Here is a publication from the IRS called "Retirement News for Employers". However, it has excellent info for everyone.
http://www.irs.gov/pub/irs-tege/rne_fall09.pdf
Wednesday, November 25, 2009
Saturday, November 21, 2009
FAQ: guide to health care reform
http://news.yahoo.com/s/ynews/20091121/ts_ynews/ynews_ts992
If you've recently found yourself wondering, "What the heck is going on with the health care reform debate?", you're not alone. The American legislative process is unwieldy, and never more so than in the United States Senate. Now that the Senate voted Saturday to move its bill to a full debate, some big hurdles remain.
Because we think you may have some of the same questions we did, and the bill being discussed would constitute one of the most consequential reforms in a generation if passed, we thought we'd put together a quick primer on what to expect in the weeks to come.
So, what exactly happened Saturday?
Saturday night at 8 p.m. ET, Senate Majority Leader Harry Reid brought his proposed bill to the floor of the Senate for a procedural vote to kick off a full debate and amendment process. To get things started, he needed 60 votes for a "motion to proceed." He got them.
The big suspense was over whether or not the bill would be successfully filibustered by opponents who wanted to stop the bill from moving forward.
What the heck is a filibuster?
Saturday night's "motion to proceed" vote was the first time the process could be stopped by a filibuster. There are two more times remaining.
With a filibuster, Republicans can prevent a vote by extending debate indefinitely by, for example, reading Sarah Palin's new book over and over and over again and refusing to stop. To bypass a hypothetical "Going Rogue" loop, Harry Reid needs 60 senators to vote to end any filibuster. This is called a "cloture" vote.
After Saturday, opponents will get their next chance to filibuster when the Senate votes to end full debate and send the bill to its final phase.
Who would filibuster and why?
Excluding the outside possibility that Olympia Snowe would break ranks, all 40 Republicans would likely support a filibuster. So, to prevent Democrats from getting the 60 votes necessary to break one, only one Democrat or independent would need to defect.
The most likely suspects for this are independent Joe Lieberman and conservative Democrats Mary Landrieu, Ben Nelson, and Blanche Lincoln. Recent speculation has focused on Lincoln, who faces low approval numbers in conservative Arkansas and an upcoming re-election bid in 2010. Nelson and Landrieu are also both from conservative states, though neither is up for re-election in 2010. Lieberman is not up for re-election and is from more liberal Connecticut, but may be influenced by the large insurance industry presence in his state.
What happens if the Senate does pass a bill?
After weeks of speeches and amendments and filibuster threats, if the Senate passes a bill, it moves on to a "conference committee." Here, members of both the House and the Senate will negotiate over the final details while trying to merge the bill passed by the House with the bill passed by the Senate.
All the hot-button issues will be on the table. If the Senate passes a bill without a "Public Option" it will need to be debated again. Many House Democrats want the controversial Stupak Amendment, which bans funding or subsidies for any insurance plan that funds abortion, removed in conference.
If these issues are ironed out, the committee will create a "conference report," or final bill, that will need to be passed yet again by both the House and the Senate. Yet again this vote in the Senate can be filibustered, so any ''conference report'' will need the support of 60 senators one last time.
If the "conference report" is passed in both houses of Congress, it will be sent to President Obama's desk for his likely signature.
When will all of this be over?
Up until last week, few people thought that this process could be completed by the end of the year. But the Senate Democrat's bill recently received positive feedback from the Congressional Budget Office, the nonpartisan federal agency that advises Congress on financial matters. This has led some political observers to think that maybe, just maybe, Americans will know whether or not their country's health care system will be dramatically overhauled in time for the holidays.
-- Thomas Kelley and Brett Michael Dykes are contributors to the Yahoo! News blog
If you've recently found yourself wondering, "What the heck is going on with the health care reform debate?", you're not alone. The American legislative process is unwieldy, and never more so than in the United States Senate. Now that the Senate voted Saturday to move its bill to a full debate, some big hurdles remain.
Because we think you may have some of the same questions we did, and the bill being discussed would constitute one of the most consequential reforms in a generation if passed, we thought we'd put together a quick primer on what to expect in the weeks to come.
So, what exactly happened Saturday?
Saturday night at 8 p.m. ET, Senate Majority Leader Harry Reid brought his proposed bill to the floor of the Senate for a procedural vote to kick off a full debate and amendment process. To get things started, he needed 60 votes for a "motion to proceed." He got them.
The big suspense was over whether or not the bill would be successfully filibustered by opponents who wanted to stop the bill from moving forward.
What the heck is a filibuster?
Saturday night's "motion to proceed" vote was the first time the process could be stopped by a filibuster. There are two more times remaining.
With a filibuster, Republicans can prevent a vote by extending debate indefinitely by, for example, reading Sarah Palin's new book over and over and over again and refusing to stop. To bypass a hypothetical "Going Rogue" loop, Harry Reid needs 60 senators to vote to end any filibuster. This is called a "cloture" vote.
After Saturday, opponents will get their next chance to filibuster when the Senate votes to end full debate and send the bill to its final phase.
Who would filibuster and why?
Excluding the outside possibility that Olympia Snowe would break ranks, all 40 Republicans would likely support a filibuster. So, to prevent Democrats from getting the 60 votes necessary to break one, only one Democrat or independent would need to defect.
The most likely suspects for this are independent Joe Lieberman and conservative Democrats Mary Landrieu, Ben Nelson, and Blanche Lincoln. Recent speculation has focused on Lincoln, who faces low approval numbers in conservative Arkansas and an upcoming re-election bid in 2010. Nelson and Landrieu are also both from conservative states, though neither is up for re-election in 2010. Lieberman is not up for re-election and is from more liberal Connecticut, but may be influenced by the large insurance industry presence in his state.
What happens if the Senate does pass a bill?
After weeks of speeches and amendments and filibuster threats, if the Senate passes a bill, it moves on to a "conference committee." Here, members of both the House and the Senate will negotiate over the final details while trying to merge the bill passed by the House with the bill passed by the Senate.
All the hot-button issues will be on the table. If the Senate passes a bill without a "Public Option" it will need to be debated again. Many House Democrats want the controversial Stupak Amendment, which bans funding or subsidies for any insurance plan that funds abortion, removed in conference.
If these issues are ironed out, the committee will create a "conference report," or final bill, that will need to be passed yet again by both the House and the Senate. Yet again this vote in the Senate can be filibustered, so any ''conference report'' will need the support of 60 senators one last time.
If the "conference report" is passed in both houses of Congress, it will be sent to President Obama's desk for his likely signature.
When will all of this be over?
Up until last week, few people thought that this process could be completed by the end of the year. But the Senate Democrat's bill recently received positive feedback from the Congressional Budget Office, the nonpartisan federal agency that advises Congress on financial matters. This has led some political observers to think that maybe, just maybe, Americans will know whether or not their country's health care system will be dramatically overhauled in time for the holidays.
-- Thomas Kelley and Brett Michael Dykes are contributors to the Yahoo! News blog
Friday, November 20, 2009
Key Provisions of the Senate Health Care Bill
http://www.cbsnews.com/blogs/2009/11/19/politics/politicalhotsheet/entry5713730.shtml
This post was written by CBS News correspondent Nancy Cordes and CBS News producer John Nolen
Senate Majority Leader Harry Reid unveiled his health care proposal "The Patient Protection and Affordable Care Act" on Wednesday night.
