The “Cadillac Tax” on Health Benefits in the United States Will Hit the Middle Class Hardest: Refuting the Myth That Health Benefit Tax Subsidies Are Regressive

U.S. employment-based health benefits are exempt from income and payroll taxes, an exemption that provided tax subsidies of $326.2 billion in 2015. Both liberal and conservative economists have denounced these subsidies as “regressive” and lauded a provision of the Affordable Care Act—the Cadillac Tax—that would curtail them. The claim that the subsidies are regressive rests on estimates showing that the affluent receive the largest subsidies in absolute dollars. But this claim ignores the standard definition of regressivity, which is based on the share of income paid by the wealthy versus the poor, rather than on dollar amounts. In this study, we calculate the value of tax subsidies in 2009 as a share of income for each income quintile and for the wealthiest Americans. In absolute dollars, tax subsidies were highest for families between the 80th and 95th percentiles of family income and lowest for the poorest 20%. However, as shares of income, subsidies were largest for the middle and fourth income quintiles and smallest for the wealthiest 0.5% of Americans. We conclude that the tax subsidy to employment-based insurance is neither markedly regressive, nor progressive. The Cadillac Tax will disproportionately harm families with (2009) incomes between $38,550 and $100,000, while sparing the wealthy.

The Current and Projected Taxpayer Shares of US Health Costs

OBJECTIVES

We estimated taxpayers' current and projected share of US health expenditures, including government payments for public employees' health benefits as well as tax subsidies to private health spending.

METHODS

We tabulated official Centers for Medicare and Medicaid Services figures on direct government spending for health programs and public employees' health benefits for 2013, and projected figures through 2024. We calculated the value of tax subsidies for private spending from official federal budget documents and figures for state and local tax collections.

RESULTS

Tax-funded health expenditures totaled $1.877 trillion in 2013 and are projected to increase to $3.642 trillion in 2024. Government's share of overall health spending was 64.3% of national health expenditures in 2013 and will rise to 67.1% in 2024. Government health expenditures in the United States account for a larger share of gross domestic product (11.2% in 2013) than do total health expenditures in any other nation.

CONCLUSIONS

Contrary to public perceptions and official Centers for Medicare and Medicaid Services estimates, government funds most health care in the United States. Appreciation of government's predominant role in health funding might encourage more appropriate and equitable targeting of health expenditures.

Public Health's Falling Share of US Health Spending

We examined trends in US public health expenditures by analyzing historical and projected National Health Expenditure Accounts data. Per-capita public health spending (inflation-adjusted) rose from $39 in 1960 to $281 in 2008, and has fallen by 9.3% since then. Public health's share of total health expenditures rose from 1.36% in 1960 to 3.18% in 2002, then fell to 2.65% in 2014; it is projected to fall to 2.40% in 2023. Public health spending has declined, potentially undermining prevention and weakening responses to health inequalities and new health threats.

Access to Care and Chronic Disease Outcomes Among Medicaid-Insured Persons Versus the Uninsured

OBJECTIVES

We sought to determine the association between Medicaid coverage and the receipt of appropriate clinical care.

METHODS

Using the 1999 to 2012 National Health and Nutritional Examination Surveys, we identified adults aged 18 to 64 years with incomes below the federal poverty level, and compared outpatient visit frequency, awareness, and control of chronic diseases between the uninsured (n = 2975) and those who had Medicaid (n = 1485).

RESULTS

Respondents with Medicaid were more likely than the uninsured to have at least 1 outpatient physician visit annually, after we controlled for patient characteristics (odds ratio [OR] = 5.0; 95% confidence interval [CI] = 3.8, 6.6). Among poor persons with evidence of hypertension, Medicaid coverage was associated with greater awareness (OR = 1.83; 95% CI = 1.26, 2.66) and control (OR = 1.69; 95% CI = 1.32, 2.27) of their condition. Medicaid coverage was also associated with awareness of being overweight (OR = 1.30; 95% CI = 1.02, 1.67), but not with awareness or control of diabetes or hypercholesterolemia.

CONCLUSIONS

Among poor adults nationally, Medicaid coverage appears to facilitate outpatient physician care and to improve blood pressure control.

