ontolawgy™ – connect the dots™

Connecting the dots: Political and legal visualizations from Federalists to metaphorical shoes

2013-04-01T15:43:00.000-07:00

My company’s slogan, “connect . . . the . . . dots” is about using an ontology to connect loosely- or poorly-organized “dots” of legal data to generate a picture of the law (hence the punny name).

This post discusses how people connect dots (sometimes literally) to paint pictures of the law or processes related to it to make complex data appear simple.

Moving from very general to extremely specific, first, there are two political visualizations. One is a chart of the political history of the U.S. Congress, followed by a dynamic visualization of U.S. Senate voting patterns over the past several years.

The next segment looks at ways to look at laws resulting from those politics with two different flow charts. One is a decision tree for evaluating hearsay exceptions, the other is a semantic directed graph that traces how to determine what kind of metaphorical shoes someone is wearing in a Medicare-related regulatory scheme. Yes, you read that correctly: There are actually Medicare regulations about not just one, but two different kinds of metaphorical shoes (details and links below).

Finally, there is a link to a survey about legal research systems. That might seem out of place at first, but one idea behind the survey is to figure out what people want to do with certain kinds legal data, specifically, how they can access the data in a way that allows them to better draw a mental or literal picture of the law, like the charts shown here. If there are enough responses to likely support statistical significance, there is a plan to publish the survey results. So, if this is something that interests you or your colleagues, please participate in the survey and ask your friends and colleagues to participate too.

Without further ado, on to the pictures.

Politics

If there was every any doubt that politics are the lifeblood of our representative democracy (or the atherosclerotic plaque slowing it to a halt), this vascular-looking chart should dispell those doubts. The picture itself describes this in more detail, but each color and the width of each color band show how many members of Congress in major parties fell/fall within certain zones of the political spectrum. At a glance, you can see the political effects (or sometimes causes) of external events. What is particularly striking to me is how the political climate seems to generally correlate to events such as economic downturns (Democrats gain seats) or wars (Republicans gain seats), or when you have both a war and an economic downturn (both parties tend to get more extreme).

(Click here to see the chart at xkcd.com; once there, click on it for a full-size picture--it's huge and requires a lot of scrolling, but it’s worth it.)

Another fun political visualization is from Chris Wilson at Yahoo, (via Rob Richards; Thanks, Rob!) which looks at voting networks in the U.S. Senate.

As an aside, for people who are interested in how technology can help make law more accessible and understandable and don’t follow Rob on Twitter or Google Plus (or both), you are missing out in a big way. Rob curates a steady and consistently excellent stream of journal articles, blog posts, and news stories about these issues. I don’t know how he does it, but I’m grateful that he does, and I’m certainly not alone.

That said, here’s the visualization (if you can’t see it here, please go to the original site):

There are so many ways to look at it, but I think it’s interesting to move the slider all the way to 100% to see what happens; to horrendously mix metaphors, this helps you see who really circles the wagons and who are the cats that need to be herded. Depending on your politics, you can draw all kinds of inferences from this, but the main point is that the data are there (thanks to GovTrack.us) and presented in a valuable way that allows people to quickly see what they’re looking at.

Moving on, let’s look at the results of politics: Laws. They’re written in words, but the words are not necessarily clear or written in a way designed to promote efficiently analyzing them, so pictures can help.

Law: Hearsay and Metaphorical Shoes

Hearsay

One way to make sense of legal requirements is a flow chart, that is, a map of facts, decision points, and results. This is a flowchart of hearsay exceptions by Margaret Hagan, currently a law student, who posits: “My hypothesis: the act of putting together a flowchart is itself one of the best ways to learn an area of law... it takes lots of flipping through pages, tracing through notes, going the rule book, and checking whether what you remember or guess is in fact true. It also forces you to go step by step through the logic of a law in a situation.” (again, thanks to Rob Richards for pointing out her work):

(See http://www.openlawlab.com/2013/03/20/law-flowcharts-hearsay-exceptions/ for original)

I could not agree more, and for years I have made flow charts when looking at an area of the law that is new to me. But it is a laborious process, which is what led me to look for a way to do it more efficiently.

Metaphorical Shoes

Because the laws Congress enacts are often so complex, many of them essentially tell the Executive Branch to figure out how to implement them by writing regulations, which brings us to this abbreviated look at metaphorical “shoes” (click to enlarge):

This is a semantic directed graph (output from a query to one of my company’s systems) for a narrow slice of the “Stark Law” regulations. Similar underlying data can also be used to map processes like a more traditional flow chart. A quick (overly-general) primer on the Stark Law and related regulations: They impose severe financial penalties on physicians reimbursed by U.S. Medicare for referring patients to entities in which the physicians have a financial interest. The main job for lawyers is to figure out whether a doctor has a financial interest (as defined—or not—in the law) in an entity to which the doctor refers patients.

The chart shows a simplified subset of selected relationships among grammatical variations and contextual uses of a metaphorical phrase “stands in the shoes” vs. “stand in the shoes”. Despite the small formal one letter difference in these terms—a small enough difference to cause many search engines, n-gram extractors, or people to just gloss over it—functionally, they are quite different (see the diagram for details). In this case, the directed graph essentially tells you when “these are not the shoes you are looking for” and where to find the right shoes.

Typically, as Margaret Hagan suggests, you have to do a fair amount careful reading, note-taking, and comparative analysis to sort out small differences like this, but just as the other charts shown here make the complex appear simple, I like to think that this chart makes the difference clear pretty quickly, including quotes and references, so you can double-check everything.

I’m certainly not advocating skipping the important research steps of careful reading, note-taking, and comparative analysis, but if there are tools available to make the process more efficient, even if only by weeding out potential dead ends (as in this case), why not use them?

Survey

That, among other questions, is being examined in this survey about legal research software. If you have 3–5 minutes to spare, please fill out the survey. If you have friends or colleagues who you think might find the survey or its results interesting, please forward the link to them (http://www.surveymonkey.com/s/8VKV3YM) and ask them to fill it out. Ideally, there will be enough responses to publish something in the near future.

As always, comments, questions, etc. are most welcome.

Kicking it up a notch: Anti-kickback statute gets expanded . . . by the tax code

2013-03-21T15:43:00.004-07:00

Starting on January 1, 2014, it is very likely that the federal anti-kickback statute (AKS) will directly apply to items and services covered by private health insurance, which it has never done before. Currently, the AKS applies to items and services furnished under health care programs such as Medicare, Medicaid (and similar programs), TriCare, and Veteran’s Administration (VA) benefits (and indirectly to items and services covered by private health insurance in certain circumstances).

Below is a brief look at what the AKS is, penalties under the AKS, why the new tax credit causes the AKS to be implicated in a wider range of items and services than it has been historically, and finally, the potential real-world impact of the change. If you’re familiar with the AKS already, feel free to skip to the “expansion” section below.

Executive Summary

January 1, 2014 is the effective date of a new refundable tax credit in the Internal Revenue Code (26 U.S.C. § 36B) that provides for direct payments from the federal government to private health insurance companies to cover at least some of the health insurance premiums for certain taxpayers with incomes under 400% of the federal poverty level. The Congressional Budget Office estimates (PDF) that this will describe about 8 million people in 2014, increasing to approximately 20 million people in 2022.* As explained below, under the explicit terms of the AKS, this almost certainly makes the items and services furnished under those health insurance plans subject to the AKS.

Because of how the tax credit is calculated and how AKS is enforced (discussed below), this also likely means that people and organizations in the health care industry—including landlords for health care providers—should treat the AKS as applicable to all items and services, regardless of whether they are reimbursable by Medicare, Medicaid, subsidized private insurance, or unsubsidized private insurance. Health care providers and their suppliers who deal exclusively with private-pay patients and do not accept any insurance whatsoever are less likely affected for patients under their direct care, but will still need to be careful about referral arrangements.

What is the AKS?

The AKS, very generally, is a federal law that penalizes “whoever” offers, pays, solicits, or receives “any remuneration” in exchange for patient referrals or the furnishing, receiving, or recommendation of items or services even partially covered by a “Federal health care program” (FHCP) to which the government even partially makes direct payments. 42 U.S.C. § 1320a-7b(b)(1), (2).

And yes, “whoever”, really means “whoever”: from doctors, to nurses, radiology clinics, laboratories, pharmacists, pharmaceutical sales representatives, delivery drivers, custodial staff, landlords for health care items and service providers, and even patients; likewise, “any remuneration” really means “any”: from season tickets to baseball games, to envelopes full of cash, a landlord charging higher rent to a doctor (as compared to an accountant) for an office across the street from a hospital, a physical therapist waiving copayments for patients, or even a pharmacy giving out coupons for $0.50 off of a movie ticket.

In the more than 40 years of the existence of the AKS and its predecessors, there has never been a minimum threshold for an FHCP’s partial coverage of an item or service, the government’s partial payment to an FHCP, or the amount of “remuneration” at issue: a fraction of a penny for any of those purposes is theoretically enough to implicate the AKS. See https://oig.hhs.gov/fraud/docs/safeharborregulations/072991.htm (search for de minimis).

AKS (and other) penalties

The penalties for violating the AKS are stiff: a felony conviction plus up to a $25,000 fine, five years in prison, possible exclusion from being reimbursed for providing items or services to anyone enrolled in an FHCP, plus assessment of additional “civil monetary penalties” (CMPs). CMPs are also applicable in certain broader situations and will be the subject of another post.

On top of that, the AKS explicitly provides that any claims filed that result from an arrangement that violates the AKS are now automatically deemed “false claims”, which brings additional penalties under the False Claims Act (FCA). See 42 U.S.C. § 1320a-7b(g). There are some additional FCA-related issues that will be discussed in a future post.

Finally, the AKS explicitly does not require any specific intent to violate it—meaning that you only need to be aware that you're doing something, but you do not need to know that that “something” is prohibited by the AKS. The AKS also explicitly provides that you don’t need to know that the AKS even exists to be guilty of violating it. So if you are involved in any way with delivering or receiving health care items or services, now, more than ever, you ignore the AKS at your peril. See 42 U.S.C. § 1320a-7b(h).

AKS expansion beyond its historical reach

The AKS directly applies only to items and services services furnished under FHCPs, which are commonly—yet not entirely accurately—understood to mean programs such as Medicare, Medicaid (and similar programs), TriCare, and the VA.

So, what is an FHCP? An FHCP is defined by statute as:

any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5 [of the United States Code])...

42 U.S.C. 1320a-7b(f)(1) (emphasis added). An FHCP also specifically includes Medicaid and Title V and XX programs. See 42 U.S.C. § 1320a-7b(f)(2); 42 C.F.R. § 1001.2.

The “health insurance program under chapter 89 of title 5”, is otherwise known as the “Federal Employees Health Benefits Program”, or FEHBP. The FEHBP is the private health insurance program for federal civilian employees, under which the federal government makes direct payments to health insurance companies to cover part of the premiums for eligible beneficiaries. The applicable statute and regulations specifically exempt only the FEHBP from the definition of FHCP, implying that the FEHBP would otherwise be included in the AKS’s definition of an FHCP.

Starting January 1, 2014, 26 U.S.C. § 36B (enacted by Pub. L. 111-148 § 1401) provides a refundable tax credit for individuals whose health insurance costs exceed certain thresholds as a proportion of income. It is not clear whether this credit alone would cause these individuals’ insurance to become an FHCP (my view: likely yes, because the credit is issued specifically to subsidize health insurance premiums, but this will be fully explored in yet another future post), but coupled with how this credit is paid on behalf of taxpayers (below), and without a specific statutory exception, in my view it almost certainly makes certain private health insurance qualify as an FHCP under the AKS.

42 U.S.C. § 18082(c)(2)(A) (enacted by Pub. L. 111-148 § 1411) provides that the Secretary of the Treasury shall make “advance payment” in the amount of the applicable credit “to the issuer of a qualified health plan” on a monthly basis to cover partial health insurance premiums on behalf of eligible taxpayers. See also 26 C.F.R. § 1.36B-2 (affirming the Secretary’s decision to make monthly advance premium payments).

