**Posted by Phineas
When our Beneficent Sun King and his minion Sebelius say so:
The Affordable Care Act is the biggest new health care program in decades, but the Obama administration has ruled that neither the federal insurance exchange nor the federal subsidies paid to insurance companies on behalf of low-income people are “federal health care programs.”
The surprise decision, disclosed last week, exempts subsidized health insurance from a law that bans rebates, kickbacks, bribes and certain other financial arrangements in federal health programs, stripping law enforcement of a powerful tool used to fight fraud in other health care programs, like Medicare.
The main purpose of the anti-kickback law, as described by federal courts in scores of Medicare cases, is to protect patients and taxpayers against the undue influence of money on medical decisions.
Kathleen Sebelius, the secretary of health and human services, disclosed her interpretation of the law in a letter to Representative Jim McDermott, Democrat of Washington, who had asked her views. She did not explain the legal rationale for her decision, which followed a spirited debate within the administration.
Under the Affordable Care Act, millions of people will be able to buy insurance from “qualified health plans” offered on exchanges, or marketplaces, run by the federal government and by some states.
Most of the buyers are expected to be eligible for subsidies to make insurance more affordable. The subsidies, paid directly to insurers from the United States Treasury, start in January and are expected to total more than $1 trillion over 10 years.
And those subsidies from the Treasury are, of course, our money — dollars taken from our taxes or borrowed overseas. But, even though they’re provided by the US government to enable people to buy (artificially overpriced) insurance, they magically don’t count as a federal health care program.
What this ruling does is create the opportunity for graft via a huge kickback scheme: drug companies providing patients with coupons to lower their out-of-pocket for their prescription, for example, in order to tempt them away from lower-cost generics and toward the higher-priced branded drugs. The patient pays less via their co-pay, but the insurance company pays more to the drug company for the medicine. And if insurance companies have to pay more, you can bet they’ll pass those costs along to the consumer in the form of higher prices or fewer services.
Coming or going, it’s the taxpaying middle-class insurance purchaser who takes the hit.
One wonders if this was part of the deal worked out between Big Pharma and the administration back in 2009. Nah. Couldn’t be.
And, yes, I would like to buy that bridge.
via Neo in the ST comments
RELATED: David Freddoso explains how insurers profit from this scheme, too:
As conservatives have been warning since before Obamacare passed, the law creates a perverse incentive for them. Insurers are restricted under Obamacare as to what kind of profits they can make, but the restriction comes in the form of a percentage of what they spend on health care — also known as the Medical Loss Ratio. The law requires MLRs of 80 or 85 percent of premiums collected, depending on what kind of health plan you’re talking about. If the MLR doesn’t get that high, insurers have to start sending rebates to its customers. So that means the maximum profit (assuming zero administrative costs) is either 25 or 17.6 percent of total health care costs. By artificially increasing what they spends on health care, these kickback schemes allow insurers to push premiums higher and higher in the long run, so that their potential profits are larger with the same margins.
(Crossposted at Public Secrets)