
“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health
insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role
to forbid it, or to pass upon its wisdom or fairness.”
Dissenting minority opinion.
“The Court regards its strained statutory interpretation as judicial modesty. It is not. It amounts instead to a vast
judicial overreaching. It creates a debilitated, inoperable version of health-care regulation that Congress did not
enact and the public does not expect.”
Medicaid expansion upheld, but limited
Majority opinion by Chief Justice Roberts
“Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the
availability of health care, and requiring that states accepting such funds comply with the conditions on their use.
What Congress is not free to do is to penalize states that choose not to participate in that new program by taking
away their existing Medicaid funding.”
Dissenting minority opinion
“Those states that decline the Medicaid expansion must subsidize, by the federal tax dollars taken from their
citizens, vast grants to the states that accept the Medicaid expansion. If that destabilizing political dynamic, so
antagonistic to a harmonious union, is to be introduced at all, it should be by Congress, not by the judiciary.”
VALUES IN HEALTH CARE
THE MORAL AND ETHICAL
The Values of a Healthy Society
(1) MAXIMIZE HEALTHY STATES (provide good,
quality medical care)
(2) COMPASSION and CARING (relieve pain,
suffering and anxiety)
(3) SOCIAL and ECONOMIC JUSTICE (provide for the
(4) CIVIC RESPONSIBILITY (society as a
Part 2 – ECONOMICS
The Inverse Care Law
JULIAN TUDOR HART The Lancet: Saturday 27 February 1971
Glyncorrwg Health Centre, Port Talbot, Glamorgan, Wales
The availability of good medical care tends to vary inversely
with the need for the population served. This inverse care law
operates more completely where medical care is most exposed
to market forces, and less so where such exposure is
reduced. The market distribution of medical care is a primitive
and historically outdated social form, and any return to it
would further exaggerate the maldistribution of medical
Concent rat ion of Healt h Spending in t he
Populat ion Per cent ile Ranked by Healt h Car e Spending
Notes: Population includes those without any health care spending and excludes those living in institutions. Health spending is
defined as total payments, or the sum of spending by all payer sources.
Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for
Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2004.
PATIENTS ARE NOT GOOD CONSUMERS
Arrow, Kenneth J. Uncertainty and the welfare economics of medical
care. The American Economic Review 1963;53:941-73.
Producing, purchasing and using medical care is profoundly
different from manufacturing, selling, purchasing and using a car, a
blouse, a refrigerator, a haircut, a college class, or an accountant.
(1) Even among the well educated there is a tremendous asymmetry
between the doctor and the patient in the esoteric technical
knowledge and judgment needed for the application of competent
and effective medical care.
(2) A person who has an accident or an illness has very little
opportunity or capacity to shop around and compare either price or
quality. Usually the sicker and more acutely ill the patient, the less
this capacity will be.
(3) During any illness it may be impossible or even catastrophically
dangerous for a patient to try to out (consume) one set of treatments
and then choose to switch to another.
PATIENTS ARE NOT GOOD CONSUMERS
(4) Enduring and managing an illness or an accident inherently involves a
huge number of emotional factors, thus impairing “rational” consumer
(5) Under the necessary insurance system the consumer/patient is mostly
insulated from the anticipated or actual purchase prices and costs
anticipated or actually incurred.
(6) It is not unusual for a bout of illness to require the sudden purchase of
medical care which will be literally catastrophically expensive, yet to
forego it is to invite personal tragedy and face ongoing pain, disability or
(7) The purchaser of most medical services and supplies and thus the
generator of most medical spending is the doctor, not the patient. (Yet
most doctors are, in fact, usually ignorant of the costs or the charges for
most of what they order.)
(8) Under our current system there are at least 48 million Americans
(15.7%) who do not have health insurance and who are overwhelmingly
without personal resources. Thus they are unable to buy into the market.
Exhibit 15. High U.S. Insurance Overhead:
Insurance Related Administrative Costs
Fragmented payers + complexity = high
transaction costs and overhead costs
– McKinsey estimates adds
$90 billion per year*
Insurance and providers
– Variation in benefits; lack of
coherence in payment
– Time and people expense for
Spending on Health Insurance Administration per
Source: 2009 OECD Health Data (June 2009).
•McKinsey Global Institute, Accounting for the Costs of U.S. Health Care:
• A New Look at Why Americans Spend More (New York: McKinsey, Nov. 2008).
Who Delivers Health Care?
