Author: Lucien Wulsin

Monopolistic Profiteering? Market Failures?

For the last 5 years since the passage of the Affordable Care Act, health care costs have been under control; per capita spending in Medicare has shown very slow growth, same with Medicaid and recently most private insurance. There have been debates about causation; some suggest the Great Recession and its aftermath; others credit the payment reforms in the ACA. The great debates on whether to regulate rates or to let the markets decide have been held in abeyance as the rates of health spending growth have moderated. But!!!

Recently, Health Affairs reported that some for profit hospitals are price gouging their uninsured patients and others by inflating their charges by up to 1000% above their costs. Ge Bai and Gerard Anderson, Extreme Markup: the Fifty US Hospitals with the Highest Charge to Cost Ratios, Health Affairs (June 2015).  While the worst actors were for profit hospitals associated with two hospital chains and many of the worst were based in Florida, inflated charges are the hospital industry norm, now averaging nearly 400% of costs here in California where three of the fifty were located.

There really is no good reason to continue the outdated fiction of hospital charges; Medicare does not pay them; Medi-Cal does not pay them; private insurance does not pay them and the uninsured are moving into coverage through Covered California and Medi-Cal at rapid rates so they don’t pay them. They are an anachronism whose time has passed and should be eliminated.

The Los Angeles Times and others have reported on the large for profit national health plans in acquisition frenzy mode to buy each other and their smaller competitors in order to achieve dominant national and state market shares.

How might this impact California? We do have smaller national for profits in Health Net and Molina based in California; they could become acquisition targets for the big national for profit plans. In California, the commercial markets are dominated by four plans: Kaiser, Anthem Blue Cross, Blue Shield and Health Net – only one of which is a large, national for profit; they have 85% of the small group market, 81% of the individual market, and 90% of the individual market. In the county Medi-Cal managed care markets, local government organized plans typically dominate their markets (about 2/3rds of total enrollment) with commercial competition from Health Net, Anthem Blue Cross, Molina and now Blue Shield/Care 1st. Health Net has about a 14% market share statewide. Kaiser participates in the Medi-Cal managed care markets in San Diego, Sacramento and as a subcontractor in Los Angeles, but is a much smaller participant than either Health Net or Anthem Blue Cross and does not compete directly with the government organized plans. In California, nearly 38% of Medicare beneficiaries participate voluntarily in managed care plans. While the Medicare Advantage Plans market includes greater participation by the national non-profits, such as Humana, United and Aetna, Kaiser, nevertheless, has nearly a 45% market share in California, followed by United at 16% and then California-based Health Net and SCAN with between 7 and 8% of the market each.



Physicians specializing in the care of cancer patients are organizing a backlash to the astronomical pricing of life saving cancer drugs. The criticisms are coming from doctors close to the drug companies, who have helped develop and test drugs for the pharmaceutical industry.

Hepatitis C blockbuster drugs (Solvadi) are priced at $1,000 a pill, projected to add $200-300 per year to every Americans’ health premium for the next five years. Sovaldi is scheduled for $10 billion in sales in 2014, making it the largest selling drug in the world. Company profits were up nearly 500% from 50¢ a share to $2.36 a share in one year.

What can be done? What needs to be done? The Covered California Board capped the amount of these soaring specialty drug costs that can be passed on to patients.  The California legislature capped hospitals’ ability to pass on their inflated charges to their low, moderate and middle-income patients.  The Health Affairs analysis of California’s Hospital Fair Pricing Act is available here.

While important, these caps do not address the fundamental question because it still leaves entities with near monopoly powers the freedom to pass on their highly inflated prices to others.

Should society regulate the monopoly pricing policies of health care purveyors for scarce and life saving treatments? My opinion is an unqualified “yes”, and it needs to get started. The state and federal governments can use the justice system, the legislative and oversight process, the administrative process, anti trust enforcement or their contracting authority, but they need to send a clear and strong message on profiteering and monopoly pricing in the health care industry. In my opinion this is not a question of free markets or competition versus state regulation, but rather of profiteering in life saving care.

