Wednesday, January 30, 2013

Whatever happened in Massachusetts?... YOU KNOW Where The Health Reform Began...

Dr. Richard Dupee (AP Photo/Steven Senne)
 
Dr. Richard Dupee (AP Photo/Steven Senne)
BOSTON (AP) — When Massachusetts adopted its landmark health care law in 2006, the goals were ambitious and the potential solutions complex.

More than 90 percent of its residents already had health insurance, but the state hoped to cover nearly everyone by plugging as many holes as possible in its system, short of a so-called single payer option.
What resulted was a state law that became the blueprint for the 2010 Patient Protection and Affordable Care Act (PPACA).

Now, as other states begin grappling with the intricacies of PPACA-, many are looking for lessons from the largely successful Massachusetts model as well as from its limitations and remaining challenges.

Officials from Wisconsin, Minnesota, Colorado, West Virginia and Rhode Island have worked with Jonathan Gruber, an MIT economics professor who helped craft both the state and federal laws, to set up their exchanges.

What are they getting in return? A guide to a law that has resulted in more people visiting doctors, more employees getting coverage through their jobs and an increase of insured residents to 98 percent, far above the national average, including virtually all children and senior citizens. That's an additional 400,000 people with insurance since the law took effect.

Other states would also do well to note the difficulties resulting from the law: a shortage of primary care doctors, which is expected to be an unintended consequence of the federal law, and an increase in the number of procedures that insurers were required to pay for, which raised costs.

Massachusetts' law, written for a state that is relatively richer and more highly educated than others, won't be a perfect fit for any other state, of course. But the experiences resulting from the law have played out on personal levels universal to all 50 states — in doctor's offices, at kitchen tables and in human resource departments.

Among those most directly affected were the uninsured who had relied on care from emergency rooms, the cost of which was borne by hospitals and taxpayers. The law's top objective was to get those people into health plans. A system was created to subsidize care for people earning less than three times the poverty level and design lower-cost private plans for those earning more.

For Valerie Spain, the overhaul proved to be a lifesaver. She was underemployed in 2011 and no longer able to extend her insurance coverage from her previous job, an option that had been costing her $550 a month.

The 57-year-old former operations manager found insurance through the new subsidized program. She pays a $20 co-pay for visits to her doctor's office but no premiums.

Without the insurance, Spain said she doesn't know how she would keep her diabetes under control.
"I'm sure I would have had to be rationing my medication," she said.

The influx of such new patients is good for those who finally have insurance, but it's been tough on doctors, said Richard Dupee, a 67-year-old primary care doctor and chief of geriatrics service at Tufts Medical Center. He said many have declined to accept patients on the subsidized plans because the reimbursement rates are not as good as private plans.

"If you nickel and dime the doctors, they are not going to take the insurance," said Dupee, who has been in practice for more than 30 years and teaches at Tufts University School of Medicine.

The state also faces a shortage of primary care doctors, Dupee said, making it harder for the newly insured to get an appointment. He said the bulk of his students are heading into subspecialties, with few choosing primary care.

Just half of primary care doctors were taking new patients last year, and average times for new patients seeking appointments with the doctors remained long — 45 days, up from 36 days the year before, a Massachusetts Medical Society survey found.

"If you are going to insure everyone, you have to make sure that you have doctors to care for those people," Dupee added.

Another struggle for Massachusetts has been its attempts to curb the costs of the law, said Lora Pellegrini, president of the Massachusetts Association of Health Plans. She faulted lawmakers for mandating that insurers cover more procedures and medicine, including hearing aids, oral cancer drugs and an assessment to help pay for the state's childhood vaccine program.

"To ultimately be sustainable, we have to address the costs," she said.

The state has worked to do so. In August, Gov. Deval Patrick signed a bill intended to save Massachusetts up to $200 billion over 15 years by encouraging a system that rewards doctors and hospitals for keeping patients healthy rather than paying piecemeal for every operation or treatment.

Employers must also brace for changes. In Massachusetts, businesses with 11 or more full-time workers were required make a "fair and reasonable" contribution to their workers' health insurance or pay a fee.

At family-owned Needham Electric Supply, five more employees began getting insurance when the law passed, said Vicki Maderia, director of human resources.

The company had considered the workers part-time, but they were deemed full-time under the law. Maderia said the cost was minimal.

"It helped us be a little more marketable because of a lot of the part-time workers were looking for benefits, so it did help us on the recruiting side," she said.

One key to the success of any health care law is to connect with people in their neighborhoods or at home to explain the law and get them enrolled, said Brian Rosman, research director for the advocacy group Health Care for All.

For example, residents need to be made aware of the individual mandate, which requires virtually everyone be insured or pay a tax penalty. Massachusetts was the first state to impose the mandate, and the federal law also includes one.

About 170,000 people in the state said they were uninsured in 2010, but about two-thirds did not report enough in income and were exempt from the tax penalty.

Of the rest, there are plenty of reasons why someone might be penalized rather than have insurance, said Rosman.

Sometimes it might be due to the difficulty of reaching out to Spanish- and Portuguese-speaking populations. In other cases, he said, some people are simply philosophically opposed to being told by the government to get insurance.

The number of people assessed the penalty has fallen steadily since the law was passed, from 67,000 in 2007, the first year the mandate took effect, to 44,000 in 2010.

Gruber said the most challenging part of establishing Massachusetts' exchange was that the state was essentially starting from scratch. There was new software to be developed and critical decisions to make.

"We really were experimenting," he said. "Other states will have, in many ways, an easier time than we did."
___
Associated Press writer Rodrique Ngowi contributed to this report.

Read More at: http://www.lifehealthpro.com/2013/01/24/whatever-happened-in-massachusetts?eNL=5109700e140ba0617100044d&utm_source=HCRW&utm_medium=eNL&utm_campaign=LifeHealthPro_eNLs&_LID=141697675&t=employee-benefits

Personal Physician Shortage Looms, Experts Say


To get much use from health coverage, patients need doctors, witnesses told Congress. (AP photo/Stuart Ramson)
 
To get much use from health coverage, patients need doctors, witnesses told Congress. (AP photo/Stuart Ramson)

One of the weaknesses of current U.S. health reform efforts is that they are counting on the idea that primary care doctors will continue to exist.

Witnesses delivered that message today in Washington at a hearing on the future of primary care that was organized by the Senate Health, Education, Labor and Pensions (HELP) primary health and aging subcommittee.

Dr. Claudia Fegan, chief medical officer at the John H. Stroger Jr. Hospital in Chicago, said she sees hundreds of people line up across the street at a walk-in clinic affiliated with the hospital every day.

Chicago residents "stand in line in the wee hours of the morning, hoping to be one of the 120-200 people who will be seen that day and, even better, hoping to be one of the 12 patients who will be assigned to a primary care physician and given an appointment so they won't have to come back," Fegan said, according to a written version of her remarks posted on the committee website.

The Patient Protection and Affordable Care Act of 2010 (PPACA) "promises to provide insurance coverage to more Americans, but I know there will still be 30 million people who will remain uninsured even after the Affordable Care Act is fully implemented," Fegan said. "So I know the need for the safety net and places like Cook County will remain."

There certainly still will not be enough primary care providers to care for all the patients who will need them, Fegan said.

The huge holes that already exist in the U.S. primary care network led to the current influenza epidemic flooding hospital emergency rooms with patients who should have been seeing primary care doctors, Fegan said.

Dr. Andrew Wilper, a medical school professor in Boise, Idaho, testified that the federal reimbursement formula system now pays primary care physicians about 30 percent to 60 percent less than it pays specialists.

In Massachusetts, a state that already has enacted a health insurance access expansion program, one result is that the coverage access program has led to an 82 percent in the length of time patients must wait to see primary care doctors, Wilper said.