Who Delivers Health Care?
Growth in Physicians and Administrators since 1970
Growth in Physicians and Administrators since 1970
Source: BLS & Himmelstein/Woolhandler/Lewontin Analysis of CPS Data
•Illness and medical bills were linked to at least 62.1% of all
personal bankruptcies in 2007. Based on the current bankruptcy
filing rate, medical bankruptcies will total 866,000 and involve 2.346 million
Americans this year – about one person every 15 seconds.
•Using identical definitions in both years, the proportion of bankruptcies attributable
to medical problems rose by 49.6% between 2001 and 2007.
•Most medically bankrupt families were middle class before they suffered financial setbacks. 60.3% of
them had attended college and 66.4% had owned a home; 20% of families included a military veteran
or active-duty soldier.
•Among medical debtors, hospital bills were the largest medical expense for 48% drug costs for 19%,
doctors’ bills for 15% and insurance premiums for 4%. In 38% of cases, lost income due to illness was
•Out-of-pocket medical costs since the onset of illness averaged $17,943.
•For the privately-insured, out-of-pocket costs averaged $17,749.
•For the uninsured, out-of-pocket costs averaged $26,971.
•Patients with neurologic disorders such as multiple sclerosis faced the highest costs, and average of
$34,167, followed by diabetics at $26,971.
2008 2Q 2009
2008 2Q 2009
Source: Securities and Exchange Commission
Source: Securities and Exchange Commission
19 Jan 2009 UnitedHealth Group on Thursday agreed to pay $350 million to settle three class-action lawsuits
filed by physicians and health plan members over allegations that the company underpaid for out-of-network
medical services, the New York Times reports (Abelson, New York Times, 1/16). On Tuesday, UnitedHealth agreed
to settle an investigation by New York state Attorney General Andrew Cuomo (D) that found health insurers
understated the portion of reimbursements for which they are responsible for such services by as much as 28% in
some cases, or hundreds of millions of dollars over the last 10 years. Under the agreement with Cuomo,
UnitedHealth will pay $50 million to finance the development of a new database that an undetermined university
will operate (Kaiser Daily Health Policy Report, 1/13). The latest settlement, which requires court approval, will
pay health plan members and physicians for out-of-network services provided since 1994 (Fuhrmans,
Wall Street Journal, 1/15)…
UnitedHealth Reaches $925 Million Settlement, Associated Press AUG-11-09:
A proposed settlement between UnitedHealth and its shareholders has been given the green light by a federal
judge, bringing to an end a class action lawsuit stemming from allegations of options backdating. The settlement is
for $925 million, $895 million of which will be paid by UnitedHealth, and the remaining $30 million by former
Chairman and CEO William McGuire, who was forced to step down as a result of the scandal in 2006. His portion
of the payment cancels $3.6 million in stock options. The lead plaintiff in the case is the California Public
Employees Retirement System.
Blue Shield, Kaiser among state insurers fined
Victoria Colliver, Chronicle Staff Writer San Francisco Chronicle November 30, 2010 04:00 AM
State regulators Monday fined seven of California's largest health insurers nearly $5 million for systematically
failing to pay doctors and hospitals fairly and on time.
The California Department of Managed Health Care issued the fines following an 18-month audit in which
investigators looked at a small but statistically significant sample of claims. The investigation found the plans were
paying on average about 80 percent of the claims correctly, far below the legal threshold of 95
percent….Regulators fined Anthem Blue Cross and Blue Shield of California $900,000 each. United/PacifiCare
was fined $800,000 and Kaiser Foundation Health Plan and Health Net were both hit with fines of $750,000.
The fines for Cigna and Aetna were $450,000 and $300,000, respectively, for a total of $4.85 million.
By 2012 'Obamacare' In California: President's Affordable Care Act Has Been
'Lifesaving' For Golden State
**About 8,600 Californians with pre-existing medical conditions have gained access to
affordable health insurance. Patients who have illnesses such as cancer or multiple
sclerosis - who face high costs or denials on the open market - can buy insurance through
**More than 350,000 young adults have been able to stay on their parents' health
insurance plans until they are 26.
**More than 370,000 low-income people have been covered by an expansion of Medi-Cal,
the health insurer for low-income Californians, that is part of the state's "bridge to reform"
waiver to alter the state-federal program.
** Consumers saved more than 100 million dollars when health insurance rate increases
were rolled back or withdrawn as a result of increased regulatory power to review those
** Seniors saved 171 million dollars in prescription drug costs in a plan to close the
Medicare limits in coverage.
