Gary Passama

Gary Passama retired as president and CEO of NorthBay Healthcare on March 31, 2017. An active blogger since 2010, here’s a collection of his work.

Don’t Count On It

May 26, 2015
 

In the next few weeks, the U.S. Supreme Court will issue an opinion in the case of King vs. Burwell. At issue is the legality of the Internal Revenue Service ruling, which allows tax credits and cost-subsidies for people enrolling for health insurance under the Affordable Care Act, aka “ACA” and “Obamacare.”

If the Supremes find the IRS action to be counter to the “plain language” of the ACA, the effect will be to kill the legislation, according to some observers.

Regardless of what happens in the rarified atmosphere of the High Court, there are other concerns that may weaken the financial underpinnings of Obamacare.

As is often the case when controversial and expensive legislation is passed, all the goodies in Obamacare were front loaded and the bill for paying them comes later. This was certainly the case for Obamacare.

Obamacare was passed in 2010. Taxes to pay for it started in 2013, but really don’t kick in until next year and extend into the future. Those taxes will be passed on to all of us. There is no free lunch.

One very controversial Obamacare toll is a 2.3 percent tax on medical devices, most of which are either life-saving or necessary for daily living. They are by no means frills. This tax gets passed on to the patient in the form of a higher price. Even legislators who were fans of Obamacare now regret this part of Obamacare. Some seek repeal of the tax.

There’s a hitch in repealing this tax. The built-in cost subsidies for people insured through Obamacare become a financial liability for the government, since a revenue stream has been terminated.

A similar situation exists with drug companies that also pay a tax on their products. That tax gets also passed on to the consumer in the form of higher drug prices. There appears to be no movement toward repealing, or at least reducing, that tax.

The real biggie is coming in two years. That is when employers who offer good health plans (so-called “Cadillac plans”) must pay a tax for being good to their workers. We are estimating the punishment for NorthBay Healthcare will be more than a $1 million per year. This one is getting the unions revved up since many of their plans fall into the Cadillac tax trap. If this tax gets repealed or reduced, the Obamacare deficit will increase.

Did I mention large, looming cutbacks in Medicare reimbursement to hospitals and other providers? Those cuts are approaching. Someone will have to pay to offset those cuts. And so it goes – on and on.

Maybe the Supremes will invoke a mercy ruling, forcing the question of how to provide more health coverage to more people to be addressed in a more intelligent and less political fashion.

But don’t count on it.

Tags: Affordable Care Act, obamacare, ceo, King vs. Burwell, healthcare costs

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