"Without payment reform, it is unlikely that efforts targeting medical students and residents will succeed in bolstering the primary care workforce," Wilper said.

Uwe Reinhardt, a well-known Princeton University economist, said one solution would be for public and private health programs to make it easier for patients to see nurse practitioners for routine primary care needs.

Today, government programs often refuse to cover visits to nurse practitioners, or pay the nurse practitioners much less for the same services, and private insurers are often just as hostile to nurse practitioners, Reinhardt said.

When it comes to the primary care-specialist pay divide, "it can be asked...why private insurers have not led the way to raise the fees they pay primary-care physicians relative to those paid specialists," Reinhardt said. "Many and probably most of them simply have adopted the Medicare relative value scale underlying their fee schedules, although their absolute level of fees may be higher than Medicare fees."

Private insurers say Medicare must lead the way, because private insurers cannot act in unison to change the primary care-specialist pay gap without violating antitrust laws, Reinhardt said.

Dr. Fitzhugh Mullan, a public health professor at George Washington University, said the primary care shortage is likely to get worse because of the way the United States pays and trains doctors.
But public and private payers pay specialists more, and specialists tend to have more prestige, and many young doctors prefer to focus on practicing in specialties that will give them more control over their hours, Mullan said.

Meanwhile, hospitals run the residency programs that train recent medical school graduates, and "not surprisingly, hospitals recruit residents who fulfill the needs of the hospitals," Mullan said. "This tilts residency heavily toward medical and surgical specialties and subspecialties."

PPACA drafters tried to ease the primary care training gap by creating a Teaching Health Center Program to get more new physicians trained in primary care settings.

But the PPACA primary care teaching program is just demonstration program, and the money is set to run out in 2014, Mullan said.

"The absence of Medicare or Medicare-like permanent funding jeopardizes this small but enormously important new model of primary care education," Mullan said.

Article via: http://www.lifehealthpro.com/2013/01/29/personal-physician-shortage-looms-experts-say?eNL=5109700e140ba0617100044d&utm_source=HCRW&utm_medium=eNL&utm_campaign=LifeHealthPro_eNLs&_LID=141697675&t=individual-health


January 29, 2013 • Reprints

Sunday, January 27, 2013

Premiums Continue To SkyRocket!!

Premiums Set To Rise This Year In Run-Up To ObamaCare Tax On Insurance Industry



 flu_michigan_111113.jpgJan. 11, 2013: Flu vaccines are counted at Borgess Health and Fitness Center flu clinic in Michigan. (AP)

 
While the most sweeping provisions of the health care overhaul have not yet gone into effect, plenty of Americans will still be paying higher insurance premiums this year -- as insurance companies try to preemptively cover the cost of a tax increase included in President Obama's Affordable Care Act.
 
That tax doesn't take effect until next year, when other major provisions like the so-called "individual mandate" and insurance subsidies also kick in. But that hasn't stopped insurance companies from charging higher premiums this year to cover the hike, as well as the cost of ObamaCare benefits such as free birth control and preventive care.
 
Premiums for individuals and small businesses are projected to increase due to the tax by roughly 2 percent this year and by as much as 3.7 percent in 2023, according to a widely cited analysis by the insurance industry.
 
Officials will argue about who is to blame for the hike -- insurance companies for sticking customers with the cost, or the government for imposing the industry tax hike in the first place. But the projected increases are the latest sign that Americans, in exchange for expanding and strengthening insurance coverage, will in many cases be paying more.
 
Already, a pair of taxes has hit higher-income households to cover the law. Those making more than $250,000 are seeing a .9 percentage point increase in their Medicare tax, and another 3.8 percentage point hike on investment income.
 
"The goal was to make health care more affordable, but adding a tax on health insurance does the opposite, increasing the cost for families and small businesses," Robert Zirkelbach, spokesman for the group America's Health Insurance Plans, said Tuesday.
 
Zirkelbach and others on the side of insurance companies say younger Americans will be among those facing the largest increases.
 
The looming tax on the insurance industry will cost health-insurance providers $8 billion in 2014, then $14.3 billion in 2018 and a total $100 billion over the next 10 years, according to the congressional Joint Committee on Taxation.
 
Insurance companies say they can start charging the higher premiums now because some polices bought in 2013 extend into 2014. State insurance commissioners say that practice is OK so long as the increases are pro-rated for next year. However, California Insurance Commissioner David Jones told Politico the company Anthem BlueCross is collecting money from customers that it "doesn't have to pay until 2014."
 
While the new law will provide insurance for millions more Americas -- and curtail the insured having to cover the medical bills of the uninsured -- insurance providers are questioning the fairness of the tax.
 
Further, they're raising concern that the individual requirement that people buy health insurance, set to take effect in 2014, doesn't have enough teeth to it. They argue younger Americans might be inclined to pay next year's $95 fine, and even $325 the following year, instead of more expensive insurance.
 
If fact, the Blue Cross and Blue Shield Association has purportedly appealed to the president to add or increase penalties, including a late-enrollment fee.


Read more: http://www.foxnews.com/politics/2013/01/21/premiums-set-to-rise-this-year-in-run-up-to-obamacare-tax-on-insurance-industry/#ixzz2JDjU5Gzp





Saturday, January 26, 2013

DID YOU KNOW??? More than one-third of consumers who buy their own insurance are owed rebates...


Health care reform brings insurance rebates.

 

If you have health insurance, you may be getting some money back this summer.
Consumers and small businesses will receive an estimated $1.3 billion in premium rebates from insurers that last year failed to meet new federal health care reform standards designed to purge excessive administrative costs and profit-taking from America's health plans.

The new standard, known as the "medical loss ratio," or MLR, requires an insurer to spend at least 80 percent of your premium directly on your medical care if you purchased your own policy, or 85 percent if you're insured under an employer's plan. When those marks are missed, the Affordable Care Act -- the "Obamacare" law now upheld by the U.S. Supreme Court -- requires the insurance company to refund the difference. The first of these annual rounds of health care insurance rebates, which cover premiums collected last year, must be issued by Aug. 1.

Many who buy own insurance will get rebate

The latest rebate estimates by the nonpartisan Kaiser Family Foundation are based on an analysis of 2011 premium data that insurers filed with the National Association of Insurance Commissioners.

The Kaiser study projects that nearly one-third (31 percent) of consumers who buy their own insurance will receive rebates, and so will more than a quarter (28 percent) of small businesses that insure their workers. About one-fifth (19 percent) of major employers are expected to get rebates -- $541 million worth.

"In total amounts, the large-group market is expecting the most rebates, but that is because that's the way most people receive private insurance," says Cynthia Cox, a Kaiser fellow and co-author of the study. "If you look at it per person, those who buy insurance on their own can expect some of the highest rebates."

Average rebate would buy a few fill-ups

How much can you expect? The study estimates that enrollees in the individual market will receive rebates of $127, on average. Small businesses will get rebates averaging $76 for each enrolled employee, and big businesses will receive an average of $72 per enrollee. The largest rebates are expected in Texas ($186 million) and Florida ($149 million). Hawaii is the only state where no insurer will be required to issue a rebate.

Kaiser says businesses that receive health care insurance rebates will, in some cases, pass the money on to employees.

Brian Chiglinsky, spokesman for the federal Centers for Medicare & Medicaid Services, says rebates will be issued by check or as a credit toward the next premium.

"In either case, it will be accompanied by a letter that explains what the MLR is, what their rate was and why the company didn't meet it," he says. "Companies that do meet the MLR standard should also send a notice that explains MLR and says, 'We've met this standard, so you're getting fair value for your premium dollar.'"

