Individual Mandate Rules Lack Teeth, Will Hurt Hospitals Further

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Healthcare reform’s individual mandate has left many pundits and politicians foaming and frothing at the mouth with rage. According to Philip Betbeze at HealthLeaders Media, this foaming and frothing may have been a waste of energy, because the set of proposed rules as issued from the IRS and the Department of Health and Human Services arrives with no teeth. In fact, in his headline, Betbeze likens the individual mandate to a “suggested donation.”

“The most surprising news about the proposed rules is that it appears exemptions built into them for enforcing the individual mandate are so permissive that only 2 percent of the population would owe a penalty,” Betbeze reports.

Only 2 percent? Say what? Wasn’t this the key portion of the PPACA that the Supreme Court obsessed over last summer? Wasn’t this the key portion of the PPACA that left many conservatives feeling we were entering a socialist state?

And as Betbeze points out, wasn’t the number of uninsured Americans in 2010 alleged to be 46 million or 17 percent of the U.S. population? Wouldn’t that number possibly be higher now? But only 2 percent will be penalized?

Betbeze writes, “Some of those millions undoubtedly will find health insurance once the state-level exchanges are set up, but there’s nothing to suggest that a large majority of them necessarily will, even though the law supposedly compels them to do so.”

He then adds that some, if not many of these exemptions are reasonable. For example, people who are residents of states that don’t have exchanges are exempted, as are “taxpayers with incomes below the filing threshold and members of Indian tribes.” Others exempted “include those who cannot afford coverage, people who qualify for hardship exemptions, individuals who have short-coverage gaps, those who don’t want to purchase health insurance for religious reasons, members of ‘health-sharing ministries,’ and individuals who are incarcerated.”

However, these latter exemptions are where matters become “dubious,” to borrow Betbeze’s phrasing. You see, he says, “some of the exemptions…are so wide that pretty much anyone could qualify for at least one of them.” Furthermore, the 2 percent who could be penalized probably won’t be since the IRS has informed Congress “that it won’t enforce the collection of the, ahem, ‘shared responsibility payment’ for people who violate the requirement that they obtain health insurance.”

Okay. So what is the purpose of the individual mandate then? Remember, hospitals and health systems will still have to treat those uninsured patients. Betbeze observes that payer rates from Medicaid will be miniscule “because the state exchanges will be supported by the government through subsidies and coupled with a Medicaid expansion.” Medicaid rates, as they are now, aren’t enough for hospitals, and “the fact that penalties paid by those who ignore the individual mandate are likely to be minuscule doesn’t help the economics of the ACA.”

As Betbeze concludes, “Despite the apparent pointlessness of the new rules given the ultimately tiny percentage of taxpayers who will find it possible to actually violate them, it’s clear that what the Obama administration is planning on enacting is far from a real individual mandate. It’s also neither a tax nor even a ‘shared responsibility payment,’ whatever that means.”

As healthcare leaders, what is your opinion on the individual-mandate rules? Will they make it harder for you as healthcare organizations to function, especially given the leniency of the individual-mandate rules? How can you strategically plan for the mandate struggles that await you?

-by Pete Fernbaugh

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