Supreme Court Upholds the Refundable Tax Credits/Premium Subsidies For Federal Exchanges

In a 6-3 decision authored by Chief Justice Roberts, the Supreme Court upheld the premium assistance provisions of the Affordable Care Act for federally operated Exchanges. The court introduced the issues at stake as follows: “the Patient Protection and Affordable Care Act adopts a series of interlocking reforms to expand coverage in the individual health insurance market. First, the Act bars insurers from taking a person’s health into account when deciding whether to sell health insurance or how much to charge. Second, the Act generally requires each person to maintain insurance coverage or make a payment to the Internal Revenue Service. And third, the Act gives tax credits to certain people to make health insurance more affordable…. This case is about whether the Act’s interlocking reforms apply equally in each state no matter who establishes the State’s Exchange” and concluded “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible we must interpret the Act in a way that is consistent with the former and avoids the latter. Section 36B (refundable tax credits in federal Exchanges) can fairly be read consistent with what we see as Congress’ plan and that is the reading we adopt.” 576 US — (2015)

Document-1-page001In dissent, Justice Scalia was outraged and characterized the majority’s opinion among other things as “apple sauce” and “jiggery pokery” and concluded “perhaps the Patient Protection and Affordable Care Act will attain the enduring status of the Social Security Act and the Taft Hartley Act; perhaps not… the cases will publish forever the discouraging truth that the Supreme Court favors some laws over others and is prepared to do whatever it takes to uphold and assist its favorites.”

Phillip Bump, writing in today’s Washington Post notes “Whether or not Republican politicians consider Thursday’s Supreme Court ruling a negative for them is open to interpretation. The 2016 candidates have railed against it in their press releases, but deep down inside, it’s hard to believe that they wanted to deal with the fallout of the nuclear detonation that a ruling against ObamaCare would have been. They still have their political cudgel and they don’t have to clean up a mess. Win-win. And for Republican voters the win is even clearer…. About 1.8 million people in federal exchanges live in counties that voted for Obama. About 4.5 million live in counties that voted for Mitt Romney”.

Lena Sun and Robert Gebelhoff writing in today’s Washington Post interviewed consumers enrolled in federal Exchanges. “Ida Sievers (of South Dakota) who was diagnosed with leukemia last fall, had been praying that she wouldn’t lose the $620 a month government subsidy for her health insurance, so she was delighted Thursday … ‘thank God, Hallelujah, that is so awesome – Oh man! I’m so happy. I’ve been so stressed about it and worried, just every day. I’ve been talking to my husband what are we going to do honey? And he just says have faith honey, it’s going to be okay. ’”

“Mary Kitchens, who lives near San Antonio Texas is paying less than $100 a month for her subsidized coverage. She began crying when informed of the decision. ‘I don’t even have words’ said Kitchens who was diagnosed with multiple sclerosis in 2009. ‘It’s amazing, it’s amazing.’

“Kitchens, who works in marketing for a real estate firm is a single mom with four children. The decision ‘means that I’ll have options in obtaining medication and treatment…. It means I won’t be a burden to my children. Without it, I felt so doomed. Without insurance, you succumb to the disease. And I don’t want to do that.’ Without it, her bill would have jumped to $500 to $600 a month.”

“Atlanta resident Ted Souris, 62, describes himself as an ‘archconservative’ who initially opposed the health law. He said her had mixed feelings about the ruling. He gets what he calls ‘a pretty hefty subsidy’ to buy insurance – he gets $460 and pays $115 for insurance. ‘I’m so against Obama and I hate that he has any kind of victory, but it’s nice that I don’t have to worry about affording health coverage.’”

“Tom Clark, of Waunakee Wis., who retired from his long time job at Canadian national Railway called the decision ‘a huge weight off my chest, a huge relief.’ In the months before coverage was available under the health law, he was cashing in on his pension fund to pay the $2,000 monthly premium for a plan that covered his wife, a diabetic who works as a clerk in a liquor store, and one of his two college-age sons. After the family signed up for coverage in December 2013, a subsidy reduced his monthly premium to about $580…. ‘If I had lost the subsidies, I don’t know what I would have done.”

Karen Tumulty interviewed strategists from both parties on the political impacts of the court’s decision for her article in today’s Washington Post. “Rick Wilson, a Florida based strategist for Republican candidates said he was relieved by the decisions which has given his party a reprieve from having to navigate these straits. ‘I’ve been telling clients for about a month now, listen, this is probably going to get passed, they’ll approve it, and you should not be freaked out by it, because otherwise you’re going to spend the next year and a half getting ads run against you where a weeping Hispanic woman looks at the camera and says ‘they took away my son’s health care. Now he’s dead.’ What I don’t want is a political environment where the next year and a half we’re in a ditch with people asking ‘what is your exact health care plan and then when we present one, it gets torn apart’… Anyone who thinks that’s a great political frame to put yourself in for 2016 hasn’t ever done an election.”


For ITUP’s analysis of King vs. Burwell click here.