Because the government makes direct payments to private health insurers, anyone who has government-subsidized insurance through those insurers is enrolled in a “program that provides health benefits ... through insurance ... which is funded directly, in whole or in part, by the United States Government” and which is not described in Title 5, Chapter 89 of the US Code. Assuming that “payment . . . to the issuer of a qualified health plan” from the Treasury is equivalent to “funded directly” by the Government—and without serious contortions of the English language, that seems to be a fair assumption, particularly given the specific exclusion of only the FEHBP from the definition of FHCP, but no specific exclusion for advance premium payments from the definition of FHCP—the AKS applies.

Still, how can one be sure of whether a health insurance plan or benefit qualifies as an FHCP? A question was recently raised on an American Health Lawyers Association email list that I moderate about whether the federal government maintains a public list of FHCPs to which the AKS applies. One benefit of such list would be that if the government maintained such a list, people could definitively know whether or not they are subject to the AKS.

The answer appears to be that there is no such official list, and the government presumably has little incentive to maintain such a list. Why? Two reasons: 1) The AKS is intentionally broad, so publishing a list might implicitly narrow its possible scope of enforcement in a manner not authorized or intended by Congress; and 2) The definition of FHCP is so broad that it is really only feasible to explain what an FHCP is not, as shown by this flow chart (start in the bottom left):

This makes the advance premium payment issue essentially a two-step inquiry (putting aside the tax credit offered to taxpayers without advance premium payments, and assuming that we are not discussing the FEHBP): 1) Is that insurance “any . . . insurance . . . other than” the FEHBP? Yes. 2) Through advance premium payments to health insurers, does the government directly pay for any portion of health insurance or health care? Yes. Therefore it is an FHCP and the AKS is directly implicated.

For those who may be interested in seeing a non-exclusive list of other programs that likely qualify as FHCPs (with one exception), it is available here: 42 U.S.C. § 14402(d) (prohibiting federal funding for assisted suicide). However, that list is not specifically incorporated into the AKS, so it is best to not rely on the list for anything other than its stated purpose.

Interesting, but what does this mean in the real world?

One problem for anyone involved in patient care is that the Treasury’s advance premium payments can fluctuate on a monthly basis with respect to any person depending on their income; that is, the Treasury could make payments in some months, but not others. Because under the AKS’s definition of FHCP, the advance premium payment makes the applicable insurance program an FHCP, it is not possible to tell who is or will be enrolled in an FHCP at any given time. Therefore, because of the high stakes involved in violating the AKS, it may be appropriate to treat all privately-insured patients as if the advance premium payment is being made on their behalf, and thus, as if they are enrolled in an FHCP. This would mean that any items or services furnished to them or their health care providers or suppliers would be treated as subject to the AKS.

What does this really mean, in practice, though? Honestly, probably not much for health care items and services providers who already serve or treat a mix of Medicare, Medicaid, etc., and privately-insured patients: they probably already are (or at least, should be) treading lightly around AKS issues because of the AKS’s longstanding indirect applicability to private insurance benefits.

The AKS currently indirectly applies to private insurance benefits in certain circumstances because the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS), the entity responsible for enforcing the AKS, has consistently explained for many years that any remuneration arrangement related only to private insurance benefits that could possibly influence FHCP referrals or other business would likely implicate the AKS as well. See https://oig.hhs.gov/fraud/docs/advisoryopinions/2000/ao00_8.pdf; https://oig.hhs.gov/fraud/docs/advisoryopinions/2012/AdvOpn12-06.pdf. Specifically, the OIG has relatively consistently declined to extend “safe harbor” protection to remuneration arrangements that apply to privately-reimbursable items and services but “carve out” FHCP-covered items and services, meaning that OIG is essentially reserving the right to pursue penalties at any time for remuneration arrangements subject to “carve outs”.

If this stance is any guide, then although the AKS will directly apply only to items and services reimbursable by subsidized private insurance, by extension, it should indirectly apply also to items and services reimbursable by unsubsidized private insurance, because of the potential influence on subsidized referrals.

Therefore, for people or organizations who do not typically deal with currently-recognized FHCPs, e.g., physicians in independent practices that don’t participate in Medicare, Medicaid, or similar programs, the advance premium payment system should be cause to seriously and thoroughly evaluate all of their business and referral relationships.

Remaining questions

There are many remaining questions about potential exceptions, the full scope of the changes, and effects in conjunction with related laws. Stay tuned...

* See Table 3. These figures are the sum of the “Exchanges” population less “Number of Unsubsidized Exchange Enrollees”.

http://l4w.us free legal URL shortener now shortening links to the CFR

2012-07-16T08:02:00.000-07:00

Last month, with little (rather, no) fanfare, ontolawgy™ LLC launched L4w.us ("law for us"), a free URL shortener* to access non-commercial sources of law.

Currently, it works for Bills in Congress (back to the 104th Congress), U.S. Public Laws (ditto), the U.S. Code, the Federal Register (to 1995 for text, 1994 for tables of contents), and as of today, the Code of Federal Regulations.

These documents are available through the the Library of Congress's legislative information site, THOMAS, the U.S. Government Printing Office's "FDSys", The Legal Information Institute's U.S. Code and Code of Federal Regulations, and the online (though unfortunately, still unofficial) Federal Register.

If they're free sources, and the sites are easily searchable, why is an URL shortener necessary? Well, these sites, thankfully, are loaded with other features that make it difficult for them to offer clean, simple, and short URLs to access legal text.

For example, to get to Public Law 111-148, you need to go to:

http://www.gpo.gov/fdsys/pkg/PLAW-111publ148

That's not too complicated, and if you can remember the scheme, not such a big deal. What if you want to send someone a link to the text? You have to send them this:

http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/html/PLAW-111publ148.htm

Not so easy. But why go through trying to remember that (or making a custom shortcut in your browser, or setting up a raft of unnecessary bit.ly links) when you can just type this:

http://l4w.us/PublicLaw/111-148 for the landing page or

http://l4w.us/PublicLaw/text/111-148 for the full text or

http://l4w.us/PublicLaw/pdf/111-148 for the PDF.

Alternatively, if you're used to legal citations or you can handle spaces in your URLs:

http://L4w.us/Pub. L. 111-148
http://L4w.us/Pub. L. 111-148 text, and
http://L4w.us/Pub. L. 111-148 pdf

will work too, with or without spaces. Hopefully, those are self-explanatory enough.

There are more examples at http://L4w.us for other legal materials.

So why has no one done this before? Honestly, I have no idea. Is it really necessary? Unless you're Rain Man, I think it can't hurt, especially if you want to send or show people links to primary (or close-to-primary) legal source material.

My main idea was to let people use L4w.us links as easy-to-remember shortcuts to public versions of our laws, so instead of going to the destination sites and searching, or trying to remember the multiple URL schemes, if you know what you're looking for (sorry, no search yet), just type it in and go.

I also put it together to help simplify ontolawgy™ LLC's bulk data downloading programs. The overhead on the server is minimal, so I thought I'd share. Feel free to use it, and tell people how it's going; use L4w.us links in blog posts, articles, theses, student projects, non-profit citizen-engagement applications/campaigns, etc. Just don't bake it into a commercial software or hardware (e.g., a book) application without permission.

Currently, the site doesn't offer any fancy features, and we don't plan to. But it also doesn't track you. We maintain basic access logs with IP addresses to make sure people aren't abusing the service (e.g., DDOS-ing it for some unknown reason or incorporating the service into commercial activity without a license), but other than that, whatever laws you look at are between you, the site providing the content, and whoever is monitoring your internet traffic.

Suggestions for how to improve the site which resources to add are most welcome here in the comments, on Twitter, or by email.

© 2012 Alex M. Hendler. All Rights Reserved.

*If you haven't picked up on it by now, technically, L4w.us is not really an URL-shortener, it's more like an API for people to access other (simple) people-facing APIs, but without scaring them away by calling it an API.

How to eat legislative sausage

2012-05-15T13:47:00.001-07:00

Here's a two-part post, after a very long absence from the blog. I have been busy with several other projects, but I am gearing up to participate in the "legal hacks" event (see http://legalhacks.org) very soon, and as a result, am revisiting some issues related to organizing code-like legal materials.

The first part of this post discusses organizing materials once they have been obtained, and the second part discussed some of the challenges in obtaining them. A bit backwards, perhaps, but the first part is likely more relevant to the upcoming event.

Part I: Organizing code-like legal materials, or, eating legislative sausage

To rehash the old adage that making laws is like making sausage, organizing them after the fact is very much like eating it, and below is my general method for doing that, for whatever it's worth. As always, I welcome any feedback, questions, or suggestions.

I read with great interest two recent blog posts by Thomas Bruce of the Legal Information Institute at Cornell and Grant Vergottini of legix.info about challenges in organizing legislative/legal data using different types of identifying information. Generally, Mr. Bruce's post describes the functions that identifying information can serve. These are summarized below:

a) “Unique naming”, i.e., assigning a specific name to a legal provision within a system

b) “Navigational reference”, which is similar to navigating a filesystem

c) “Retrieval hook/container label”, i.e., to use a citation as a placeholder to aggregate lower-level content that is stored in other locations/records

d) “Thread tag/associative marker”, i.e., grouping of related documents in “threads”; one example he uses is a “captive search” URI, but in my view, this is mainly another way to get at a retrieval hook

e) “Process milestone”, i.e., inferring some meaning from the official status of a document, e.g., if a bill has been assigned a Public Law number, it has presumably been enacted into law.

f) “Proxy for provenance”, e.g., the existence of a bill number means that legislation has been officially noticed in some way.

g) “Popular names, professional terms of art, and other vernacular uses”, e.g., the Social Security Act, the Stark Law, the Anti-Kickback Statute (to use some of the examples with which I am most familiar).

Mr. Vergottini goes into the issues surrounding selecting frameworks to be used to actually implement those kinds of identifiers, e.g., via a URN or URL-based system, and discusses some of the difficulties inherent in selecting and implementing a system to capture relevant data in a machine-readable way. He also identifies problems with viewing different portions of text, as well as tracking text that gets amended or redesignated.

Common problems Messrs. Bruce and Vergottini both discuss include documents/provisions with identical names/identifiers in an official classification system (e.g., the two subparagraphs 42 U.S.C. § 1320a-7b(b)(3)(H) that coexisted for seven years until fixed by Pub. L. 111-148 § 3301), or how to store temporally different versions of text.

I started building the ontolawgy™platform (a web-based legal analysis system) about 6 years ago for my regulatory practice, and I ran into the problems discussed above quite early. Here are some of the approaches I have taken to address them:

Treat every textual division as a unique document, and allow it to be accessed via a unique URL based on its location in the government taxonomy (a - c in Mr. Bruce's overview).
Store each descriptive element about that document in a tag/field. This includes official and unofficial “popular names” (e.g., the Social Security Act), section numbers within those popular names, section numbers of the U.S. Code, Public Law enacting provisions, etc. (c - g)
Allow users to query on any of those elements. (a - g)
Track duplicates and give them distinct records that are still retrieved in an appropriate way using their descriptive tags/fields. (a - d, g)
Track each provision using its current designation, but maintain a full locative, temporal, and ontological history within the record and the system. (a - e, g) For example, 42 U.S.C. § 1320a-7b(b)(3)(I) used to be the second 42 U.S.C. 1320a-7b(b)(3)(H) that was enacted by Pub. L. 108-173 § 431 (the first subparagraph (H) was enacted by § 237 of the same Public Law); the system tracks all that information and allows users to query it and, e.g., gather together all historical versions of subparagraph (H) to track how it has changed over time.

As for the mechanics, when I started building the system, my main goal was to get up and running quickly with a free, open-source, off-the-shelf system. The system is extremely flexible, has a very active development community, and still works quite well. While it does not currently use any sort of (proposed) standard like URN:lex or Akoma Ntoso, it does use inline markup, and thus, should be easily convertible to a legal markup standard once one is in place.

I can't go into much more detail here, but please contact me to get access to my demo system if you would like to see it in action.

Part II: Obtaining legal source materials, or, how the government makes sausage even messier

All that said, one significant challenge I still face is getting rational raw data from official sources. Indentation can be highly relevant semantically, depending on the subject matter, but official sources either just do away with indentation altogether (I'm looking at you, Code of Federal Regulations) or present it in such an inconsistent format that it might as well not be there (U.S. Code).

