Category Archives: Affordable Care Act

You Can Have Your Cake

The United States Supreme Court will soon have a decision on Masterpiece Cakeshop v. Colorado Civil Rights Commission. The decision is one of the most anticipated in the present term of the Court as it examines the rights of creative professionals to withhold their services based on religious objections. The Court must decide based on what seems to be a conflict of free speech and free exercise of religion, both provided under the First Amendment of the Constitution, and anti-discrimination law.

The facts of the case are as follows. In July 2012, Charlie Craig and David Mullins decide to get married. It was to be a same-sex marriage which, at that time, was not recognized in Colorado. They planned to be married in Massachusetts and then have a reception at a Denver restaurant. In anticipation of the Denver reception, they went to Masterpiece Cakeshop in Lakewood Colorado where they hoped to purchase a cake designed for them by the bakery’s owner.

The bakery owner, Jack Phillips, was a self-professed cake artist who was known for his elaborate cake creations for weddings and other celebrations. He was also a devout Christian who had a history of not baking any goods for any Halloween or bachelor party (sexual in nature?) themes. Since Mr. Phillips had strong religious objections to same sex marriages, he refused to design a cake that would be part of either a wedding or a marriage. Interestingly, he was willing to make them baked goods for any shower, birthday, or other occasion that was not related to the wedding. He was also willing to sell them a cake off the shelf but he just could not participate in creating a new, unique cake for the reception itself.

Craig and Mullins filed a complaint with the Colorado Civil Rights Commission against Masterpiece Cakeshop alleging they were discriminated against based on their sexual orientation. Phillips argued that his artwork was a form of speech and he could not be compelled to participate in the expression needed to make the cake. He also argued that he could not be compelled to make a cake that would impair his free exercise of religion.

The case was first heard by an administrative judge who rejected both the free speech and free exercise of religion claims. The judge reasoned that since there was no particular design or message requested by Craig and Mullins, then there could be no free speech right to deny the request.

The original decision was confirmed on appeal to the state civil rights panel. This panel then ordered Phillips to design wedding cakes for any subsequent same-sex weddings so long as he does this for opposite-sex couples. He was also ordered to provide training for his staff in regard to the state’s anti-discrimination law.

The Colorado Court of Appeals upheld this decision stating that Phillips would not be conveying a message in support of same-sex marriage just because he was following the state’s law.

Phillips followed the ruling of the courts by choosing to stop making any wedding cakes at all. This had a significant effect on his business but it allowed him to follow his religious tenets.

Phillips appealed to the Colorado Supreme Court but they declined to hear the case. However, the Supreme Court of the United States granted a review.

The issue confronting the Court is the right of artistic individuals to create works of art that are consistent with their religious convictions. One of the main hurdles for this argument is to convince the Court that custom cakes made by a self-professed “cake artist” is truly an artistic expression. One of the amicus briefs in support of Phillips includes color photos of custom cakes made for numerous occasions. Since art is in the eye of the beholder it is hard to predict how the justices will rule on this argument.

Another brief coming from then Acting Solicitor General Jeffrey Wall argues that the First Amendment protects Phillps from having to participate in any ceremony that would violate his religious beliefs. This brief is narrowly written to include only the anti-bias law relating to same-sex marriages and is clear to exclude discrimination base on race. The brief states, “[a] state’s ‘fundamental, overriding interest’ in eliminating private racial discrimination—conduct that ‘violates deeply and widely accepted views of elementary justice’—may justify even those applications of a public accomodations law that infringes on First Amendment freedoms.”

Craig and Mullins contend that any business that makes a product and is open to the public must be willing to sell to any customer. Phillips was willing to sell any cake on display in the bakery but he was not willing to use his artistic skills to make a special one relating to the same-sex marriage.

The recent Supreme Court decision of Obergefell v. Hodges 576 U.S. (2015) held that all states must recognize and license same-sex marriages. This decision rested on the Fourteenth Amendment which the majority felt protected gay couples who were trying to get married and have those marriages recognized in all of the states. In dicta, Justice Kennedy did note that “many who deem same-sex marriage to be wrong reach that conclusion based on decent and honorable religious or philosophical premises.” Will Kennedy decide that there may be a religious exception for artists who have religious convictions contrary to the written law? There is precedent for this holding in the Affordable Care Act where certain religious orders were exempted from having to provide birth control services in their mandated insurance coverage for their employees. Will the Court write in a religious exception for artists to allow them not to use their artistic skills for religious reasons?

The case is coming down as a conflict between the First and Fourteenth Amendments. Since this battle is dealing with a highly contentious social issue, I would predict that the Court will have a very narrow holding; it is likely they will rule only on a product based on artisitic expression and they may even limit it to artistic cake makers. If they are broad in their decision, then any store owner may decide to turn away customers for any reason so long as they can show that their product has some sort of artistic expression. This would likely lead to more litigation to clarify the decision.

Obergefell was a close decision with Kennedy coming down on the side of the majority. It is likely that he will be the one to cast the deciding vote in Masterpiece Cakeshop.

by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Not Enough Academic Faculty

A friend of mine who is an Assistant United States Attorney recently called me to ask for help. He was trying to get a primary care provider and was unable to find any group in town that was willing to take on new patients. I was taken aback by this request since his insurance, as a federal government employee, was probably pretty good. Fortunately, I was able to make a phone call and get him an appointment with one of the groups in town; it is one of the perks of being in practice in the community for a long period of time.

The plight of this attorney made me reflect on the increasing mismatch between the ever growing patient population coupled with the rapidly rising patient population reaching the age where health care is often needed, compared to the number of health care providers.

A recent report from the Association of American Medical Colleges entitled The Complexities of Physician Supply and Demand: Projections from 2015 to 2030, predict that there will be a shortfall in primary care providers in the range of 7,300 to 43,100 by 2030.

Projected shortfalls in non-primary care providers is even more worrisome; the range predicted is between 33,500 and 43,100 with most of the deficit accruing from the surgical subspecialties. With our current methods of training new surgeons we are only able to keep up with the attrition rate of surgeons retiring or dying. With the United States population predicted to grow about 12% between now and 2030, this will amount to about 40 million more people with no increase in the number of surgeons that can take care of them.

It can be argued that increasing the number of Nurse Practitioners and Physician Assistants can help with the patients needing primary care providers. However, these providers cannot do what surgeons do. In the population over 65, which is projected to grow by 55% by 2030, many operations are needed on an urgent or emergent basis. There may not be enough trained surgeons to meet the needs of our country. We either need to train more surgeons or admit that some patients who need surgery will not be able to get it.

I am painfully aware of how difficult it is to convince bright college students to consider medicine as a career. Even my two daughters have told me that they are just not interested in working day and night as I have done. Nor are they willing to make the sacrifices necessary to get the education and training required for the profession. It seems that many students who may have been interested in a career as a physician or other type of health care provider are now looking at careers in investment banking, law, business, or the computer sciences.