Congratulations to Governor Brown, Senator Ricardo Lara and the State’s Legislative Leadership

Governor Jerry Brown signs $167 billion state budget with significantly increased funding for schools and $40 million for Medi-Cal coverage for immigrant children beginning by May 2016. Up to 170,000 children may qualify and the state will achieve near universal children’s coverage. Congratulations to Governor Brown, Senator Ricardo Lara and the state’s legislative leadership



ITUP Summary of Findings from the National Health Insurance Survey

The Centers for Disease Control, National Center for Health Statistics released its 2014 survey results on health insurance status for the nation.

Thirty-six million (11.5% of the nation’s residents) were uninsured at the time of their interview. The nation’s rate of uninsurance for adults fell from 22.3% in 2010 to 16.3% in 2014. The rate of uninsurance for young adults (19-25) fell from 33.9% in 2010 to 20.0% in 2014. The numbers of uninsured nationally fell from 48.6 million in 2010 to 36 million in 2014.

The percentages of uninsured ranged from highs of 21.5% in Texas and Oklahoma and 21.2% in Alaska to lows of 2.5% in Hawaii, 3.2% in Massachusetts and 3.3% in Washington D.C. California, which used to be competing with states like Texas and New Mexico for the highest uninsured rates, is now at 13.4%, just about the national average. Its uninsured rates for adults 18-64 fell from 24.4% in 2012 to 16.7% in 2014. Its uninsured rates for children fell from 6.7% in 2012 to 5.0% in 2014.

California’s rate of private insurance is 60.6%, below the national average of 63.6% and far below leading states like New Jersey (74.4%), Hawaii (72.8%) and Massachusetts (72.2%). Thirty-seven percent of those with private insurance are enrolled in high deductible health plans – a percentage that is increasing.

California’s rate of public insurance is 26.8%, a bit above the national average of 24.5% and far below the leaders such as Kentucky (36%), New Mexico (37.4%) and Washington DC (32.4%).

Between 2013 and 2014 as the ACA was implemented, the rates of uninsurance fell precipitously for the poor (39.3% to 32.3%) and near poor (28.5% to 30.9%), falling as well as for the non-poor (11.4% to 8.9%).

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States with state-based Exchanges like California had a sharper reduction in their uninsured rates between 2013 and 2014 than did those states with federal Exchanges, and they had strong growth in their rates of private insurance.

States with Medicaid expansions like California achieved sharper reductions in their uninsured rates (18.4% to 13.3%) between 2013 and 2014 than did those states, which refused to expand Medicaid (22.7% to 19.6%).

The results are that states which have resisted ACA implementation like Texas and Oklahoma have maintained their very high rates of uninsured while states like California and New Mexico (21% uninsured in 2012 to 14% uninsured in 2014) that have enthusiastically implemented it have seen large reductions in their rates of uninsured.





ITUP’s Summary of The Kaiser Health Tracking Poll Findings

Today the Kaiser Family Foundation released its Kaiser Health Tracking Poll on public views of the Affordable Care Act (ACA).  Some of the findings include:

    • About 43% like the ACA and 42% dislike it. 75% of Republicans dislike it and 70% of Democrats like it. Independents are evenly split.
    • Only 8% knew the ACA is costing less than projected.
    • 19% say the law has helped them and 22% say it hurt them.
    • 29% say the law should be repealed; 46% say it should be expanded or implemented as is, and 12% say it should be scaled back,
    • Priorities for the President and Congress
      • Making high cost drugs for chronic conditions more affordable (76%)
      • Reduce the costs of prescription drugs (60%)
      • Protecting people from high provider prices (56%)
      • Assuring sufficient provider networks (55%)
      • Transparency of provider prices (54%)
      • Transparency of provider quality (54%)
      • Improving eligibility rules so more people can be helped (50%)
      • Requiring all states to expand their Medicaid programs (50%)
      • Repealing the employer mandate (39%)
      • Repealing the individual mandate (37%)
      • Repealing the entire law (36%)
      • Reducing the number of people who get help (28%)
    • Only about 30% reported seeing any information comparing plan and provider prices and only 20% have seen this information on plan and provider quality
    • 2/3rds say it is difficult to find out what medical care will cost
    • Most (73%) of the uninsured do not believe they can pay for usual medical costs and nearly all (92%) do not believe they can pay for the costs of a major illness
    • A third of the insured say it is difficult to pay their deductible, 28% say it is difficult to pay their premiums and a quarter say it is difficult to pay their copays
    • A quarter of the insured believe health costs have gone up a lot, and 60-70% believe their premiums and out of pocket have held steady or gone up a little.