**12 million people who currently have health insurance no longer face a cap on coverage
in case of a catastrophic illness.
The Primary Care Workforce
Foundation in the US is Crumbling
Plummeting numbers of new
physicians entering primary
Primary care shortages
Growing problems of access
to primary care and
Doctor Shortage Likely to Worsen With Health Law
By ANNIE LOWREY and ROBERT PEAR, THE NEW YORK TIMES, July 28, 2012
RIVERSIDE, Calif. — In the Inland Empire, an economically depressed region in
Southern California, President Obama’s health care law is expected to extend
insurance coverage to more than 300,000 people by 2014. But coverage will not
necessarily translate into care: Local health experts doubt there will be enough
doctors to meet the area’s needs. There are not enough now…A government
council has recommended that a given region have 60 to 80 primary care doctors
per 100,000 residents, and 85 to 105 specialists. The Inland Empire has about 40
primary care doctors and 70 specialists per 100,000 residents — the worst shortage
in California, in both cases.
Other places around the country, including the Mississippi Delta, Detroit and
suburban Phoenix, face similar problems. The Association of American Medical
Colleges estimates that in 2015 the country will have 62,900 fewer doctors
than needed. And that number will more than double by 2025, as the expansion of
insurance coverage and the aging of baby boomers drive up demand for care. Even
without the health care law, the shortfall of doctors in 2025 would still exceed
Moreover, across the country, fewer than half of primary care clinicians were
accepting new Medicaid patients as of 2008, making it hard for the poor to find
care even when they are eligible for Medicaid. The expansion of Medicaid accounts
for more than one-third of the overall growth in coverage in President Obama’s health care law. Across the country,
a factor increasing demand, along with expansion of coverage in the law and simple population growth, is the aging
of the baby boom generation. Medicare officials predict that enrollment will surge to 73.2 million in 2025, up 44
percent from 50.7 million this year.
The proportion of medical students choosing to enter primary care has declined in the past 15 years, as average
earnings for primary care doctors and specialists, like orthopedic surgeons and radiologists, have diverged. A
study by the Medical Group Management Association found that in 2010, primary care doctors made about
$200,000 a year. Specialists often made twice as much.
Family Health Centers of San Diego has 30 community health centers and was founded in 1970. Our mission is
to provide caring, affordable, high quality healthcare and supportive services to everyone, with a special
commitment to uninsured, low income and medically underserved persons.
Everyone is welcome at our health centers, including Medi-Cal, insured and uninsured patients. Many patients
qualify for programs that cover the cost of their care. If patients are uninsured and do not qualify for a
program, their cost is discounted based on income and family size.
The Great Dealmaker
The Obama Administration made a
series of deals to pass PPACA:
The insurance industry: Assured that
everyone would be required to buy their
product -- and there would be no public
The drug industry: No negotiation on prices
The AMA: No cut in physician fees
Hospitals: No cut in reimbursements, only
slower growth in payments
Employers: Continued control of health
Nervous members of the public: “You can
keep what you have”
Obamacare architect leaves White House for pharmaceutical industry job
Glenn Greenwald, theguardian.com, Wednesday 5 December 2012
When the legislation that became known as "Obamacare" was first
drafted, the key legislator was the Democratic Chairman of the Senate
Finance Committee, Max Baucus. As Baucus himself repeatedly boasted,
the architect of that legislation was Elizabeth Fowler, his chief
health policy counsel; indeed, as it was Fowler who actually drafted it.
As Politico put it at the time: "If you drew an organizational chart of major
players in the Senate health care negotiations, Fowler would be the chief
operating officer."What was most amazing about all of that was that,
before joining Baucus' office as the point person for the health care bill,
Fowler was the Vice President for Public Policy and External Affairs (i.e.
informal lobbying) at WellPoint, the nation's largest health insurance
provider (before going to WellPoint, as well as after, Fowler had worked as Baucus' top health care aide).
Whatever one's views on Obamacare were and are: the bill's mandate that everyone purchase the products of the
private health insurance industry, unaccompanied by any public alternative, was a huge gift to that industry; To the
extent that Liz Fowler is the author of this document, we might as well consider WellPoint its author as well.