Recent data shows that the average retirement age for a surgeon has dropped to 57 years. Many explanations for this drop are being given, but the most likely reasons relate to the increased overhead costs emanating from the Affordable Care Act (ACA) coupled with the decreases in payments being given by the third party payers. There comes a point where the hard work of being a physician just does not seem to be worth the income earned. Of course, there are many non-financial rewards of helping someone who is sick, but these rewards are not be enough to pay the bills of staying in practice and raising a family.

Another recent survey from the Association of Academic Health Centers (AAHC) revealed that impending faculty shortages may lead to a crisis in training the next generation of health care providers. Without enough teachers, there will not be enough trained health professionals to take care of the patients flooding the system. This will add to the impending shorages described above.

The influx of “Baby Boomer” patients is not the only problem. A recent article in the Wall Street Journal (WSJ November 21, 2017, VA Chief Wants More Private Health Care) describes a new strategy where veterans will be allowed to seek care in the private sector instead of using the VA’s hospital system. This may lead to 10 million more patients seeking care in an already over-stressed system where getting an appointment to see a provider is already very difficult. There is no data to show that VA physicians will migrate to the private sector to help ameliorate the shortage in providers.

There are several reasons which may account for this lack of faculty. First, the level of interest in academic careers is decreasing among those who are now entering the health professions. There are significant disparities between the salaries of those who go into private practice, industry, and academics. The cost of getting a medical education is high and the debt facing recent graduates is a driver to choose a private practice career instead of an academic one. The average debt for a graduating medical student in 2015 was $180,000!

Of those who participated in the AAHC survey, 20% reported that they will have to make changes in their training programs in order to make ends meet. There will be fewer training programs for radiology, rehabilitation medicine, allergy, pediatric pulmonary medicine, anatomy, and pharmacology. There will also be cut-backs in medical school class size and other residency training programs. Of all the strategies listed by the survey participants, “limiting student enrollment” was most often cited.

Of major concern, a decrease in nursing school enrollment was listed most often as the area where cutbacks in enrollment would be made. In a hospital setting, you have to have the nurses to take care of the patients. Physicians cannot admit patients to beds that are not staffed by nurses.

It is clear that we need to train more health care providers if we are to adequately care for the anticipated rise in the number of patients needing care. It is also clear that we just do not have enough teachers to adequately train the people looking to go into health care as a profession.

Hiring physicians from other countries is an option, but steps will need to be taken to assure that those providers have the education, knowledge, and training that we have grown to expect in our system.

Since most of the training of the health care work force is dependent on funding from the government, there needs to be ongoing communication from the schools and the government to come up with a strategy to build and sustain our health care educational pipeline. This is a national interest and yet, not much is being written about it in the national press. It is time for this pending crisis to be brought forth in the public arena so that our children and their children will not be left with too few physicians, nurses, and other ancillary health care personnel to take care of them when they need it. This problem will not be fixed overnight.


by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Free Legal Advice

I am a lawyer but not an attorney. According to the Black’s Law Dictionary, a lawyer is a person who is licensed to practice law. I attended and graduated from the Cecil C. Humphreys School of law at the University of Memphis and I passed the Bar Exam for the State of Tennessee. I have even been sworn in by the Supreme Court of Tennessee so I am truly licensed to practice law in this state.

On the other hand, the legal definition of an attorney is a person who practices law. Notice that the legal definition does not even require licensure. I do not practice law so I do not fit the definition for being an attorney. It is not surprising that most people do not know of this legal distinction; I have even been in court where it became obvious that even the lawyers did not know the difference. I make my living as a surgeon and have done so going on 40 years.

Since it is common knowledge at our medical center that I have a legal education, I am often asked legal questions by my medical colleagues. These questions usually relate to medical malpractice issues, informed consent doctrine, medical ethics such as end of life issues and futile care, and contracts. Whenever approached for such legal advice, I first acknowledge that, even though I am a lawyer, I do not practice law. This disclaimer is important because I do not want to ever be accused of malpractice as a lawyer; it is enough that I have to deal with possible medical malpractice on a daily basis. I pay a significant premium for medical malpractice insurance and have no desire for similar payments as a practicing attorney.

When residents or fellows are finishing up their programs, they look for jobs and, eventually decide to take a position. For most, it will be their first job as a attending with the rights and privileges and pay commensurate with that position. Many will be given an employment contract which, for a physician, can be difficult to understand. For those who come to me for advice, the first thing I recommend is that they hire an attorney who is familiar with contracts dealing with physician issues. This true legal advice may be expensive but it is worth it. It would be a mistake for a physician to review the documents on his own as the legal language may be difficult to understand and it may have clauses that may come back to haunt him in the future.

There are three main areas that I look at if I am reviewing a contract; compensation and other benefits, termination clauses, and restrictive covenants.

When I review contracts for these young doctors, the first thing I look for are the terms for employment. How long is the contract for? Is there an automatic renewal or will written notice be required? Is the salary spelled out and is it guaranteed for the terms of the contract or is it dependent on income generated?

Since the Affordable Care Act went into effect, the overhead costs of a medical practice have gone up significantly. An electronic health record (EHR) is now required to practice and they are expensive. The documentation requirements for payment and quality improvement, also required under the law, usually mean that people will need to be hired for to keep the medical records up to date; it is just too time consuming for the physician to do everything himself. I once was considering joining a private practice group but the negotiations broke down when I learned my overhead costs would be $30 thousand a month.

Because of the overhead costs, most physicians have left private practice and joined hospitals or clinics which pay for this infrastructure. The physician becomes an employee under contract and the pay is usually good for the first term of the contract, usually for two years. However, the payment may go down significantly or the physician terminated if he does not generate an income to justify the salary over the term of the contract.

Other compensation issues to consider are bonuses, how are they calculated; benefits, such as vacation time; costs of continuing medical education, and malpractice insurance. If joining a group, the contract should be clear on what needs to be done to become a partner; is there a “buy-in” fee? It is common for the employer to keep renewing the physician’s contract but then terminate before he can become a partner. This does not seem fair, but the employer is out to make a profit and the mission of taking care of patients may not be the primary goal.

There are usually termination statements and it is important to note if the termination can only be “with cause” or “without cause”. If termination can be without cause, the employer can terminate the contract for any reason. This is harsh and it would be wise to have a notice requirement of 3 to 6 months so that there will be some time to look for another job. It is nice to have income while looking for a new position.

If the contract can be terminated “with cause” it is important that the reasons for termination be spelled out. Reasons for termination such as loss of a state license, inability to obtain Board certification, loss of medical malpractice insurance, or a felony conviction are understandable for termination. The new attending should be aware of vague terms such as “disloyalty to the practice” as this is open to wide interpretation and may lead to high legal bills if the clause is invoked and the court is asked to decide what the term means.