The Congressional Budget Office says the bill would cost $848 billion dollars over 10 years, reduce the deficit by $130 billion and would extend coverage to 94 percent of eligible Americans, reducing the number of uninsured individuals by 31 million leaving about 24 million people uninsured.
Here's a look at some of the key provisions of the bill:
• Effective Date 2014
• Requires most individuals to purchase coverage through their employer, privately or through a public plan. Includes exemptions for economic hardships. Fines for individuals not complying would start at $95 in 2014 phased-in over time up to $750.
• Creates a new public federal health insurance plan, the so-called "public option" which would compete with private insurers. States would have the choice of opting out by passing a state law.
• Establishes Health Insurance Exchanges, a marketplace where individuals, small businesses and others could purchase health care coverage.
• Insurance companies could not refuse coverage based on pre-existing condition. Would not allow higher premiums for pre-existing conditions or based on gender.
• Allows children to stay on their parents plan up to age 26.
• There's no employer mandate, but fines are paid by companies if the government subsidizes employees coverage.
• Extends tax credits to individuals and families earning up to 400 percent of the poverty level, on a sliding scale depending on income. On the low end of the scale Americans would pay no more than 2 percent of their income on premiums, rising to 9.8 percent at the high end of the scale.
• Forty percent Tax on high premium insurance plans, so-called "Cadillac" plans, those plans costing over $8,500 for individuals and $23,000 for families.
• Creates a new 5 percent tax on elective Cosmetic Surgery
• Increases Medicare payroll taxes by one-half percent to 1.95 percent for individuals earning more than $200,000 or couples earning more than $250,000.
• Limitations on Health flexible spending accounts, capping annual contributions at $2,500.
• Provides for one year additional $500 dollars for seniors before hitting the Medicare donut hole, but does not close the donut hole.
• Expands Medicaid program for low – income people from 100 percent of poverty level to 133 percent of poverty level.
• Immigrants in the country illegally would not receive health care subsidies, nor would they be able to obtain insurance through an insurance exchange.
This post was written by CBS News correspondent Nancy Cordes and CBS News producer John Nolen
Senate Majority Leader Harry Reid unveiled his health care proposal "The Patient Protection and Affordable Care Act" on Wednesday night.
The Congressional Budget Office says the bill would cost $848 billion dollars over 10 years, reduce the deficit by $130 billion and would extend coverage to 94 percent of eligible Americans, reducing the number of uninsured individuals by 31 million leaving about 24 million people uninsured.
Here's a look at some of the key provisions of the bill:
• Effective Date 2014
• Requires most individuals to purchase coverage through their employer, privately or through a public plan. Includes exemptions for economic hardships. Fines for individuals not complying would start at $95 in 2014 phased-in over time up to $750.
• Creates a new public federal health insurance plan, the so-called "public option" which would compete with private insurers. States would have the choice of opting out by passing a state law.
• Establishes Health Insurance Exchanges, a marketplace where individuals, small businesses and others could purchase health care coverage.
• Insurance companies could not refuse coverage based on pre-existing condition. Would not allow higher premiums for pre-existing conditions or based on gender.
• Allows children to stay on their parents plan up to age 26.
• There's no employer mandate, but fines are paid by companies if the government subsidizes employees coverage.
• Extends tax credits to individuals and families earning up to 400 percent of the poverty level, on a sliding scale depending on income. On the low end of the scale Americans would pay no more than 2 percent of their income on premiums, rising to 9.8 percent at the high end of the scale.
• Forty percent Tax on high premium insurance plans, so-called "Cadillac" plans, those plans costing over $8,500 for individuals and $23,000 for families.
• Creates a new 5 percent tax on elective Cosmetic Surgery
• Increases Medicare payroll taxes by one-half percent to 1.95 percent for individuals earning more than $200,000 or couples earning more than $250,000.
• Limitations on Health flexible spending accounts, capping annual contributions at $2,500.
• Provides for one year additional $500 dollars for seniors before hitting the Medicare donut hole, but does not close the donut hole.
• Expands Medicaid program for low – income people from 100 percent of poverty level to 133 percent of poverty level.
• Immigrants in the country illegally would not receive health care subsidies, nor would they be able to obtain insurance through an insurance exchange.
$4.8 trillion - Interest on U.S. debt
How can the U.S. afford yet another entitlement program? It needs to recognize America is a poor country.
http://money.cnn.com/2009/11/19/news/economy/debt_interest/index.htm
Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels.
By Jeanne Sahadi, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest.
More than half. In fact, $4.8 trillion.
If that's hard to grasp, here's another way to look at why that's a problem.
In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.
On the bright side - such as it is - the record levels of debt issued lately have paid for stimulus and other rescue programs that prevented the economy from falling off a cliff. And the money was borrowed at very low rates.
But accumulating any more interest on what the United States owes at this point is like extreme sport: dangerous.
All the more so because interest rates will rise when private sector borrowers return to the debt market and compete with the government for capital. At that point, the country's interest payments could jack up very fast.
"When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt," Konigsberg said.
The Congressional Budget Office, which made the $4.8 trillion forecast, already baked some increase in rates into the cake. But there is always a chance those estimates may prove too conservative.
And then it's Vicious Circle 101 - well known to anyone who has gotten too into hock with Visa and MasterCard.
The country depends heavily on borrowing to fund what it wants to do. But the more debt it racks up, the more likely it becomes that creditors could demand a higher interest rate for making new loans to the government.
Higher rates in turn make it harder to pay off the underlying debt because more and more money is going to pay off interest - money, by the way, which is also borrowed.
And as more money goes to interest, creditors may become concerned that the country can't pay down its principal and lawmakers will have less to fund all the things government is supposed to do.
"[P]olicymakers would be less able to pay for other national spending priorities and would have less flexibility to deal with unexpected developments (such as a war or recession). Moreover, rising interest costs would make the economy more vulnerable to a meltdown in financial markets," the CBO wrote in its most recent long-term budget outlook.
So far, that crisis of confidence hasn't happened. And no one can predict with any certainty whether or when it could occur.
But should it occur, the change could be abrupt.
That's because the government frequently rolls over - or refinances - the debt it has issued as it comes due.
In other words, when a Treasury bond or note matures, the government must pay the investor the face value on that debt. In order to do that, the Treasury borrows money to pay back the investor, which means the debt would be refinanced at whatever the going interest rates are at the time.
Just how much churn is there? Of late, a fair bit it seems. A Treasury borrowing advisory committee reported in early November that "approximately 40 percent of the debt will need to be refinanced in less than one year."
Since rates may well stay low over the next year, it's possible that debt could be refinanced at the same or even lower rates. But that situation won't last forever.
So what will Washington do?
To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues. That way the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time.
And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected.
If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don't increase as much as CBO expects.
"There will be less debt outstanding than if we don't get the deficit down. It may also reduce [the average interest rate on the debt] since less debt means less pressure on interest rates," said William Gale, co-director of the Tax Policy Center.
But whether they can do that within a few years of an economic recovery is another matter. "Even under the president's [2010] budget as evaluated by the CBO we do not get anywhere close to that," Gale said.