Back to the sausage. Essentially, we pay the government to make legal sausage, cook the sausage, and serve it to us, but just before they serve it, they mash it up, smear it around the plate, then take away our silverware and tie our hands behind our backs. I spend much more time than should be necessary simply ensuring that the materials I work with are properly indented to accurately reflect their meaning. I've written several small programs to do about 95% of the work, but that remaining 5% can be almost maddening, particularly when dealing with multiple levels of unenumerated flush text. The materials are certainly drafted with visible indentation (take a look at Public Laws: all the indentation is there and correct), but all this useful information gets stripped out at some point in the publication process, and it is not at all clear to me why this happens. The U.S. Code uses “bell codes” for typesetting print documents, but this doesn't excuse the lack of indentation in electronic publications.

The C.F.R. is even more maddening: This document claims that the XML format of the C.F.R. “is a complete and faithful representation of the Code of Federal Regulations, which
matches most closely to the author's original intent... [and] fully describes the structure of the Code of Federal Regulations, including the large structure (chapters, parts, sections, etc.), the document structure (paragraphs, etc.), and semantic structure” then goes on to explain that the SGML indentation for subsections, paragraphs, subparagraphs, clauses, etc. have all been collapsed to a the same single tag. This means that every last bit of indentation/separation (except for line breaks) within each section—“sections” can be very long and complex, with multiple nested levels of semantically-relevant indentation—has been completely stripped from all publicly-available electronic materials. How is this supposed to help the public?

The LII has generally addressed indentation issues in its publication of the U.S. Code (See http://www.law.cornell.edu/uscode/text/42/1395ww for an example), and content is freely available for viewing and non-commercial re-publication.

LII's new Code of Federal Regulations (CFR) system, the result of a close collaboration with the government, also does an excellent job of organizing and indenting CFR data the way it was meant to be read: it is the only freely-available resource of which I am aware that does this.

While the LII's sites offer a valuable public service, they do not solve the underlying problem: Properly indented content is not freely available to the public from the government for commercial re-use, even though these government works are in the public domain. Why is this a problem? Because official platitudes notwithstanding, government publications significantly obscure or corrupt the intended meaning and scope of the laws that govern us.

If anyone has some insight about how to get the government to bring useful and accurate indentation to its official publications, please get in touch, I would be thrilled to work with you to help make this happen.

Getting ACOld shoulder, or how a carrot becomes a stick: ACO Proposed Rule could negatively affect non-ACO health care providers

2011-05-02T14:21:00.000-07:00

As described in a previous post, PPACA section 3022 (a.k.a. Public Law 111–148 § 3022, or § 1899 of the Social Security Act, to be codified at 42 U.S.C. § 1395jjj) authorizes the formation of Accountable Care Organizations (ACOs) to implement a Medicare “shared-savings program” (MSSP). At the risk of contributing to all the noise around ACOs, below are some observations about a “proposed rule” issued by the Centers for Medicare and Medicaid Services (CMS) on April 7, 2011, and how the rule as currently proposed could have some negative consequences for entities that do not participate in an ACO, particularly when this proposed rule is considered in conjunction with other pre-regulatory activity.

When reading below, please remember that the bulk of this post relates to a proposed rule, and that if you are truly concerned about possible consequences, it is absolutely worth submitting comments on the proposed rule.

So, what's an ACO?

As proposed by CMS, ACOs would generally be groups of health care providers that are centered around primary care physicians, and Medicare beneficiaries would be “assigned” to them to allow the government to monitor health care quality and cost. Note that this post discusses only the PPACA Medicare ACO concept, and does not address possible future private sector ACOs (which could nevertheless take strong cues from the Medicare ACO concept).

The MSSP will essentially pay ACOs to: 1) Reduce the overall cost of care provided to Medicare beneficiaries; 2) maintain or improve the quality of that care; and 3) provide quality data to Medicare. MSSP payments could in some cases be significant: Up to 10 percent of what the reimbursement would be for a similar group of patients not assigned to an ACO. However, CMS’s current proposed rule could significantly affect an organization even if it does not participate in an ACO. How? Read on....

The ACO/MSSP program must by law start on or before January 1, 2012. Various government agencies responsible for regulating ACO activities, including CMS, have issued proposed regulations or official requests for comment on how to implement the ACO/MSSP program, as described in more detail below. It is likely (although not explicitly stated by statute or the proposed rule) that quality data collected through the ACO/MSSP program may be used to influence future Medicare payment policy, and the program could to some degree serve as a model for private payer reimbursement policy changes. In fact, the FTC and Department of Justice request for comment on antitrust issues (see below) suggests this latter possibility.

This post addresses four main issues below: Current regulatory activity around ACOs, who can form an ACO, how Medicare beneficiaries are assigned to it, and how an ACO gets paid (along with potential ripple effects).

Why all the exposition? Well, without it, the main point here—i.e., that if the proposed rule gets implemented as currently proposed, ACOs could become some sort of “carrot stick” to entice Medicare-enrolled health care providers to join ACOs, then essentially force all the others who haven't to join them—wouldn’t make much sense (but if you’re already familiar with the proposed rule, please skip ahead to “The Stick” below). So, let’s dive in.

Current Regulatory Activity

Regulators from the Department of Justice (DOJ), Federal Trade Commission (FTC), and Internal Revenue Service (IRS) have issued “requests for comment” on possibly modifying enforcement of antitrust laws for certain Medicare ACO operations and collecting input on potential implications for tax-exempt organizations. Substantively responding to these requests for comment could result in improved clarity about the legality of operating ACOs, which could contribute to making their operation more efficient in the future. Written responses to the DOJ, FTC, and IRS requests are due on or before May 31, 2011. See http://www.gpo.gov/fdsys/search/pagedetails.action?granuleId=2011-9466&packageId=FR-2011-04-19&acCode=FR for the FTC and DOJ request for comment; see http://www.irs.gov/irb/2011-16_IRB/ar07.html for the IRS request for comment.

CMS and the HHS Office of Inspector General (OIG) are also soliciting comments on how they should execute their statutory authority to waive application of various civil and criminal laws that would otherwise apply to—and thus, make illegal—many ACO operations. See 76 Fed. Reg. 19655 (April 7, 2011); http://www.gpo.gov/fdsys/search/pagedetails.action?granuleId=2011-7884&packageId=FR-2011-04-07&acCode=FR. Comments on those issues are due by June 6, 2011 at 5 p.m. EDT.

CMS has also issued a proposed rule to implement the MSSP on or before January 1, 2012. See 76 Fed. Reg. 19528 (April 7, 2011), available at http://www.gpo.gov/fdsys/search/pagedetails.action?granuleId=2011-7880&packageId=FR-2011-04-07&acCode=FR. Comments on the proposed rule are due by June 6, 2011 at 5 p.m. EDT.

The bulk of comments below address CMS’s proposed ACO/MSSP rule.

Who can form an ACO, and how would it be organized?

As described in PPACA and CMS’s proposed rule, ACOs would be organizations consisting of at least primary care physicians and other practitioners (the proposed rule would limit these other practitioners to physician assistants, nurse practitioners, and clinical nurse specialists), and may be integrated health systems, hospitals that employ primary care physicians and other practitioners, physician and practitioner group practices or networks, joint ventures between hospitals and physicians and other practitioners, or other arrangements authorized by CMS.See Social Security Act § 1899(b)(2) (to be codified at 42 U.S.C. § 1395jjj(b)(2)).

The currently proposed structure of an ACO is relatively flexible, but ACOs would need to meet a raft of legal, organizational, financial, administrative, and record-keeping requirements that with few exceptions would likely make them more complex than existing practices. See Proposed 42 C.F.R. § 425.24, 76 Fed. Reg. at 19654. As provided by PPACA, ACOs will be required to enter into a three-year agreement with CMS to operate as ACOs.

CMS’s proposal to “assign” beneficiaries to an ACO

Unlike an HMO, under an ACO, beneficiaries would be free to use any Medicare provider they choose, and beneficiaries would not enroll an in ACO: CMS would assign them to one. CMS is proposing a relatively complex process to assign beneficiaries to ACOs, but it is essentially based on where each beneficiary gets the “plurality” of his or her primary care services as measured by the aggregate Medicare allowed amounts paid on behalf of that beneficiary for certain HCPCS codes specified in Proposed 42 C.F.R. § 425.4. Aside from the hopefully improved quality of care, beneficiaries would likely not even notice that they have been assigned to an ACO until they have been told so. Similarly, under the current proposed rule, the only way for a beneficiary to get out of an ACO is to get a “plurality” of his or her “primary care” services from a physician who does not belong to an ACO.

By statute, ACOs need to serve at least 5,000 beneficiaries, and CMS is proposing penalties if ACOs serve fewer than 5,000 beneficiaries during a year. See Proposed 42 C.F.R. § 425.6, 76 Fed. Reg. at 19645. ACOs would also be required to notify beneficiaries that the ACO’s “providers” (generally, Part A health care providers) and “suppliers” (generally, Part B health care providers) are participating in an ACO.

Calculating “shared savings” payments

The Carrot

To calculate MSSP payments, CMS is proposing to look at Medicare expenditures for each ACO’s patients at the beginning of an ACO agreement and adjust that amount every year to account for Medicare expenditure inflation; this is called the “benchmark”. The proposed rule suggests this is a per-capita figure, but for simplicity, we'll use it in the aggregate sense here, because that is how CMS will effectively use it to calculate MSSP payments and remittances to CMS. The benchmark is designed to project what the average expenditures would be for a similar patient group outside of an ACO. See Proposed 42 C.F.R. § 425.7, 76 Fed. Reg. at 19645–6 (there are also some other adjustments and calculations, but they’re too complicated to be relevant here).

The proposed rule provides that if the total cost of care—for all services, not just primary care—for an ACO’s patients falls below the benchmark in a given year of the ACO’s agreement with CMS, then the ACO may be eligible to receive a “shared savings payment” at the end of that year. If the total cost of care is above benchmark, then (with several exceptions) the ACO may need to pay CMS the difference between the benchmark and the cost of care (a “loss”).

Generally, CMS is proposing two “Tracks” to participate in the MSSP as an ACO. “Track 1” would allow an ACO to not assume any risk for increased costs in years 1 or 2 of an ACO agreement (called the “one-sided model” in the proposed rule), but would limit “shared savings” payments to 7.5% of the benchmark. In year 3, this would increase to 10%, but the ACO would also be liable to CMS for up to 5% of the benchmark if costs go significantly above the benchmark (this is called the “two-sided model”). Under “Track 2”, the maximum payment in each year of the agreement would be 10% of the “benchmark”, but the ACO could be liable for up to 5%, 7.5%, and 10% of the benchmark if costs go significantly above the benchmark in years 1, 2, and 3, respectively (i.e., it’s under the “two-sided model” the whole time). After completing its first agreement, an ACO may only participate in Track 2 in the future. In both Tracks, “loss” payments would be payable to CMS in full within 30 days of CMS assessing them.

The proposed rule goes into substantially more detail about how the benchmarks, savings, and losses are calculated, and there are many hoops to jump through to get the maximum payment, as well as minimum loss and savings thresholds to trigger savings or loss payments, but here’s the upshot: Under the “one-sided model”, an entity could get up to 50% of its “shared savings” plus any extra payments, net 2 percent of the benchmark. For (fictionalized) example, in Track 1’s “one-sided model” period, for an ACO with an aggregate benchmark of $100,000, to get the maximum 7.5% payment of $7,500 the ACO would need to meet all quality requirements—and there are many—in the proposed rule and demonstrate savings of 17% over the benchmark (i.e., (($17,000 - $2,000) * 50%) = $7,500; see 76 Fed. Reg. at 19613, 19646–7). However, if 41% or more of the ACO’s beneficiaries visit a rural health clinic (RHC) or federally-qualified health center (FQHC) at least once in the year upon which payment is based, the ACO would get a 2.5 percentage point bonus ($2,500 in this case) above the quality-adjusted savings it earned and would only need to demonstrate 12% savings over the benchmark (i.e., (($12,000 - $2,000) * 50% = $5,000) + $2,500 = $7,500; see id.).