There is usually a non-compete clause, often termed a “restrictive covenant.” This clause is meant to keep the new attending from stealing patients from the group if he decides to leave within a set time-frame. No new employer wants to set up a new practice for a new hire only to have that hire leave and take those patients with him to a new, competing practice. Many states do not allow restrictive covenants as they have deemed that to be a restraint of trade and anti-competitive. Even states that do allow for these non-compete clauses will usually have limits on the prohibition of setting up a competing practice; these limits are related to duration and the distance from the original practice.

If there is a restrictive covenant, the new attending should be aware of the time and distance restrictions as they may not allow him to take on another potential job in that area, even if he has been successful in growing the practice. Physicians who sign a contract with a non-compete clause would be wise to hold off on buying a home in the area until he is certain that his relationship with his new employer is likely to be long term.

There are other issues emanating from employment contracts such as severance pay, reimbursement clauses if you leave the group early, and what happens to income coming to the group after termination. All can be complicated and further justifies the hiring of a competent contract lawyer. If any of the contract issues become grounds for future litigation, having an attorney to fight for your rights is worth the costs. It is also beneficial if it is the same attorney who has been with you from the beginning.

by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

The Conundrum of Health Insurance

I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person’s family and economic stability—taken from the Hippocratic Oath.

When the Obama administration began pushing for the passage of the Affordable Care Act (ACA), the claim was made that the Act would make health care better and more affordable for everyone. Since health care costs are now responsible for about 17.8 percent of the Gross Domestic Product (GDP), the goal of decreasing costs makes sense. However, the claim that increasing the number of people covered by third party payers would lead to a decrease in costs was difficult to understand.

It is obvious that something has to be done to reign in the cost of health care in America. Health care costs were $3.2 trillion in 2015. This comes out to about $9,990 per person in the country. Despite the implementation of the ACA, the percent of GDP paid for health care has actually gone up; it was 17.4% of GDP in 2014.

Under free-market principles, costs will depend on what people will be willing to pay for a product that they desire. If the costs for health care are paid by someone else, it is reasonable to assume that market principles may not apply. If someone gets sick, they will want their doctor to do whatever is necessary, or not, to get them well. With this model, the only ways to decrease costs are to pay less to those that are providing the health care service, or restrict what will be paid for on the front end.

Unfortunately, health care has been mostly a fee-for-service model since the mid 1960’s. By doing more, the physicians were paid more. It has been estimated that one third of the procedures and one third of the tests were unnecessary; eliminating the incentives to doing tests and procedures will lead to significant cost reductions.

One of the most significant consequences of the ACA is that it forced more physicians out of private practice and into the employment of hospitals and clinics. As salaried employees, they are less likely to order unnecessary tests or do unnecessary procedures since their income will no longer depend on what they do; unless their contract has incentives for doing more and ordering more.

To contain costs, it would be a good idea to prevent the employer from coercing the provider to do more procedures and order more tests by tying remuneration to services billed. I’ll bet Congress can do that under its Commerce Clause powers. They could easily do this by capping payments based on the disease entities being treated. This would incentivise the providers to follow best practices and even look for better ways to care for chronic conditions in hopes of keeping the patient out of the hospital where costs are high.

A return to free-market principles also makes sense for the purchase of health care insurance. Letting people shop for the coverage they need for their family, without artificial goverment requirements for coverage that will never be used by that particular buyer, will lead to a decrease costs for the insurance and make it more likely that more people will be covered. Even young and healthy people should be willing to buy coverage for the possibility of a devastating injury or early onset cancer so long as the premiums are reasonable. After all, most people are willing to buy other forms of insurance such as auto, homeowners, and life even though they are unlikely to ever get a payout.

Patients with pre-existing conditions may have to pay more so there may need to be some premium support from the government. No one should ever be denied coverage no matter what their pre-existing condition is; this part of the ACA should be kept no matter what the new plan is.

Allowing people to buy insurance across state lines and keep insurance when they change jobs would also lead to a decrease in premiums and deductibles which would increase the number of people buying the health insurance.

Even with the return of free-market principles in the health insurance market, there will still be some patients, not covered by Medicare and Medicaid, who will still not buy insurance. However, these patients will still need to be given care if needed. After all, this is America!

For people who are not covered by Medicaid or Medicare and who do not have their own health insurance policy, there are safeguards already in place to make sure that they will be cared for in an emergency. Under the Emergency Medical Treatment and Active Labor Act, anyone presenting to a hospital that takes Medicare must be given an emergency screening exam and if that exam reveals an emergency medical condition, stabilizing treatment. By the time the patient is stabilized, the physician-patient duty will have been established so that further care must be provided under the State’s laws dealing with medical malpractice and the requirements of the various licensing bodies and specialty boards. Patients without coverage will be responsible for the costs, but it is unlikely that hospitals and providers will ever be paid.

Let’s not forget that most physicians in America who have graduated from American medical schools, have taken the Hippocratic Oath. Under this oath, they have sworn to do no harm and to take care of people regardless of their ability to pay. The physicians I know take this oath very seriously—I actually have a copy of the oath (written in the original Greek language) hanging on my office wall.

Couple the increase in people with third party payers along with requirements placed on the health care providers, the foundation has been set to decrease payments for health care itself. The added requirements of electronic health records (EHR), complex forms for billing—which led to the necessity of hiring knowledgeable coders, and the increasing complexity of health care laws relating to fraud, privacy, and proper documentation, all made it more difficult for the health care providers to maintain their incomes. It is now estimated that physicians spend 50 percent of their time filling out forms for billing and for performance measures which are required under the law. There must be some relief for the providers who are being squeezed from both ends or we are heading towards a perfect storm where we will not have enough health care providers to care for the ever increasing influx of patients.

For the people now on Medicare and Medicaid, let them keep that coverage but increase the number of providers willing to take care of those patients by allowing for tax write-offs for the cost of care not covered by the Medicare and Medicaid payments. Write-offs should also be allowed for patients without any coverage. Allowing for these write-offs will likely make the care less costly as the providers would be more willing to compete for these patients. There will need to be a bureaurocracy in place to adjudicate any discrepancy in the costs claimed and the write-offs allowed, but these discrepancies should decrease as more data on costs accrues over time.