That could mean the president's 2011 budget proposals would have to make a lot of changes to get closer to the 3% goal. Unpopular changes like tax hikes and spending cuts.
Budget hawks hope the president will push for a deficit-reduction commission to come up with ways to cut the deficit and then propose legislation that lawmakers would only be able to vote for or against. The reason: There is no political will to make the tough calls. Especially in a mid-term election year.
First Published: November 19, 2009: 11:58 AM ET
http://money.cnn.com/2009/11/19/news/economy/debt_interest/index.htm
Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels.
By Jeanne Sahadi, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) -- Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest.
More than half. In fact, $4.8 trillion.
If that's hard to grasp, here's another way to look at why that's a problem.
In 2015 alone, the estimated interest due - $533 billion - is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.
On the bright side - such as it is - the record levels of debt issued lately have paid for stimulus and other rescue programs that prevented the economy from falling off a cliff. And the money was borrowed at very low rates.
But accumulating any more interest on what the United States owes at this point is like extreme sport: dangerous.
All the more so because interest rates will rise when private sector borrowers return to the debt market and compete with the government for capital. At that point, the country's interest payments could jack up very fast.
"When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt," Konigsberg said.
The Congressional Budget Office, which made the $4.8 trillion forecast, already baked some increase in rates into the cake. But there is always a chance those estimates may prove too conservative.
And then it's Vicious Circle 101 - well known to anyone who has gotten too into hock with Visa and MasterCard.
The country depends heavily on borrowing to fund what it wants to do. But the more debt it racks up, the more likely it becomes that creditors could demand a higher interest rate for making new loans to the government.
Higher rates in turn make it harder to pay off the underlying debt because more and more money is going to pay off interest - money, by the way, which is also borrowed.
And as more money goes to interest, creditors may become concerned that the country can't pay down its principal and lawmakers will have less to fund all the things government is supposed to do.
"[P]olicymakers would be less able to pay for other national spending priorities and would have less flexibility to deal with unexpected developments (such as a war or recession). Moreover, rising interest costs would make the economy more vulnerable to a meltdown in financial markets," the CBO wrote in its most recent long-term budget outlook.
So far, that crisis of confidence hasn't happened. And no one can predict with any certainty whether or when it could occur.
But should it occur, the change could be abrupt.
That's because the government frequently rolls over - or refinances - the debt it has issued as it comes due.
In other words, when a Treasury bond or note matures, the government must pay the investor the face value on that debt. In order to do that, the Treasury borrows money to pay back the investor, which means the debt would be refinanced at whatever the going interest rates are at the time.
Just how much churn is there? Of late, a fair bit it seems. A Treasury borrowing advisory committee reported in early November that "approximately 40 percent of the debt will need to be refinanced in less than one year."
Since rates may well stay low over the next year, it's possible that debt could be refinanced at the same or even lower rates. But that situation won't last forever.
So what will Washington do?
To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues. That way the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time.
And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected.
If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don't increase as much as CBO expects.
"There will be less debt outstanding than if we don't get the deficit down. It may also reduce [the average interest rate on the debt] since less debt means less pressure on interest rates," said William Gale, co-director of the Tax Policy Center.
But whether they can do that within a few years of an economic recovery is another matter. "Even under the president's [2010] budget as evaluated by the CBO we do not get anywhere close to that," Gale said.
That could mean the president's 2011 budget proposals would have to make a lot of changes to get closer to the 3% goal. Unpopular changes like tax hikes and spending cuts.
Budget hawks hope the president will push for a deficit-reduction commission to come up with ways to cut the deficit and then propose legislation that lawmakers would only be able to vote for or against. The reason: There is no political will to make the tough calls. Especially in a mid-term election year.
First Published: November 19, 2009: 11:58 AM ET
Thursday, November 19, 2009
Germany's health care ailments
http://blogs.wsj.com/health/2009/11/18/germanys-health-care-suffers-from-some-familiar-ailments/
By James A. White
Rising medical costs, higher unemployment and a rapidly aging population are putting the health-care system under tremendous financial strain. This all sounds close to home but a story in today’s WSJ says those problems are confronting health care in Germany, whose system is often held up as one of the world’s models.
Costs in the German system are shared between employers and workers, whose premiums are pegged to income, the paper reports. Everyone is obliged to pay into the plan — the world’s oldest publicly sponsored health-care system that dates back to Bismark in 1883 — and the government is looking to boosting employee contributions to cover a $11.1 billion shortfall expected next year, according to the WSJ.
But that’s only a short-term answer. “Germans already pay 8% of their gross wages into the centralized health-care pot, while their employers contribute an amount equal to 7% of gross wages,” the paper reports. Longer term, analysts expect Germany will be forced to make painful cuts to the system.
“Yet in a country where quality universal health care is considered a basic right, such proposals are extremely controversial,” the WSJ says. Contrast that with overhaul efforts going the other way in the U.S., where proposals to extend health-care coverage to more Americans are proving extremely controversial as well.
__________
More on Germany's universal heath care system's financial problems:
http://online.wsj.com/article/SB125849684108252695.html
http://online.wsj.com/article/SB125495456609471843.html
http://online.wsj.com/article/SB125615781934399715.html
By James A. White
Rising medical costs, higher unemployment and a rapidly aging population are putting the health-care system under tremendous financial strain. This all sounds close to home but a story in today’s WSJ says those problems are confronting health care in Germany, whose system is often held up as one of the world’s models.
Costs in the German system are shared between employers and workers, whose premiums are pegged to income, the paper reports. Everyone is obliged to pay into the plan — the world’s oldest publicly sponsored health-care system that dates back to Bismark in 1883 — and the government is looking to boosting employee contributions to cover a $11.1 billion shortfall expected next year, according to the WSJ.
But that’s only a short-term answer. “Germans already pay 8% of their gross wages into the centralized health-care pot, while their employers contribute an amount equal to 7% of gross wages,” the paper reports. Longer term, analysts expect Germany will be forced to make painful cuts to the system.
“Yet in a country where quality universal health care is considered a basic right, such proposals are extremely controversial,” the WSJ says. Contrast that with overhaul efforts going the other way in the U.S., where proposals to extend health-care coverage to more Americans are proving extremely controversial as well.
__________
More on Germany's universal heath care system's financial problems:
http://online.wsj.com/article/SB125849684108252695.html
http://online.wsj.com/article/SB125495456609471843.html
http://online.wsj.com/article/SB125615781934399715.html
Wednesday, November 18, 2009
Improper US Government Payments Hit $98 Billion
It's about time the federal government looks into improper payments and fraudulent claims. But for Office of Management and Budget Director Peter Orszag to say "This is one of the reasons why, as part of health reform, we believe there are crucial changes necessary to the Medicare Advantage program" seems far fetched. As written on page 50 of the 2010 Medicare & You, care providers under Medicare Advantage are paid a flat amount each month with no additional reimbursements. So how could abolishing Medicare Advantage reduce fraudulent claims?
By: Reuters
Improper payments by the U.S. government to people, firms and contractors rose sharply to $98 billion in fiscal 2009 and President Barack Obama plans new rules to clamp down, the White House said Tuesday.
Over half the mistakes were made in the Medicare and Medicaid programs, and although some of the deterioration reflected stricter measurement, it also showed the need for healthcare reform, Office of Management and Budget Director Peter Orszag told reporters.