More amazingly still, when the Obama White House needed someone to oversee implementation of Obamacare
after the bill passed, it chose . . . Liz Fowler. That the White House would put a former health insurance industry
executive in charge of implementation of its new massive health care law was
roundly condemned by good government groups as at least a violation of the "spirit" of governing ethics rules and
even "gross", but those objections were, of course, brushed aside by the White House. She then became Special
Assistant to the President for Healthcare and Economic Policy at the National Economic Council. Now, Fowler is
once again passing through the deeply corrupting revolving door as she leaves the Obama administration for a
senior-level position leading 'global health policy' at Johnson & Johnson's government affairs and policy group.
Let's use the Health Reform Subsidy Calculator
(from Kaiser Family Foundation http://healthreform.
to check a few examples. In each example, we will
assume that the policyholder is 45, has a family of
four, and does not have employer coverage available.
For this family living in a region with a medium cost
factor, the predicted premium for the silver plan
(70% actuarial value) is $14,245. In the examples,
we will change the level of income only.
Income: $31,155 (133% of poverty)
Premium payment: None - covered by Medicaid
Maximum out-of-pocket costs: None - covered by Medicaid
Income: $31,156 (133% of poverty plus $1)
Premium payment: $935
Maximum out-of-pocket costs: $4,167
Total Family Cost: $5102 (17% of family income)
Income: $93,700 (400% of poverty)
Premium payment: $8,901
Maximum out-of-pocket costs: $8,333
Total Family Cost: $17,234 (18% of family income)
Income: $93,701 (400% of poverty plus $1)
Premium payment: $14,245
Maximum out-of-pocket costs: $12,500
Total Family Cost: $26,745 (28% of family income)
Anthem limits number hospitals in NH from which insurance exchange
members can seek care By KEVIN LANDRIGAN, THE TELEGRAPH (Nashua, NH), September 5, 2013
CONCORD – Starting Jan. 1, Southern New Hampshire Regional Medical Center and 11 other hospitals will not
serve patients who get individual health insurance through exchanges under the Affordable Care Act, officials with
Anthem Blue Cross and Blue Shield confirmed Wednesday. Critics quickly said this change will force residents in
Concord, the Seacoast and the North Country to travel farther to get to a hospital or their own doctor’s office.
Anthem will use this “narrower network” for all customers with individual insurance whether they are in or out
of the exchange also known as the marketplace, Anthem lobbyist Paula Rogers told the Joint Health Care Reform
Oversight committee. “We are working towards a focused and narrower network,” Rogers said. “We’ve got 26
hospitals. Do we need 26 hospitals to serve the population we expect to see and still provide quality of care?
We decided that we didn’t.” This change affects not only hospital care but doctor visits since many primary
care physician practices across the state are hospital-owned. Anthem’s stated goal with this narrow network is
to reduce what these preferred hospitals and affiliate doctors charge them for care. In return, the chosen
hospitals and doctors become exclusive providers for individual insurance, and those plans typically are the
most expensive for consumers, Rogers said.
Senate Majority Leader Jeb Bradley, R-Wolfeboro, said it was frustrating state Insurance officials recommended
Anthem’s proposal to federal officials July 27 but still has not spoken publicly about the details because agency
rules require all insurance plans are confidential until their effective date.“It is astounding to me. We are going to
be introducing rationing of health care in New Hampshire, and we aren’t talking about it.” The GOP-led
Legislature passed a state law in 2012 blocking the state from running its own exchange, and the federally run
alternative leaves consumers here with less information and government oversight.
(Anthem is the ONLY insurance company offering health insurance plans through the ACA exchange in New
AIDS advocates say drug coverage in some marketplace plans is inadequate
By Ariana Eunjung Cha, The Washington Post, December 9, 2013
The nation’s new health-care law says insurers can’t turn anyone away, even people
who are sick. But some companies, patient advocates say, have found a way to
discourage the chronically ill from enrolling in their plans: offer drug coverage too
skimpy for those with expensive conditions.
Some plans sold on the online insurance exchanges, for instance, don’t cover key
medications for HIV, or they require patients to pay as much as 50 percent of the cost
per prescription in co-insurance — sometimes more than $1,000 a month.
“The fear is that they are putting discriminatory plan designs into place to try to deter
certain people from enrolling by not covering the medications they need, or putting
policies in place that make them jump through hoops to get care,” said John Peller, vice
president of policy for the AIDS Foundation of Chicago.