Another way to help decrease the costs associated with health care is to require that those writing the laws be subject to the same laws they are requiring for everyone else. Since we are a nation of laws where everyone is supposed to be equal under the laws, this should already be in effect; for some reason that I have never understood, this is just not the way it is.

by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Health Care Reform

Both Republicans and Democrats agree that health care costs are too high and that there are too many people that are not covered by health care insurance. Both the Affordable Care Act (ACA) passed during the Obama administration and several plans being discussed by the Republicans have remarkably similar goals. If the Republicans follow through on their promise to “repeal and replace” the Affordable Care Act, then they must carefully tailor their plan to (1) decrease costs of health care, (2) allow everyone to have access to some form of health insurance, (3) allow patients to have choices in tailoring their individual plans, (4) place an emphasis on preventative care so as to keep more patients out of the hospital, and (5) have some form of medical malpractice tort reform. They should also do what they can to keep the parts of the ACA that garnered good feedback.

There were several good ideas imbedded in the Affordable Care Act. For example, pre-existing conditions could no longer be used to deny a person health care coverage. Small businesses (defined as a business with less than 50 employees) were given tax credits for up to 50% of employee premiums. The cut-off age for young adults to be covered by their parents insurance was raised to 27. This was especially good for recent college graduates who were finding it difficult to get jobs in the depressed economy.

The ACA also decreased the “donut hole” by 50%. The previous hole limited prescription medication expenditures over $2,700.

Lifetime caps on health insurance expenditures were to be eliminated by the ACA. Previously, insurers could cut off patients whose bills exceeded a certain amount. With the ACA, insurers had to keep paying for health care so long as the patient was not dead. This clause has taken on more importance with the McMath case which I wrote about last month (this case described a patient who was deemed to be dead in California but alive in New Jersey).

Under the ACA, all insurance plans had to include preventative care without co-pays by 2018. Preventative care is important in keeping patients with chronic conditions out of the hospital where the costs are highest.

At this time, it seems clear that the Republicans have the votes to repeal the Affordable Care Act. There are several models being presented as to what they will replace the Act with and it is now worthwhile to look at some of these ideas. Whichever plan they choose, it would be wise for them to keep the good aspects of the ACA in place.

Here are some thoughts on what a new health plan might incorporate.

Most Republican plans will eliminate the community rating where everyone in a community are charged the same premiums. The community rating was needed to keep premiums down for people with pre-existing conditions but it forced others to pay higher premiums. Also, mandatory benefits in the ACA health plans forced people to pay for benefits they would never use. The Republicans argue that people should not have to pay for plans mandating care for such things as in-vitro fertilization, cosmetic surgery, and abortions. The ACA required this coverage so that the higher premiums could be used to off-set the costs of the patients who needed these benefits and other benefits that few would use.

There are several other ideas that are being discussed to make health care insurance more affordable. For example, vouchers of $5,000 for the purchase of health insurance with tax-free dollars would allow people to shop for policies that would meet their budget and needs. This would not require a large bureaucracy; it would only require people to process the forms and police the system for fraud. People would have a vested interest in their health care policy and, hopefully, the free market would decrease the costs. The use of vouchers would be a good way for those with pre-existing conditions to purchase policies without having everyone else pay higher premiums for coverage for things they would never need.

Currently, the states regulate health care insurance. This leads to large cost disparities. If people could cross state lines to buy insurance, then they could shop for the best deals to meet their needs. I believe the Commerce Clause would allow the Congress to pass a law to allow for this. This would probably lead to an overall decrease in premiums as the insurers would have to compete with more companies in other states.

Another way to cut health care costs is to put people in charge of their own routine care. One way to do this is to let people set up health savings accounts where tax free dollars are used to pay for routine care. Medical providers will have to compete for these dollars by offering the best service for the lowest price. Once the free market is back in play, drug companies, hospitals, and providers will not be able to raise prices without losing patients.

The health savings accounts should not be used for over the counter remedies and there would be tax penalties for those patients who make non-medical withdrawals.

Premiums for health insurance should be tax deductible. If companies can do it (and they can) then individuals should be allowed to do this also. This would allow most of the 176 million enrolled in company owned plans to buy their own insurance and force the companies to compete by offering supplemental tax free compensation to allow the consumer to buy more insurance if they see the need. This would be another way to allow those with pre-existing conditions to get coverage without having everyone else pay higher premiums.

Health coverage should be portable. Employees should be able to control their own health plans and should be able to take these plans with them from job to job. This would force employers to treat their workers better since the worker would not be locked into the job for fear of losing their health care insurance.

Health care insurance should be like other insurance i.e., auto, life, home, and fire. The plans would be private property and they would allow for maximum choice. They should be flexible and creative allowing the consumer to buy a policy they deem necessary to meet their needs. This would remove big business, labor unions, and politicians from the health insurance business and let the free market control the costs.

Updating Medicare by allowing each senior an actuarial determined $250,000 to purchase some form of elder care insurance would encourage older patients and their care-givers to shop for their own health care. Again, it is hoped that the free market would lead to decreased costs as this patient population would be empowered to look for the best deals.

Allowing the states to cover their own Medicare and Medicaid populations would encourage better management that is state specific. Each state would be given a set amount every year based on their Medicare and Medicaid population. The states could then experiment for better ways to improve care and decrease costs. Successful programs could be emulated by states that are not as successful.

Unfortunately, under the Affordable Care Act, many providers stopped seeing Medicare and Medicaid patients as the costs exceeded the payments. Costs and payments must be brought into alignment so that the providers will be willing to care for all patients in the system.

If the government would allow charitable care to be tax deductible, health care providers would be more inclined to treat the low income or uninsured patient. This would be much cheaper than having these patients rely on the emergency room for their primary care. It would also lead to a predictable continuity of care which would be beneficial for the patients and the providers. Providers who have patients for the long term are more likely to reap the benefits of managing chronic conditions in the “out of hospital” setting.

The Affordable Care Act had no provisions pertaining to tort reform. Most Republican plans recognize that tort reform is critical if health care costs are to be decreased. Malpractice insurance is costly. For some specialties, premiums can be over $200,000 per year and these costs are transferred to the patients. Defensive medicine as a strategy to defend against potential malpractice claims raises the cost of health care for everyone. Estimated costs for defensive medicine is about $124 billion per year and each year, this estimate is going up.

Some states limit the payment for non-economic damages in a malpractice suit in an effort to control malpractice premiums. Some states may soon try to take malpractice claims out of the hands of juries by using alternative forms of resolution such as Health Courts.

Limiting attorneys’ fees is another strategy being looked at to decrease the costs of malpractice premiums but attorneys are lobbying against this; since many legislators are themselves attorneys, this will be an uphill battle.

The ACA was over 2000 pages long and was very complex. The Republican plan should not try to fix everything at once. They should start with some laws that are understandable and allow some choice for the patients. The providers also need some protection to keep all the cost cuts from falling on their shoulders.