Improper payments in the Medicare and Medicaid programs totaled $55 billion in fiscal 2009, according to documents provided by OMB.
Medicare covers healthcare for the elderly and some disabled, while Medicaid does the same for the poor.
Orszag said the error rate for payments under Medicare Advantage, where private insurers offer coverage to Medicare beneficiaries, jumped to 15 percent, or to $12 billion, in fiscal 2009. The error rate was 10 percent in fiscal 2008.
"This was not the result of methodological changes. This is one of the reasons why, as part of health reform, we believe there are crucial changes necessary to the Medicare Advantage program," he said on a telephone conference call.
Obama has made overhaul of the $2.5 trillion U.S. healthcare industry his top domestic policy goal, pledging to expand medical coverage to millions of the uninsured and make healthcare more affordable.
Orszag stressed that tougher measurement, as well as higher government spending due to the recession, explained a big part of the jump in government waste.
The government made improper payments of $72 billion in the 2008 financial year. Fraud may also be partly to blame.
But Orszag stressed that the lack of tools to identify how much fell into this category made it impossible to estimate the size of the problem.
One exception to this rule was fraud connected with improper payments under unemployment insurance, which OMB said added up to around one-fifth of the $12 billion in improper payments in that program.
Obama will sign a new executive order within a week to improve transparency and to encourage people to play straight, Orszag said.
Part of this effort will aim to explore imposing penalties on anyone who knowingly gets an improper payment — for instance if they get paid twice for the same thing.
At the moment, all recipients have to do is return the money.
"It goes without saying that these results would be completely unacceptable in the private sector, as they should be in government, especially at a time of record deficits," said Democratic Senator Tom Carper, chairman of the Senate subcommittee on federal financial management.
"Unfortunately, these numbers may still be just the tip of the iceberg since they don't even include estimates for several major programs, including the Medicare prescription drug plan," Carper said in a statement.
http://www.medicare.gov/publications/pubs/pdf/10050.pdfhttp://www.cnbc.com/id/34009267
"Medicare pays a fixed amount for your care every month to the companies offering Medicare Advantage Plans."
By: Reuters
Improper payments by the U.S. government to people, firms and contractors rose sharply to $98 billion in fiscal 2009 and President Barack Obama plans new rules to clamp down, the White House said Tuesday.
Over half the mistakes were made in the Medicare and Medicaid programs, and although some of the deterioration reflected stricter measurement, it also showed the need for healthcare reform, Office of Management and Budget Director Peter Orszag told reporters.
Improper payments in the Medicare and Medicaid programs totaled $55 billion in fiscal 2009, according to documents provided by OMB.
Medicare covers healthcare for the elderly and some disabled, while Medicaid does the same for the poor.
Orszag said the error rate for payments under Medicare Advantage, where private insurers offer coverage to Medicare beneficiaries, jumped to 15 percent, or to $12 billion, in fiscal 2009. The error rate was 10 percent in fiscal 2008.
"This was not the result of methodological changes. This is one of the reasons why, as part of health reform, we believe there are crucial changes necessary to the Medicare Advantage program," he said on a telephone conference call.
Obama has made overhaul of the $2.5 trillion U.S. healthcare industry his top domestic policy goal, pledging to expand medical coverage to millions of the uninsured and make healthcare more affordable.
Orszag stressed that tougher measurement, as well as higher government spending due to the recession, explained a big part of the jump in government waste.
The government made improper payments of $72 billion in the 2008 financial year. Fraud may also be partly to blame.
But Orszag stressed that the lack of tools to identify how much fell into this category made it impossible to estimate the size of the problem.
One exception to this rule was fraud connected with improper payments under unemployment insurance, which OMB said added up to around one-fifth of the $12 billion in improper payments in that program.
Obama will sign a new executive order within a week to improve transparency and to encourage people to play straight, Orszag said.
Part of this effort will aim to explore imposing penalties on anyone who knowingly gets an improper payment — for instance if they get paid twice for the same thing.
At the moment, all recipients have to do is return the money.
"It goes without saying that these results would be completely unacceptable in the private sector, as they should be in government, especially at a time of record deficits," said Democratic Senator Tom Carper, chairman of the Senate subcommittee on federal financial management.
"Unfortunately, these numbers may still be just the tip of the iceberg since they don't even include estimates for several major programs, including the Medicare prescription drug plan," Carper said in a statement.
Tuesday, November 17, 2009
Stimulus surprise: 15 million may owe IRS
http://money.cnn.com/2009/11/17/pf/taxes/making_work_pay/index.htm
Treasury report estimates many may be getting paid more of the Making Work Pay credit than they should. Their refunds may be cut or they'll have to cough up the overpaid amount.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: November 17, 2009: 9:45 AM ET
NEW YORK (CNNMoney.com) -- Nothing with taxes is ever simple, even when you're getting a tax break.
An estimated 15.4 million tax filers may be getting paid more of the Making Work Pay credit than they should, according to a report from a Treasury Department inspector general publicly released Monday.
And that means they either will get less of a refund than they expected, or will actually owe money to the IRS on their 2009 taxes.
The IRS said in a written response to the report that the agency believes far fewer people than the inspector general estimates would be affected, and that the majority who might be would see less of a refund but would not have an out-of-pocket tax liability come April 15.
The taxpayers most vulnerable are those in two-earner couples; those who have dependents who earn wages; single or married filers who have more than one job at the same time; and filers who get pension payments or have a job and receive Social Security benefits.
The Making Work Pay credit, created as part of the stimulus legislation enacted in February, is equal to 6.2% of earnings up to $400 per person (or up to $800 per couples who file jointly). The full credit is paid to people making $75,000 or less ($150,000 per couple per household). A partial credit would be paid to those making above those amounts but no more than $95,000 ($190,000 for couples per household).
Bailout Tracker: Understand the rescues
For most who qualify, the 2009 credit is being paid in advance incrementally through their paychecks. And it's been automatic - meaning employers, based on what they know of a worker's income and using IRS withholding tables, automatically reduce the amount of taxes withheld from a worker's paycheck.
But an employer doesn't know the income of the worker's spouse or whether the worker is claiming a dependent who also is earning money, or whether the worker has income from other jobs.
So, for instance, two spouses might be receiving the full credit at their jobs when their joint income only qualifies them for a partial credit or none at all. Another scenario: A single person with more than one job might be receiving the full credit at each of his jobs, when in fact he's only entitled to $400 total.
You get the picture.
Such taxpayers could have increased their withholding to account for the possibility that they might receive more of the credit than they should. Indeed, when the credit was first passed, the IRS put out statements and created a calculator to help taxpayers in such situations figure out how much tax they should have withheld. But that doesn't mean that everyone did.
Those who have had too little tax withheld this year will either face a reduced refund or owe money to the IRS. The money primarily would be the amount of the credit overpaid to them. But a much smaller group might also owe a penalty if they were significantly underwithheld.
"More than 1.2 million taxpayers included in these groups may be subject to: 1) paying back some or all of the Making Work Pay Credit and 2) being assessed the estimated tax penalty or an increased estimated tax penalty as a direct result of the Making Work Pay Credit," the inspector general's report said.