As the details of the benefits offered by the new health-care plans become clear,
patients with cancer, multiple sclerosis, rheumatoid arthritis and autoimmune
diseases also are raising concerns, said Marc Boutin, executive vice president of the
National Health Council, a coalition of advocacy groups for the chronically ill. “The
easiest way [for insurers] to identify a core group of people that is going to cost you a
lot of money is to look at the medicines they need and the easiest way to make your
plan less appealing is to put limitations on these products,” Boutin said.
Clinical Care Transformation Model
THE ACCOUNTABLE CARE ORGANIZATION (ACO)
Accountable Care Organization
• Service Line Integration
• Medical Staff Alignment
• Incentives for Efficiency & Lean Six Sigma
• Quality (SCIP, Leap Frog)
• Outcomes & Evidence Based
• Call Coverage
• Free-Standing ASC &
• Consult Services (Stroke,
Enterprise Level Activities
• ER Avoidance Programs
• PCP/SCP Incentives & Clinical Guidelines
• Urgent Care
• Pay for Performance Initiatives
• Hospitalists, Post Discharge Follow-Up Programs • End of Life (Palliative Care)
• Home Safety Visits
• Patient Satisfaction & Loyalty
• Integration &
• Post Discharge Visits
Oversight with Care
• Care management (Acute, Chronic,
• Home Health
• Transition of Care
Coordinator of Services
• Provider Satisfaction
• Health Coaching (Shared Decision
• Behavioral & Mental Health
Skilled Nursing Facilities
• On-site Case Management
• Efficiency Rating Systems
• Enterprise Level
• PC-MH Functions
Advanced Primary Care
Under Patient-Centered Medical Home
• Cost Effective Medical
• Prevention & Wellness
• Point of Care Analytics & Clinical
Management & Utilization of
Services (SCP, Ancillary)
• Access, Same Day Appointments, e• Gaps in Care
• Population Management & Chronic
• Patient Satisfaction & Loyalty
• Provider & Office Staff Satisfaction
• Home Visiting Teams
• Generic Prescribing
• Personal Health Record
• Patient Portal
• Health Risk Assessment
• Patient Engagement &
Lessons from the Physician Group Practice Demonstration — A Sobering Reflection
Gail R. Wilensky, Ph.D., N Engl J Med 2011; 365:1659-1661 November 3, 2011
In early August, the Center for Medicare and Medicaid Services (CMS) announced the results of the Physician
Group Practice (PGP) Demonstration project. Although the headline of the press release was glowing — “Physician
Group Practice Demonstration Succeeds in Improving Quality and Reducing Costs” — the reported information
suggests more mixed results.1 These results should dampen unreasonable expectations, particularly in terms of
potential savings, for accountable care organizations (ACOs), which were modeled after the PGP demo…. The
demo began in 2005 (the first sobering fact is that it took so many years to get it started) and included 10 large
PGPs. All were multispecialty groups, many with well-known names, such as the Marshfield Clinic, Geisinger, Park
Nicollet, and Billings; two were associated with academic medical centers — the University of Michigan and
Dartmouth. Physician groups in the demo received their regular Medicare payments for services provided to
beneficiaries but could also share in the savings generated as long as they met certain quality metrics and
exceeded a savings threshold of 2%. Thirty-two quality goals were used, most of them process measures related
to coronary artery disease, diabetes, heart failure, hypertension, and preventive care. The savings threshold was
calculated by using the per capita expenditures for a comparator group in the same geographic area and adjusting
for the case mix and severity of illness.2 The PGPs did very well on the quality metrics during all 5 years of the
demo. In the fourth year, all 10 groups met at least 29 of the 32 quality goals.
The savings are another matter. Even with all their experience, only two of the PGP participants were able to
exceed a 2% savings threshold the first year of the demo, and only half managed to surpass that threshold after
3 years…. only half of these 10 experienced PGPs were able to achieve the 2% savings threshold — these results
are unexpected and, more important, they suggest (doubts) about the likelihood of success for ACOs. The
minimum savings threshold that CMS has proposed for ACOs is also 2% (or 3.9% for plans with fewer patients),
but plans will have to share losses as well as gains by year 3.
Effects of Care Coordination on Hospitalization, Quality of Care, and Health Care Expenditures Among Medicare
Beneficiaries - 15 Randomized Trials
Deborah Peikes, PhD; Arnold Chen, MD, MSc; Jennifer Schore, MS, MSW; Randall Brown, PhD
Objective To determine whether care coordination programs reduced hospitalizations and Medicare
expenditures and improved quality of care for chronically ill Medicare beneficiaries.