Insurers are no fans of rebates

While consumers are likely to welcome the rebates, the MLR program is really designed to punish insurers that spend too much on things such as overhead and executive bonuses.

"Yes, consumers should feel great to get some money back," says Chiglinsky. "But they should bear in mind that it's money they should not have been charged in the first place." He adds that the MLR results, which will be posted on Healthcare.gov this fall, should help consumers shop for insurance offering the best value once the new state health exchanges open in 2014.

Health insurers are not thrilled with the health care insurance rebates program, to put it mildly, according to Robert Zirkelbach, spokesman for America's Health Insurance Plans, an industry trade group.

"MLR is the absolute wrong way to get health care costs under control," he says. "Instead of focusing on what the data shows is the real driver of rising health insurance premiums, which is underlying medical costs, it is capping health plan administrative costs, which have been consistent for about the last decade. "

Some played wait-and-see with high court

Deborah Chollet, a senior fellow at Mathematica Policy Research in Washington, D.C., says some rebates may be the result of foot-dragging by insurers in the 26 states that unsuccessfully challenged the health care reform law in the Supreme Court. She says some carriers in those states were in denial about the Affordable Care Act and held off on recalculating their premiums.

Chollet, who is helping states set up the new health exchanges, says the MLR program and its health care insurance rebates were designed to put the onus on insurers to find other profit streams, ideally by renegotiating with service providers to lower health care costs.

"I think what HHS (the Department of Health and Human Services) is saying is: 'This shouldn't be the consumer's problem, it should be the insurance company's problem,'" she says. "Their much-lauded nimbleness needs to come into play now."


Read more: http://www.bankrate.com/finance/insurance/health-care-reform-brings-insurance-rebates.aspx#ixzz2J6wleR4P
By Jay MacDonald • Bankrate.com

Thursday, January 24, 2013

How is individual health insurance different from group coverage?

How is individual health insurance different from group coverage?


Individual health insurance and group coverage have several distinct differences. If you’re making the switch from one type of health insurance to the other, it’s important to understand what changes to expect.

Facts About Group Coverage

Group coverage is typically available through your employer. Depending on your employer’s budget, you may pay some of your premiums or your employer may cover them entirely. In almost every circumstance, however, the employer will pay at least a portion of the cost.

With group coverage, a human resource representative or other executive does the health insurance shopping for you. Once this person picks an insurance carrier, you choose a health plan from the options provided. In a large company, you may have several choices. In a smaller company, you may have one or two. If you want a particular type of coverage that’s not an option with your employer, you must shop for it and purchase it completely on your own.

It’s unusual that a person with group coverage will opt out of an employer-sponsored plan for an individual health plan. This is because an employer typically pays for a portion or all of the health care premium.

Facts About Individual Health Insurance

Any eligible individual can apply for individual health insurance. The premium and application approval is based on a process called medical underwriting. During this process, the health insurance application is sent to an underwriter. The underwriter looks at the application and medical records to find out the health status of the applicant. Premium amounts are then calculated from the person’s health status as well as the person’s coverage and deductible choices.

With individual health insurance plans, you’re in charge of shopping for health insurance. You choose the health plan you want from the company you choose. This may mean more coverage options for you and your family.

The Main Difference

The primary distinction between group coverage and individual health insurance is selection. People who receive health insurance through an employer-sponsored plan pick their plan from a short list of options. On the other hand, people familiar with purchasing health insurance on their own are used to choosing a health plan from a wide range of companies and policies.

For those with group coverage, the thought of shopping for a plan from a variety of insurers with multiple policy choices can be overwhelming. However, individual health insurance plans can offer more flexibility. For some, individual health insurance may be the only option. Plus, you can select individual health insurance optional benefits to meet your needs,1 and most plans are guaranteed renewable once you are accepted.

To better understand these differences, check out the following chart.




Group Coverage

Individual Health Insurance

Available through a person’s employerAvailable to any eligible individual who applies
Employer usually pays for a portion of the insurance premiumApplications go through medical underwriting to find out the health status of the person applying
Choose a plan from what a company offersPick the plan you want from the insurance company you choose

Which is Better?

Is individual health insurance or group coverage the better option? The truth is, it depends. For many with employer-sponsored health insurance, group coverage is the best fit. For others, the flexibility of individual health insurance is the best option.

If you’re shopping for health insurance, contact us at (901) 300-0091 and speak with a licensed Health Insurance Advisor. Your Advisor will answer your questions and recommend a health plan based on your needs and budget. Your Advisor would also offer you a free plan anaylsis of your existing plan.

Individual Health Insurance - Group Coverage...What's the Difference???

How is individual health insurance different from group coverage?


Individual health insurance and group coverage have several distinct differences. If you’re making the switch from one type of health insurance to the other, it’s important to understand what changes to expect.

Facts About Group Coverage

Group coverage is typically available through your employer. Depending on your employer’s budget, you may pay some of your premiums or your employer may cover them entirely. In almost every circumstance, however, the employer will pay at least a portion of the cost.

With group coverage, a human resource representative or other executive does the health insurance shopping for you. Once this person picks an insurance carrier, you choose a health plan from the options provided. In a large company, you may have several choices. In a smaller company, you may have one or two. If you want a particular type of coverage that’s not an option with your employer, you must shop for it and purchase it completely on your own.

It’s unusual that a person with group coverage will opt out of an employer-sponsored plan for an individual health plan. This is because an employer typically pays for a portion or all of the health care premium.

Facts About Individual Health Insurance

Any eligible individual can apply for individual health insurance. The premium and application approval is based on a process called medical underwriting. During this process, the health insurance application is sent to an underwriter. The underwriter looks at the application and medical records to find out the health status of the applicant. Premium amounts are then calculated from the person’s health status as well as the person’s coverage and deductible choices.

With individual health insurance plans, you’re in charge of shopping for health insurance. You choose the health plan you want from the company you choose. This may mean more coverage options for you and your family.

The Main Difference

The primary distinction between group coverage and individual health insurance is selection. People who receive health insurance through an employer-sponsored plan pick their plan from a short list of options. On the other hand, people familiar with purchasing health insurance on their own are used to choosing a health plan from a wide range of companies and policies.

For those with group coverage, the thought of shopping for a plan from a variety of insurers with multiple policy choices can be overwhelming. However, individual health insurance plans can offer more flexibility. For some, individual health insurance may be the only option. Plus, you can select individual health insurance optional benefits to meet your needs,1 and most plans are guaranteed renewable once you are accepted.

To better understand these differences, check out the following chart.



Group Coverage

Individual Health Insurance

Available through a person’s employerAvailable to any eligible individual who applies
Employer usually pays for a portion of the insurance premiumApplications go through medical underwriting to find out the health status of the person applying
Choose a plan from what a company offersPick the plan you want from the insurance company you choose

Which is Better?

Is individual health insurance or group coverage the better option? The truth is, it depends. For many with employer-sponsored health insurance, group coverage is the best fit. For others, the flexibility of individual health insurance is the best option.

If you’re shopping for health insurance, contact us at (901) 300-0091 and speak with a licensed Health Insurance Advisor. Your Advisor will answer your questions and recommend a health plan based on your needs and budget. Your Advisor would also offer you a free plan anaylsis of your existing plan.

TAX SEASON TIP!! Top 7 Tax Deductions for the Self-Employed



Top-7-tax-deductions-for-the-self-employed-35b0f31023
These days, more professionals are shifting from the role of full-time employee to freelancer, a movement that some refer to as a gig economy. If you have freelance income to report by U.S. tax day (Apr. 17), your taxes will be more involved than your colleagues', who only have W-2 forms.
Whether this is your first year self-employed, or you’re an experienced entrepreneur, freelancing comes with a whole new set of tax issues. But you can still find plenty of opportunities to cut your tax bill.

