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Magical MAGI: Defining Who Gets ObamaCare Subsidies

A person who buys an ObamaCare health insurance policy can get a tax credit (subsidy) if his household’s Modified Adjusted Gross Income (MAGI) puts him below 400 percent of the Federal Poverty Level (FPL).

But what is a household?

It isn’t easy figuring out those magical MAGI groups when ObamaCare premium subsidies depend on family size and the definition of a family is, shall we say, rather flexible. As the Wisconsin training handout puts it, “the new MAGI methodology introduces tax relationships into the way we build BC+ [BadgerCare Plus] household composition. Under MAGI, household composition is formed using either ‘tax rules’ or ‘relationship rules.’ The use of tax rules versus relationship rules is based on whether or not the individual for whom the assistance group is being formed intends to file taxes or is a tax dependent.”

The manual goes on to say that it is important to remember that because Assistance Groups are person specific, “the household composition for each Assistance Group must be examined one person at a time and each Assistance Group is formed around a target (the individual who is requesting assistance). The target’s assistance group is formed based on that target’s age, marital status, tax filing status, tax relationships and/or family relationships.”

If you have a “target” living in a spare room or basement, here’s a flowchart that might come in handy:


The State of Medicaid Quality Measurement

Thanks to ObamaCare, the state of quality measurement in health care is rapidly approaching the state of quality measurement in public education. Process measures dominate. Many of these measures are worthless. They measure nothing that has anything to do with providing actual medical care that successfully cures or alleviates the suffering of sick people in a timely manner.

The following list gives the items chosen to measure the general performance of the Indiana Medicaid program for 2012 with an emphasis on access to care. The good news is that Indiana contracts for an independent outside evaluation of its program. The bad news is that 13 of the 16 measures depend upon whether or not a patient decides to visit the doctor.

In those 13 measures, quality is assumed to be higher if a higher fraction of covered individuals have at least one health care visit. The report continually equates visits with access as in “there were fewer differences in the rate of access to primary care for adults across the regions than was found for children” and “the adults in the 45-64 age range were more likely to access primary care services than the 20-44 range.”

The bulk of the measures show whether an otherwise healthy person came in for a check-up. One of the measures, nutrition and physical activity counseling for children and adolescents, which is satisfied by entering BMI data in a patient record, likely duplicates school programs. Others, like measuring the quality of mental health care by whether or not someone hospitalized with a psychiatric diagnosis shows up for an appointment 7 or 30 days later, are beyond the control of anyone but the patient.

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Ignoring the Obvious? Choosing Suitable Metrics in Evaluating Health Care

One of the biggest problems in health policy is choosing the appropriate metrics to evaluate a complex good like health care. Value is in the eye of the beholder. All too often, the beholder is not the consumer, which leads to an affinity for numeric measures said to be more “rigorous” or “precise.”

As a result, many Medicaid evaluations use population health measures that have as much or more to do with individual behaviors as they do with the action of any part of the healthcare system. Things like number of primary care visits, BMI, cholesterol levels, and blood pressure, are easy to measure provided someone first decides to visit the doctor. And outcomes based on those measures depend upon whether someone decides to diet, exercise, and take the prescribed medications.

Because simple metrics abound, we have a lot of studies evaluating the health “system” that only observe changes in relatively simple and inexpensive treatments that are behaviorally dependent and are provided to a lot of people. Many policy makers are satisfied with this. It accords well with the views of U.S. health care reform advocates who favor more centralized gatekeeping and approve of policies that force people to consume more primary care as a condition of being allowed access to specialists. If people got more primary care, the mantra goes, they wouldn’t need to see specialists.

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Puzzle of the Day: Medicaid Expansion and Unavoidable Emergency Department Visits

Ambulance at Emergency EntranceTo paraphrase John Wayne, evaluating health care is hard. It is even harder if you use percentages.

A 2011 report on whether or not Wisconsin’s BadgerCare’s coverage of childless adults affected their utilization of services concluded that people in a sample of about 10,000 very low income childless Milwaukee adults increased their total emergency department visits by 39 percent when they were newly enrolled in Medicaid coverage.

Seventeen percent of visits resulted in a hospital admission before Medicaid was expanded to cover the group. After expansion, 9.5 percent of emergency department visits resulted in a hospital admission.

The report spins this like it was a good outcome: “This significant 45% decline is notable in that Wisconsin Medicaid payment policy considers an ED visit ‘appropriate’ when it results in a hospital admission.” Later on, the report reminded readers that “the percentage of hospital admissions from the emergency department declined dramatically.”

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ObamaCare Subsidies for Illegal Aliens?

Health Affairs is a reliable barometer of the direction of mainstream health policy. The following is from the abstract of a May 2014 article:

iStock_000004348658XSmallUndocumented immigrants were excluded from the health benefit Marketplaces created by the Affordable Care Act partly because of claims that they contribute to problems such as high costs and emergency department (ED) crowding. This article examines the likely health care use and costs of undocumented immigrants in California in 2009-10. Using data from the 2009 California Health Interview Survey (CHIS), we developed a model that estimated the state’s adult and child undocumented immigrant population…We found that undocumented immigrants in California, and the uninsured among them, had fewer or similar numbers of doctor visits, ED visits, and preventive services use compared to U.S. citizens and other immigrant groups. Allowing undocumented immigrants to purchase insurance in the Marketplaces and ensuring receipt of low-cost preventive services can contribute to lower premiums and reduce resource strains on safety-net providers.

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Does the EITC Subsidize Tax Cheats?