Support for National Health Insurance Seven Years Into Massachusetts Healthcare Reform: Views of Populations Targeted by the Reform

Before the Affordable Care Act (ACA), many surveys showed majority support for national health insurance (NHI), also known as single payer; however, little is currently known about views of the ACA's targeted population. Massachusetts residents have had seven years of experience with state health care reform that became the model for the ACA. We surveyed 1,151 adults visiting safety-net emergency departments in Massachusetts in late 2013 on their preference for NHI or the Massachusetts reform and on their experiences with insurance. Most of the patients surveyed were low-income and non-white. The majority of patients (72.0%) preferred NHI to the Massachusetts reform. Support for NHI among those with public insurance, commercial insurance, and no insurance was 68.9%, 70.3%, and 86.3%, respectively (p < .001). Support for NHI was higher among patients dissatisfied with their insurance plan (83.3% vs. 68.9%, p = .014), who delayed medical care (81.2% vs. 69.6%, p < .001) or avoided purchasing medications due to cost (87.3% vs. 71.4%; p = .01). Majority support for NHI was observed in every demographic subgroup. Given the strong support for NHI among disadvantaged Massachusetts patients seven years after state health reform, a reappraisal of the ACA's ability to meet the needs of underserved patients is warranted.

Medical Causes and Consequences of Home Foreclosures

The objective of this study was to elucidate the medical causes and consequences of foreclosure. We surveyed 90 households undergoing foreclosure in 2013–2014 in Maricopa County, Arizona on two occasions approximately five months apart. At baseline, median monthly household income was $3,000, and median mortgage payment $1,350. Only 10% of respondents lacked health insurance when surveyed, although 28% had experienced a gap in coverage within the past two years. Fifty-seven percent identified a medical debt or another medical cause of their foreclosure, and 54% had taken on new debt to pay medical bills; 10% had mortgaged their home for this reason. Although 57% of respondents had a chronic condition requiring ongoing care, more than half reported delaying or skipping a needed medical visit. At follow-up, one-third of respondents had been unable to afford food, and 3 respondents reported becoming homeless; 46% said foreclosure had worsened their health; and 63% had already incurred new medical debts. Medical debt and medical problems frequently contribute to foreclosure, even among insured families. Foreclosure compromises access to care and basic necessities like food and shelter, and worsens self-reported health.

Identifying individual risk factors and documenting the pattern of heat-related illness through analyses of hospitalization and patterns of household cooling

Background

As climate change increases the frequency and intensity of extreme heat events researchers and public health officials must work towards understanding the causes and outcomes of heat-related morbidity and mortality. While there have been many studies on both heat-related illness (HRI), there are fewer on heat-related morbidity than on heat-related mortality.

Objective

To identify individual and environmental risk factors for hospitalizations and document patterns of household cooling.

Methods

We performed a pooled cross-sectional analysis of secondary U.S. data, the Nationwide Inpatient Sample. Risk ratios were calculated from multivariable models to identify risk factors for hospitalizations. Hierarchical modeling was also employed to identify relationships between individual and hospital level predictors of hospitalizations. Patterns of air conditioning use were analyzed among the vulnerable populations identified.

Results

Hospitalizations due to HRI increased over the study period compared to all other hospitalizations. Populations at elevated risk for HRI hospitalization were blacks, males and all age groups above the age of 40. Those living in zip-codes in the lowest income quartile and the uninsured were also at an increased risk. Hospitalizations for HRI in rural and small urban clusters were elevated, compared to urban areas.

Conclusions

Risk factors for HRI include age greater than 40, male gender and hospitalization in rural areas or small urban clusters. Our analysis also revealed an increasing pattern of HRI hospitalizations over time and decreased association between common comorbidities and heat illnesses which may be indicative of underreporting.

THE AFFORDABLE CARE ACT AND MEDICAL LOSS RATIOS: NO IMPACT IN FIRST THREE YEARS

The Patient Protection and Affordable Care Act (ACA) set limits on insurers' overhead, mandating a medical loss ratio (MLR) of at least 80 percent in the individual and small-group markets and 85 percent in the large-group market starting in 2011. In implementing the law, the Obama administration introduced new rules that changed (and inflated) how insurers calculate MLRs, distorting time trends. We used insurers' filings with the U.S. Securities and Exchange Commission to calculate the largest insurers' MLRs before and after the ACA regulations took effect, using a constant definition of MLR. MLRs averaged 83.04 percent in the three years before reform and 83.05 percent in the three years after reform. We conclude that the ACA had no impact on insurance industry overhead spending.

