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Articles by Galen Institute

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How Obamacare Screwed Up 800,000 Tax Returns February 20, 2015 ,

By Ryan Ellis

The Associated Press is reporting today that an “erroneous” glitch in Obamacare tax forms is causing filing season to come to a halt for 800,000 taxpayers.  Tens of thousands of these families have actually already filed and will need to file amended returns redundantly.

Americans for Tax Reform can shed some light on what the “erroneous” problem is.  The affected form for enrollees is known as an IRS Form 1095-A.  It documents health insurance coverage obtained through the federal exchange.  It reports premiums charged by month.  It is supposed to also report the amount of a tax credit advanced from the IRS to the covered family’s insurance company.  Finally, a middle column is supposed to say what the average premium amount was for the second lowest-cost silver plan (the poetically-named “SLCSP”).

All three inputs–monthly premium cost of the health insurance plan, the SLCSP, and the advanced premium tax credit amount–are vital to calculating the accurate tax credit a taxpayer is entitled to under the Obamacare law.  Without even one of these inputs, the calculation is thrown off.  It would therefore also be impossible to determine whether the advanced tax credit was too generous (in which case the taxpayer may owe the IRS money), or too stingy (in which case the taxpayer claims the remaining credit amount on his 1040 filing).


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Behind the Curtain, Troubles Persist in February 18, 2015

Behind the scenes, is still a mess.

The “back end” of the Obamacare website still isn’t properly wired to the health insurance companies. It’s slow going for health plans to make sure the 11.4 million people who have signed up end up in the right plan. Subsidy payments aren’t automated, so the insurers get payments based on estimates. And adding information like a marriage or the birth of a child is a convoluted, multi-step process.

Even though consumers had a largely smooth enrollment experience this year, the fact that these gaps persist behind the scenes 18 months after launched shows that the system is still not working as intended. Instead of a swift process, health plans use clunky workarounds and manual spreadsheets. It takes time and it costs money.

“You’re not going to find a lot of customer-facing issues,” one insurance industry official said. “It’s more like you lift up the hood, and that’s where the problems are.”

“All of these things, it’s sort of the cost of doing business right now. And it’s not cheap,” the insurance official added, referring to the ongoing administrative expenses of doing so much of it by hand.

The back end isn’t broken so much as it’s unfinished. It wasn’t constructed in time for it to be part of the botched website launch in the fall of 2013; one administration official told a congressional hearing that it was 40 percent incomplete. And it’s not totally done now, although it’s gotten closer.

“CMS has focused on improving operational efficiency and the consumer experience while building the back-end system. We continue to add new back-end functionality, and we are closely managing the work to ensure it is completed in 2015,” CMS spokesman Aaron Albright said.

Because consumers aren’t having such a tough time, the website hasn’t been in the political crossfire so much this year. Obamacare is still facing a Supreme Court challenge, and Republicans are still trying to repeal it. But they’ve focused on confusion during tax season, cost, access to doctors and the heavy government role in health, not so much the technology.

President Barack Obama has declared this year’s enrollment a success. The White House on Tuesday night announced that 11.4 million people had signed up or re-enrolled — though not all of them have paid yet, so the true coverage number will be lower. Still, sign-ups exceeded the administration’s estimates.


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First Biosimilar Poised For FDA Approval February 13, 2015

By Grace-Marie Turner

Patients and payers have been anxiously awaiting approval of the first “biosimilar” medicines in the United States, hoping the new biologics will lower the cost of these often lifesaving treatments.

But early statements from makers of the first of these drugs likely to reach the market indicate that the company expects to launch its biosimilar at parity with the brand-name drug, a decision which would disappoint patients, policymakers, and payers, including Medicare.

The FDA is expected to soon approve Zarxio, a drug that is biologically similar to Amgen’s Neupogen which is injected as part of the treatment for cancer patients receiving chemotherapy, for patients with abnormally low counts of white blood cells, and other indications.

Zarxio is a product of Sandoz Biopharmaceuticals which already sells its Neupogen biosimilars in more than 40 countries outside the United States.

Mark McCamish, Sandoz’s global head of biopharmaceuticals and oncology injectables development, recently told a Food and Drug Administration panel that sometimes the product might be priced “at parity,” but that overall Zarxio would save the system money through rebates or other mechanisms.

“The cost will be less, to the consumer, to the payer, to the healthcare economy — otherwise it doesn’t make sense,” he told the panel.