The good news is that the IRS is likely to waive penalties for filers who may have to pay an estimated tax penalty or who would see their estimated penalty increased as a result of the Making Work Pay credit, according to the report.
The inspector general's report also recommended that the IRS embark on an expanded effort to publicize this issue more and specifically target the message to those tax filers most likely to be affected. To top of page
First Published: November 17, 2009: 3:55 AM ET
Treasury report estimates many may be getting paid more of the Making Work Pay credit than they should. Their refunds may be cut or they'll have to cough up the overpaid amount.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: November 17, 2009: 9:45 AM ET
NEW YORK (CNNMoney.com) -- Nothing with taxes is ever simple, even when you're getting a tax break.
An estimated 15.4 million tax filers may be getting paid more of the Making Work Pay credit than they should, according to a report from a Treasury Department inspector general publicly released Monday.
And that means they either will get less of a refund than they expected, or will actually owe money to the IRS on their 2009 taxes.
The IRS said in a written response to the report that the agency believes far fewer people than the inspector general estimates would be affected, and that the majority who might be would see less of a refund but would not have an out-of-pocket tax liability come April 15.
The taxpayers most vulnerable are those in two-earner couples; those who have dependents who earn wages; single or married filers who have more than one job at the same time; and filers who get pension payments or have a job and receive Social Security benefits.
The Making Work Pay credit, created as part of the stimulus legislation enacted in February, is equal to 6.2% of earnings up to $400 per person (or up to $800 per couples who file jointly). The full credit is paid to people making $75,000 or less ($150,000 per couple per household). A partial credit would be paid to those making above those amounts but no more than $95,000 ($190,000 for couples per household).
Bailout Tracker: Understand the rescues
For most who qualify, the 2009 credit is being paid in advance incrementally through their paychecks. And it's been automatic - meaning employers, based on what they know of a worker's income and using IRS withholding tables, automatically reduce the amount of taxes withheld from a worker's paycheck.
But an employer doesn't know the income of the worker's spouse or whether the worker is claiming a dependent who also is earning money, or whether the worker has income from other jobs.
So, for instance, two spouses might be receiving the full credit at their jobs when their joint income only qualifies them for a partial credit or none at all. Another scenario: A single person with more than one job might be receiving the full credit at each of his jobs, when in fact he's only entitled to $400 total.
You get the picture.
Such taxpayers could have increased their withholding to account for the possibility that they might receive more of the credit than they should. Indeed, when the credit was first passed, the IRS put out statements and created a calculator to help taxpayers in such situations figure out how much tax they should have withheld. But that doesn't mean that everyone did.
Those who have had too little tax withheld this year will either face a reduced refund or owe money to the IRS. The money primarily would be the amount of the credit overpaid to them. But a much smaller group might also owe a penalty if they were significantly underwithheld.
"More than 1.2 million taxpayers included in these groups may be subject to: 1) paying back some or all of the Making Work Pay Credit and 2) being assessed the estimated tax penalty or an increased estimated tax penalty as a direct result of the Making Work Pay Credit," the inspector general's report said.
The good news is that the IRS is likely to waive penalties for filers who may have to pay an estimated tax penalty or who would see their estimated penalty increased as a result of the Making Work Pay credit, according to the report.
The inspector general's report also recommended that the IRS embark on an expanded effort to publicize this issue more and specifically target the message to those tax filers most likely to be affected. To top of page
First Published: November 17, 2009: 3:55 AM ET
Monday, November 16, 2009
Report: Bill would reduce senior care
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/14/AR2009111402597.html
By Lori Montgomery
Washington Post Staff Writer
Sunday, November 15, 2009
A plan to slash more than $500 billion from future Medicare spending -- one of the biggest sources of funding for President Obama's proposed overhaul of the nation's health-care system -- would sharply reduce benefits for some senior citizens and could jeopardize access to care for millions of others, according to a government evaluation released Saturday.
The report, requested by House Republicans, found that Medicare cuts contained in the health package approved by the House on Nov. 7 are likely to prove so costly to hospitals and nursing homes that they could stop taking Medicare altogether.
Congress could intervene to avoid such an outcome, but "so doing would likely result in significantly smaller actual savings" than is currently projected, according to the analysis by the chief actuary for the agency that administers Medicare and Medicaid. That would wipe out a big chunk of the financing for the health-care reform package, which is projected to cost $1.05 trillion over the next decade.
More generally, the report questions whether the country's network of doctors and hospitals would be able to cope with the effects of a reform package expected to add more than 30 million people to the ranks of the insured, many of them through Medicaid, the public health program for the poor.
In the face of greatly increased demand for services, providers are likely to charge higher fees or take patients with better-paying private insurance over Medicaid recipients, "exacerbating existing access problems" in that program, according to the report from Richard S. Foster of the Centers for Medicare and Medicaid Services.
Though the report does not attempt to quantify that impact, Foster writes: "It is reasonable to expect that a significant portion of the increased demand for Medicaid would not be realized."
The report offers the clearest and most authoritative assessment to date of the effect that Democratic health reform proposals would have on Medicare and Medicaid, the nation's largest public health programs. It analyzes the House bill, but the Senate is also expected to rely on hundreds of billions of dollars in Medicare cuts to finance the package that Majority Leader Harry M. Reid (D-Nev.) hopes to take to the floor this week. Like the House, the Senate is expected to propose adding millions of people to Medicaid.
The Centers for Medicare and Medicaid Services administers the two health-care programs. Foster's office acts as an independent technical adviser, serving both the administration and Congress. In that sense, it is similar to the nonpartisan Congressional Budget Office, which also has questioned the sustainability of proposed Medicare cuts.
In its most recent analysis of the House bill, the CBO noted that Medicare spending per beneficiary would have to grow at roughly half the rate it has over the past two decades to meet the measure's savings targets, a dramatic reduction that many budget and health policy experts consider unrealistic.
"This report confirms what virtually every independent expert has been saying: [House] Speaker [Nancy] Pelosi's health-care bill will increase costs, not decrease them," said Rep. Dave Camp (Mich.), the senior Republican on the House Ways and Means Committee. "This is a stark warning to every Republican, Democrat and independent worried about the financial future of this nation."
Democrats focused Saturday on the positive aspects of the report, noting that Foster concludes that overall national spending on health care would increase by a little more than 1 percent over the next decade, even though millions of additional people would gain insurance. Out-of-pocket spending would decline more than $200 billion by 2019, with the government picking up much of that. The Medicare savings, if they materialized, would extend the life of that program by five years, meaning it would not begin to require cash infusions until 2022.
"The president has made it clear that health insurance reform will protect and strengthen Medicare," said White House spokeswoman Linda Douglass. "And he has also made clear that no guaranteed Medicare benefits will be cut."
Republicans argued that the report forecasts an increase in total health-care spending of more than $289 billion.
__________
For more, read these Post columns:
http://voices.washingtonpost.com/ezra-klein/2009/11/cms_house_bill_great_on_covera.html
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/14/AR2009111402278.html
By Lori Montgomery
Washington Post Staff Writer
Sunday, November 15, 2009
A plan to slash more than $500 billion from future Medicare spending -- one of the biggest sources of funding for President Obama's proposed overhaul of the nation's health-care system -- would sharply reduce benefits for some senior citizens and could jeopardize access to care for millions of others, according to a government evaluation released Saturday.