No matter what elements are incorporated in a Republican plan, it looks like they recognize the fundamental fact that optimal health care is a very personal experience between the patient and his provider. This experience must be affordable and patient centered. Patients should be allowed to pick and keep their provider. The constant switching from one plan to another from year to year which often lead to new providers who did not have an on-going relationship with the patient was not good health care. It is no surprise that the ACA was struggling to meet its mission. I look forward to studying the details in the proposed Republican plans. I think everyone should be as interested as me.

by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Is Health Care In America Really So Bad?

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (ACA). The intent of the law was to provide health insurance to all Americans while, at the same time, lower the health care costs for the people and the United States government. Although it seems counterintuitive, President Obama promised that the plan would lower the cost of health insurance premiums while at the same time, reduce government spending. It is hard to see how this promise could have been sincere, especially since the plan would have added over 30 million patients into the mix.

I think most would agree that health care in our country is expensive. In 2009, the United States spent 17.3 percent of the gross domestic product (GDP), about $2.5 trillion on health care. This was the most spent for health care by any country in the world. We also spend more than any other country on defense. I think both of these things are good. We should be spending on health care and defense to maintain our way of life which I believe is the best.

Proponents of Health Care change make claims that despite spending more on health care than other countries, the United States lags behind in critical health care measures such as life-expectancy and infant mortality. However, a critical look at these measures shows that the United States is really not so bad.

While it is true that life-expectancy in the United States is less than about 30 other countries, it is likely related to the high homicide rate in America along with the high death rate from auto accidents, both of which are much higher than those found in other Western countries. If we factor out homicides and auto accident fatalities, then the United States has the longest life-expectancy. Homicides and auto related deaths, while concerning, should not count on our quality of health care analysis. (Glen Whitman, “Who’s Fooling Who? The World Health Organization’s Problematic Ranking of Health Care Systems,” CATO Institute, February 28, 2008)

Infant mortality is defined differently depending on the country. Since the definitions differ, it is not surprising that the mortality rates differ. In America, a birth is counted as live if there is any sign of life, regardless of the birth weight or gestational age. This follows the World Health Organization (WHO) definition which defines a live birth as one where the infant, removed from the mother, “breathes or shows any other evidence of life such as beating of the heart, pulsation of the umbilical cord, or definite movement of voluntary muscles.” (Geneva Foundation for Medical Education and Research, Live Birth Definition)

In Switzerland, the baby must be at least 30 centimeters long at birth to be counted as a live birth (David Hogberg, Ph.D., “Don’t Fall Prey to Propaganda: Life Expectancy and Infant Mortality are Unreliable Measures for Comparing the U.S. Health Care System to Others,” National Policy Analysis, July 2006). Even if it’s breathing and the heart is beating, a subsequent death will not be counted as an infant mortality in that country if the baby is shorter than 30 centimeters.

In France, there must be a medical certificate stating that the baby was born alive and viable. Without that certificate, a subsequent death will not count as an infant mortality. Also, in France and Belgium, babies born before twenty-six weeks are counted as deaths even if they fit the WHO criteria for live birth. (Bernadine Healy, “Behind the Baby Count.” US News and World Report, September 24, 2006) It’s obvious that using infant mortality rates as a measure of quality health care is a disingenuous argument for those claiming our health care system is not so good.

I believe that the cost of our health care is reasonable for what we get. It is the best health care in the world. Many of our treatments lead the way for both cure and palliation. Cancer treatments, Human Immunodeficiency Virus (HIV) care, and cardiac and vascular surgery advances are the best in the world. When Russian President Boris Yeltsin needed heart surgery, they sent for Dr. DeBakey’s team from Baylor in Houston.

It is not unusual for other world leaders to send their families or themselves to our country for their own care. When I was a resident at the University of Chicago, it was not unusual for world leaders to take over a hospital floor while they were cared for at that facility. I was even reprimanded by the United States Secret Service when I mistakenly entered the area during one of my rounds.

Former Vice-President Cheney had a left ventricular assist device keeping him alive for quite a while until he was able to get a match for a heart transplant. He spoke to one of our surgical societies where he described his course. He was doing great and I could not see any detrimental effects of his prolonged illness. This type of care is available to all in the United States!

As a Cardiothoracic surgeon, I am frequently exposed to dangerous blood borne infections such as Hepatitis C and Human Immunodeficiency Virus (HIV). I was most fearful of Hepatitis C for which, until recently, there was no good treatment and the resulting death was from fulminant liver failure—not a pleasant way to go.

Now, there is a new drug, Sovaldi (sofosbuvir), to treat Hepatitis C and it is curative. It costs $80 thousand for a course of therapy but the illness would otherwise lead to death or to a liver transplant and further immunosuppressive drug therapy the costs of which would exceed the pills. It makes sense to use this new class of drugs but there is an on-going debate that the drug manufacturers are gouging the public. It is a breakthrough therapy where the developers are being chastised instead of honored. What a shame.

The high cost of drugs reminds me of when I was a young resident and surgeon. Tissue plasminogen activators (tPA) and other clot busters were being introduced as a way to treat patients with myocardial infarctions. The drug was expensive; over $2 thousand to save a heart attack victim. This was deemed exorbitant in the 1980’s. Now it is the standard of care and no one is complaining about the costs.

Drug companies spend millions of dollars on research and development of new therapies and they take a huge financial loss for the drugs that do not pan out. However, when they do have a success like with Hepatitis C, then I don’t have a problem with them charging high rates. This sends the right message to those involved in research and development that what they are doing will be rewarded if they are successful. We want the researchers to be advancing the science of medicine and this is the way to do it.

New endovascular techniques are allowing high risk patients to undergo complex aortic repairs and even aortic valve replacements. These patients would not have tolerated the difficult open procedures that would have been required in the past. With new aortic valves and aortas, many of these otherwise healthy individuals may live for another 10 or 20 years and the lives will be meaningful. Who wouldn’t want that?

…if you think research is expensive, try disease.’ Sure it’s expensive, but life and health are among the most precious things we have. Who wouldn’t spend what is necessary to save a loved one or themselves?

Mary Lasker was a health activist and philanthropist who raised funds for medical research. She helped found the Lasker Foundation. She has been quoted as saying, “if you think research is expensive, try disease.” Sure it’s expensive, but life and health are among the most precious things we have. Who wouldn’t spend what is necessary to save a loved one or themselves? A Lasker Award is often a harbinger of the Nobel Prize in Medicine as, at least 86 Lasker Award winners have gone on to win the Nobel.

My grandparents used to tell us to get the best doctors if we were sick and the best lawyers if we were confronted with legal problems. You’re looking for the best return on your investment and there is nothing more important than your life and health. It is said that there are problems that money can solve and then there are real problems. Perhaps we are spending more on health care because we are getting the best health care. I am OK with that and I think that most Americans would agree with me.

by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Health Insurers Are Pulling Out Of Exchanges

As the election of 2016 draws closer, it is not surprising that more and more articles relating to the Affordable Act of 2010 (ACA) are appearing on the front pages. If the republicans win the Presidency, they will probably move to repeal the ACA and start a process to replace it. If the democrats win, repeal will be off the table, but changes will still be inevitable. The most pressing of several contentious issues relates to several large insurers who are planning to pull out of the health care exchanges starting in 2017 unless premiums are allowed to go up significantly.