Health and Financial Consequences of 24 States' Decision to Opt Out of Medicaid Expansion

Twenty-four states have opted out of expanding Medicaid coverage under the Affordable Care Act. We projected the number of persons who will remain uninsured because of the Medicaid opt-outs and used data from three prior studies to predict the health and financial impacts of the opt-outs. We estimate that as a result of the opt-outs, 7.74 million people who would have gained coverage will remain uninsured. This will result in between 7,076 and 16,945 more deaths than had all states opted-in, as well as 708,195 more persons screening positive for depression, 239,557 more persons suffering catastrophic medical expenditures, 420,273 fewer diabetics receiving medication, 193,735 fewer mammograms, and 441,260 fewer Pap smears. Many low-income adults will suffer health and financial harms because of their state's refusal to expand Medicaid coverage.

Administrative Work Consumes One-Sixth of U.S. Physicians' Working Hours and Lowers their Career Satisfaction

Doctors often complain about the burden of administrative work, but few studies have quantified how much time clinicians devote to administrative tasks. We quantified the time U.S. physicians spent on administrative tasks, and its relationship to their career satisfaction, based on a nationally representative survey of 4,720 U.S. physicians working 20 or more hours per week in direct patient care. The average doctor spent 8.7 hours per week (16.6% of working hours) on administration. Psychiatrists spent the highest proportion of their time on administration (20.3%), followed by internists (17.3%) and family/general practitioners (17.3%). Pediatricians spent the least amount of time, 6.7 hours per week or 14.1 percent of professional time. Doctors in large practices, those in practices owned by a hospital, and those with financial incentives to reduce services spent more time on administration. More extensive use of electronic medical records was associated with a greater administrative burden. Doctors spending more time on administration had lower career satisfaction, even after controlling for income and other factors. Current trends in U.S. health policy—a shift to employment in large practices, the implementation of electronic medical records, and the increasing prevalence of financial risk sharing—are likely to increase doctors' paperwork burdens and may decrease their career satisfaction.

Health issues and health care expenses in Canadian bankruptcies and insolvencies

Illness can contribute to financial problems directly, through high medical bills, and indirectly, through lost income. No previous in-depth studies have documented the role of medical problems among Canadian bankruptcy filers. We obtained the bankruptcy filings from a random sample of 5,000 debtors across Canada and mailed surveys to them seeking information about the medical antecedents of their bankruptcy. A total of 521 debtors responded (response rate of 10.4%), of whom 40.1 percent reported losing at least two weeks of work-related income because of illness or injury in the two years before their filing; 8.3 percent reported a similar income loss because of caregiving responsibilities for someone else who was ill. Although 60.1 percent of respondents reported being responsible for a medical bill within the previous two years, only 6.9 percent had bills over $5,000 (all amounts in Canadian Dollars). Prescription drugs were cited as the costliest medical expense by two-thirds of debtors reporting bills > $5,000, with dental bills cited by 22.2 percent. Universal health insurance affords Canadians protection against ruinous doctor and hospital bills. Inadequate coverage for prescription drugs and dental care, however, leaves some with unaffordable out-of-pocket costs. In addition, illness is a frequent indirect cause of bankruptcy through loss of work-related income.

Pay-for-Performance: Toxic to Quality? Insights from Behavioral Economics

Pay-for-performance programs aim to upgrade health care quality by tailoring financial incentives for desirable behaviors. While Medicare and many private insurers are charging ahead with pay-for-performance, researchers have been unable to show that it benefits patients. Findings from the new field of behavioral economics challenge the traditional economic view that monetary reward either is the only motivator or is simply additive to intrinsic motivators such as purpose or altruism. Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that pay-for-performance may backfire.

Medicare overpayments to private plans, 1985-2012: shifting seniors to private plans has already cost Medicare US$282.6 billion

Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for, at most, a few years. However, no study has calculated the total overpayments to private plans since the program's inception. Prior to 2004, selective enrollment of healthier seniors was the major source of excess payments. We estimate this has added US$41 billion to Medicare's costs since 1985. Medicare adopted a risk-adjustment scheme in 2004, but this has not curbed private plans' ability to game the payment system. This has added US$122.5 billion to Medicare's costs since 2004. Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, which was mitigated, to a degree, by the subsequent Affordable Care Act. In total, we find that Medicare has overpaid private insurers by US$282.6 billion since 1985. Risk adjustment does not work in for-profit MA plans, which have a financial incentive, the data, and the ingenuity to game whatever system Medicare devises. It is time to end Medicare's costly experiment with privatization. The U.S. needs to adopt a single-payer national health insurance program with effective methods for controlling costs.