The report, requested by House Republicans, found that Medicare cuts contained in the health package approved by the House on Nov. 7 are likely to prove so costly to hospitals and nursing homes that they could stop taking Medicare altogether.
Congress could intervene to avoid such an outcome, but "so doing would likely result in significantly smaller actual savings" than is currently projected, according to the analysis by the chief actuary for the agency that administers Medicare and Medicaid. That would wipe out a big chunk of the financing for the health-care reform package, which is projected to cost $1.05 trillion over the next decade.
More generally, the report questions whether the country's network of doctors and hospitals would be able to cope with the effects of a reform package expected to add more than 30 million people to the ranks of the insured, many of them through Medicaid, the public health program for the poor.
In the face of greatly increased demand for services, providers are likely to charge higher fees or take patients with better-paying private insurance over Medicaid recipients, "exacerbating existing access problems" in that program, according to the report from Richard S. Foster of the Centers for Medicare and Medicaid Services.
Though the report does not attempt to quantify that impact, Foster writes: "It is reasonable to expect that a significant portion of the increased demand for Medicaid would not be realized."
The report offers the clearest and most authoritative assessment to date of the effect that Democratic health reform proposals would have on Medicare and Medicaid, the nation's largest public health programs. It analyzes the House bill, but the Senate is also expected to rely on hundreds of billions of dollars in Medicare cuts to finance the package that Majority Leader Harry M. Reid (D-Nev.) hopes to take to the floor this week. Like the House, the Senate is expected to propose adding millions of people to Medicaid.
The Centers for Medicare and Medicaid Services administers the two health-care programs. Foster's office acts as an independent technical adviser, serving both the administration and Congress. In that sense, it is similar to the nonpartisan Congressional Budget Office, which also has questioned the sustainability of proposed Medicare cuts.
In its most recent analysis of the House bill, the CBO noted that Medicare spending per beneficiary would have to grow at roughly half the rate it has over the past two decades to meet the measure's savings targets, a dramatic reduction that many budget and health policy experts consider unrealistic.
"This report confirms what virtually every independent expert has been saying: [House] Speaker [Nancy] Pelosi's health-care bill will increase costs, not decrease them," said Rep. Dave Camp (Mich.), the senior Republican on the House Ways and Means Committee. "This is a stark warning to every Republican, Democrat and independent worried about the financial future of this nation."
Democrats focused Saturday on the positive aspects of the report, noting that Foster concludes that overall national spending on health care would increase by a little more than 1 percent over the next decade, even though millions of additional people would gain insurance. Out-of-pocket spending would decline more than $200 billion by 2019, with the government picking up much of that. The Medicare savings, if they materialized, would extend the life of that program by five years, meaning it would not begin to require cash infusions until 2022.
"The president has made it clear that health insurance reform will protect and strengthen Medicare," said White House spokeswoman Linda Douglass. "And he has also made clear that no guaranteed Medicare benefits will be cut."
Republicans argued that the report forecasts an increase in total health-care spending of more than $289 billion.
__________
For more, read these Post columns:
http://voices.washingtonpost.com/ezra-klein/2009/11/cms_house_bill_great_on_covera.html
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/14/AR2009111402278.html
AP Poll: Fine print in health care prompts worries
http://news.yahoo.com/s/ap/20091116/ap_on_bi_ge/us_ap_poll_health_care
By RICARDO ALONSO-ZALDIVAR and TREVOR TOMPSON, Associated Press Writers – Mon Nov 16, 7:15 am ET
WASHINGTON – What's it going to cost me?
Americans are worried about the fine print in the health care overhaul, an Associated Press poll says, and those concerns are creating new challenges for President Barack Obama as he tries to overcome doubts in Congress.
Despite a widely shared conviction that major health care changes are needed, Democratic bills that aim to extend coverage to the uninsured and hold down medical costs get no better than a lukewarm reception in the latest results.
The poll found that 43 percent of Americans oppose the health care plans being discussed in Congress, while 41 percent are in support. An additional 15 percent remain neutral or undecided.
There has been little change in that broad public sentiment about the overhaul plan from a 40-40 split in an AP poll last month, but not everyone's opinion is at the same intensity. Opponents have stronger feelings on the issue than do supporters. Seniors remain more skeptical than younger generations.
The latest survey was conducted by Stanford University with the nonprofit Robert Wood Johnson Foundation.
When poll questions were framed broadly, the answers seemed to indicate ample support for Obama's goals. When required trade-offs were brought into the equation, opinions shifted — sometimes dramatically.
In one particularly striking finding, the poll indicated that public support for banning insurance practices that discriminate against those in poor health may not be as solid as it seems.
A ban on denial of coverage because of pre-existing medical problems has long been one of the most popular consumer protections in the health care debate. Some 82 percent said they favored the ban, according to a Pew Research Center poll in October.
In the AP poll, when told that such a ban would probably cause most people to pay more for their health insurance, 43 percent said they would still support doing away with pre-existing condition denials but 31 percent said they would oppose it.
Costs for those with coverage could go up because people in poor health who'd been shut out of the insurance pool would now be included, and they would get medical care they could not access before.
"I'm thinking we'd probably pay more because we would probably be paying for those that are not paying. So they got to get the money from somewhere. Basically I see our taxes going up," said Antoinette Gates, 57, of Atlanta.
The health care debate is full of such trade-offs. For example, limiting the premiums that insurance companies can charge 50-year-olds means that 20-year-olds have to pay more for coverage.
"These trade-offs really matter," says Robert Blendon, a professor at the Harvard School of Public Health who follows opinion trends. "The legislation contains a number of features that polls have shown to be popular, but support for the overall legislation is less than might be expected because people are worried there are details about these bills that could raise their families' costs."
If the added costs — spread over tens of millions of people — turn out to be small, it probably won't make much difference, Blendon said. But if they're significant, Obama could be on shaky ground in the final stretch of his drive to deliver access to health insurance to most Americans.
More than 4 in 5 Americans now have health insurance, and their perceptions about costs will be critical as Obama tries to close the deal. Democrats in the House came together to pass a bill, but in the Senate, Democratic liberals and moderates disagree on core questions.
The poll suggests the public is becoming more attuned to the fact that when it comes to health care, details often make all the difference.
For example, asked if everyone should be required to have at least some health insurance, 67 percent agreed and 27 percent said no.
The responses flipped when people were asked about requiring everybody to carry insurance or face a federal penalty: 64 percent said they would be opposed, while 28 percent favored that.
Both the House and Senate bills would require all Americans to get health insurance, either through an employer, a government program or by buying their own coverage. Subsidies would be provided for low-income people, as well as many middle-class households.
And there would also be a stick — a penalty collected through the income tax system to enforce the coverage mandate.
Among Democrats, only 12 percent oppose the broad goal of requiring insurance. But 50 percent oppose fines to enforce it.
"I think it's crazy. I think it infringes on our rights as a citizen, forcing us to do these things," said Eli Fuchs, 26, of Marietta, Ga.
The poll found a similar opinion shift on employer requirements: 73 percent agreed that all companies should be required to give their employees at least some health insurance.
Yet when asked if fines should be used to enforce such a requirement on medium and large companies, support dropped to 52 percent. Most large and medium businesses already provide coverage. Uninsured workers are concentrated in small companies.