Under the “two-sided model” (i.e., year 3 of Track 1 or all of Track 2) with the same hypothetical $100,000 benchmark, to get the maximum 10% payment ($10,000), an ACO would get up to 60% of its “shared savings” for meeting all quality measures and other requirements, and would therefore need to demonstrate 16.67% savings over the benchmark ($16,667 * 60% = $10,000; no “net” requirement and a higher savings ratio), or only 8.33% of the benchmark if 41% or more of its beneficiaries visit an RHC or FQHC at least once in the year upon which payment is based, which results in a 5 percentage point bonus (i.e., (($8,333 * 60%) = $5,000) + $5,000 = $10,000).

The Stick (or carrotstick if you prefer)

All sounds good (or at least marginally so) so far, right? Well, here’s the rub: under CMS’s proposed rule, as noted above, although beneficiaries are assigned to an ACO based on primary care services only, with no minimum threshold for a quantity of primary care services, CMS is proposing that “savings” and “losses” will be computed based on all care furnished to a beneficiary, regardless of where the beneficiary receives that care.

Thus, under the proposed rule, primary care physicians that belong to an ACO could have a strong incentive to not refer patients to facilities or specialists outside of the ACO or that they view as inefficient. The proposed rule would penalize ACO primary care physicians for dropping “at risk” patients, but it does not per se prevent ACO primary care physicians from changing their referral patterns.

Granted, under current law (CMP/AKS/Stark; take your pick), directing referrals to specific people or groups to maximize one’s own revenue would likely be very problematic (essentially, the physician would get a kickback from the ACO for referring a patient to a specific entity; ACOs would pay kickbacks to health care providers who withhold certain care, etc.), but much of what an ACO is supposed to do would likely be problematic under current law, which is one reason that CMS and OIG are soliciting comments on how to carve out exceptions that would allow ACOs to lawfully operate. Bear in mind, however, that if physicians cannot direct their referrals to other health care providers in their ACOs or other providers they view as efficient, the entire purpose of the ACO system would be undermined and ACO physicians would risk losing a substantial mount of money. Thus, it is likely that these sorts of preferred referrals would need to be carved out for the ACO program to have any chance of success.

This is all well and good if you intend to join an ACO and take on all the administrative responsibilities and financial risk. However, the problem is that if you’re a health care provider and you’re not in an ACO or don’t plan to join one, the ACO program is not a carrot so much as a stick. Why is that?

If you’re a health care provider and you don’t join an ACO, you run the risk of losing referrals from ACO physicians in the area unless you reduce the amount you charge Medicare for each patient. If you do that without joining an ACO, however, you lose out on the bonus payments, which could help recover some of the reduction in Medicare reimbursement (which could get promptly eaten up—or surpassed—by administrative costs unless the ACO is large enough, but that's another story).

Conclusion

So, what to do about all of this? Tell CMS what you think. Almost everything above comes from a “proposed rule”, meaning that it’s just a proposal. CMS wants and needs your input. If you are concerned about the issues raised here, responding to the CMS/OIG fraud and abuse request for comment as well as commenting on the CMS ACO reimbursement rule would likely be a good way to help CMS and OIG strike a balance between achieving the aims of ACOs and protecting beneficiaries from unscrupulously directed care. Instructions for submitting comments are in the Federal Register notices linked to above.

When preparing comments, it may help to consider the following: CMS is statutorily authorized to determine how to assign beneficiaries to ACOs (see 42 U.S.C. § 1395jjj(c)) or to use “other” payment models (see 42 U.S.C. § 1395jjj(i)(3)), so comments on this proposed rule could, theoretically, help CMS decide how to adjust the beneficiary assignment process and/or remove or limit the negative incentive to refer outside of an ACO or to fail to join an ACO.

If you have a lawyer you work with on a regular basis for regulatory issues such as this, I would encourage you to work with him or her to draft and submit comments that make sense for you. If you don't have someone like that, please contact me, and I may be able help you find the right person to help you address your concerns.

All that said, where Medicare goes, other payors often follow. Thus, although the full impact of ACOs is unknowable at this stage, responding to the proposed rule and other requests for comment could not only directly affect how ACOs are implemented for Medicare, but could influence private reimbursement for years to come.

No mere "mandatectomy" for PPACA/HCERA: Off with their heads!

2011-02-02T12:32:00.000-08:00

On Monday, Jan. 31, Senior U.S. District Judge Robert Vinson in the Northern District of Florida ruled that the "individual responsibility" tax penalties (the so-called "individual mandate") of PPACA/HCERA (collectively, the "Act") are unconstitutional as written. Furthermore, he held that because the "mandate" cannot rationally be severed from the rest of the Act, the whole mess of a law needs to be thrown out and Congress needs to start over. Ilya Shapiro offers a comprehensive take on the decision here, along with a link to the decision itself.

I've finally had a chance to read through the decision, and it's a good read in general; a particularly good read when you consider that it's a court decision. If you ever need a primer on the history and evolution of Commerce Clause jurisprudence, this is a great place to start.

Judge Vinson fully accepts the "inactivity" argument against the "mandate", which is the rather myopic—and perhaps legally correct, albeit not economically correct—view that because someone makes a present decision not to purchase health insurance, this is economic "inactivity", and the future economic impact of potentially uncompensated care can only be regulated once it actually occurs or is imminent. That is, it appears that Judge Vinson would have no legal problem with a law that financially penalizes an uninsured person who goes to the hospital and can't afford to pay, but there is a big legal problem with prospectively penalizing that person.

Clearly, this stance does not work for an insurance system, which relies on people paying into the system before they get sick or injured, but that is really not the judge's concern: His concern is whether Congress has the power to compel people to do this or face immediate financial consequences (his answer is no, at least not the way they did it here). Judge Vinson also firmly rejects the notion that health insurance and health care are in any way "unique", and thus the same rules that apply to any other activity (or "inactivity") should apply here; the rules being that Congress can regulate only "activity", and this is not it, no matter how "unique" it might be.

(Whatever the merits of his Commerce Clause analysis, Judge Vinson is 100% wrong in footnote 14 about young people not being able to buy scaled-down "catastrophic" insurance plans: PPACA § 1302(e) (124 STAT. 168) explicitly provides for this; this mistake is certainly not a dealbreaker in terms of the opinion's overall validity, but it certainly reveals that we all make mistakes, as I'll discuss a bit below.)

Of course, this decision will be appealed, but there are some other important issues worth noting:

A tax is a tax is a tax. Unless it's not....

As much as it pains me to admit it, I may have been wrong about there being a lack of Constitutional issues with the "mandate." As Mr. Shapiro and Judge Vinson have noted, courts have so far universally rejected the assertion that the PPACA § 1501 penalty provision (as amended by PPACA § 10106 and HCERA § 1002) is a "tax" (see also p. 4, n. 4 of Judge Vinson's decision). So what, exactly, is wrong with calling this thing a "tax"?

As I have freely admitted, I am by no means a tax scholar, but some researchers have very cogently and convincingly explained that the "penalty" imposed by the law acts more like a "capitation tax" than an income tax because it potentially imposes an obligation upon a taxpayer to pay per-person dollar amounts, and as such, the Constitution demands that it must be "apportioned" among the States, which it isn't (i.e., the amount of total tax collected from residents of any given State is not related to the State's population as a proportion of the national population). Thus, if the government successfully argued that the "penalty" were a tax, it would be almost necessarily conceding its unconstitutionality.

However it seems that Congress would be fully within its rights to levy a 100% income tax, then refund it to people to reward behavior that it deems desirable. This already happens to some extent with the mortgage interest deduction, hybrid car credits, and child tax credits. Of course, a 100% income tax would be politically ruinous and people would storm the Capitol with ~~pitchforks~~ plastic forks and ~~torches~~ flashlights (welcome to the post-9/11 world...).

Thus, if Congress had, for example, enacted an across-the-board income tax increase (not very popular in an election year) or imposed a new "excise tax" (like Medicare or Social Security) then offered refundable tax credits roughly equivalent to—or perhaps even identical to or exceeding—the amount of the new tax paid, less the penalty amounts currently in the Act, this would almost certainly be a "tax". For example, the following would probably be legally (if not politically) acceptable: enact a 2.5 percentage-point income tax increase for every taxpayer in every bracket, refund all of it to everyone as a tax credit, but reduce the credit by the greater of $[X] per person in the household who does not have qualifying insurance or the entire 2.5 percent.

This is functionally almost indistinguishable from the Act as it is currently written, but formally, the difference is enormous. The bottom line seems to be this, based on the materials I've read on the topic: Congress can tax your income and give the money back for whatever reason it wants, e.g., if you buy a hybrid car, a home, or health insurance, or you have a child; Congress cannot, however, simply take money from you if you choose not to buy a hybrid car, a home, or health insurance, or have a child. This latter bit seems to be what is happening here, and I'm coming around to the idea that Congress should not be able to do this outside the income tax regime.

A major benefit of requiring this sort of coercive regulation—and I do mean that in the nicest possible way—to go through the income tax wringer is that not only does this give Congress the clear authority to act, but Congress will likely think very, very carefully about it before doing anything. Few constituents would ask their Representative or Senator to support a tax hike. Which leads us to....

Political Compromises?

Earlier versions of the Act contained a "severability" clause, meaning that if a court struck down any portion of the law, Congress would intend for the rest of it to go forward, but Congress dropped this clause before passing the law. See pp. 66-68 of Judge Vinson's opinion.

Why drop the clause? The bill likely could not have gotten endorsement from key supporters unless linked to the "mandate", e.g., insurers would never have gone along with the bill without the "mandate," which makes perfect sense.

In any event, the government in this case argued—quite honestly—that large portions of the Act could not function as intended without the individual mandate. Judge Vinson therefore reasoned that if the individual mandate is unconstitutional as written, all the portions of the Act that rely upon it must therefore be discarded; because the Act is so big and complicated, he reasoned, it goes beyond the judge's role to pick and choose which provisions are inextricably bound to the "mandate" and which are not, so he threw out the whole thing. Yes, that's right, all of it.

Was this the best way to go? That depends what he was trying to accomplish, but you have to admit that this is one surefire way to bump this controversy to higher courts.

How to fix it

Now that the midterm elections are over, Congress could likely head off the leading potential Constitutional problem (although I'm sure that people vehemently opposed to the bill will look for others) with a comparatively simple bill to do the following:

1) Amend the Act to add a severability clause. This is not foolproof, but it could help prevent the whole law from being thrown out if courts find another problem with one of its provisions.

2) Repeal the "individual responsibility" penalty provisions (PPACA § 1501 and amendments thereto). Despite my earlier argument that these are functionally equivalent to Constitutionally-permissible taxes, after becoming more familiar with the case law and scholarly research, the formal difference is dramatic, and possibly even insurmountable.

3) The hard part (politically): Institute a new income or excise tax, say, a flat rate of 2.5 percentage points of taxable income (i.e., the maximum current "penalty" as of 2014), and set aside the proceeds in a trust fund that helps subsidize uncompensated care or the purchase of insurance for those otherwise unable to afford it.

4) The slightly easier part: Amend PPACA § 1401 (26 U.S.C. § 36B) to expand the existing refundable tax credits for qualifying insurance coverage to completely wipe out taxpayer's tax liability under the new tax if they purchase qualifying insurance or are unable to afford qualifying insurance. For those able, but unwilling, to get insurance, reduce the refundable credit by an amount equal to what the § 1501 penalty (as amended) would have been, not to exceed the amount of the new tax. This is analogous to the mortgage interest deduction or the child tax credit, the only possible twist being that instead of receiving an larger deduction or credit for engaging in desired behavior, someone would be receiving a smaller credit for engaging in undesired behavior. This would likely still be controversial, but substantially less so than the current situation.

Conclusion

There is no guarantee that any of this would be politically or legally feasible, but in my view these fixes would moot the Commerce Clause issue upon which this and other "mandate" cases are based, putting the Act on considerably more solid footing and allowing implementation to go forward.

Why should implementation go forward? The Act is far from an ideal solution to the complete market failure we have had in the health care/health insurance industries, but it is a step towards some meaningful reform. Hopefully politics will not continue to impede progress in that direction.

© 2011 Alex M. Hendler. All Rights Reserved.