Design, Setting, and Patients Eligible fee-for-service Medicare patients (primarily with congestive heart failure,
coronary artery disease, and diabetes) who volunteered to participate between April 2002 and June 2005 in 15 care
coordination programs (each received a negotiated monthly fee per patient from Medicare) were randomly
assigned to treatment or control (usual care) status. Hospitalizations, costs, and some quality-of-care outcomes
were measured with claims data for 18 309 patients (n = 178 to 2657 per program) from patients' enrollment
through June 2006. A patient survey 7 to 12 months after enrollment provided additional quality-of-care measures.
Interventions Nurses provided patient education and monitoring (mostly via telephone) to improve adherence
and ability to communicate with physicians. Patients were contacted twice per month on average; frequency
Main Outcome Measures Hospitalizations, monthly Medicare expenditures, patient-reported and care process
Results Thirteen of the 15 programs showed no significant (P<.05) differences in hospitalizations; however, Mercy
had 0.168 fewer hospitalizations per person per year (90% confidence interval [CI], −0.283 to −0.054; 17% less than
the control group mean, P=.02) and Charlestown had 0.118 more hospitalizations per person per year (90% CI,
0.025-0.210; 19% more than the control group mean, P=.04). None of the 15 programs generated net savings.
Treatment group members in 3 programs (Health Quality Partners [HQP], Georgetown, Mercy) had monthly
Medicare expenditures less than the control group by 9% to 14% (−$84; 90% CI, −$171 to $4; P=.12; −$358; 90% CI, −
$934 to $218; P=.31; and −$112; 90% CI, −$231 to $8; P=.12; respectively). Savings offset fees for HQP and
Georgetown but not for Mercy; Georgetown was too small to be sustainable. These programs had favorable effects
on none of the adherence measures and only a few of many quality of care indicators examined.
Conclusions Viable care coordination programs without a strong transitional care component are unlikely to yield
net Medicare savings. Programs with substantial in-person contact that target moderate to severe patients can be
cost-neutral and improve some aspects of care.
The first order of business in the new Congress is a Republican attempt to repeal
PPACA. A clue to what is really bugging members of the GOP might be that, in
Republicanese, the term "job-killing" is often a synonym for "raises taxes on the
rich". And, indeed, the PPACA bill does include some new taxes that do exactly
that, and in precedent-setting ways which merit more public attention than
they have received so far.
Two such new taxes of particular interest are:
1) A 0.9% addition to the Medicare payroll tax-rate on earned income
exceeding $200,000 for individuals, and $250,000 for families.
2) A new 3.8% tax on unearned income (e.g. dividends, capital gains,
interest, rents, etc.) for those in that high-income bracket.
These two new taxes constitute more than just an increase in federal revenue. As an article in the June 12, 2010
Wall Street Journal said, "Each tax signals a radical change in policy". This statement might have been meant to
alarm the high-income readers of the WSJ…. As the WSJ itself said, "The extra 0.9% levy [in the Medicare payrolltax] puts a progressive element in what used to be a totally flat tax." In other words, for the first time the
Medicare payroll tax rate will have some progressivity built into it. This is a wonderful development, long overdue.
And regarding the second new tax, the WSJ noted that "The 3.8% tax on investment income also knocks down a
longstanding wall by applying a 'payroll' tax to unearned income. Until now, FICA taxes for Social Security and
Medicare have applied only to wages, not investment income." Absolutely, and exactly the right direction to go.
FICA taxes are regressive precisely because they have not applied to unearned income, which accrues
overwhelmingly to wealthy people. This new tax finally breaks this barrier to tax fairness.
GOP Governors' Obamacare Opposition Is Denying The Poor Health Care
Nonelderly Poor Uninsured Adults
in the Coverage Gap in States Not
Expanding Medicaid by
Total, United States:
4,832,000 - All races/Ethnicities
2,248,000 - White
1,327,000 - Black
992,000 - Hispanic
265,000 - Other
2,584,000 - People of Color
Preventable Deaths from Heart Disease & Stroke
Impact of Health Reform on:
Health Care Costs (Expansions)
All figures reflect spending through 2019
Impact of Health Reform on:
Health Care Costs (Savings)
All figures reflect spending through 2019
…and Costs Will Keep On Rising
National Health Expenditures (trillions)
PPACA (CMS Actuary)
PPACA (Commonwealth Fund)
National Health Expenditures as Percent of GDP
17.8 17.9 18.0 18.2 18.8 19.3 19.8 20.2
Notes: * Modified current projection estimates national health spending when corrected to reflect underutilization of services
by previously uninsured.