Other Neupogen biosimilars are in the pipeline, and the “other mechanisms” that could drive down the price could well be free market competition. Experience with pricing of Gilead Hepatitis C drug, Sovaldi, is instructive.

Continued on Forbes…

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Approaching ObamaCare with Humility February 13, 2015

By Doug Badger

President Obama spoke frequently of humility during last week’s prayer breakfast. Congressional Republicans could use a healthy measure of that virtue should the Supreme Court rule that ObamaCare subsidies are not available in the 37 states with federally facilitated exchanges.

ObamaCare is the product of a yawning humility deficit. Its core conceit is that a group of very smart and ideologically like-minded people could reorganize the financing of a $3 trillion industry that touches the lives of 320 million Americans.

Its architects boast that more people have “selected a plan” this time around than during the program’s disastrous initial open season. They are quick to overlook the law’s wreckage — canceled policies, loss of employer-sponsored coverage, erroneous subsidies that will require people of modest means to repay the government with interest, and assorted other disruptions and deformations.

A law that is minutely prescriptive too often got its prescriptions horribly wrong. Its flaws will reach the point of absurdity should the Supreme Court rule that its attempt to subsidize health insurance made most health insurance subsidies illegal.

The case of King v. Burwell would be a simple one, but for its social and political implications. The court is examining a defect in the law, one of many in what is perhaps the most poorly drafted statute in U.S. history. The provision in question provides that subsidized health insurance coverage is available only through an exchange “established by the state.”

The IRS effectively rewrote the law to allow subsidies to be paid as well through the 37 exchanges that were not “established by the state,” but by the federal government. In defending the agency, the Justice Department in essence argues that the IRS can change laws so that they conform to what Congress must surely have meant to write, rather than what they actually wrote.


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What Happens To The ACA If The Petitioners In King v Burwell Win At The Supreme Court? February 12, 2015 , ,

By Tom Miller and Grace-Marie Turner

One of the mechanisms through which the Affordable Care Act (ACA) expands access to health insurance is through tax subsidies provided to individuals to help offset the cost of health insurance. These subsidies are only available if people purchase highly-regulated and -mandated policies that are sold only through government-run insurance exchanges.

The law’s formula for determining the amount of these premium subsidies specifies that people are eligible for them if they are enrolled in qualified plans offered in “an Exchange established by the State under [section] 1311 of the Patient Protection and Affordable Care Act.” However, only 13 states are operating state-based exchanges this year. The rest are relying on exchanges created by the federal government. In 2012, the IRS wrote a rule that allows the subsidies to flow through the federal exchanges as well.

The Supreme Court has agreed to hear a case, King v Burwell, challenging the illegal IRS rule which, despite statutory language to the contrary, authorizes people to get subsidies in the federal exchanges. Petitioners argue that the law clearly restricts the subsidies to state exchanges; that this gives states an incentive to create their own exchanges; and that administrative agencies like the IRS cannot alter legislation without statutory authorization by Congress. Respondents say that “established by the State” is at worst a drafting error, not a reflection of legislators’ intent, and that Congress wanted subsidies to be available to citizens in all of the states.

The Supreme Court justices will hear oral arguments in the case on March 4, and the justices will privately cast their initial votes soon afterward on whether they believe the law allows the subsidies in the federal exchanges. If the justices decide that the IRS acted illegally in opening federal exchanges to subsidies, citizens in states that have defaulted to the federally-created exchanges soon would be ineligible for the subsidies. As a result, most would begin to face the full cost of the unsubsidized premiums on their policies and would be more likely to drop their health insurance coverage.

The Obama administration’s goal is to enroll 9.1 million people in health insurance this year in the 37 states where it is operating federally-facilitated exchanges. Because an estimated 87 percent of people enrolled are receiving taxpayer subsidies for their coverage, that means up to 7.9 million people could be impacted by the decision.

Many court watchers believe the King v Burwell decision could hinge on whether or not Congress has a viable plan to provide for alternative, if not continued, coverage for them.

Many leaders in Congress recognize the court needs to be reassured that legislators have a plan to address this issue. As a result, efforts are underway for Congress to develop legislation that would create a transition path to other types of subsidized coverage, particularly a safety net for lower-income individuals currently covered by policies in federal-exchange states. The legislation should not only take care of people who are at risk of losing their current coverage, but also use this as an opportunity to begin to move our system toward a more competitive market, centered around individual choice.