A rose by any other name: ACOs to receive kickbacks for reducing short-term Medicare expenditures

2010-08-22T12:23:00.000-07:00

Let’s start with the basics:

“ACO” stands for “Accountable Care Organization”. This is a new type of entity designed to allow the government to pay kickbacks to certain organizations that provide health care to Medicare patients, as authorized by §§ 3022 and 10307 of the Patient Protection and Affordable Care Act of 2010 (“PPACA”), a.k.a. Pub L. 111-148, a.k.a. H.R. 3590 ENR, a.k.a. the “health care reform” law. (This is a lovely example of PPACA amending itself; for even more “fun”, check out § 10309, all its references, and the additional amendments made by the Reconciliation Act, Pub. L. 111-152).

At its core, an ACO is a “group[] of providers of services and suppliers”—in Medicare-speak, that’s (very) generally hospitals, nursing homes and similar facilities, and doctors or other professional practitioners—who can get kickbacks from Medicare for incurring lower than average costs to treat their Medicare patients. Of course, the statute gets a bit more specific on eligible “providers ... and suppliers”, goes into a bit more detail than “average”, and it doesn’t call the payments “kickbacks”, but that is the gist of the program, which is due to start in 2012. (Note: The ACO model seems likely to run afoul of civil and criminal statutes that prohibit kickbacks and certain referral arrangements, but Congress has authorized HHS to “waive” the application of those statutes to allow ACOs to operate. This will likely begin to get sorted out over the next 16 months or so in the regulatory process that is scheduled to begin in the fall of 2010.)

Like any good government program, the ACO payment arrangement has an appropriate euphemism: the “shared savings program.” Why? Because the Medicare program saves money on patient treatment and shares some of that money with doctors and hospitals.

How does an ACO work?

For (a very basic) example, person A with diabetes and a heart condition visits an ACO doctor 3 times in a year, and person B with diabetes and a heart condition sees a “regular” doctor 5 times in a year; both A and B have the same outcome (let’s assume that neither A nor B go into a diabetic coma or have a heart attack).

The ACO and Medicare split the difference between the cost of treating A and the cost of treating B. That is, the ACO doctor gets paid for 3 visits, and the ACO gets paid some portion of the difference between 3 and 5 visits. The exact ratio, as well as some additional conditions, will start to be determined by regulation within the next 16 months or so. The doctor treating B would still get paid for 5 visits, assuming the visits were not “not reasonable and necessary” (the statute that authorizes all Medicare reimbursement is written in the double negative) and met other coverage criteria.

So, why would a doctor choose to join an ACO, if he or she might get paid less (in the short run) for treating the same kind of patients?

There are other components to the “shared savings program” that may help explain. Medicare will only pay the “shared savings” to an ACO that meets certain to-be-determined “quality” standards, which require Medicare to collect patient outcome data from the ACO. Thus, Medicare gets data on patient outcomes that it will (one hopes) use to adjust payment policies to encourage health care provider behavior that leads to better outcomes; you could look at this as Medicare paying a consulting fee to efficient health care providers for data on best practices. You could also look at it as a kickback for skimping on care, but these are ACOs, not HMOs, right? Well, maybe; we’ll get to that in a bit....

In the meantime, what’s in it for the ACOs? Medicare will likely “assign” patients to them, so the ACOs have a built-in referral source (which raises some interesting issues that the coming regulations will almost surely address). This means that the ACO members may see higher volume than they otherwise would. That is, theoretically, ACOs could treat more people less often, resulting in an overall increase in revenue.

One potentially exciting aspect of the program is that Medicare would finally be allowed to step into the 20^th century: ACOs will be encouraged to use practices such as “telehealth”, that is, telephone and video (e.g., Skype) conversations with patients. Medicare generally only pays for those now if you, as a patient, are physically present in an area so remote that there is likely no telephone or internet service, and happen to be named Yossarian. (I exaggerate slightly, but under current law, it is exceedingly rare for Medicare to pay for “telehealth” services). The “shared savings program” also encourages “remote monitoring” (e.g., check your blood sugar at home, electronically send results to your doctor), for which Medicare does not currently pay at all.

These technologies can, theoretically, cut down on the need for costly office visits, so patient A, above, might only actually physically see the ACO doctor one time a year, and the ACO would split the difference with Medicare for the difference between 1 office visit and 5 office visits—again, ratio TBD, but add that up over a few hundred patients, and now you, as a doctor or hospital, are quite possibly doing less work for more money, not to mention keeping your patients healthier.

What’s not to like?

Well, that’s just the first part. The rest, hidden down in PPACA § 10307, adds some interesting wrinkles.

The “shared savings” payments under § 3022 were designed to be made based on actual projected savings, but § 10307 authorizes a a “partial capitation” model, where ACOs are “at risk for some or all” of the services furnished to its patients under Medicare Parts A and B. This could be limited to ACOs that are “highly integrated systems of care” or are “capable of bearing risk”, which raises the question: What is a group of hospitals and/or doctors that is a highly integrated system of care that is capable of bearing risk? It sounds quite a bit like an HMO to me.

Granted, these latter two conditions are not “requirements”, but Medicare is authorized to make them requirements in order to make these payments to an ACO. There is also a statutory cap on the capitated payments to prevent a political disaster similar to the one in which Part C plans were getting paid more per patient than the average Medicare Part A & B patient cost the Medicare programs. CMS has also—so far, informally—stressed that unlike an HMO, patients would not be required to go to the ACO for care, which raises some other questions about how “savings” could be reliably measured.... Congress has also given CMS carte blanche to implement “any payment model that the Secretary determines will improve the quality and efficiency of items and services furnished” without incurring additional program expenditures.

Stay tuned for further developments and examples of how the ontolawgy™ platform can help to navigate the coming ACO regulatory system. If you have specific questions or would like a demonstration, please contact me via http://ontolawgy.com or Twitter.

PPACA your bags, we're headed to Taxes

2010-03-23T03:53:00.000-07:00

Now that the Patient Protection and Affordable Care Act (PPACA) has been signed into law, what, specifically, does PPACA do, tax-wise? Let's take a look at the so-called "individual mandate".

Very briefly, under PPACA, you (generally) will be subject to a financial "penalty" if you don't buy or otherwise get health insurance. Some people are not happy about this. Let's look at the law first, and then what people are saying about it.

What the law actually does

Under the current (pre-reconciliation) version of PPACA, specifically, § 1501, which will add § 5000A to the Internal Revenue Code, starting in 2014, for each month you do not have health insurance you must pay a nominal "penalty" of about $8 a month, ramping up to $62.50 per month in 2016 and thereafter. Generally insurance premiums are much higher than that, so this does not provide much incentive to purchase insurance coverage.

Fortunately, PPACA § 10106 addresses that problem: "Section 5000A(b)(1) of the Internal Revenue Code of 1986, as added by section 1501(b) of this Act, is amended to read as follows...." Pardon me? Instead of enacting what you meant to enact, you enact something else, then amend it? In the same piece of legislation? We'll get to that later.

I'll summarize to spare you the pain of reading it yourself: Under PPACA's amendment to its own new § 5000A of the Internal Revenue Code, you would pay either the average nationwide monthly premium, or the greater of a fixed dollar amount or 2% of your income (fully phased in in 2016), if that amount is less than the average nationwide monthly premium. (HR 4872 would make further adjustments to this formula). In fake algebra: penalty = lesser of (average premium or (greater of (fixed dollar amount or percentage of income))).

Alternatively, you could just buy health insurance and not worry about it; if you can't afford insurance, you're likely eligible for a subsidy.

Without ascribing any motive to Congress, there are some potentially interesting things happening here. If Congress is adding a new legal provision, why add the provision in full, then amend it in the same bill? Doesn't this approach just double or triple (or more) the work of someone trying to find out what the law is? Briefly: Yes.

At least one benefit is that this approach conveniently embeds the legislative history within the Act itself, which can aid future inquiries into congressional intent should any litigation arise. Perhaps it could also allow an offending provision to be more easily severed in case of a constitutional or other legal issue. As for other benefits, it could help prepare people for the frustration and confusion of driving in Washington, D.C., or serve as a component of cognitive stimulation therapy—I'm guessing they weren't intentionally headed in those directions, though....

Another potentially interesting issue is Congress's choice to impose a "penalty" under the tax code for failing to purchase insurance, rather than impose a tax and exempt people from that tax if they purchase insurance. Potato, potahto, you might say—it is the same result. That is, unless you are a red-State Attorney General up for reelection this year. Which brings us to....

What people claim the law does

The New York Times recently published an article describing how various State Attorneys General plan to sue to enjoin implementation of provisions of PPACA that these officials allege force people to buy insurance. (See also the Washington Post's opinion piece). The Times article indicates that various constitutional law scholars suggest that these challenges will "amount to no more than a speedbump" on the way to implementing PPACA for a variety of reasons, one of which is that the penalty payment is tied Congress' taxing power authorized by the Constitution.

For the originalists out there, the 16th Amendment to the U.S. Constitution reads:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

The Times article describes legal scholars' views that the Supreme Court has very broadly construed Congress's "power to lay and collect taxes". Congress has been doing this for Medicare for more than 40 years: If you're employed by someone else, you currently pay a 1.45% tax on your income from that employment; if you're self-employed, it's about 2.9%. Under PPACA, if you make more than $200,000 in employment income per year (or $250,000 if you file a joint return), you will pay an extra 0.5% of your income, starting in 2013.

Clearly, that is a tax, and it funds insurance (Medicare Part A). It differs from the PPACA penalty in several respects: 1) This is a mandatory payment to the government; and 2) there's no guarantee that you'll actually become a beneficiary of the system (you and the Medicare program both need to survive until you're 65 or sufficiently disabled). Apparently, these Attorneys General have no problem with Medicare. They seem to accept that the government can make you pay taxes to support a government insurance program that you may never use, but they don't seem to accept that the government can give you a choice: pay tax penalties or purchase private insurance that you could use today.

What is the reasoned basis for this objection? I don't have an answer, but PJ O'Rourke asks a similar question, implying that if the Attorneys General (he singles one out, but I won't) wanted to be ideologically consistent, they would be pushing for a single-payer health care system, like the one we had for sailors more than 200 years ago.

I do not pretend to know enough about the intricacies of the Internal Revenue Code or income tax jurisprudence to opine on Congress's motives for implementing this provision via a "penalty" rather than a "tax", however, based on the plain text of the bill itself and the other provisions surrounding it, imposing a penalty under the tax code does not seem substantially different from directly imposing a tax. Admittedly, neither "tax" nor "penalty" appear to be explicitly defined within the Internal Revenue Code or the Constitution—although we can all agree that both are money that must be paid to the government and are not attached to a criminal offense (i.e., they are not fines).

In case of any doubt about the penalty's status as a "tax", enter the Commerce Clause (U.S. Const. Art. 1 § 8 cl. 3): Congress explicitly incorporated "findings" (see PPACA § 1501) indicating that health insurance and health care services constitute "interstate commerce", and that the penalty is a way to regulate that commerce. So, not only is it a "tax", but it also regulates interstate commerce (at least, Congress intends for it to do so). Belt with suspenders, anyone? If you're curious, U.S. v. Morrison, 529 U.S. 598, 608-09 (2000), presents a good overview of Congress's (very) broad power to regulate interstate commerce; I am no Constitutional scholar, but the penalty provision seems to be well within that power.

The Post's opinion piece (see above) does raise an interesting point, however: "the individual mandate extends the commerce clause's power beyond economic activity, to economic inactivity".

It would be a more interesting point if it did not rest on such shaky ground: 1) The penalty is functionally indistinguishable from a "tax" (see above), and thus, does not necessarily emanate from the Commerce Clause; and 2) the statement incorrectly assumes that people who don't buy insurance don't have an economic effect on health care. For example, if an uninsured person goes to an emergency room to get primary care treatment, and doesn't pay the bill (PDF), that person is engaging in economic activity by causing the emergency room to incur expenses, which then get passed on to paying customers (patients, rather). Sounds like commerce to me. The "penalty" imposed by PPACA is designed to discourage or offset that negative economic activity. Similarly, if the uninsured person does pay, clearly, that is economic activity. Perhaps I'm missing something, but does anyone see a legitimate Constitutional issue here?