From the abstract of an article summarizing interviews with 115 recipients of the Earned Income Tax Credit, the largest anti-poverty program in the United States:

Rather than adjust work hours, defer marriage, or have additional children, respondents exhibit a different type of behavioral response to the incentive structure of the EITC: They alter their tax filing status in order to maximize their refunds. They routinely claim zero exemptions and deductions on their W-4s, file their tax returns as head of household rather than as married, and divide children among the tax returns of multiple caregivers. Although some of these behaviors qualify as tax noncompliance, they emerge because the intricacies of the tax code conflict with the complexity and fluidity of finances and family life in low-income households.

In ordinary, non-academic English, “tax noncompliance” by making false statements on federal returns would usually be called cheating. How this “tax noncompliance” is understandable because family life in low-income households is complex with “fluidity of finances” we leave to readers’ comments below.

Are There Elements of Consumer Direction in the Proposed Indiana Medicaid Expansion Plan?

Supporters of Indiana’s proposed Medicaid expansion say that Healthy Indiana Plan 2.0  (HIP 2.0) is “an alternative to traditional Medicaid” that promotes “consumerism by requiring members to make contributions” to their individual health accounts. They say that it is modeled after the much smaller Healthy Indiana Plan (HIP) and that HIP is a consumer-directed model that has “demonstrated remarkable success in promoting healthy lifestyles and appropriate utilization of health care services by increasing preventive care and decreasing inappropriate use of hospital emergency departments.”

These claims greatly overstate the case.

HIP has little in common with consumer-directed health care models. The people in it are not allowed to shop for care. They are required to use the services of a single managed care provider. Their individual POWER (Personal Wellness and Responsibility)accounts are prefunded with $1,100 in government money. They must make low monthly premium payments to their accounts, but because the size of the payment is means tested, they have relatively little of their own money at risk, and premium payments were waived for about 23 percent of enrollees in 2012. Aside from monthly premiums, the only out-of-pocket cost current HIP members face is a copay for unnecessary emergency room visits. It ranges from $3.00 to $25.00.

Most HIP emergency room users don’t even pay that. According to the HIP annual report for 2012, of the people who used the emergency room in the past six months, only 28 percent of them, an “extremely small” number, were asked to make a copay. Hospitals may not have bothered to collect it due to the “administrative burden of collecting small co-payments” and “the difficulties inherent in refunding copayments after ER visits were determined to be true emergencies.”

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More on Medical Costs: The Cost of Hemophilia

Hemophilia is a rare genetic disease. It cannot be cured or prevented by diet, exercise, counseling, or wellness programs. About 400 babies are born with it each year and CDC estimates that there are 20,000 people in the US who have it. Individuals with hemophilia have defective blood clotting mechanisms and are at risk for internal bleeding which causes pain and swelling. If uncontrolled, it can lead to permanent joint damage, chronic pain, anemia, infections, and fatal hemorrhage.

In the commercially insured population in the United States, Hemophilia A and B affect about 13 men 100,000 men. The prevalence for men with Medicaid coverage is higher.

A Milliman report provides the means and 90th percentile costs for commercially insured hemophiliacs from 2008-2011. Unlike high cost cancer or trauma patients, hemophiliacs are likely to have very high costs over many years, costs that are high enough to wipe out the profits of insurers or Medicaid plans without adequate stop loss insurance or capital reserves. Note that the average annual cost per person in the commercial population as a whole is $4,199, and that only 10 percent of people have annual costs over $8,404.


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Another Viewpoint on the $84,000 Cost of Sovaldi

Sovaldi reportedly cures 90 percent of patients with hepatitis C in 12 weeks of treatment. Gilead, the company that invented it, is charging $1,000 a pill for it which works out to about $84,000 per course of treatment in the U.S. No other treatment comes close to working as well.

prescription-bottleRather than considering whether profiting from this breakthrough will stimulate new discoveries and methods of production, as well as liberate millions of people from a deadly disease, critics are all about the money. They charge that the pricing will increase the federal debt, destroy employer health plans, and lay waste to the health insurance industry.

If these people had been in charge when insulin was first introduced in the early 1920s their nostrums probably would have ended up killing a lot of diabetics. Insulin was given away when it was first produced, but by the end of 1922, Lilly could no longer afford to do so. It began selling the drug to specialists at cost and using the money to expand production. Over time, ways were found to increase yields and arrangements were made to process the entire Canadian supply of beef and pork pancreas.

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The VA Scandal and Cheap Government Medicine

The VA waiting list scandal is a strong piece of evidence that governments running monopoly health systems have few incentives to provide quality health care. The easiest way to cut costs is to deny access to prompt care, advanced treatments, and new drugs. As far back as 2007, the VA Inspector General reported that some of its facilities keep poor records and had long waits for care. It has never accurately estimated the size of its waiting lists, or been able to say exactly how it spends its budget.

VA care looks better than it is because a lot of veterans have Medicare or other private insurance. They can switch to private care when the VA fails. And VA care does fail. Even if they make it to the top of the waiting list, people stuck in the VA are 35 percent less likely to receive kidney transplants or effective modern drugs than people with private insurance.

Like most government entities, the VA often seems more concerned about the people who work for it than the patients it is supposed to serve. In 1995, he GAO reported that the VA shields “its physicians from the professional accountability that is required of private sector practitioners,” and it is not clear whether all of its hospitals have formal processes to report incidences of serious injury, death, or potential legal liability. In 2003, its electronic records were found to contain numerous errors, and did not include some important adverse events. As of 2007, its electronic patient records could be edited by unauthorized people.

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