As a sole proprietor, you can deduct a lot of your expenses, such as the cost of a computer, office supplies and work-related travel. You may even be able to deduct your health insurance premiums and part of your rent or mortgage.

Read on to learn more about some of the key deductions available to freelancers, self-employed taxpayers with small or startup businesses, or other sole proprietors.

1. Health Insurance

As part of the Small Business Jobs Act, self-employed taxpayers, including sole proprietors reporting income on Schedule C, may be able to deduct the cost of health insurance for themselves and their families. However, the deduction isn’t available if you were able to participate in an employer-subsidized health plan (either by your employer or spouse’s employer). And this deduction can’t exceed the earned income you collect from your business.

If applicable, take this deduction on Form 1040 Line 29. You can find a Self-Employed Health Insurance Deduction worksheet in the instructions for Form 1040 (scroll down to line 29).

2. Home Office

If you work from home, you may be entitled to deduct a portion of your housing costs. To qualify, you must use part of your home, “exclusively and regularly as your principal place of business,” or “exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business.”

Home office deductions are based on the percentage of your home that is used for business purposes. If you use a spare room (180 sq. ft.) as an office and your home is 1,900 sq. ft., then you can write off 9.5% of certain home expenses, including rent or mortgage payments, insurance (homeowners or renters) and utilities. Direct costs relating to the space, such as repairs or paint, can also be deducted.
Although this deduction is commonly considered a red flag for an IRS audit, if you play by the IRS’s rules and qualify, don’t be afraid to take this legitimate deduction. For a full explanation of the home office deduction, including eligibility and record-keeping requirements, check out IRS Publication 587.

3. Monthly Utilities

If you are taking the home office deduction, you may also deduct a percentage of your heating and electricity bills. You may be able to deduct a portion of your home Internet bill, if you can prove it’s work related.

Of course, if you rent or have purchased a dedicated, out-of-home office, utilities for this space are 100% deductible. Additionally, phones used for business are legitimate self-employed deductions. This includes a second line in your home or a cellphone for business use.

4. Office Supplies

 Most members of the self-employed arena don't know that they can deduct the cost of equipment you buy for your business, such as filing cabinets, desk, printers and office supplies like pens and envelopes.

What about your laptop and tablet? If they are used for your freelance or small business, they can be deducted. However, if you only have one laptop and use it partly for business, and partly for personal purposes, you can only deduct the percentage of its business use (e.g. 60% for business). Refer to Publication 535 for more details on business expenses.

5. Autos and Commuting

In general, commuting is considered personal use and is not deductible. If you’re self-employed and have an office outside of the home, you cannot deduct your commute to the office. However, you can deduct travel to meet a client, purchase business supplies or conduct research. Travel expenses include any public transit, parking and tolls.

If you’re driving to meet a customer or conducting business travel, you can deduct a standard mileage rate for this travel (Note: you could also opt to calculate your auto deductions, based on actual expenses; refer to IRS Publication 463 for more details.)

For the standard mileage rate, you’ll need to use two different rates for your 2011 calculations. For Jan. 1 through June 30, 2011, the standard rate is $0.51 per mile; for July 1 through Dec. 31, 2011, the rate is $0.555 cents per mile. Again, refer to Pub 463 for all the details.

6. Travel

If your trip was primarily for business purposes, for example, to meet with a potential client or attend a conference, you can deduct certain expenses. You should be able to fully deduct any transportation costs (plane tickets, taxis, airport parking, etc.). You can deduct hotel costs for any business days; if you combine work and play, you can’t deduct lodging and meals for your personal days (although transportation is still fully deductible).

Business owners and self-employed taxpayers can write off 50% of business meals, as well as entertainment. If you take a client to a basketball game, you can deduct 50% of the ticket costs, as long as business was discussed before or after the event. If you’re away from home overnight, you can claim a daily meal allowance of $46 per day in small localities. (Most major cities will qualify for a higher standard meal allowance; per diem rates are listed in Publication 1542.)
While it’s always advisable to hold on to any receipts, you particularly need to keep track of receipts for your meal, lodging and entertainment expenses. Publication 463 advises you which expenses can be deducted.

7. Retirement Plans

Self-employed business owners can stash money away in tax-deferred retirement plans. For example, in 2011 you can contribute up to $49,000 into a SEP IRA or solo 401(k) plan. To qualify for your 2011 tax return, you needed to have set up a plan by Dec. 31, 2011. However, once the plan is established, you’re able to deduct contributions up to your tax-return filing date (Apr. 17).

Smart Approach

As with any tax strategy, the best way to avoid trouble is to be honest about your income, deduct only the expenses you’re entitled to, and keep all receipts and supporting documentation to back up your deductions. And of course, consulting with a qualified tax professional is always wise to make sure you’re following the rules and enjoying all the deductions available to you.

Moving Forward

If you’re self-employed, operating as a sole proprietor, tax time can be yet another reminder that you haven’t addressed your business structure yet.

Talk with a CPA or tax advisor to see whether an S Corporation (which can help business owners reduce their self-employment or Social Security/Medicare taxes) is right for you. The LLC and S Corp can protect your personal assets on the off chance your business is sued or can’t pay its debts. While it’s too late to impact your 2011 taxes, the end of tax time is a perfect time to reassess what’s next for your business.

By: ellie Akalp
Images courtesy of iStockphoto, bluestocking, Flickr, 401K via http://mashable.com/2012/03/15/self-employed-tax-deductions/

Health Care Reform: YOUR MONEY Financial Impact 2013 and Beyond


As the third year of the Patient Protection and Affordable Care Act (PPACA) approaches, employers need to be aware of additional fees that will be assessed on insurers and plan administrators of self-insured plans beginning in 2013. In addition, reporting health care costs to the government begins.
The new fees will increase the cost of providing group health plans for employees. They include:
  • Fees to fund research on patient-centered outcomes
  • Transitional reinsurance fees
  • Pay or play penalties
  • Cadillac tax
Fees to fund research on patient-centered outcomes
Health care reform created the Patient-Centered Outcomes Research Institute (PCORI), which is charged with promoting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs. PCORI is to be funded in part by fees assessed on health insurers and sponsors of self-insured group health plans. This fee is commonly referred to as the "comparative effectiveness fee" or "PCORI fee." The PCORI fee will be assessed at $1.00 times the average number of covered lives (employees and dependents) for the first plan or policy year ending on or after October 1, 2012. Employer plan sponsors must choose a method for calculating the average number of covered lives for their required annual fees by December 31, 2012, for calendar year plans.
Transitional reinsurance fees
The transitional reinsurance program will require health insurance issuers, as well as certain plan administrators on behalf of self-insured group health plans, to make contributions to a transitional reinsurance program for the three-year period beginning January 1, 2014. This fee is likely to result in additional costs for employer plan sponsors and - depending on whether the plan at issue is self-administered - certain additional reporting obligations.
Pay or play penalties
In 2014, large employers with fifty or more full-time equivalent employees could be subject to two potential penalties: the No Coverage Penalty and the Unaffordable Coverage Penalty. The No Insurance Penalty subjects certain employers to a $2,000 per full-time employee penalty (excluding the first thirty full-time employees) under specific conditions. The Unaffordable Coverage Penalty applies if an employer offers its full-time employees the opportunity to enroll in coverage under an employer plan that either is unaffordable (relative to an employee's household income) or does not provide minimum value. This penalty is $3,000 for every full-time employee who receives a subsidy for coverage in a state exchange.
In some cases, the total cost of these penalties may be less than the total cost of providing coverage. CliftonLarsonAllen's Health Insurance and Penalty Calculator provides information about the impact of reform on individual companies.
Cadillac tax
Starting in 2018, insurers of employer-sponsored plans or companies that self-insure their own plans will be subject to an excise tax if their premiums are in excess of $10,200 for individual coverage and $27,500 for family coverage. Roughly 60 percent of large employers believe their plans would trigger the tax unless they take action to avoid it, according to a 2011 survey by Mercer, a human resources consulting firm. Although the tax is to be imposed on insurers, the effects are likely to trickle down to consumers.
Many health care reform provisions will impact the cost to provide health care coverage for employees. Employers should be aware of the additional fees and reporting requirements and work with their benefits consultants to determine the financial impact of health care on their businesses. Plan sponsors should have already verified that they have the systems in place to determine and report the aggregate cost of applicable employer-sponsor ed coverage for 2012 on employees' Forms W-2.
 
