NHD

So it’s 2012 and a year of consequence for healthcare reform is ahead of us.  Aside from the ten key elements of the law that are scheduled to kick in this year (http://tinyurl.com/5u2f8e6), a slew of ongoing HCR programs and actions are about to become very important to all Americans in 2012.  Here’s a quick list of some key HCR Developments for the next twelve months…

Essential Health Benefits –Late last year, the Obama Administration decided to delegate this responsibility for creating a list of” essential health benefits” to the states (http://tinyurl.com/8965pvg).  Consumer groups cried foul, claiming HHS had dodged a key HCR responsibility; others are saying it was a shrewd political move.  Much more to come on this important issue.

 PCORI – The quiet Patient Centered Outcomes Research Institute likely enters troubled waters this year.  Right after January 1st, PCORI drew fire from the Republican Policy Committee that charged PCORI’s real role is the creation of a cult of “parsimony”, i.e., extreme frugality, in delivering U.S. medical care.  Will PCORI join IPAB and become Congressional Republicans’ “Death Panel 2”?

ACO’s – Despite early rules trouble, this important aspect of the HCR program is now operational.  Confusion and skepticism still surround this concept, especially in the area of actual cost savings.  We’ll see where we are in 2013.

SCOTUS – No doubt here.  This is “the one.”  The US Supreme Court is set to rule this spring on the constitutionality of the HCR insurance mandate for all Americans.  So much is riding on this decision…if one is made.

OK.  But what about the multitude of other HCR actions that continue to ride “sidecar” to these major issues?  Which ones should we be watching?  Well, for my money, I continue to believe the most intriguing smaller piece of the HCR law is the expanding role of the IRS in our healthcare.

IRS as “Enforcer” and More…

You may be surprised to learn that the IRS is directly involved in HCR, and has issued rulings and guidance on no fewer than 18 new, major programs under the 2010 law (http://tinyurl.com/y45gf6g ).  And, today, as I write this, the agency is well on its way to implementing many of these new obligations.

For example, on September 30, 2012, the above mentioned PCORI program will be funded by a new $2 tax per covered life on all existing private health insurance plans.  This “operating budget” for PCORI is being collected from insurers by the IRS…

Another new IRS responsibility is the collection of a 10% tax on services that delivered by an estimated 25,000 tanning salons in the US.  Again, the IRS is responsible for getting the money and is directed to use all of its usual tools to insure full collection.

And on and on these HCR collection mandates go.  I guess, really, there is nothing that unusual here, other than the width and breadth of the new work the IRS has been tasked with undertaking.   But aside from “collections,” few people seem aware that there is also a lot of “mission creep” going on at the IRS that’s being driven by this new law.

Check this out:  One year ago, national Taxpayer Advocate, Nina Olson, released a general summary of developments ongoing at the IRS (http://tinyurl.com/7rrl7bx ).  As you scroll down the document, you will come to a section entitled:

“IRS CHALLENGES IN ADMINISTERING BENEFITS PROGRAMS, INCLUDING HEALTH CARE REFORM”

Give it a read.  It’s a fascinating discussion.  In particular, Olson suggests that beyond its traditional role of tax “collector,” HCR has caused the agency to become a “benefits administrator,”  responsible for deterring who gets the HCR Small Business Tax Credit, the Premium Assistance Credit, the Individual Responsibility Requirement, the Employer Requirement, and more.  In short, the IRS has gone into the “judgment” business.  As Olson suggests, these new responsibilities are “way of scope” versus the skills and training of most of the current IRS staff:

 “From an organizational standpoint, there are substantial differences between benefits agencies and enforcement agencies in terms of culture, mindset, and the skill sets and training of their employees.

“As the IRS prepares to administer large portions of the health care legislation, it will have to shift from being an enforcement agency that primarily says, in effect, ‘you owe us’ to an agency that places much greater emphasis on hiring and training caseworkers to help eligible taxpayers receive benefits and work one-on-one with taxpayers to resolve legitimate disagreements.”

• Among the new areas of “benefits” calls already made by the IRS are:
  • The Service has determined who shall be covered under the extended “dependents” insurance and has, for example, ruled that the age coverage limit is actually up to 27, not 26.  News to me.
  • In this same rule they determined that temporarily housed “foster children” can also be covered under this provision.  Somewhat surprising.
  • The IRS has also made the call on when certain government debit cards can be used for Rx prescriptions, and when they may not…

Given this expanded responsibility, how is the IRS planning to accomplish this new “benefits” mission?  Well, in the main, it appears that the agency plans to bring on a lot of new help…Hundreds of new staffers & auditors…Up to 1,100 – 1,300 for 2012, alone (http://tinyurl.com/73mpkh6), and potentially thousands more going forward.  In fact, exactly how many the IRS will need has become controversial (http://tinyurl.com/5tvpfrj).  About all I can say is, let’s hope Jon Huntsman’s estimate of 19,000 new IRS FTEs is incorrect.

However, given my initial reference to the 18 new areas in HCR that the IRS is now servicing, and the many more that are yet to come, there is a deeper, philosophical concern I have here.  Basically, I am troubled by the idea of the IRS as a factor, as a “decider” in our healthcare system.

For instance:  If the IPAB determines that the GDP and medical pricing ratios are not in sync versus the allowed percentage increases under HCR, how exactly will IPAB propose raising the dollars needed to cover the short fall?  Logically, it will either be a recommendation for a reduction in entitlement services; or a tax increase to cover the shortfall…It will be up to Congress to decide how to proceed with the IPAB recommendations and you tell me which recommendation Congress will act on?  Right. They will raise taxes…And who do you think Congress is going to turn to for administration of those new taxes?  Correct, the IRS.

So one clear potential outcome for this new IRS inclusion in HCR is the prospect that Congress will learn to regularly lean on the IRS…directing them to act as its HCR “enforcer.”   This will be especially true when Congress faces unpopular policy tasks like raising taxes to cover HCR’s deficits.

And here’s another angle to consider:  In this new area of the IRS acting as “benefits administrator” for large swaths of HCR programming, how do we feel about the IRS writing the rules to determine who gets what care and why?  Right, I realize their work will be subject to oversight by some entity.  However, to me the idea of the IRS getting first crack at deciding who gets access to various medical benefits under HCR is troubling on several levels…To put it succinctly, what the heck does the IRS know about medical care, anyway?

Anyway, a substantial amount of IRS/ HCR activity is now underway.  The challenge for all of us, seems to me, is not only paying attention to the major developments of the HCR, but also keeping an eye on those other, smaller matters flowing through HCR — like the clear incursion of the IRS into our American healthcare system.

That’s my point of view.  I would be interested in hearing your thoughts on the involvement of the IRS in HCR.