Post-ACA, public opinion continues to be divided.

King v. Burwell in the U.S. Supreme Court

The case is about individuals’ refundable tax credits that help pay for individuals’ health insurance in the 34 (37) states whose Exchanges are administered by the federal Department of Health and Human Services. There are about 8.6 million subscribers now enrolled – ranging from about 1.6 million in Florida and 1.2 million in Texas to 18,000 in South Dakota and 21,000 in Alaska who could be impacted. This does not apply to states like California or New York or Vermont or Washington State, which decided to run their own Exchanges.

The petitioners, 4 residents[1] of the Commonwealth of Virginia, maintain that the ACA does not authorize individual refundable tax credits in states unless the state decided to operate their own state Exchange, rather than deferring it to HHS. Health coverage for 385,000 fellow Virginians would be impacted. The District Court and the 4th Circuit Court of Appeals decided that the ACA did authorize refundable tax credits to all individuals regardless of which option their state chose. The Supreme Court is now about to hear oral argument on March 4. The Supreme Court’s decision will apply to at least 8.6 million individuals (and growing) in all 34 (or 37) states with HHS operated Exchanges – not California.

Here is a little background on the arguments. The Affordable Care Act/ObamaCare requires all Americans to have basic health coverage — the lowest cost bronze coverage pays at least 60% of the costs of their health care. It requires all insurers in the individual and small employer markets to sell coverage regardless of an individual’s health status. It helps individuals pay for their coverage through a refundable tax credit that is graduated based on an individual’s ability to afford coverage – i.e. those with the lower incomes pay less and those with higher incomes pay more and the tax credits pay the difference.[2] These are referred to as the three legs of the stool of the ACA (affordability, availability and personal responsibility). The tax credits are paid by the US Treasury to the private health plan that the individual selects within the Exchange – in other words these are individual tax credits for individual health insurance purchased through Exchanges.[3]

The ACA permits states to choose to operate their own Exchange, or have the federal government (HHS) operate their Exchange consistent with the laws governing insurance in the individual’s state of residence. The federal regulations from the IRS (Treasury) and HHS (Health and Human Services) give states four options: run your own Exchange, run a regional Exchange with several other states, run a hybrid Exchange where the state performs some functions and the federal government others functions, or have the federal government (HHS) run it for you. Many states decided to let HHS run their Exchanges – an option that California strongly considered and rejected.

The IRS rule that is being challenged (26 C.F.R. § 1.36B-2(a)(1)[4] provides individual federal tax credits regardless of which approach a state took. The petitioners say that under the ACA the credits are only available to individuals in states that operate their own Exchange, and the IRS rules should be struck down as a violation of the ACA. Their argument is based on their reading of 26 USC 36B (tax credits) and Sections 1311 (state operated Exchanges) and 1321 (state Exchanges operated by HHS) of the Affordable Care Act. The ACA subsection of 26 USC 36B[5] in question is cross-referenced back to ACA §1311 and makes no reference to §1321. The federal government (the respondent) defends its rule by pointing out that §1321 is a subsidiary of §1311 (i.e. the federal government is operating the Exchange for the state in accordance with state insurance laws and the state’s Medicaid rules), that the ACA from start to finish is about providing affordable coverage for every American, and that administrative rule making is to be given wide deference by the courts.

The Fourth Circuit in King v. Burwell held that in reading the whole Act and the legislative history Congress clearly intended the tax credits to be available nationwide regardless of whether an individual purchased coverage through state or HHS Exchanges, and the IRS rule was fully consistent with the ACA.

You may find the briefs of the Petitioners and Respondents compelling reading if you are a lawyer, or have great fondness for legal writing. See I found the Petitioner’s efforts to come up with an argument to explain why Congress intended to disadvantage individuals in states with HHS run Exchanges and then didn’t tell anyone about it to be the most entertaining portion of the briefs. Since there was not a word of contemporary legislative history to that effect, they created hypothetical back room deal making to encourage state-operated Exchanges and punish the citizens of states that chose federally operated Exchanges.

This is a Hail Mary pass to undo the ACA at a time when it appears to be working increasingly well – more people are getting coverage, the electronic enrollment is functioning, and individual insurance market premiums are stable. However, the Supreme Court took this case on certiorari (i.e. it was discretionary) indicating that at least 4 Justices thought it had some merit and wanted to hear it. A parallel case, Halbig v. Burwell, Number 14-5018 (DC Circuit, July 21, 2014) is pending before an en banc panel of the DC Circuit, which had vacated the 2-1 decision striking down the IRS rule.