To fully understand this impact more, please do not hesistate to contact an expert advisor of M.D. Bean $ Co. Insurance Agency.
 
Posted by Terri Eyden on 05054, By Anita F. Baker, CPA, CEBS via http://www.accountingweb.com/article/health-care-reform-financial-impact-2013-and-beyond/220148

Wednesday, January 23, 2013

10 Health Care Reforms On Track For 2013 Since Obama's Re-election... MUST READ!

 

US-VOTE-2012-ELECTION-OBAMA
US President Barack Obama arriveS on stage after winning the 2012 US presidential election November 7, 2012 in Chicago, Illinois. Obama swept to re-election, forging history again by defying the dragging economic recovery and high unemployment which haunted his first term to beat Republican Mitt Romney. AFP PHOTO / Saul LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

Medicare
 
1. Federal subsidies begin phasing in for brand-name prescriptions filled in the Medicare Part D coverage gap to reduce out of pocket costs for beneficiaries. Coinsurance will drop from the 2010 level of 100 percent of costs to co-payments of 25 percent in 2020.

Additionally, a 50 percent discount automatically will be applied at the pharmacy counter on Part D-covered prescription drugs while beneficiaries are in the doughnut hole.
Effective date: Jan. 1, 2013
2. The Medicare Part A (hospital insurance) tax rate will increase from 1.45 percent to 2.35 percent on earnings over $200,000 for single taxpayers and $250,000 for married couples filing jointly. When it comes to higher-income earners, there will also be a new 3.8 percent assessment on unearned income, such as investment returns.
Effective date: Jan. 1, 2013
3. Disproportionate share hospital (DSH) payments will fall initially by 75 percent. These are annual allotments states pass on to hospitals that serve disproportionate numbers of low-income patients. Medicaid DSH also will be reduced.

Subsequently, payments will increase based on the percent of uninsured persons hospitals serve and the amount of uncompensated care that is provided.
Effective date: Oct. 1, 2013
 
Medicaid
 
4. Federal matching payments for preventative services will rise by 1 percentage point for states that offer Medicaid coverage with no patient cost sharing for services and immunizations they receive, as recommended by the U.S. Preventive Services Task Force.
Effective date: Jan. 1, 2013
Children’s Health Insurance Program
 
5. CHIP funding is authorized through 2013 but will be extended until 2015.
Effective date: Jan. 1, 2013

 
Taxes
 
6. The threshold for the itemized deduction for non-reimbursed medical expenses goes up from 7.5 percent of adjusted gross income (AGI) to 10 percent of AGI. That jump is waived, however, for taxpayers age 65 and older in tax years 2013 to 2016.Effective date: Jan. 1, 2013
7. A 2.3 percent excise tax will be imposed on medical device manufacturers.
Effective date: Jan. 1, 2013
 
Flexible Spending Accounts
 
8. Contributions to health care flexible spending accounts to cover medical expenses will be capped at $2,500 per year, but could go up based on cost-of-living adjustments. Currently there is no legal limit, but there is a use-it-or-lose-it rule for contributed funds.
Effective date: Jan. 1, 2013
Retiree prescription drug subsidies
 
9. The tax deduction for employers who receive Medicare Part D drug subsidies for retirees will be eliminated. Some employers have been shifting more costs to retirees despite getting government dollars to offset their costs.
Effective date: Jan. 1, 2013
Penalties
 
10. Penalties will be imposed on employers who do not withhold sufficient Medicare payroll taxes for employees.
Effective Date: Jan. 1, 2013

By Angela Carter via http://www.insidebayarea.com/politics-national/2012/11/10-health-care-reforms-on-track-for-2013-after-obama-election-win/
 

Saturday, January 19, 2013

NY Times Reports - Behind Double-Digit Premium Increases

National health care spending has been rising at an unusually low rate for three consecutive years. Yet health insurance companies in some states with lax regulations are requesting and winning double-digit premium increases for some customers. That jarring discrepancy suggests that both the federal government and the states need more power to reject premium increases that can’t be justified.

The Affordable Care Act requires that proposed premium increases of 10 percent or more for small businesses and for individuals who lack employer coverage must be reviewed by state or federal regulators to determine if they are reasonable. Most states can reject increases found to be unjustifiable. But some states cannot; they simply rely on public disclosure to deter insurers from getting too greedy.
      
For example, in California, which lacks the power to deny excessive rate increases, three major insurers are proposing premium rate increases for 2013 of as much as 20 percent, 22 percent, and 26 percent for some policyholders. In New York, however, the rate increases for 2013 are far lower than what insurers requested because state law allows state regulators to roll back unjustified increases. For individual policies, the insurers sought an average 9.5 percent increase but were granted only 4.5 percent. For small groups, insurers asked for 15.8 percent but were approved for 9.6 percent.
      
For now, the slow rate of growth in national health spending — a modest 3.9 percent annually in 2009, 2010, and 2011, the lowest annual increases in the 52 years the government has been collecting such data — is good news. But experts don’t know whether this is a temporary, recession-related slowdown or a permanent downward trend. Insurers often claim that high premiums for individual policies are driven by rising medical costs in some states and younger and healthier people forgoing insurance in the slow economy, leaving only sick and costly patients signed up for insurance. That rationale should disappear in 2014 when virtually all Americans will be required to buy insurance or pay a penalty.

Fox Business Reports---Countdown To The Health-Care Reform

Countdown to Health-Care Reform

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If you like your 401(k) retirement savings account, you're going to love what healthcare reform does to your employer-provided health care plan.

In a post-Obamacare future, expect more employers to adopt defined contribution healthcare plans. Instead of providing coverage, they will throw a set amount of cash at workers and have them buy their own coverage on private employer-sponsored exchanges.

That future isn't here yet - right now only about 5% of companies are using this approach, according to Alan Cohen, chief strategy officer of Liazon, a firm that sets up private exchanges for companies. But it is fast approaching. Cohen expects that in 5 years, half of all companies will be offering these private-choice dollar benefit plans.

Major elements of the Patient Protection and Affordable Care Act are approaching even faster than that. On Oct. 1 of this year, the first massive open-enrollment health insurance season in history starts, when the state and federal exchanges open for business.

Workers at big companies probably will face fewer immediate changes than everyone else. But those who buy their own insurance, go without coverage or work for small employers will see dramatic changes in the coverage available to them. Here's an early take on what to expect and what to do about it now.

-- This tax season matters. Take a look at your 2012 tax return to see if you're going to qualify for subsidies. People who earn 400% of the federal poverty level or less will have their premium costs capped and excess premium covered by tax credits.

Those figures do get adjusted annually, but using 2012 numbers, that means that even families earning four times the poverty level - roughly $44,680 for singles and $92,200 for that family of four - would see their health insurance costs capped.

At that income level, premiums couldn't cost more than 9.5% of family income. Lower levels of income would qualify for lower caps and higher subsidies.

People with incomes up to 250% of the poverty line ($22,340 for singles and $46,100 for families of four, based on 2012 figures) also will qualify for lower deductibles and copayments subsidized by the federal government.