Thoughts, comments?

© 2010 Alex M. Hendler. All Rights Reserved.

Health care reform: Cost savings, but at what cost?

2010-03-12T01:22:00.000-08:00

On March 11, 2010 the Congressional Budget Office released an “Updated Estimate of Budgetary Impact” for the Senate-passed version of H.R. 3590. Some highlights and analysis follow.

“CBO and JCT [the Joint Committee on Taxation] now estimate that, on balance, the direct spending and revenue effects of enacting H.R. 3590 as passed by the Senate would yield a net reduction in federal deficits of $118 billion over the 2010–2019 period.”

How does it do that? According to the CBO’s analysis, the bill would cut Medicare Fee-for-Service payments by about $186 billion over the next 9 years, reduce Medicare Advantage payments by about $118 billion, and reduce Medicare and Medicaid DSH payments by about $43 billion over the same period, plus about $82 billion in other savings.

OK, so the government is going to spend less money, but that won't cover all the costs. According to the CBO's analysis, the bill would also substantially increase government revenue through a set of taxes and fees, including an excise tax on certain high-cost health insurance plans (good for about $149 billion through 2019), federally-based reinsurance and risk-adjustment "collections" ($106 billion), "fees" from "certain manufacturers and insurers" ($101 billion), "additional hospital insurance tax" ($87 billion), "other" revenue provisions ($77 billion), penalty payments ($39 billion), and what appears to be a halo of "associated effects of coverage provisions on revenues" ($57 billion).

This is an incomplete list of all the budgetary impacts, but there are other non-government costs that could be significant.

The CBO has provided a very handy itemized section-by-section list of projected budgetary impact, and has projected very little (if any) budgetary impact for the "quality improvement" (i.e., the goal of spending less money for better care) and "program integrity" (i.e., reductions in fraudulent or "abusive" payments under Medicare and Medicaid) provisions of the bill.

Of particular interest to some entities may be new administrative reporting requirements. The CBO is projecting that Title VI, Subtitle A of the bill (§§ 6001–6005) would have little (if any) impact on government revenues. What the CBO has not—and indeed, cannot have—accounted for is the likely burden that these requirements may place on health care providers. Section 6001 would introduce rather complex conditions that must be met to ensure a physician's compliance with the "Stark Law" (Social Security Act § 1877/42 U.S.C. § 1395nn) if the physician has had (as of February 1, 2010) an ownership or investment interest in a hospital. This provision is applicable to physicians who treat Medicare patients.

Section 6002 would require drug, device, biological, or medical supply manufacturers to publicly disclose on a government-run website any "payment or other transfer of value" to physicians by the manufacturers. Manufacturers and "group purchasing organizations" would also need to report any physician "ownership or investment interest" in such entities. With penalties of between $1,000 and $10,000 for each untimely unreported "ownership or investment interest" or "payment or transfer of value" (capped at $150,000 "with respect to each annual submission of information"), and between $10,000 and $100,000 for a "knowing" failure to submit the information (capped at $1,000,000 "with respect to each annual submission of information"), manufacturers and group purchasing organizations should take notice. Furthermore, it appears that the annual caps are applicable only to each physician or covered individual or entity whose interest must be reported, rather than the total of all reportable interests or payments. So if an entity has many physician investors, the penalties could multiply rather quickly: all the more reason to scrupulously report the information. Again, this provision is applicable to entities that sell product/services to Medicare patients.

Section 6003 would require a physician subject to the Stark Law, when making certain referrals for radiology services, to "inform the individual in writing at the time of the referral that the individual may obtain the services for which the individual is being referred from [someone other than the prescribing doctor or group practice] ... and provide such individual with a written list of suppliers ... who furnish such services in the area in which such individual resides". If this provision goes into effect, physicians with in-house radiology capabilities should very carefully review their radiology referral/prescription forms and procedures. They would likely also need to build (or access) a geographical database of radiology providers, likely by zip code, to facilitate the "written list" component of the provision. Free? Not for the physician. Applicable to Medicare patients? Of course.

These are just a few examples. The bill would also introduce other significant administrative reporting requirements for distributors of drug samples, pharmacy benefit managers, and nursing homes, all of whom provide services to (are you seeing a pattern here?): Medicare patients.

Although all this reporting will likely increase the transparency of some of the more opaque institutions in the health care world, there can be no doubt that these new provisions would increase administrative costs. No one in the history of health care has responded to increased administrative costs by voluntarily lowering fees charged to patients.

However, because the health care providers subject to these reporting provisions are by definition providing Medicare services, and Medicare services are the biggest item on the chopping block, these providers would by law almost certainly receive less for each unit of care provided to their patients. It is a rare person who happily does more of the same work for less money, so how much would this really cost? In other words, would there be fewer doctors or nursing homes willing to take on Medicare patients? Probably. How many fewer? How would this affect the quality of care? That depends on the quality and efficiency of the systems available to help Medicare providers comply with these requirements. What would this do to the cost of care provided to other patients? The money to pay for this has to come from somewhere.

Comments? Questions?

Brace yourself for "dense reading of the most tortuous kind"

2010-03-01T05:41:00.000-08:00

Well, not here, I hope, but I thought I should warn you about it. With reports coming in that the House may pass the Senate health care bill with a simple majority and move it to reconciliation in the Senate for a simple majority vote, it seems that meaningful debate on the big issues is essentially over (though the partisan sniping shows no signs of letting up); there may be a few minor tweaks here and there, and some issues may be carved out and addressed separately.

If the bill is going to survive in roughly the same form in which the Senate passed it (i.e., likely its best hope for survival), then it is going to present a number of challenges to those who want to understand and implement it, as suggested in a previous post.

The first step in analyzing it is looking at the current laws that it would amend. Among the laws the bill would amend is the Social Security Act, which, among other things, governs Medicare and Medicaid. The bill would make significant changes to how Medicare and Medicaid are funded and reimburse for services. The U.S. Court of Appeals for 4th Circuit has characterized this body of law rather colorfully:

There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of the matters addressed merely a passing phase.

Rehabilitation Ass'n of Va. v. Kozlowski, 42 F. 3d 1444, 1450 (4th Cir., 1994)

"Surely," you might think, "this must be judicial hyperbole." I can assure with great confidence that it is not.

For example, below is a simplified (and rather incomplete) 1-degree semantic map of the term "physician" as it appears in Section 1861 of the Social Security Act, based upon analytical information available on the ontolawgy™ platform. By "1-degree", I mean that the map tracks only direct relationships among element within a system, i.e., A -> B and relationships that A and B share with other elements.

On the right are the terms that require understanding of the term "physician" or that one must understand to understand the term "physician". On the left are the legal provisions—only within Section 1861—that are in some way related to the term "physician". Each of the lines in this diagram represents not only that a relationship exists between elements in the system, but also actually describes what the relationship is. Think of each line as a thought that a lawyer would need to have—consciously or not—in order to actually understand what a term or statutory provision means.

In some instances, it may require 4 or 5 "thoughts" to fully understand the relationship among the elements. The ontolawgy™ platform tracks those thoughts and places them into a searchable database.

If that's a "simplified" map, what does an unsimplified map look like? Well, because you asked so nicely, here's a 2-degree map; it tracks relationships beyond the first degree. For example, A -> B is a 1-degree relationship. A -> B -> C is a 2-degree relationship; the map also tracks common relationships among A, B, or C:

If these diagrams don't look particularly helpful to navigate or understand the law, don't worry: They're not supposed to be (at least not when presented as static images). They are supposed to represent the complexity and interconnectedness of elements of the law and to demonstrate the difficulty that a mere mortal lawyer might encounter when researching Medicare and Medicaid issues.

Now before you jump to any conclusions about the intellectual prowess of lawyers, remember that this diagram just relates to the term "physician" as used in Section 1861 of the Social Security Act. It does not address the term as it may appear in the other 108 sections of Title XVIII of the Social Security Act, nor does it address the term as it might be used in the context of Medicaid, nor in any of the millions of words (no exaggeration) of regulations, rules, Medicare and Medicaid manuals, and other statements of official policy. It may also help to bear in mind that Medicare and Medicaid regulate considerably more than just physicians.

I submit that anyone who can keep track of all of this in his or her head either has a beautiful mind or an unusual affinity for toothpicks. Let's just say that I don't have a little shed out back and I eat with a knife and fork....

© 2010 Alex M. Hendler. All Rights Reserved. No claim to original government works.

An Escherian Dilemma: Health Insurance Access or Health Care Cost?

2010-02-09T21:29:00.000-08:00

Access to health insurance is an important problem, as is evident from one insurer's recent announcement that it would raise premiums by up to 39 percent. Improving access to insurance seems to have been the main focus of most health care reform legislation to date, but there is more to the story. According to the insurer that is proposing to raise its rates, the cost of medical equipment and services is the reason behind its proposed premium hike.

Given the dramatic increase in health care expenditures over the last several years, there is no doubt that limiting the growth rate of medical expenditures is extremely important to do. To see why, just take a look at some of the scariest sites on the internet: The Congressional Budget Office's Health page, and the Centers for Medicare and Medicaid Services National Health Expenditure Data page.

If you are not familiar with the CBO, it does some impressive and eye-opening work. If you are at all interested in how the government is proposing to spend your money, take some time to review the CBO's site. The site includes a number of interesting documents relating to health reform efforts, and CBO (thankfully) has the freedom to demystify some of the more confusing language. For example, in one analysis, the CBO notes that the Senate's health reform bill would actually increase the deficit, while nominally preserving the solvency of the "Health Insurance" (that is, Medicare Part A) "trust fund" that has been projected to be bankrupt by 2017.

So, which should be addressed first, access to insurance or the cost of health care itself? Like almost everything involving paying for health care, the only clear and simple answer is that there is no clear and simple answer: This is a chicken that hatches out of its own egg. Are there any M.C. Escher devotees who want to try their hand at drawing that?

(On another note, here are some interesting additional perspectives on what it would mean to repeal the antitrust exemption for health insurers. Although most of the experts in that article suggest that repealing the exemption would have little, if any effect on the health insurance market, there is only one surefire way to find out what it would do....)

© 2010 Alex M. Hendler. All Rights Reserved.

Brobdingnagian, Leviathan, or just plain enormous?

2010-01-08T02:22:00.000-08:00

It is hard to pick an adjective to describe the (finally) published version of the Senate's amended health care bill, a.k.a. H.R. 3590.EAS. For a bill that started off as a few paragraphs to extend the first-time home buyer's tax credit to certain overseas members of the military, it has—in line with one of my earlier predictions—morphed into a beast that weighs in at about 2.4 kilopages (2,407, to be exact, not counting two superfluous pages at the end). I have not yet had a chance to read it, but with the election of Scott Brown to the late Senator Kennedy's seat in the Senat e, it would probably not be the best use of time, the general consensus being that his election limits the likelihood that the Senate's version of the bill would survive unscathed a conference with the House.

That said, below are some potentially interesting statistics on the bill that the Senate passed (much of it based on automated analysis):

Size

As a plain text file, it is about 2.5 MB;
The official PDF of the bill is about 4.3 MB;*
The table of contents is 16 pages long;
The bill is approximately 16,000 lines long;
It contains approximately 379,638 words.

Complexity

It has 441 Sections of its own;
It adds 173 new Sections to existing law;
I doubt there is any religious significance, but that amounts to 614 sections altogether (one more than the number of commandments commonly held to exist in the Hebrew Bible), a fact that might be interesting to certain factions that oppose this legislation;
It makes approximately 912 amendments to existing law;
It mentions the "Social Security Act" 706 times;
It mentions the "Public Health Service Act" 284 times;
It mentions the "Internal Revenue Code" 195 times;
It mentions the "Employee Retirement Income Security Act" (also known as ERISA) 25 times.

Money

It contains 360 dollar signs;
It mentions numbers in unrounded millions (i.e., xxx,000,000) approximately 206 times;
It mentions numbers in billions rounded to millions (i.e., xxx,xxx,000,000) approximately 39 times;
Of those 39 times, it mentions numbers in unrounded billions (i.e., xxx,000,000,000) approximately 26 times.