In Tennessee, my home state, Cigna and Humana have received permission to raise premiums by 46 and 44 percent, respectively. Blue Cross Blue Shield of Tennessee, losing an estimated $500 million on the state’s exchange by the end of 2016, has been given permission to raise premiums 62 percent for 2017.

Texas Blue Cross has lost a billion dollars on the state exchange and is requesting a 60 percent premium increase for 2017. Blue Cross Blue Shield of Minnesota has pulled out of that state’s exchange as losses over the last three years are $500 million.

The average premium rise for plans being offered on the state exchanges will be 24 percent for 2017. The rates must rise to offset losses due to the risk profile of those buying insurance being much worse than originally expected.

Insurance companies were early supporters of the ACA. They envisioned millions of healthy people forced to buy health insurance with higher premiums mandated by the law. The higher premiums were meant to off-set the lower premiums being paid for those with pre-existing conditions. The lower premiums were, again, mandated by the law under the “community standard” provision.

What the insurers failed to properly predict were the millions of healthy people who elected to not buy insurance; instead paying the penalty (tax?) which was much lower than the premiums required. The insurers found themselves paying more for health care than they were receiving in premium income. Predictably, many insurers suffered significant financial losses; many have opted out of the health care business.

One of these large insurers, Aetna, has recently announced that it will pull out of 11 of the 15 states where it currently offers health insurance on the exchanges. This is following the lead of United Health Group which is also planning to withdraw from several exchanges in the same time-frame. If Aetna follows through on its plan, it will only offer exchange plans in 242 counties, down from the current level of 778. In those counties where it is pulling out, consumers will find there are fewer plans to choose from or, in some instances, no plans on the exchanges at all.

Aetna’s decision to roll back on its coverage comes on the news that its planned merger with Humana is going to be blocked by the Justice Department. The Justice Department also has moved to block a similar merger contemplated by Anthem and Cigna. The Justice Department believes that consolidating the health insurance industry to just a few key companies will lead to monopolistic practices; there will be less competition and as a result, consumers will face higher costs.

If the consumer is unable to find a suitable plan on the exchange for their county, they have the option of buying their own health insurance from companies who are not participating in the exchanges. However, these buyers would not be eligible for premium and cost sharing supports which are only available for those who buy insurance on the exchanges. Medicaid would be an option but not for those whose income is too high to qualify.

It is foreseeable that state or federal regulators will try to convince some insurers to enter into the counties which have lost their carriers. They could do this by promising the approval of high premiums or perhaps, governmental subsidies to offset any potential losses. High premiums, no competition, and governmental subsidies would be a win for the carrier.

Under the ACA, many people have gained health care coverage through the loosening of restrictions on Medicaid. Many more have gained coverage through the exchanges. Those with pre-existing conditions cannot be denied coverage due to the individual mandate of the law and those same people will not be charged higher premiums due to the community rating requirement. These are all good things.

Medicaid contractors, used to delivering lower cost care, are surviving.

The ability to buy health insurance at any time of the year is another factor leading to healthy people holding off on buying until they needed to be covered. These factors led to healthy people not buying insurance and those who need to use the insurance to buy it now. Not getting the premiums of the non-users has been a game changer for the insurers. Aetna has claimed $430 million in losses on individual products since January 2014.

Promised governmental subsidies to insurers are being blocked by the Congress that has not yet appropriated those funds; the funds are not likely to be appropriated so long as the House is under republican control. Seeing the political lines in the sand, the insurers are not relying on the promise of future funding while their losses continue to pile up.

In order to get the healthier patients to buy insurance, the penalties for not participating will have to be increased. To help off-set the rising costs that the insurers are seeing from the unhealthy patients who are now buying insurance, the premiums and deductibles will have to go up. There will need to be a time frame in which no one will be allowed to buy on the exchanges or apply for Medicaid; these steps are needed to get the healthier people to buy insurance now. These non-users of health care will be subsidizing those who are users but that is how insurance is supposed to work.

As the election draws closer, these rising costs are going to result in political consequences. The democrats passed the law and there was not a single republican vote in support. As the ACA is looking more and more like an entitlement, politics will make reforms more difficult, even unlikely. It will be interesting to see how the press handles this conflict. My guess is that little will be reported until after the election.


by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

Accountable Care Organizations and the Affordable Care Act

In an effort to get out from under a “fee-for-service” model in health care delivery, the Affordable Care Act (ACA) calls for programs with different payment methods. The goal is to decrease the growth in health care spending and improve the quality of care being delivered. Physicians, hospitals, and other health care providers are being offered incentives to form networks to coordinate health care and deliver the care in a more efficient and less costly manner. An Accountable Care Organization (ACO) is an example of one of these programs.

An Accountable Care Organization is paid a set amount of money per patient enrolled. Medicare is not billed per procedure. Bonuses will be paid to the ACO if it stays under a predetermined budget; but it will have to pay penalties if it goes over budget.

Accountable Care Organizations are designed to have health care providers and hospitals coordinate care to keep patients from getting so sick as to require hospitalization. It is the hospitalizations that lead to higher costs. The government and other third party payers would pay bonuses to those systems that would keep costs below what would have been spent under the traditional Medicare model.

Unfortunately, in crafting the ACO section of the ACA, the government made requirements which have led to increasing costs and a reduction in patient choices as to health care. These requirements include the need to institute an Electronic Health Record (EHR), track and submit quality measures data, and the ACOs must be at least 75% under the control of providers.

The new overhead costs mandated under the ACA are forcing many private practitioners to give up their practices and become employees of the hospitals. This loss of private practitioners reduces the patient’s choices for providers. In fact, if the provider has to join a hospital or group that is not covered under the patient’s new insurance, they lose the doctor of their choice. So much for being able to keep their provider. With more overhead costs and less choice, it is not surprising that health care costs continue to rise.

By requiring the ACOs to be at least 75% provider controlled, the law assumes that providers would actually be interested in doing this extra administrative work. Unfortunately, most physicians are not subject matter experts in starting complex health care organizations such as ACOs. Also, the needed data acquisition and analysis is beyond the expertise (and interest) of those whose real love is taking care of patients. The data acquisition and analysis is needed to be able to justify care and apply for the bonuses available for those providing high quality and cheaper care. The payers are unlikely to send the checks without the data.