"The cost — who's going to pick up the cost? There's nobody to help that business out. If they can't afford to pay for the insurance, then what do they say, you either pay for the insurance or you go out of business?" said Emerson Wilkins, 62, of Powder Springs, Ga.
The poll was based on land line and cell phone interviews with 1,502 adults from Oct. 29 to Nov. 8. It has a margin of error of plus or minus 2.5 percentage points. The interviews were conducted by GfK Roper Public Affairs and Media. Stanford University's participation was made possible by a grant from the Robert Wood Johnson Foundation, a nonpartisan organization that conducts research on the health care system.
By RICARDO ALONSO-ZALDIVAR and TREVOR TOMPSON, Associated Press Writers – Mon Nov 16, 7:15 am ET
WASHINGTON – What's it going to cost me?
Americans are worried about the fine print in the health care overhaul, an Associated Press poll says, and those concerns are creating new challenges for President Barack Obama as he tries to overcome doubts in Congress.
Despite a widely shared conviction that major health care changes are needed, Democratic bills that aim to extend coverage to the uninsured and hold down medical costs get no better than a lukewarm reception in the latest results.
The poll found that 43 percent of Americans oppose the health care plans being discussed in Congress, while 41 percent are in support. An additional 15 percent remain neutral or undecided.
There has been little change in that broad public sentiment about the overhaul plan from a 40-40 split in an AP poll last month, but not everyone's opinion is at the same intensity. Opponents have stronger feelings on the issue than do supporters. Seniors remain more skeptical than younger generations.
The latest survey was conducted by Stanford University with the nonprofit Robert Wood Johnson Foundation.
When poll questions were framed broadly, the answers seemed to indicate ample support for Obama's goals. When required trade-offs were brought into the equation, opinions shifted — sometimes dramatically.
In one particularly striking finding, the poll indicated that public support for banning insurance practices that discriminate against those in poor health may not be as solid as it seems.
A ban on denial of coverage because of pre-existing medical problems has long been one of the most popular consumer protections in the health care debate. Some 82 percent said they favored the ban, according to a Pew Research Center poll in October.
In the AP poll, when told that such a ban would probably cause most people to pay more for their health insurance, 43 percent said they would still support doing away with pre-existing condition denials but 31 percent said they would oppose it.
Costs for those with coverage could go up because people in poor health who'd been shut out of the insurance pool would now be included, and they would get medical care they could not access before.
"I'm thinking we'd probably pay more because we would probably be paying for those that are not paying. So they got to get the money from somewhere. Basically I see our taxes going up," said Antoinette Gates, 57, of Atlanta.
The health care debate is full of such trade-offs. For example, limiting the premiums that insurance companies can charge 50-year-olds means that 20-year-olds have to pay more for coverage.
"These trade-offs really matter," says Robert Blendon, a professor at the Harvard School of Public Health who follows opinion trends. "The legislation contains a number of features that polls have shown to be popular, but support for the overall legislation is less than might be expected because people are worried there are details about these bills that could raise their families' costs."
If the added costs — spread over tens of millions of people — turn out to be small, it probably won't make much difference, Blendon said. But if they're significant, Obama could be on shaky ground in the final stretch of his drive to deliver access to health insurance to most Americans.
More than 4 in 5 Americans now have health insurance, and their perceptions about costs will be critical as Obama tries to close the deal. Democrats in the House came together to pass a bill, but in the Senate, Democratic liberals and moderates disagree on core questions.
The poll suggests the public is becoming more attuned to the fact that when it comes to health care, details often make all the difference.
For example, asked if everyone should be required to have at least some health insurance, 67 percent agreed and 27 percent said no.
The responses flipped when people were asked about requiring everybody to carry insurance or face a federal penalty: 64 percent said they would be opposed, while 28 percent favored that.
Both the House and Senate bills would require all Americans to get health insurance, either through an employer, a government program or by buying their own coverage. Subsidies would be provided for low-income people, as well as many middle-class households.
And there would also be a stick — a penalty collected through the income tax system to enforce the coverage mandate.
Among Democrats, only 12 percent oppose the broad goal of requiring insurance. But 50 percent oppose fines to enforce it.
"I think it's crazy. I think it infringes on our rights as a citizen, forcing us to do these things," said Eli Fuchs, 26, of Marietta, Ga.
The poll found a similar opinion shift on employer requirements: 73 percent agreed that all companies should be required to give their employees at least some health insurance.
Yet when asked if fines should be used to enforce such a requirement on medium and large companies, support dropped to 52 percent. Most large and medium businesses already provide coverage. Uninsured workers are concentrated in small companies.
"The cost — who's going to pick up the cost? There's nobody to help that business out. If they can't afford to pay for the insurance, then what do they say, you either pay for the insurance or you go out of business?" said Emerson Wilkins, 62, of Powder Springs, Ga.
The poll was based on land line and cell phone interviews with 1,502 adults from Oct. 29 to Nov. 8. It has a margin of error of plus or minus 2.5 percentage points. The interviews were conducted by GfK Roper Public Affairs and Media. Stanford University's participation was made possible by a grant from the Robert Wood Johnson Foundation, a nonpartisan organization that conducts research on the health care system.
Drug Makers Raise Prices in Face of Health Care Reform
http://www.nytimes.com/2009/11/16/business/16drugprices.html
By DUFF WILSON
Published: November 15, 2009
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
The drug trend is distinctly at odds with the direction of the Consumer Price Index, which has fallen by 1.3 percent in the last year.
Drug makers say they have valid business reasons for the price increases. Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.
“When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes.
A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.
“They try to maximize their profits,” Mr. Newhouse said.
But drug companies say they are having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs are set to expire over the next few years.
“Price adjustments for our products have no connection to health care reform,” said Ron Rogers, a spokesman for Merck, which raised its prices about 8.9 percent in the last year, according to a stock analyst’s report.
This year’s increases mean the average annual cost for a brand-name prescription drug that is taken daily would be more than $2,000 — $200 higher than last year, Professor Schondelmeyer said.
And this means that the cost of many popular drugs has risen even faster. Merck, for example, now sells daily 10-milligram pills of Singulair, the blockbuster asthma drug, at a wholesale price of $1,330 a year — $147 more than last year. Singulair is now selling at retail, on drugstore.com, for nearly $1,478 a year.
The drug companies “can charge what they want — it’s not fair,” Eric White, the 42-year-old owner of a small jewelry store in Queens, said as he left a pharmacy recently.
Despite having drug insurance, Mr. White says he now pays $110 a month out of pocket for two brand-name allergy medicines, even as he has cut prices in his jewelry store by at least 40 percent to keep customers coming through the door.
He shook his head. “What can I do?” he said. “I need my medicines.”
The drug industry has actively opposed some of the cost-cutting provisions in the House legislation, which passed Nov. 7 and aims to cut drug spending by about $14 billion a year over a decade.
But the drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks.
But this year’s price increases would effectively cancel out the savings from at least the first year of the Senate Finance agreement. And some critics say the surge in drug prices could change the dynamics of the entire 10-year deal.
“It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.
Name-brand prices have risen even as prices of widely used generic drugs have fallen by about 9 percent in the last year, Professor Schondelmeyer said. But name brands account for 78 percent of total prescription drug spending in this country. And as long as a name-brand drug still has patent protection it faces no price competition from generics.