What is the point of reporting all these numbers? Merely to point out that the bill is big, complicated, and addresses numbers of a size more typical of biology, chemistry, physics, and CMBS balance sheets. Why is is so big and complicated?

Unfortunately, the straightforward solutions to the problem of securing universal health insurance coverage (i.e., mandate individual insurance purchases through imposition of a new income tax, refunded in part through vouchers to pay for such insurance, in part to subsidize insurance for those who could not otherwise afford it; get rid of preexisting condition exclusions; completely remove the federal antitrust exception for health insurance), are, for the most part, political non-starters.

While some of the complexity in health reform legislation may stem from earmarks or other concessions to bring certain legislators on board, I submit that a larger part comes from attempting to reach the same results as above in such convoluted—sorry, "creative"—ways that politicians can try to explain their way around the outcome in a manner that would allow them to get reelected.

There are some hints of what a "pared-down", passable bill might do, and while it could be a start, if that is what Congress ultimately does, it is still quite far from where we need to be, i.e., universal (but not necessarily unified, i.e., "single payer") coverage.

So, is Scott Brown's election a good or a bad thing for "health reform"? With that, I leave you to Federalist No. 10 and your own conclusions:

A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders ambitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes have been interesting to the human passions, have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good.

*Your numbers may differ; my operating system reports sizes in megabytes as if 1 MB = 1000KB; some systems reports sizes as if 1MB = 1024KB; technically, the latter definition is called a "MebiByte", but few people actually use that term.

Take a swim in the risk pool: It’s not as risky as it sounds

2009-12-24T02:31:00.000-08:00

Until I can actually see the latest health reform legislation without painstakingly redoing the work that our Senators and their staff have already done for us, on our dime—valiantly and tirelessly, I might add, but on our dime nonetheless—let’s take a look “risk pools.”

So what is a “risk pool” and why would you want to swim in it? I know, it sounds risky, but chances are you’ve got prune hands from being in one so long already, so don’t be too scared.

A “risk pool”, very generally, is a group of people paying premiums into an insurance plan and who are entitled to some benefits from the plan. Generally, the larger the pool, the larger the amount of total money available to an insurance plan to pay for health care for the people who pay premiums, and the less each person has to pay into it.

You may also see the term “high risk pool” being bandied about. It is a “risk pool”, but for people who are at a high risk to spend a lot of money on health care. (Some sources equate the terms “risk pool” and “high risk pool”, but I am not doing that here.)

To use a very loose analogy (and perhaps taking too many liberties with the word “pool”), a regular risk pool is like an Olympic-sized swimming pool located in southern Florida, where it doesn’t take much energy to keep it nice and comfortable (heating, filtering)—let’s call the energy costs “premiums”. So, everyone who swims in it chips in a little bit to keep the pool comfortable; that is, except for the uninsured, who hop the fence and do cannonballs into it, but we’ll get to them.

A “high risk pool” is like a hot tub: It is smaller, and it may take a similar amount of energy to run and heat as compared to the bigger pool, but it can hold fewer people, so fewer people can chip in. Thus, it’s more expensive per person.

Seems fair, right? You want a hotter pool with bubble jets and such, you have to pay more.

The conventional wisdom has been that high risk pools are fair to the general population because the high risk people pay higher premiums to help compensate for the amount of health care expenditures they incur. Sounds great if you’re in the regular risk pool; not so great if you’re in the high risk pool. The problem is that this (generally) is not equitable in the health care arena. Whereas some people might choose to pay more for hot water and bubble jets, no one chooses to be born with a congenital heart defect or Type I diabetes, and that’s where the “hot tub”/ “big pool” analogy breaks down—the big pool is just as good for people with heart defect and diabetes as for everyone else, so we’ll assume (for the purposes of this discussion) that everyone goes into the big pool.

I won’t get into the grey areas that include obesity or smoking (or other similar health hazards caused by genetics and free will in varying unmeasurable degrees) or other issues such as paying for health care for illegal aliens—they’re not really relevant at this fundamental a stage of the discussion.

Back to the pool. Think of a mandate to purchase health insurance like going to a big pool used by a bunch of different swim clubs. But imagine that everyone must swim at some point and that you need to join a swim club before you can jump in. Some clubs offer different services (fresh towels, swim lessons, sunscreen, babysitting, free use of kick boards), and some are pretty bare-bones, (e.g., they'll pull you out if you start drowning), but everyone pitches in to use the pool. Just as with health insurance, some plans offer annual physicals, nutritrional counseling, and discounted gym memberships, whereas others just pay for you to get your hand sewn back on after a horrific accident.

Some people might never plan to go into the pool, just like some people (e.g., Christian Scientists, devout Rastafarians) might not plan to use the health care system. But the risk pool system breaks down unless everyone belongs to a swim club/health insurance plan—someday they or someone they care about is almost certain to go for a swim, voluntarily or not. One reason health care insurance premiums are so high is that not everyone has insurance. This wouldn’t be a problem if the uninsured didn’t use the health care system, but in the U.S., the uninsured use the system all the time, and often don’t pay for the privilege, so the cost gets passed on to the people who have insurance. This is not the place to get into why or how much, but I’ll lay out some of the consequences below.

So what happens if you put everyone in the same pool? For the most part, peoples’ insurance premium costs go down. There are a few people who will pay more (typically, those who are currently uninsured or underinsured), but generally, because everyone is pitching in, the per-capita cost goes down. If you understand fractions, you’ll see why very quickly.

5/4 > 5/5 (or for the fractionally deficient: 1.25 > 1.0)

That is, if 5 people use health care, but only 4 pay for it, those who pay must pay 5/4ths of what their care actually cost to keep the system solvent. If 5 people use health care and all 5 pay for it, then everyone only needs to pay for 5/5ths. So, before you whine about being “forced” to buy “universal” coverage, ask yourself: “Would I rather pay $1.25 in insurance premiums or $1.00”? Assuming you’re a rational person, it would be the latter, right?

That said, at the risk of demonstrating why lawyers shouldn’t be allowed to play with numbers, below is an illustration of what would happen if the uninsured were able to get insurance and start paying premiums (whether on their own or through a subsidy scheme) in Texas, which, as of 2008, had the highest proportion of uninsured people of any State (including DC) in the country.

The latest year for which data are available for all States is from 2004. Looking at the overall numbers shows how (sadly) dated the data are: Total national health expenditures in 2004 were “only” about $1.55 trillion (that is, $1,551,261,000,000.00) and Medicare expenditures were “only” about $303 billion (that is, $303,462,150,000.00). As of 2007, they were each roughly 40% higher.

The health expenditure data are mainly from the Kaiser Family Foundation’s excellent, crystal-clear http://statehealthfacts.org, and many of the data come from the somewhat more daunting Centers for Medicare and Medicaid Services statistics page. I pulled the 2004 Medicare enrollment data from there directly.

Major assumptions: 1) The uninsured, once they obtain insurance, will use care at the same rate they do now (an arguable proposition, given that they may be using less acute care and more preventative care); 2) The inference of the number of uninsured people was taken from percentages in a 2007-2008 survey—the assumption is that the percentage of the population that is uninsured has not changed between 2004 and 2008. (Although this assumption likely does not hold true for Massachusetts because of its recently implemented universal coverage system); 3) a “medical loss ratio” of 85% (taken from § 102 of H.R. 3962.PCS), that is, 85% of premiums collected are used to pay for health care; 4) the "premiums" below may be a bit off, because for the sake of simplicity, deductibles and coinsurance/copayments were not considered, so this assumes that insurance covers 100% of all medical expenses, but for a person who satisfies their deductible and pays 15-20% coinsurance, the out-of-pocket expense would likely be similar; 5) even if people are paying money into different pots, if everyone is insured, it acts effectively as a unified risk pool on a per-capita basis—the currently uninsured don’t choose which insurance company to bill their expenses to, so the assumption is that the costs are currently evenly spread across all the insured; and 6) smaller risk pools are generally more expensive per capita, but without data on risk pool sizes (e.g., number of insurance companies in each State, and number of people each company insures and sizes of their respective risk pools), it’s not possible to work out the advantage of a Statewide pool vs. the current situation for those in high-risk pools, rather only 100% coverage vs. current overall coverage rates, thus, the 100% coverage rate insurance premium projection is based upon a single Statewide risk pool because no other data are available (to me, that is).

Note that the illustration is extremely simple in that it does not take into account possible benefits of 100% coverage such as improved economies of scale or reduction in acute care utilization, nor does it account for self-insurance (personal or organizational), possible increased overutilization, medical expenditure inflation, the potential overlap (double-counting) of non-elderly Medicare beneficiaries, or Medicaid (which is likely to be supplanted in large part by premium and cost-sharing subsidies in what I’ve been able to glean from the leading health care legislation). At a fundamental level, the illustration below roughly shows that 5/4 > 5/5, but it looks somewhat more impressive when you plug in the real numbers. That said, let’s proceed.

Using currently available data and the above assumptions (with the above caveats), here’s a comparison between Texas now, and what Texas would look like with everyone (everyone who’s not in Medicare, that is) in the same risk pool:

Now (estimated)	Texas
Per Capita Health Care Expenditures (“PCE”), 2004, including Medicare	$4,601.00
Total health care expenditures (“HCE”) (millions, 2004)	$103,600.00
Inferred population (millions, 2004, inferred from HCE / PCE)	22.516844
Medicare enrollees (2004, actual numbers)	2,451,234
Medicare PCE (2004)	$8,292.00
Total Medicare spending (millions, 2004, computed from Medicare PCE * # of Medicare enrollees)	$20,325.63
Total HCE, less Medicare (millions, 2004)	$83,274.37
Non-elderly population (millions, 2004, inferred from inferred population less Medicare enrollment)	20.065610
PCE not including Medicare expenditures or enrollees	$4,150.10
Percentage of non-elderly population uninsured (2007-08)	27.72%
Estimated number of non-elderly uninsured (millions in 2004 using 2007-08 uninsured percentage from StateHealthFacts and inferred non-elderly population)	5.563172
Insured (millions in 2004 using 2007-08 uninsured percentage)	14.502438
Rough estimate of total cost of care for uninsured (millions, 2004)	$23,087.74
PCE per insured person to cover care for uninsured	$1,591.99
Total PCE for each insured person to cover uninsured (overall PCE + PCE per insured to pay for uninsured)	$5,742.09
Estimated per-capita premium for each current non-elderly insured person @ 85% loss ratio to cover uninsured health care costs	$6,755.40
Estimated total premiums paid @ 85% loss ratio (millions)	$97,969.84
Estimated per capita uninsured care cost ratio (a.k.a., for every dollar an insured person spends on his or her own health care, this much is spent by an uninsured person or on such person’s behalf)	$0.28
With 100% Coverage (everyone swims)
PCE assuming 100% coverage (would be identical to current PCE)	$4,150.10
Estimated per-capita premium @ 85% loss ratio and 100% coverage	$4,882.48
Estimated total premiums paid @ 85% loss ratio and 100% coverage (millions, 2004, computed as per-capital premium * total # of all non-elderly)	$97,969.84
Estimated per-capita premium savings for current insured	$1,872.93
Estimated per-capita premium increase for uninsured	$4,882.48

As you can see, the total amount of insurance premiums would not change, but the distribution of the expense would.

“But isn’t this unfair to those who can’t afford insurance”? Well, if insurance becomes roughly 28% cheaper, it probably will be somewhat more fair. Furthermore, the most recent version of meaningfully published legislation would offer some help to those people who truly can’t afford it. See §§ 341–347 of H.R. 3962.PCS.

The spreadsheet used for the calculations above is available upon request; I may post it or a link to it in the near future. It shows considerably more data, including some interesting projections on what would happen with a nationwide risk pool, but which I’ll summarize below:

1) Using the assumptions above, insured people every State (plus DC) would be better off with full coverage and a Statewide unified risk pool as compared to the current situation.

2) With a nationwide unified risk pool, people living in 22 States would likely be worse off financially in the short run as compared to a Statewide risk pool—28 plus DC would be better off.

3) Only the insured folks living in Utah and Arizona would be better off in their current situation as compared to a nationwide risk pool with full coverage, meaning that for 48 States and DC, a unified nationwide risk pool with full coverage would likely result in lower premiums than people pay now.