The income used to determine this is modified adjusted gross income, calculated basically by adding tax-exempt interest income and tax-free Social Security benefits to adjusted gross income.

So, if your 2013 tax return puts you on the cusp, check again to make sure there's not a retirement contribution you could make or another move that would bring your income below those key levels.
And married couples who have been filing separately should give very strong consideration to filing jointly, suggests Cheryl Fish-Parcham, deputy director of Families USA, a consumer advocacy organization. Complex regulations will make it difficult or impossible for those married-separate filers to claim the subsidy credits.

-- Get educated. Fish-Parcham and her colleague, Claire McAndrew, a senior policy analyst, say they most worry about newcomers to the health insurance buffet getting scammed or misled once they are both required to buy health insurance and responsible for choosing their own. Beginning on Oct. 1 this year, there will be public exchanges featuring health insurance plans that meet minimum federal guidelines. That means they won't exclude people with pre-existing conditions and they won't have lifetime spending limits, for example.

There will also be web-based exchanges run by private companies, like the ones run now by companies like ehealthinsurance.com and Netquote.com. And private exchanges available through employers from companies like Liazon, which runs its own Bright Choices exchange. "We're a little concerned about the confusion that might result," McAndrew said.

All of the exchanges would be required to carry policies that meet new minimum federal guidelines and they would be required to meet federal pricing rules too. But the private exchanges might offer more separate coverage, such as vision and dental care. And the state exchanges will also screen for other federal and state assistance programs.

For now, it's good to look at your family and analyze your use of the healthcare system. Do you have lots of well-child visits? Chronic conditions? Do you want to pay higher premiums for first-dollar coverage or less for higher-deductible plans? If you know early what your health spending patterns are, it will be easier for you to shop for health insurance.

-- Save money now. If you currently have a high deductible plan with a health savings account, max out your contribution for 2012 and 2013. It's not clear that these programs will all survive in their current form going forward; you may find yourself with other choices that don't allow you to use an HSA, and that money could come in handy later.

Furthermore, many people may see their health insurance costs rise in 2014, warn experts. Costs could rise as insurers stretch to meet higher coverage standards. And with new rules limiting the markups that could be charged to older subscribers, some young people could find their insurance costs rising, said Sam Gibbs, president of eHealth Inc's Government Systems division.

As more employees are nudged to cheaper high-deductible plans in the future, they will want to learn more about the healthcare they are buying, suggests Ceci Connolly, managing director of the PwC Health Research Institute. She said that after being switched to a high-deductible plan herself, she started questioning her healthcare costs more carefully.

"When the first $3,000 to $5,000 is out of your own pocketbook, you might think differently about the different tests and screenings; the things that get ordered up quickly."
A first step? Check at the government's websiteto see data on doctors and hospitals. Begin to think about finding better doctors and hospitals to achieve better health. More and more of that information will be made public as we move into the future of healthcare.


Read more: http://www.foxbusiness.com/news/2013/01/16/stern-advice-countdown-to-healthcare-reform/#ixzz2IUbUiLuY

Thursday, January 17, 2013

4 Things That Will Cost More This Year---Of Course Health Insurance Is One Of Them

The economy may be on a path to recovery, but that doesn’t necessarily mean good news for consumers’ wallets.
Household incomes are expected to remain steady this year, but experts expect the prices of some consumer staples to increase due to supply and demand or inflation issues and consumers can expect to pay more for these four items in 2013.

Gas

According to GasBuddy.com’s 2013 forecast, drivers in major cities including Atlanta, Boston, Dallas and Los Angeles should expect prices to creep above $4.00 a gallon during the year. The pain at the pump could be worse for West Coast residents with expectations of the price to surpass $4.50 a gallon in Los Angeles and San Francisco at some point.
Drivers should expect volatility in gas prices all year, especially from April 1 through May 15 when refineries typically face problems when starting to produce cleaner-burning summer gas. Prices tend to also fluctuate August through mid September for hurricane season and October 15 through November 15 when winter gas is coming into retailers.
“Even with increasing energy production in the U.S., declining fuel consumption and improving fuel efficiency, Americans may still face rising gasoline prices in 2013... and that appears to be closely tied to the nation's $16 trillion debt,” said Gregg Laskoski, a senior petroleum analyst at GasBuddy in prepared remarks.

Food

The severe 2012 Midwest drought didn’t have an immediate large-scale impact on food prices, but consumers won’t be so lucky in 2013.
According to the United States Department of Agriculture, the drought impacted prices for corn and soybeans and other field crops, which will increase retail food prices and finally trickle down to the consumer level this year.
What’s more, the USDA says inflation will remain strong for all animal- based food products because of higher prices of feed and that inflation should be above the historical average for cereals, bakery products and other foods.

Airfare and Lodging

Traveling will cost a little more this year as airfare and lodging prices are expected to creep up.
According to the American Express Global Business Travel Forecast, business class air fares in the U.S. are expected to increase 1% to 3% while fares for short haul economy class tickets will rise 2% to 4%. Travelers staying in mid-range hotels will see an increase of 2% to 7% in rates while those looking for high-end hotels will pay 4% to 9% more.
But there is some good news for U.S.-based travelers in 2013: the survey also says increased competition will result in lower prices for car rentals. International travelers, especially those visiting Europe, Middle East and Africa may actually enjoy decreases in airfare, largely due to the euro zone crisis. According to the forecast, countries hit hard by the crisis like Spain will see a decline as much as 8% in long haul fares. As for international hotel fares, only conservative increases are predicted for 2013.

Health Plan Premiums

Last year was the lowest health-care premium rate increase in six years, according to Aon Hewitt, but that won’t be the case this year.
In 2013 the average health-care premium is projected to increase 6.3%, and according to Aon Hewitt, the average health-plan premium cost per employee is projected to increase to $11,188, with the average contribution by the employee coming in at $2,385.
Average out-of-pocket costs including co-pays, co-insurance and deductibles are projected to be $2,429 in 2013. In 2008, employees’ contributions came in at $3,199 which is expected to increase to $4,814 based on Aon Hewitt’s analysis.
Aon Hewitt also forecasts health maintenance organization or HMO plans to experience a 7% increase in premiums while preferred provider organization or PPO plans will see a 6.1% increase as will point-of service or POS plans.


Read more: http://www.foxbusiness.com/personal-finance/2013/01/10/four-things-that-will-cost-more-this-year/#ixzz2IFwDAIQu

5 Positive Things YOU Must Know About OBAMACARE

(1) Most Americans don’t know what it means to them.

Americans reacted to the passage of the Affordable Care Act with continued ambivalence, with opinions divided roughly down the middle in incessant polls asking whether the new law was the right thing to do. During many months of partisan battles and legislative maneuvers about the new legislation, groundless warnings about “death panels” and draconian cuts to Medicare unnerved many people—and the entire mess was confusing. Not only right after passage, but in subsequent months, most Americans have told pollsters they are not sure what is in the legislation. People don’t understand what reform actually means for them—or what it portends for the future of our economy. With the Supreme Court decision looming until Thursday’s announcement, most Americans have yet to fully absorb the impact of the Affordable Care Act.

(2) Most people benefit from the Affordable Care Act.

The winners of health reform are the vast majority of Americans. When the provisions are effectively implemented, seniors, the sick, and middle Americans — including many families in the upper middle class — will receive wider and easier access to health insurance benefits protected from trickery by the insurance industry. The number of working-age Americans and their children who have to go without basic health insurance will decline by a remarkable 32 million people. This comes from the nonpartisan CBO, which projects that coverage will be extended to 94% of all Americans and legal immigrant residents (up from 83% today). About a third of the remaining uninsured will be undocumented or illegal immigrants, who are not eligible for coverage under the reform law.