Even if the payers do send bonus checks to the ACOs, how will the bonus money be divided amongst the providers? Hospitals and health care systems are using Relative Value Units (RVU) to measure productivity of the providers. The providers who do more clinical work (generate more income for the system) get more RVUs. This looks like a fee-for-service model with RVUs being substituted for dollars. Is this a “Catch 22” of the ACA whereby those doing the most tests and procedures are, once again, the ones who will generate the most income?

Currently, the physicians who are generating the most RVUs are the ones being rewarded; but those doing the necessary non-clinical work will not be generating the RVUs needed to be eligible for the bonuses. This model is inherently unfair. Unless there will be RVUs associated with administrative work, it is unlikely that physicians will be willing to do the work required in the ACO model; this will lead to a violation of the 75% requirement.

What will happen to the ACO which is not provider controlled under the law’s requirement? There is no case on point yet, but I would not be surprised if this rule is ignored; not an unusual circumstance under this law.

Under ACOs, providers are given financial incentives if they save money. They are to do this by avoiding unnecessary tests and procedures. They are also encouraged to keep a close eye on their patients with syndromes that could be optimally managed as outpatients. Diabetes and congestive heart failure are examples of clinical care models already being studied to improve care and reduce costs. How best to measure cost savings and quality is still being figured out.

Unfortunately, this model only rewards cost cutting. There are no bonuses for providing good care. It is conceivable that ACOs which provide good care but do not reduce costs will be penalized. This has actually happened; Maine’s Beacon Health Network had a high score for patient health but was still fined $2.9 million for going over budget. Another ACO, Banner Health Network, scored lower on quality than Beacon in 2014, but they were paid a bonus of $18 million because they were able to cut costs.

As health care costs continue to rise, and the patient mix continues to be predominately those who need to use health care, the ACOs are struggling. If ACOs are to survive, they will need to “cherry-pick” the healthy patients. Unfortunately, it is the healthy patient population which is holding off from buying health insurance as the premiums and deductibles continue to rise. The individual mandate and community rating makes the delay in purchasing health care insurance a reasonable choice for the patient but a potentially devastating situation for the ACOs.

Many ACOs have withdrawn from the health care market and others are trying to consolidate to minimize costs. In an effort to get economy of scale, some ACOs are trying to merge. In a strange twist, the move to minimize costs by consolidation is now being blocked by government lawyers who are afraid that further consolidation will lead to monopolistic practices.

A proposed merger of Aetna Inc. and Humana Inc. is being blocked by the Justice Department. A federal judge has set December 5th as the date to start trial proceedings. Under the current contractual agreement between the two insurers, if a merger does not occur by December 31st, Humana has an option of walking away and collecting a $1billion fee. This is another rather novel way for insurers to make money. In this case, however, Humana’s gain is Aetna’s loss.

In a similar case, Anthem is trying to acquire Cigna Corp. This case is scheduled to begin on November 21st. If this deal does not close by April 30, 2017, Cigna will be owed a $1.85 billion breakup fee.

ACOs payment policies are evolving. It will take time for health care providers to adjust their mind-set from individual care—doing what’s best for an individual patient—to a population model where the cost of care must be reduced.

As time goes on, it is foreseeable that the government will adjust savings targets which will make it even more difficult for the surviving ACOs to show they are saving on health care spending. Everyone cannot continue to be “above average.”

If the ultimate goal is to have a single party payer, then punishing the surviving ACOs makes sense. When ACOs and other health care delivery models (Co-ops) disappear as is happening, then the government as the main provider of health care funding will be all that’s left. It is no surprise that both President Obama and Hillary Clinton have both planted the seeds for the single government payer.

The President’s Assessment Of The Affordable Care Act

This article originally was posted July 29, 2016 on Huffington Post.

I was recently reading a July issue of the Journal of the American Medical Association (JAMA) when a special communication written by Barack Obama, J.D., caught my eye (JAMA; Published online July 11, 2016). It was the first article I had ever read in a medical journal that was written by a president of the United States. JAMA is a much respected medical journal which usually presents peer-reviewed articles relating to medical research. However, the journal will publish special commentaries written by experts relating to timely medical issues.

At first, I was taken aback by the President writing in a medical journal whose readership was pretty much limited to physicians. It seemed like he was using his “bully pulpit” to try and convince us that the Affordable Care Act (ACA) was well on the way to meeting its goal of increasing the number of people with health insurance, decreasing the costs of health care, and increasing the quality of the care provided. Seeing as there are about 850 thousand practicing physicians in the United States (based on a 2010 analysis of the Federation of State Medical Boards data base), I wondered why he was limiting his audience to such a select few. I then saw several related articles in newspapers and magazines commenting on the President writing an article in a medical journal. It is clear that the claims of the article did reach the general public which was probably the plan to begin with.

The conclusions of the President’s article are that the ACA has lowered the number of people who do not have health insurance, access to health care has improved, financial security for those on Medicaid has improved, and health itself, based on a survey of nonelderly adults, has also improved.

There is no argument that the ACA has lowered the number of people who do not have health insurance. Allowing young adults to stay on their parents insurance policy until they are 26, increasing the number of people eligible for Medicaid, and the individual mandate requiring health insurance or paying a tax (penalty), have all contributed to lowering the number of uninsured from 49 million people in 2010 to 29 million in 2015. Some argue that the improving economy has also had a role in allowing more to afford health insurance, but, clearly, the ACA is helping in this regard.

The claims that access to care and the financial security for those on Medicaid has improved are based on another article in JAMA which presents data on self-reporting telephone surveys in adults aged 18-64 years (JAMA 2015; 314(4):366-74). There is a subjective bias in these types of surveys whereby those in favor of the ACA are more likely to respond. Objective measures such as claims data and health care outcomes would have been more convincing but were not done in this article. All of the authors in the cited article were employees of Health and Human Services (HHS) and HHS reviewed and approved the article before submission. Bias seemed obvious.

Despite the claimed progress that has occurred under the ACA, the President would like to see policy makers (Congress?) take steps to improve the Health Insurance marketplace, increase financial assistance for Marketplace enrollees, reduce prescription drug costs, and institute a public plan option for areas devoid of individual market competition for health insurance plans.

The article reads like a political speech. The President claimed that shortcomings of the law were due to lack of funding, excessive oversight, and relentless litigation by the Republicans. He also took special interests to the woodshed especially the pharmaceutical industry which opposes any change to drug pricing “no matter how justifiable and modest, because they believe it threatens their profits.” Talk about a “straw man”.

In the article, the President asks Congress to give the federal government the authority to negotiate prices for certain high-priced drugs. There is no law that I am aware of that would prevent this negotiation from happening right now. I think what the President really wants is to regulate what pharmaceutical companies can charge. He also wants the Congress to keep the Independent Payment Advisory Board (IPAB) from any type of legislative review. The role of the IPAB is to determine what and how much Medicare and Medicaid will pay for. The last I checked, we have a free market economy where suppliers of a product are allowed to charge what the market will bear. Competition in the market place, not the government, is the best way control costs.