What Congress could learn from farting phones

2009-12-22T23:58:00.000-08:00

With the Senate inching ever closer to passing health care reform legislation, unless you’re working on the Hill or have a few dozen hours to dig through THOMAS to piece together what the most recent version of the health reform legislation actually does, you’re out of luck if you actually have the gall to want to read it.

There’s a November 19 version of the available from the previous link (H.R. 3590.AS), but you need to look at the “Bill summary and status file” (specifically, “All Congressional Actions with Amendments”) to see what has happened to the multiple amendments that Thomas reports have been made to the bill. Then you’ll have to manually insert the adopted amendments into the Nov. 19 text yourself and see what you can figure out has been done. There’s no freely available unified text as of this writing. Some commercial services may have independently produced unified text, but I don’t subscribe to any of those—nor should I have to to find out what my Congress is doing.

Given that Congress actually uses computers now (at least, that’s the rumor), it is thoroughly shameful that we, for whom the Representatives and Senators work, cannot actually see what they are doing until well after they’ve done it—a major problem in a Republic where the Representatives and Senators are supposed to represent our interests. It is also highly doubtful that the Representatives or Senators can see what they are doing if this is the system they are actually using to keep track of things. Fortunately, there is software—much of it free—that could help.

It is no coincidence that we speak of computer “code” just as we speak of legal “code”. Each is a set of relatively arcane instructions to a computer (silicon or human, respectively) to perform or not perform a certain set of actions within a defined framework. Each is typically comprised of complexly interconnected elements, yet remains readable and (somewhat) intelligible to experts in their respective fields.

Typically, when one speaks of human-readable computer code, one is describing “source code”, that is, a human-readable equivalent of what a programmer intends for a computer to do. Once the code is “compiled” for a particular type of microchip, a computer can run it. For example, multiple developers can work on a program to make an iPhone simulate flatulence. The program is split into different sections, and the developers can revise these sections, tracking each revision along the way, debating changes, and, in some cases, letting anyone in the world track progress on the developing source code through a public website. Once the code is complete, it is compiled, and can be used by an iPhone to everyone’s juvenile delight.

Similarly, legislation is “source code” that must be “compiled” (either into the Statutes at Large or in the U.S. Code, or both) after its passage to be applied (“run”) by the legal system (judges, lawyers, police, etc.). However, it is put together in person (for the most part), on paper (in large part), then transcribed into a computer system that (at least to the general public) seemingly simulates paper in many ways. Changes are rarely integrated in real time, instead, they are often posted as monolithic “amendments” (if the amendments are posted at all) and not integrated into a “live” version of the text. Typically, with complex legislation, its full text is not available until after it has been passed by the House and the Senate and signed by the President—too late for mere mortal citizens to do anything about it (e.g., talk to their Representatives or Senators).

The analogy is not as useful when taking it much further, so let’s stop there for the moment and get to the point:

The same free software that people can use to collaboratively make their phones fart could be used to draft complex legislation and share it—in real time—with the general public.

There is a trove of free, (relatively) easy to use software that is designed to track the minutest of changes to extraordinarily complex documents and share those changes—including all the history back to the original text—with the entire world. Git, CVS, subversion, Mercurial, take your pick.

Although THOMAS is an incredible resource, it still largely catalogues information as if it were written on vellum parchment with quills, bound together with catgut, horsehide glue, and a calfskin cover. It does give one some appreciation for the complexity of what Congress does, but as as legislation and the legislative process grow increasingly complex, THOMAS’s utility as a tool to extract meaningful information decreases dramatically. Hopefully THOMAS will git (or some equivalent) with the program soon.

Time to bring out the big stick: Who’s afraid of McCarran-Ferguson?

2009-10-15T16:33:00.000-07:00

OK, so what is “McCarran-Ferguson” and what does it have to do with health care reform or the law?

The McCarran-Ferguson Act*, codified in part at 15 U.S.C. § 1012, allows the U.S. Congress to supersede State regulation of insurance.

15 U.S.C. § 1012(a) specifically delegates to States the regulation of the “business of insurance”; 15 U.S.C. § 1012(b) allows Congress to supersede State regulation of insurance, so long as the Act of Congress “specifically relates to the business of insurance”. But doesn’t Congress already regulate health care insurance? To some extent, yes, but there is still a lot of room for improvement.

For the past six decades, Congress has generally spoken softly with McCarran-Ferguson, typically exercising its power under § 1012(a), i.e., to do nothing. Congress has swung the big stick of § 1012(b) for Medicare, Medicaid, and HIPAA, among other issues, but generally, Congress holds the big stick still and leaves insurance regulation to the States—to the seemingly ambivalent delight of health insurance companies (i.e., good for the bottom line, not so good for consumers or their health).

In a recent editorial, Michael Tanner of the Cato Institute deftly laid out several issues that he sees as limiting the potential effectiveness of current health reform efforts in Congress. Among other issues, Tanner noted that current regulatory systems “limit competition between insurers and providers by, for instance, prohibiting people from buying insurance across state lines”, which prohibition, he implied, could be contributing to increased health care insurance costs.

Kudos to Tanner for so publicly airing this ugly open secret. Tanner neglected to note, however, that the offending regulatory systems, are, by and large, State regulatory systems. His editorial implies that Congress may have the power to do something about this problem and it suggests the admirable goal of a “consumer-oriented free market” health insurance scheme. Tanner did not—understandably, for a variety of unstated reasons—propose a specific course of action for Congress to achieve this goal. At my peril, I’m going to get specific and try to do so. Back to McCarran-Ferguson.

A responsible and effective swing of § 1012(b)’s big stick would accomplish at least the following: 1) Prohibit States from regulating certain aspects of health insurance (e.g., pricing and interstate sales); and 2) Forbid health insurance companies from offering separate “group” and “individual” policies. In a future post, I’ll dive into why these two provisions are essential to meaningful reform (and perhaps how they could be implemented without causing people to storm Capitol Hill with pitchforks and torches).

UPDATE - 2009-10-15, 20:02: This article suggests that the McCarran-Ferguson Act can exempt insurance companies from federal antitrust regulation and refers to some movement to repeal the Act in its entirety. I do not know much the repeal movement, but what the Act does is slightly more complex than suggested in the article. Based upon my reading of the Act, Congress does not need to repeal the Act to make health insurers fully subject to antitrust law, although it must take out of States’ hands any competition-related aspects of health insurance industry regulation. Specifically, 15 USC § 1012(b) provides that federal antitrust laws do apply to insurance companies (since 1948 in any case), but only “to the extent that such business is not regulated by State Law”. Thus, I have amended point 1 above from “Require States to allow insurance to be sold across State lines” to read as it does now.

At the risk of horrendously mixing metaphors, even a liberty-focused organization such as Cato could rationalize this course of action: this use of § 1012(b) would be chemotherapy for the anti-competitive cancer of a fragmented health insurance market; CABG for the clogged arteries of health insurance that are strangling the heart of our economy; a machete cutting through the brambles that impede our progress as a 21^st -century nation; Congress courageously doing what needs to be done, rather than what is politically expedient; or, in the alternative: Justice through economic rationality.

Comments are welcome below. In the next installment we’ll take a swim in the “risk pool”. (In the meantime, you may want review this rather lengthy post from another blogger—“Jay” does an excellent job of laying out the framework of many of the underlying issues).

*I would read this article for a history of the Act, not necessarily an accurate analysis of the Act or the court cases giving rise to it.

Senate takes a major step in a long, hard slog on health reform

2009-10-02T02:46:00.000-07:00

At this stage, I was hoping to be able to have analyzed some health reform legislation (namely, the “American’s Healthy Future Act of 2009”), but given the dozens (or hundreds, according to another source*) of amendments on which the Committee completed voting only hours ago (and me not having a direct link to the Committee), I haven’t gotten a chance to see the whole thing yet.

Furthermore, at this stage, a bill may not even be publicly available in legislative language anytime soon. The most recent information posted on the Committee’s website is a 223-page outline explaining the current law and what the Committee wanted the bill to do as of September 22.

The next step is getting the Office of the Legislative Counsel to draft a bill. (They may have already done so, but I cannot find any publicly available legislative language). If the House’s bill is any guide (the version of that bill as amended more than two months ago is still not available, but you can try cobble together your own version from the House Committee on Energy and Commerce’s health reform page), we may be looking at something that can be measured in kilopages and that no single person could fully understand.

Now, back to the Office of the Legislative Counsel to the U.S. Senate. This Office has an extremely daunting task before it. The Office regularly excels at quickly converting legislative intent into legislation that, if enacted, would modify the law in accordance with that intent. However, there is some risk that with a bill of this size and complexity, the outline may not correspond to legislators’ intent; alternatively, if legislation has actually been drafted, there is no guarantee that the Committee’s summary accurately reflects what the legislation actually does.

To be sure, legislation always includes some intentional “wiggle room” for a variety of reasons—e.g., political expediency, delegation to regulatory authorities, or (for the cynical among us) keeping judges and lawyers employed—but as the size and complexity of legislation increases, so does the likelihood of unintentional wiggle room, i.e., gaps, oversights, or human error. I have met with Senate staff to discuss complex legislation only to find them shocked at what the legislative language would actually do as compared to what they intended it to do. To be fair, it was an amendment to the notoriously inscrutable Internal Revenue Code, but look at what they’re up against this time:

As metioned in a previous post, the Finance Committee’s bill outline proposes to amend not only the Internal Revenue Code, but also to amend (or incorporate) the equally-inscrutable (albeit somewhat less famously so) following laws/systems:

CHIP
ERISA
Medicare
Medicaid

Also remember that statutes are just the beginning of the story: This legislation would require the enactment or amendment of multiple regulations that are based upon or authorized by those systems, not to mention various official policies, bulletins, newsletters, advisories, and necessary modifications to State laws.

How do you plan to keep track of it all? Please comment below. I’ll explain my strategy in a future installment.

*One would think that the Washington Post has a copy editor on hand to review things before publishing them, but apparently not for that article (at least the version I read), e.g., “the fifth and final to contribute to the legislation” and “the committee’s work of churning through 564 amendment”. I understand that it was published at 2:36 a.m., but reporters and editors are paid to work through the night on a regular basis. What major crisis could have prevented a front-page article from being proofread and published at 2:37 (or even 2:38) instead of 2:36?

An Introduction

2009-09-14T12:11:00.000-07:00

My name is Alex M. Hendler. I am an attorney from the U.S. I own and run a small company called ontolawgy™ LLC. My company's goal is to help make the law more accessible to attorneys and non-attorneys alike, using an internet-based computer system called the ontolawgy™ platform.

The ontolawgy™ platform is a semantic legal analysis system. What is semantic legal analysis? In a nutshell, it is what an attorney does in his or her head to analyze a legal issue; the ontolawgy™platform simply allows the coherent electronic storage and retrieval of the key elements of that analytical process and dynamic, customizable presentation of the results. So, why the reference to "connect the dots™"? Semantic legal analysis helps make legal research almost as straightforward as drawing a connect-the-dots picture on a placemat in your neighborhood family dining establishment or in one of your childhood coloring books.

As for this site, I plan to post bi-weekly (i.e., once every two weeks) thoughts on semantic legal analysis, health care reform, and the relationship between the two.

To set the stage a bit, in the U.S., there is increasing movement towards revamping about 16% (and growing) of our country’s economy through what is commonly called “health care reform”. A comprehensive approach to health care reform will likely include changes to federal tax, employee benefits, and Medicare and Medicaid law (four of the more complex legal regimes in the U.S.), as well as the possible creation of a new legal regime to govern a “public option”, “regional co-ops”, “health insurance exchanges”, or some other variant designed to increase access to health care insurance in the U.S., and possible reforms to the Social Security system and the various laws governing health care insurance plans available to civilian, military, and law enforcement federal employees.

Because of its necessary legal complexity (at least in the U.S.), health care reform provides a unique opportunity to explore semantic legal analysis, which I will do in part here, and in part on a deployment of the ontolawgy™ platform that will address health care reform once some solution is enacted into law.

For more information about me or the ontolawgy™ platform, please visit http://ontolawgy.com or come back in a couple of weeks for the first substantive installment.