(3) The affluent will pay more but will ultimately benefit.

The newly reformed U.S. health care system provides, on balance, a good deal for the vast majority of Americans. At the very top of the economic ladder, though, the payoff for families making more than $250,000 a year is mixed. They will share in general improvements in insurance, and, of course, many wealthier Americans place a high value on a better health care system for all their neighbors, as well as for themselves. They want their children to grow up in a healthier America, where teachers and policemen and clerks can enjoy health security, too. Still, the rich are asked to pay a bit more to make this better system possible. On the plus side of the ledger for privileged folks, richer families will benefit along with all other Americans from new restrictions on insurance companies that prohibit caps on coverage and egregious abuses such as finding a pretext to drop beneficiaries when they get sick.

(4) The Affordable Care Act will help the economy.

Health reform will impact the economy in ways that help everyday Americans, while producing an overall boost to job growth. People will be able to build careers and found businesses secure in the knowledge that they can get affordable insurance for their families. Employers will have to navigate new rules—and larger employers may pay new fees. But all employers will benefit from more fluid job markets, healthier workers, and reduced costs—especially for employers who have already been providing health care coverage for their employees. As for businesses in the U.S. economy’s vast health care sector, they are going to win, on balance, enjoying more customers and opportunities for growth and profits. “Wall Street Welcomes New Health Prescription,” proclaimed a banner headline in the business section of a leading metropolitan newspaper right after Congress voted on Affordable Care. Traders in health industry stocks know how to penetrate the partisan and ideological fog to see the economic bottom line.

Lest we think that only Wall Street will win, so will the Main Street economy. Without comprehensive health reform, perhaps a quarter of U.S. workers have been locked into their jobs—afraid to pursue new openings out of concern to hold on to health benefits, or choosing a less than optimal job because it has health benefits and an otherwise more attractive job does not. “Job lock” is certainly bad for Americans trying to get ahead. And it is bad for the whole economy, too, because a mobile workforce is more dynamic, efficient, and entrepreneurial.

(5) We can afford to provide most Americans with health care through tax revenue and cost controls in the Affordable Care Act.

According to the design of Affordable Care, the mammoth bill is to be paid by the affluent, well-to-do businesses, and established medical providers. Just over half the bill for health reform is to be paid by taxes and fees that fall on the wealthiest Americans and on businesses (including health care giants and employers that have been free-riders in the past). The remainder of the revenue to defray costs in health reform comes from trimming what the federal government and nation were previously slated to pay over many years to health care industries and providers. Significantly trimmed subsidies to private insurance companies involved in Medicare are a substantial source of savings. “Bending the curve” is the term for this—and it reflects the fact that even if only slight reductions can be made now in the rate of price increases charged by physicians, hospitals, and health care companies of all sorts, such slight reductions can nevertheless add up to big savings over time. The authoritative and nonpartisan CBO projects that the law’s combination of increased revenue from taxes on the affluent, plus cost restraints, will more than cover the price tag for health reform. Better, the CBO projects that future federal expenditures on health care will come down from previously assumed levels enough to reduce the federal government budget deficit by about $140 billion during the first ten years of the new program. CBO projects further improvement in the bottom line for deficit reduction during the second decade of Affordable Care. In short, Affordable Care as enacted is a deficit-reducer, not a budget buster.

Tuesday, January 15, 2013

HARVARD STUDIES: Can cost-effective health care = better health care?





Cost-effectiveness research pinpoints best values for limited health care dollars—and the results may surprise you.

An interview with Harvard School of Public Health’s Milton Weinstein offers some revealing insights into how the U.S. health care system could save money by focusing on the cost per year of healthy life that each medical intervention provides. Not all new technology is too costly, he says—nor is every prevention strategy a money saver. 
 
Weinstein, an expert on cost-effectiveness in medicine, is the Henry J. Kaiser Professor of Health Policy and Management at the Harvard School of Public Health (HSPH) and professor of medicine at Harvard Medical School. He spoke with Review guest editor Madeline Drexler.

Annual Pap Smears or Dialysis?

Q: Why did so many people equate cost containment in health care, and assessing the costs and benefits of medical technology, with “death panels”?

A: Because we don’t like to have government—we don’t like to have anybody—make decisions for us. We don’t mind using markets to ration things. If the price of a bottle of wine is too high, then we’ll buy a different bottle of wine. But if a big sign says the U.S. Department of Agriculture has determined that you can’t have prime rib because it’s too expensive, people don’t like it.

Q: How can studies by you and others in cost-effectiveness research help answer the question of how we might pay for universal health care coverage?

A: Cost-effectiveness looks at technologies and drugs and treatments through an economic lens. How much do they cost? What do they cost compared to alternatives? And not only what do they cost, but is it worth the cost?

For example, we developed a concept called the quality-adjusted life year, or QALY. It reflects how many years of high-quality life a patient gains with a particular intervention. Another number that we use to measure value is the cost-effectiveness ratio. Basically, it tells us the “price” of buying more healthy years with a new treatment compared with the standard treatment, and whether it’s a good value.

Q: On that scale, what dollar amount is considered a good value—or cost-effective?

A: The World Health Organization [WHO] has a rule of thumb: Three times per-person income per quality-adjusted life year gained is a cost-effective intervention. In this country, per-person income is about $40,000, so an intervention that costs less than $120,000 per quality-adjusted life year would be considered cost-effective according to the WHO rule. David Cutler, the Harvard economist, has suggested $100,000 as a reasonable value.

Here are some examples. If a doctor prescribes a beta-blocker for a high-risk patient after a heart attack, it costs about $5,000 to buy that person one quality-adjusted life year. If a doctor gives a patient with HIV combination antiretroviral therapy, it costs $20,000 to buy one quality-adjusted life year. Dialysis for end-stage kidney failure costs $50,000 to $60,000 per quality-adjusted life year, which is still a good value in this country.

Q: Are today’s new, expensive treatments usually bad values?

A: Not necessarily. Some expensive breakthroughs not only bring better health outcomes, but are well worth the money. One surprising example is the implantable cardioverter defibrillator, which uses electrical shocks to restore normal heart rhythm. Its cost-effectiveness ratio compares favorably to dialysis for end-stage renal disease—which we accept as being worth the money.

Another example is a new class of drugs for breast cancer, called aromatase inhibitors. A colleague of mine was at a clinical meeting where a well-known cancer specialist said these drugs will never catch on, because they’re too expensive—costing more than twice as much as the standard treatment. Well, it turns out that the cost-effectiveness ratio was on the order of $20,000 per quality-adjusted life year. It’s an expensive drug, but the benefits are dramatic, mostly in longevity.

Q: What are examples of routine interventions that are poor investments?

A: The annual Pap smear. The cost-effectiveness of screening every year compared to screening every two years is almost a million dollars per quality-adjusted life year. It’s not because it costs a million dollars to do a Pap smear every year. It’s because the gain in per-person life expectancy is on the order of hours to days. By doing a Pap smear every year on every woman, you only catch a few treatable cervical lesions that you would have missed if you did it every other year, but the extra cost of doing this for every woman is much higher. That’s not to say it’s not worth doing Pap smears.

Doing a Pap smear once every four years is extremely cost-effective. Doing it every three years instead of every four is still cost-effective. Every two years instead of every three years starts to get less cost-effective than the implantable cardioverter defibrillators I was talking about. And screening every year instead of every two costs about $800,000 per life year gained compared to every two years.

That’s why the standard of care is gradually moving toward less frequent screening. If you get three consecutive normal Pap smears, it’s OK to start doing them less often. If vaccination against the virus that causes cervical cancer—human papillomavirus—catches on, then guidelines may well shift toward even less frequent screening.