Many of the ACA’s Congressional opponents have been asking the Administration what it will do to preserve coverage for the 8+ million residents in states with federal Exchanges and assure the viability of their individual insurance markets. To date, the Administration has maintained it has no back-up plans, and it expects the IRS rule-making to be sustained.

Others have pointed to the market and human chaos that will ensue if the IRS rule is struck down – removing one of the key pillars (affordability) of the Affordable Care Act in these states. See Amicus Brief of the Commonwealth of Virginia and many other states including Mississippi, North Carolina, Iowa, New Mexico, Maine and North Dakota, which selected HHS to operate their state’s Exchanges.

Essentially, this was a case generated by two distinguished scholars affiliated with the Cato Institute about a possible drafting glitch in the ACA.[6] It’s surprising that it has gone to the Supreme Court given the undisputed legislative history of the ACA to cover every American, but nine justices will yet again have an opportunity to go down in the history books ruling for or against coverage for every American.



[1] Petitioners claim they want to buy catastrophic coverage rather than bronze coverage and their eligibility for tax credits/premium assistance disqualifies them from purchasing catastrophic coverage.

[2] Because individual health insurance premiums are age rated and family rated (i.e. you pay substantially higher premiums in individual markets as you age or have more family members), those who are older and with larger families get more help (bigger tax credits) than individuals (with equal incomes) who are younger and have fewer family members.

[3] Employers and employees have a different system of tax subsidies – pre-tax purchasing. For the self-employed a tax deduction is also available.


[5] (

[6] Jonathan H. Adler & Michael F. Cannon, Taxation Without Representation: The Illegal IRS Rule To Expand Tax Credits Under the PPACA, 23 Health Matrix 119, 123 (2013)


Mom, Dad, I’m 26 and I forgot to enroll in Covered California, “I’m so sorry, but what do I do now”?

If you just started preparing your taxes for that refund you were hoping for and you just now learned that there is a tax penalty for not enrolling, you can apply from now until April 30 at Covered California.

If your income is less than $16,100 for an individual, you may apply for Medi-Cal at any time. There is no limited open enrollment period for Medi-Cal.

If you got married, had a child, lost health coverage, moved to another county or state, lost your job, your income changed a lot so you now qualify for help paying your premiums, you became a citizen or a new legal permanent resident or you had a really, really good life changing excuse, you can qualify for “special enrollment”, but you have to do it in 60 days of the life event.

Mom, how much is that tax penalty, maybe I should just pay it. For last year (2014), it was $95 per person or 1% of your annual income, whichever is more. For this year (2015), it will be $325 per person or 2% of your annual income, whichever is higher. For next year, it goes up to the higher of $650 or 2.5% of your annual income. Just don’t ask your Dad to pay your tax penalties.

ITUP Draft summary of the §1115 Waiver Concepts

ITUP Draft Summary of the State’s §1115 Waiver Concepts, dated 2/11/15

The request is for $15-20 billion in increased FFP over 5 years or $3-4 billion a year in federal and state shared savings. The state and federal government would agree on a per member per month cost amount that would be allocated to the state to support the delivery system reforms envisaged. It appears that the state would make the enhanced pmpm available to local managed care organizations who would in turn be responsible to achieve the goals of the waiver.

Download the full draft summary here: Summary of the State’s §1115 Waiver Concepts

If You are Uninsured…

If You are Uninsured or Have Private Individual Insurance, Ten Good Reasons to Enroll before February 15, 2015

– the Deadline for Covered California –

  1. In case you get sick — measles, mumps, the flu, chicken pox or any other infectious disease.
  2. In case you get hurt — driving, fixing the house, at a rowdy Super Bowl party, exercising or just walking the dog.
  3. In case you get pregnant.
  4. In case you get really sick – cancer, heart attack, depression or stroke.
  5. In case you are not a billionaire and cannot afford to pay for all your medical bills out of your own pocket.
  6. To make your mom, dad, grandma, kids or siblings happy that you’ll be ok if something bad happens. To make your partner happy for Valentine’s Day.
  7. To get preventive care or a check up so you stay healthy.
  8. Because the next open enrollment is not until November 15, 2015 and you cannot just buy individual coverage any time you need it to pay your bills.
  9. Because you are likely to qualify for some help paying your monthly premiums and/or out of pocket costs (incomes up to $46,680 for an individual or $95,400 for a family of four).
  10. Because you don’t want to pay the penalty for being uninsured in 2015 – 2% of your income or $295 per year, whichever is more.



In Loving Memory

The 19th ITUP conference is dedicated in loving memory to Peter Harbage.