Ken Johnson, senior vice president of the industry association — the Pharmaceutical Research and Manufacturers of America — criticized the analysis Professor Schondelmeyer had conducted for AARP, saying it was politically motivated.
“In AARP’s skewed view of the world, medicines are always looked at as a cost and never seen as a savings — even though medicines often reduce unnecessary hospitalization, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases,” he said.
But Professor Schondelmeyer’s analysis — which found prices for the name-brand drugs most widely used by the Medicare population rising by 9.3 percent in the last year, the fastest rate since 1992 — is in line with the findings of a leading Wall Street analyst, too.
Catherine J. Arnold, a drug industry analyst at Credit Suisse, said her latest study of the nation’s eight biggest pharmaceutical companies showed markedly similar results: list prices rising an average of 8.7 percent in the 12 months ending Sept. 30 — the highest rate of growth since at least 2004.
As does Professor Schondelmeyer, Ms. Arnold based her price calculations on reported wholesale prices and a formula that puts more emphasis on each company’s best-selling drugs.
Ms. Arnold said the prospect of cost containment under health care reform, as well as the tougher business environment, entered into the decisions of manufacturers to raise prices this year.
The industry stands to gain about 30 million customers with drug insurance from the legislation pending in Congress. But the industry also faces the prospect of tougher negotiations from both public and private buyers as the government tries to squeeze savings out of the health system.
“If you’re going to take price increases,” Ms. Arnold said, “here and now might be the place to do that, because the next year and the year after that might be tough.”
Mr. Johnson did not dispute the Credit Suisse study or deny Ms. Arnold’s finding that American drug makers have raised prices at the fastest rate in five years.
He said both studies were incomplete by failing to include rebates that drug makers give distributors. But Ms. Arnold, Professor Schondelmeyer and a 2007 Congressional study of Medicare said the rebates often accrue to the middlemen, not consumers, and higher manufacturer prices lead to higher retail prices.
And the drug industry’s own major consulting firm, IMS Health, has also reported a significant run-up in prices. Back in April, IMS predicted that United States drug sales might actually decline this year.
Billy Tauzin, president of the industry’s trade association, highlighted the gloomy prediction in a June 1 letter to President Obama shortly before striking the deal to cut drug costs by $80 billion. In negotiating the deal, the drug makers argued that they could not afford to give up more than that.
But in October, IMS made an unusual change in the middle of its forecasting cycle, saying it now believed United States sales would grow at least 4.5 percent in 2009 — or $21 billion more than expected six months earlier.
A major reason, IMS said, was higher-than-expected price increases for drugs in the United States.
By DUFF WILSON
Published: November 15, 2009
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
The drug trend is distinctly at odds with the direction of the Consumer Price Index, which has fallen by 1.3 percent in the last year.
Drug makers say they have valid business reasons for the price increases. Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.
“When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes.
A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.
“They try to maximize their profits,” Mr. Newhouse said.
But drug companies say they are having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs are set to expire over the next few years.
“Price adjustments for our products have no connection to health care reform,” said Ron Rogers, a spokesman for Merck, which raised its prices about 8.9 percent in the last year, according to a stock analyst’s report.
This year’s increases mean the average annual cost for a brand-name prescription drug that is taken daily would be more than $2,000 — $200 higher than last year, Professor Schondelmeyer said.
And this means that the cost of many popular drugs has risen even faster. Merck, for example, now sells daily 10-milligram pills of Singulair, the blockbuster asthma drug, at a wholesale price of $1,330 a year — $147 more than last year. Singulair is now selling at retail, on drugstore.com, for nearly $1,478 a year.
The drug companies “can charge what they want — it’s not fair,” Eric White, the 42-year-old owner of a small jewelry store in Queens, said as he left a pharmacy recently.
Despite having drug insurance, Mr. White says he now pays $110 a month out of pocket for two brand-name allergy medicines, even as he has cut prices in his jewelry store by at least 40 percent to keep customers coming through the door.
He shook his head. “What can I do?” he said. “I need my medicines.”
The drug industry has actively opposed some of the cost-cutting provisions in the House legislation, which passed Nov. 7 and aims to cut drug spending by about $14 billion a year over a decade.
But the drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks.
But this year’s price increases would effectively cancel out the savings from at least the first year of the Senate Finance agreement. And some critics say the surge in drug prices could change the dynamics of the entire 10-year deal.
“It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.
Name-brand prices have risen even as prices of widely used generic drugs have fallen by about 9 percent in the last year, Professor Schondelmeyer said. But name brands account for 78 percent of total prescription drug spending in this country. And as long as a name-brand drug still has patent protection it faces no price competition from generics.
Ken Johnson, senior vice president of the industry association — the Pharmaceutical Research and Manufacturers of America — criticized the analysis Professor Schondelmeyer had conducted for AARP, saying it was politically motivated.
“In AARP’s skewed view of the world, medicines are always looked at as a cost and never seen as a savings — even though medicines often reduce unnecessary hospitalization, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases,” he said.
But Professor Schondelmeyer’s analysis — which found prices for the name-brand drugs most widely used by the Medicare population rising by 9.3 percent in the last year, the fastest rate since 1992 — is in line with the findings of a leading Wall Street analyst, too.
Catherine J. Arnold, a drug industry analyst at Credit Suisse, said her latest study of the nation’s eight biggest pharmaceutical companies showed markedly similar results: list prices rising an average of 8.7 percent in the 12 months ending Sept. 30 — the highest rate of growth since at least 2004.
As does Professor Schondelmeyer, Ms. Arnold based her price calculations on reported wholesale prices and a formula that puts more emphasis on each company’s best-selling drugs.
Ms. Arnold said the prospect of cost containment under health care reform, as well as the tougher business environment, entered into the decisions of manufacturers to raise prices this year.
The industry stands to gain about 30 million customers with drug insurance from the legislation pending in Congress. But the industry also faces the prospect of tougher negotiations from both public and private buyers as the government tries to squeeze savings out of the health system.
“If you’re going to take price increases,” Ms. Arnold said, “here and now might be the place to do that, because the next year and the year after that might be tough.”
Mr. Johnson did not dispute the Credit Suisse study or deny Ms. Arnold’s finding that American drug makers have raised prices at the fastest rate in five years.
He said both studies were incomplete by failing to include rebates that drug makers give distributors. But Ms. Arnold, Professor Schondelmeyer and a 2007 Congressional study of Medicare said the rebates often accrue to the middlemen, not consumers, and higher manufacturer prices lead to higher retail prices.
And the drug industry’s own major consulting firm, IMS Health, has also reported a significant run-up in prices. Back in April, IMS predicted that United States drug sales might actually decline this year.
Billy Tauzin, president of the industry’s trade association, highlighted the gloomy prediction in a June 1 letter to President Obama shortly before striking the deal to cut drug costs by $80 billion. In negotiating the deal, the drug makers argued that they could not afford to give up more than that.
But in October, IMS made an unusual change in the middle of its forecasting cycle, saying it now believed United States sales would grow at least 4.5 percent in 2009 — or $21 billion more than expected six months earlier.
A major reason, IMS said, was higher-than-expected price increases for drugs in the United States.
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