Yesterday I got a call from a friend who retired as a corporate tax lawyer for a highly regarded law firm. He said, "Al, I was watching television and what did I see, exactly what you wrote me about a few days ago was being reported as a new discovery"
It's being called a loophole, first described as such by the AP story that gets picked up everywhere, and then repeated as such in every report that I could find by googling. Except it's not and never was a loophole at all, but something more revealing of the essential quality of this health care reform effort.
This was my email to B. sent last Tuesday:
On Health Care Reform....your old specialty
One of the hot button emotional justifications for this bill is that people with insurance will not have them cut off for when they need it the most. Rescission are excessive, yet they can be controlled by state laws that put the burden of proving fraud on the insurer. The current proposals does not federalize this, merely states that cancellation can only be for fraud.
Actually that's the case now. And various state Departments of Insurance, those that have not been the victim of "regulatory capture" do defend those clients abused by this practice.
The following is why I'm contacting you. From the Senate bill:
‘‘(a) IN GENERAL.—A group health plan and a health
insurance issuer offering group or individual health
insurance coverage may not establish—
‘‘(1) lifetime limits on the dollar value of bene7
fits for any participant or beneficiary; or
‘‘(2) unreasonable annual limits (within the
meaning of section 223 of the Internal Revenue
Code of 1986) on the dollar value of benefits for any
participant or beneficiary.
If someone has a catastrophic illness or accident, what would be a "reasonable" annual limit. If it didn't cover all treatment, it's not reasonable to the patient.
I tried to research the specific code that they referenced with no luck. How about some help by finding out how this IRS code defines reasonable limits on annual insurance that the bill makes reference to.
The "loophole" is not exactly hidden, being right toward the front, page 16 of the bill available here. The clause was an embarrassment, a contraindication of the principles laid down by President Obama for minimal requirements for this legislation, but a loophole is something different from Websters": an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded"
What is also disturbing is how CNN described this as something that would be fixed, like a typo, ignoring the fact that if the individual insured is not going to pay, then the public in the form of taxes or increased premiums will pay. And the commentator also described that "loophole" as saying that the definition of reasonable limits would be left to federal regulators.
No program actually described the other defect of this clause, that it made reference to a specific IRS section, 223 of 1986, that my friend could find no reference that remotely related to defining limits on annual health insurance payments.
The limit on annual insurance payment has been in this bill for the three weeks that it has been published, on the web, examined by the staffs of congress members, evaluated by thousands of paid journalists, and millions of amateurs, like myself. Yet, this was not noticed.
While this was clear for anyone to see, there are hundreds of clauses, all referencing other sections of existing federal and state law. Those are actually complex, and real loopholes are to be expected as they will be designed into the bill by those who will benefit from the real law, as opposed to the rhetoric meant for the uninformed.
Harpers Magazine wrote, and I expanded on, how this bill is the essence of a perverse well documented phenomenon, regulatory capture, where in the guise of government controlling a corporate sector, the reverse happens, and the government and the sector becoming allies against the people.
I'm convinced we are seeing this occur right before our eyes
I do read the actual bill, at least some of it. I also read the reports by the Chief Actuary of the Medicare division of HHS on the house bill. But, in spite of my reaching his secretary at 8 last night, she could not put the current report on the effects of the Medicare buy-in on their web site.
This leaves us the dark, since it is not available anywhere on the Wide World Web; so must take second hand reports, that as in this "loophole" are often less than accurate.
While I have posted many diaries here, and on my personal web site, Health Care Beyond Partisanship, all opposed to this legislation, I try to read material that supports it. This articlein the Current New Yorker is worth reading, but not convincing to me for reasons to be found in this essay.
For more detailed essays, including a comparison of the CBO and the CMS Actuary's office biases, give my personal site linked above a try