Source: D. M. Cutler, K. Davis, and K. Stremikis, Why Health Reform Will Bend the Cost Curve, Center for American Progress
and The Commonwealth Fund, December 2009. Estimated Financial Effects of PPACA as Amended, Richard Foster, CMS
Actuary, April 2010
Independent Payment Advisory Board
One of the most controversial provisions of the Patient Protection and Affordable Care Act was the
establishment of an Independent Payment Advisory Board (IPAB). The American Medical Association opposes
the IPAB and supports its repeal.
The ACA established a 15-member Independent Payment Advisory Board (IPAB) to extend Medicare solvency
and reduce spending growth through use of a spending target system and fast track legislative approval
process. The IPAB members include: 15 members appointed by the President, by and with the advice and
consent of the Senate. In selecting individuals for nominations for appointments to the Board, the President
shall consult with: (i) the majority leader of the Senate concerning the appointment of 3 members; (ii) the
Speaker of the House of Representatives concerning the appointment of 3 members; (iii) the minority leader of
the Senate concerning the appointment of 3 members; and (iv) the minority leader of the House of
Representatives concerning the appointment of 3 members. The HHS Secretary, the Administrator of CMS, and
the Administrator of the Health Resources and Services Administration (all of whom will serve ex officio as
nonvoting members of the Board).
By April 30 of each year, beginning in 2013, the Centers for Medicare & Medicaid Services (CMS) Actuary’s
Office will project whether Medicare’s per-capita spending growth rate in the following two years will exceed a
targeted rateT. If future Medicare spending is expected to exceed the targets, the IPAB will propose
recommendations to Congress and the President to reduce the growth rate. The IPAB’s first set of
recommendations would be proposed on January 15, 2014. Spending rate reductions will be established at:
0.5 percent in 2015; 1.0 percent in 2016; 1.25 percent in 2017; 1.5 percent in 2018 and beyond. If Congress
fails to pass legislation by August 15 each year to achieve the required savings through other policy changes,
the IPAB’s recommendations will automatically take effect. The IPAB is prohibited from submitting
proposals that would ration care, increase revenues, change benefits, modify eligibility, increase Medicare
beneficiary cost sharing (including Parts A and B premiums), or change the beneficiary premium percentage
or low-income subsidies under Part D. Hospitals and hospice will not be subject to cost reductions proposed
by the IPAB from 2015 through 2019. Clinical labs would be exempt for one year.
Beginning July 1, 2014, the IPAB must also submit an annual report providing information on systemwide
health care costs, patient access to care, utilization, and quality of care that allows comparison by region,
types of services, types of providers, and payers - both private insurers and Medicare.
Part 5 - SINGLE PAYER
IS THE REAL ALTERNATIVE
(MEDICARE “2.0” FOR ALL)
Conyers HR 676
Expanded and Improved Medicare
for All “single payer national
• Automatic enrollment - everyone receives a
card assuring payment for all needed care
• Free choice of doctor and hospital
• Doctors and hospitals remain independent,
negotiate fees and budgets with public agency
• Public agency processes and pays bills
• Financed through progressive taxes
A WORLD WIDE PERSPECTIVE
on DISEASE and MORBIDITY
An updated study by the prominent economists Emmanuel Saez and Thomas Piketty shows that the top 1
percent of earners took more than one-fifth of the country’s total income in 2012, one of the highest levels
recorded in the century that the government has collected the relevant data.The top 10 percent of earners took
more than half of all income. That is the highest recorded level ever. The income share of the top 1 percent of
earners in 2012 returned to the same level as before both the Great Recession and the Great Depression: just
above 20 percent, jumping to about 22.5 percent in 2012 from 19.7 percent in 2011. The new data shows that
incomes for the top 1 percent of earners declined about 36 percent during the recession, and rebounded about
31 percent in the recovery. The incomes of the other 99 percent plunged about 12 percent in the recession and
have barely grown since then, on aggregate. Thus, the 1 percent have captured about 95 percent of the income
gains since the recession ended. The figures underscore that even after the recession the country remains in a
kind of new Gilded Age, with income as concentrated as it was in the years that preceded the Great Depression,
OPTIMAL HEALTH OUTCOMES
DEPEND ON SOCIAL and ECONOMIC