Q: How much money could be saved if we thoroughly analyzed the cost-effectiveness of medical care?

A: There are wide variations in how often doctors order tests, prescribe medicines, do surgeries—not just in different parts of the country, but in hospitals that are right next to each other. One place may do many, many times more procedures of a particular kind than the place next door.

And if you look across regions of the country or across hospitals or states, you often see negative relationships between expenditures and outcomes: areas or states or hospitals that spend more do worse by their patients.

One interpretation is that if we could make the high-spending/poor-performance hospitals or regions or service areas more like the lower-spending/better-outcome ones, we could save money and improve health at the same time. Some people take that to mean there’s waste in the system. But the evidence says that we already may have cut most of the waste.

Q: So what’s a better explanation for these gaps in spending and performance?

A: The low-cost areas are doing things that the high-cost areas aren’t. In other words, the low-cost areas are using more cost-effective services: counseling to quit cigarette smoking, colonoscopies, giving beta-blockers to patients after heart attacks. These are well-established interventions that are effective and also are cost-effective. But they’re underutilized.

Q: What about the high-spending systems? What are some of their overused practices that are not cost-effective?

A: Intensive care unit treatment for patients with several fatal conditions, extra diagnostic tests such as MRI, CT scans, and PET scans. They’re expensive, and for many patients who don’t have clear indications of a disease, you get teeny-tiny gains. Sometimes you’re talking about cost-effectiveness ratios of millions of dollars per quality-adjusted life year. Many of the same tests are cost-effective for the right patients, but very cost-ineffective for the wrong patients.

If you do more of those expensive things that have marginal value and less of the cost-effective things that have proven value, then you get places that spend more and get worse outcomes.

Q: How do other nations handle this problem?

A: Most countries of the developed world use cost-effectiveness analysis to form policy around their national health insurance plans. We don’t have a national insurance plan, but we do have Medicare, which is national health insurance for people over 65. Yet Medicare doesn’t look at cost.

Q: What’s at stake if we don’t have a national discussion about the costs of medical technology?

A: Costs will keep going up. People will keep demanding costly new procedures. More and more people will have inadequate care. From a public policy viewpoint, we could end up with more disparities in this country than we already have—which is the worst in the developed world.

Q: In other words, rationing?

A: Yes. The biggest way we ration is by cutting people out of care. When 15 percent of people in this country have no health insurance, that’s rationing.

Q: If you were America’s medical technology assessment czar, with an unlimited budget and staff, what would you do to make this a rational, transparent system?

A: Within a market-based system, we can create incentives to use more cost-effective medical care. On the patient side, we currently have tiered co-payments for pharmacy purchases. They could be linked to cost-effectiveness. Patients could be required to pay up to a set amount per year, based on their income, for medicines that are not cost-effective. For an antihypertensive medicine that’s cost-effective, you waive the co-pay. You can also reimburse physicians based on cost-effectiveness.

If I were the czar and I had the ear of the president, I would urge him or her to have fireside chats. I’d say: Let’s talk turkey. Let’s be candid about how much of our health care dollar is going to interventions that offer benefits on the order of only days or hours of improved health. Some of these interventions cost a lot.

No president has talked about this, ever. They dance around it. They talk about cost savings and prevention and waste.

Q: Why can’t they talk about it?

A: People don’t want to think about it. They think they can have their cake and eat it too.
It’s amazing how uninformed people are. “I want the best available medical care regardless of cost”—90 percent of people agree with that. “I think that health care is too expensive”—90 percent of people agree with that. “I think health care should be available for everyone”—90 percent of people agree withthat. You can’t have it all.

The Price of Health

How do economists calculate value for money when it comes to delivering health care?

One way is to measure health improvement in terms of the “quality-adjusted life year,” or QALY. This number reflects how many years of life are gained as a result of an intervention, on average, per patient, per episode—and weights the extra years of life by how patients subjectively describe the quality of those years.

Another number used to measure value—the cost-effectiveness ratio—is the net dollar increase in the cost of health care compared to the standard treatment, divided by the net gain in health. Effectiveness and cost are always comparative, because one treatment or procedure is always compared to another.

Cost-effectiveness calculations yield a number on a continuous scale, ranging from a very low number of dollars to gain a year of life to a very high number of dollars to gain a year of life. An intervention that costs $100,000–120,000 or less per quality-adjusted life year is considered cost-effective.

Most Medical Treatments Lack Evidence That They are Effective

More than half of the medical treatments delivered today lack clear evidence that they work, according to the Institute of Medicine (IOM). To remedy the situation, the U.S. Congress, in the American Recovery and Reinvestment Act of 2009, set aside $1.1 billion to jump-start research on which interventions are and are not worthwhile.

In June 2009, the IOM, part of the National Academy of Sciences, issued a report that lists 100 areas where popular medical interventions need to be rigorously compared, head-to-head. Top candidates for comparison are treatments for:

• Atrial fibrillation (the most common form of abnormal heart rhythm)—comparing surgery, catheter ablation, and drug therapy.

• Managing prostate cancer that has not spread beyond the prostate gland—comparing watch-and-wait, removal of the gland, and radiation therapy. Such studies would compare survival, recurrence, side effects, quality of life, and costs.

• Low-back pain.

• Reducing infant mortality and preterm births among African American women—comparing prenatal care, nutrition counseling, smoking cessation, and substance abuse treatment.

• Preventing falls in older adults—comparing exercise and balance training versus clinical treatments.

A Tale of Two Cities

In Texas, medical care is cheaper—and patients fare better—in El Paso than in McAllen. What difference does 800 miles make?

In 2006, per capita Medicare expenditures in McAllen, Texas, hovered around $15,000 per enrollee. In El Paso, 800 miles away, the figure was half as much. What’s behind the discrepancy? “Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care,” writes Atul Gawande, associate professor in the Department of Health Policy and Management, in the June 1, 2009, issue of The New Yorker. “The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.”

In “The Cost Conundrum,” which was quickly touted as required reading in the Obama White House, Gawande describes McAllen as “the most expensive town in the most expensive country for health care in the world.” But his story isn’t just about irrationally lavish medical treatment. McAllen’s five largest hospitals also perform more poorly, on average, than El Paso’s.

This confirms a large body of research from Dartmouth Medical School, suggesting that patients in high-cost areas often get more expensive treatments of marginal value but less of what actually made them better. One study, for example, found that patients in high-cost areas were less likely to receive modestly priced preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency room visits, and were less likely to have a primary-care physician. According to Gawande, “They got more of the stuff that costs more, but not more of what they needed.”

Gawande’s prescription for change? Emulate models such as the Mayo Clinic, which is among the highest-quality, lowest-cost health care systems in the nation. The clinic pools all the money doctors and the hospital system receive and pays everyone a salary, so that physicians aren’t tempted to pad their own incomes by ordering unnecessary procedures. It also carefully coordinates patient care, with a sprawling team of medical personnel working in sync with one another.

Gawande calls not only for comparative effectiveness research on specific treatments, but also for studies of what makes the best health care systems successful.

“I’m fascinated by the positive deviants of the world—the El Pasos that outdo the McAllens. They have learned something. And in fact, there are numerous communities across the country with lower-cost and higher-quality results,” he observed recently.

“We need local medical leadership to acknowledge that we as clinicians are slowly bankrupting the country—and that we have the ability and responsibility to work on our costly problems of overtreatment, undertreatment, and mistreatment.” Otherwise, expenses will continue to skyrocket and quality of care will remain uneven. As Gawande writes in “The Cost Conundrum,” “[W]e are witnessing a battle for the soul of American medicine.”

Madeline Drexler is guest editor of this issue of the Review.

Photo: Christopher Thomas/Getty Images