As an academic surgeon, I was also bothered by the fact that this opinion piece failed to properly acknowledge those who were involved in the research upon which the article relied. Usually, these people are named as co-authors. Instead, they are named in a small paragraph just before the reference section. All were employees of the Executive Office of the President and there were no physicians in the group. Again, bias was obvious.

The Affordable Care Act is failing. Some insurance companies are bailing out as they are experiencing financial losses. Some larger companies are trying to merge but are being blocked by the government who are afraid of monopolistic practices. Healthy people are not participating in the numbers expected since the tax penalties of abiding by the individual mandate are less than the insurance premiums and copays and there is no penalty for waiting until the need for insurance arises (community rating). Two thirds of the Obamacare Co-ops have withdrawn and two more are threatening to leave. They could not continue to sustain financial losses while still meeting their obligations to their policy holders.

The Public Plan option raised in the President’s article is really just a single payer system. The plan was mentioned deep in the article and stated that Congress should consider it for those facing limited insurance market competition. As insurance companies bail out of this market, more people could become eligible for this option. Maybe that’s what the President wanted all along. Socialized medicine has been tried in other countries; it usually results in a two tiered system. Those who can afford to pay will be able to get timely and high quality care. Those who cannot afford to pay will be put on a waiting list and the care provided will be regulated by the government. I cannot be convinced that the government will be better at taking care of my patients than I am.

As with most medical journals, the authors and contributors have to disclose any conflicts of interest so the readers will have this information as they read the article. For this article, the conflict of interest disclosure sends the reader to a website:

This brings you to President Obama’s financial disclosure report; nothing is said about the other contributors.

Lawyers are trained to present the evidence that is most favorable for their client’s position. President Obama is a graduate of Harvard Law School. The jury is still out.



by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016. 

The Cadillac Tax

“It will be of little avail to the people…if laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.”  James Madison


When the Affordable Care Act (ACA) was passed in 2010, there was a provision to have an excise tax on high-cost employer sponsored health care plans. This tax, known as the “Cadillac tax” was to be 40% of the cost of health coverage that exceeds certain, predetermined threshold amounts. This tax was to go into effect in 2018. In the original law, this tax was to be non-tax deductible and it was to be permanent.


In calculating the tax, the cost of coverage was to include the total contributions paid by both the employer and the employees. However, cost sharing amounts such as co-pays and deductibles would not be used in the cost calculations.


The intent of the Cadillac tax was to reduce the tax preferred treatment of employer purchased health care insurance; reduce the overall health care spending which was manifest by these high cost plans, and to help finance the expansion of health care coverage of the ACA.


The tax was supposed to incentivize employers to pay their employees higher salaries or wages instead of compensating them with these desirable health care plans. The government could tax wages and salaries but they could not tax the health care plans prior to the ACA.


It was also claimed by those who were in support of the tax, that the expensive health care plans were more likely to be used by the people; they would be more inclined to visit the emergency room or their physicians when they might not need to. People act rationally; they are more likely to use something if they do not have to pay for it.


During the debates on the Affordable Care Act, Nancy Pelosi infamously proclaimed that the bill must be passed so that we can find out what’s in it (or words to that effect). She was being prescient. When it became known what benefits would be effected by the Cadillac tax there was significant movement to have it removed from the law.


On December 18, 2015, Congress passed and President Obama signed a two year delay of the Cadillac tax. With the change, the tax would not become effective until 2020 and the payments would be deductible for federal tax purposes.


The tax would be 40% of the cost of the health care insurance policy so long as the policy exceeded a predetermined amount. This predetermined amount is currently $10,200 for an individual policy and $27,500 for a family policy. However, these amounts are allowed to be raised before the tax takes effect in 2020. The tax will be indexed for inflation in future years which means it is only going up.


For people under 65 who are engaged in high risk professions, the threshold amounts are a little higher, $11,850 for individuals and $30, 950 for a family policy. These amounts may also go up prior to the tax going into effect and they will also be indexed for inflation in future years.


A recent survey done by the National Business Group on Health showed that about half of our nation’s largest companies have health plans that will reach the threshold by 2018 if measures fail to control rising costs. Three quarters of these companies are likely to reach the threshold by 2020.


Not surprisingly, republicans, employees and employers subject to the tax would like to see it removed from the ACA. What is a surprise is that unions and some democrats are in agreement that the tax should eliminated. Even President Obama agreed to sign off on the two year delay on implementation—this is actually the first significant change of Obamacare that he will sign off on.


Initially the Cadillac tax will affect the benefits of employees and union workers that already have generous plans. As the caps rise each year (remember, they are indexed to inflation), this tax will go up. As the tax goes up, it is foreseeable that the wages and salaries of those who have the plans, will go down. Or, if salaries do not go down, it is foreseeable that the benefits will be decreased, or in some cases, eliminated. Since the plans deductibles and out of pocket expenses are not subject to the Cadillac tax calculations, it is likely that these costs will rise.


Wellness programs, tax-free contributions to health savings accounts, and on-site health clinics, are all subject to health plan costs that are used in the Cadillac tax calculation. As such, they are likely to be removed from the plans even though they would be likely to decrease health care costs in the long run. Unions that have also been able to negotiate higher benefits in their health care plans (often at the cost of lower wages) would also be subject to changes in their health plan benefits. No wonder that President Obama and some democrats in Congress are willing to hold off on the Cadillac tax and let the next administration deal with its implications.


One of the key problems with the Cadillac tax in its present form is the link of the threshold to standard inflation. Historically, inflation of medical costs has exceeded standard inflation and there is every reason to think that this will continue. As the costs of the plans rise faster than the threshold, more plans will be subject to the Cadillac tax. The battle between what the provider’s bill and what the third party payers will be willing to pay will also continue.


Since the Cadillac Tax was supposed to help cover some of the costs for Obamacare, the two year delay will lead to increased deficits associated with the law. In fact, the Committee for a Responsible Federal Budget estimates that the delay will add over $90 billion to the federal deficit.


It’s hard to predict how people will react once this tax goes into effect. Will it change the way people see their health care providers? Will health care costs decrease as people will be less inclined to see their providers under the lesser plans? Will health care improve? Hard to believe that it will.


The two year delay in implementation will allow Congress to make adjustments such as by indexing to medical inflation. However, if a republican administration is elected to the Oval Office, then the postponement will likely become just the first step to repeal, not just of the Cadillac tax, but all of the Affordable Care Act.




by Darryl S. Weiman, M.D., J.D.

Professor, Cardiothoracic Surgery, University of Tennessee Health Science Center and Chief of Surgery, VAMC Memphis, TN

MORE ABOUT THE AUTHOR: Darryl Weiman is a featured expert in on February 17, 2016.