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Thursday, March 25, 2010

Diabetes And Health Care Reform

Many may not understand my comments about the regulations, nor my bitterness about what this bill does to diabetics.

Here's an example. You may have read about the possibility that tampons could be taxed under the act. This is unlikely IMO.

The section of the act reads
b) TAXABLE MEDICAL DEVICE.—For purposes of this section— (1) IN GENERAL.—The term "taxable medical device" means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans. (2) EXEMPTIONS.—Such term shall not include— (A) eyeglasses, (B) contact lenses, (C) hearing aids, and (D) any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use.
So it is up to Secretary (see the end of the post - this is the Secretary of the Treasury) to determine whether items such as blood pressure monitors are included. However it is questionable whether items such as blood sugar monitors and testing strips can be exempted, because it is much harder to argue that they are purchased by the "general public".

Section 201(h):
(h) The term "device" (except when used in paragraph (n) of this section and in sections 301(i), 403(f), 502(c), and 602(c)) means an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is--

(1) recognized in the official National Formulary, or the United States Pharmacopeia, or any supplement to them,

(2) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or

(3) intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes.
As you can see, blood sugar monitors and testing strips are defined as medical devices.

The idea that taxing items like blood sugar monitors and testing strips is going to cut medical expenses in this country is about as insane as it gets. Some persons who are not diabetics do buy these (for example, if you at risk and are trying to avoid developing Type II diabetes, you'd be well advised to use these devices). But mostly these items are used to control a medical complication, and their use is part of necessary medical care. Raising their cost only raises the burden upon persons with the disease. Insulin is elsewhere excluded, but these items are just as necessary.

Raising the cost of these items will make it harder and more expensive for persons to control a disease in which control is of the essence to avoid complications. For early Type II patients, using these devices and lifestyle modification can reverse the progression of the disease, preventing the need for medication and many other complications. There are many persons with diabetes who do not have insurance, and many more who have insurance that doesn't cover much of their costs. Further, the type of insurance offered in the exchanges still won't cover much of the cost. This is why some persons will be forced to not buy insurance in order to safeguard their health - unless this sort of thing is fixed in regulations, and that fix may not be possible.

If these bills had been posted as promised, and if legislators had not been hurried through this process, I believe that there would have been a specific exemption of such items. This is obviously very harmful to a portion of the population, and it is just as obviously very bad public policy. But this is what the process used to push this bill generated.

Perhaps this one example can explain part of my frustration and worry over this piece of legislation. I hope it will be fixed, but don't think that this sort of thing won't leap out and bite many other people. The idea that we will partially fund insurance for contingencies by taxing medical necessities was never realistic.

I would urge everyone with a sense of decency to contact your legislators about this and the ramifications.

I don't, btw, have diabetes. But I do have a neurological problem, and I do have to use a blood pressure monitor and test my blood sugar at times. My body's regulatory mechanisms have been deeply compromised by basically brain and nerve damage, and the treatment I use to control my condition can induce transient swings. So I am aware of these costs, and they are significant.

The cruelty of this bill is that in many ways it shifts the cost of chronic medical conditions onto those who can least afford it. We cannot control medical costs with this type of approach.

Also see Shrinkwrapped's post yesterday about the Ruth Marcus' column. Yes, this is a dumb approach.

PS: I forgot to link NFIB's earlier statement about the bill. Here it is:
This isn’t a healthcare bill, this is a tax bill wrapped up in healthcare paper. For small businesses, healthcare reform has always been about costs – reducing them. But the only thing this bill does is drive costs even higher. It will raise, not lower, insurance costs and it will increase both taxes and the cost of doing business for the very people they said they wanted to help – small business.
Update: Here's the whole informational thing I sent to a Critter who never answered, because of course it was just RW nutcases who had concerns over this bill.

I wanted them to change this language which is earlier in the same section:
(1) IN GENERAL.—The term ‘‘medical device
8 sales’’ means sales for use in the United States of any
9 medical device, other than the sales of a medical de
10
vice that—
11 (A) has been classified in class II under sec12
tion 513 of the Federal Food, Drug, and Cos13
metic Act (21 U.S.C. 360c) and is primarily sold
14 to consumers at retail for not more than $100
15 per unit, or
(B) has been classified in class I under such
17 section.
This gets a bit complicated, but blood sugar monitoring devices and ancillaries are Class II under 513:
(a) Device Classes

(1) There are established the following classes of devices intended for human use:

(A) CLASS I, GENERAL CONTROLS.—

(i) A device for which the controls authorized by or under section 501, 502, 510, 516, 518, 519, or 520 or any combination of such sections are sufficient to provide reasonable assurance of the safety and effectiveness of the device.

(ii) A device for which insufficient information exists to determine that the controls referred to in clause (i) are sufficient to provide reasonable assurance of the safety and effectiveness of the device or to establish special controls to provide such assurance, but because it—

(I) is not purported or represented to be for a use in supporting or sustaining human life or for a use which is of substantial importance in preventing impairment of human health, and

(II) does not present a potential unreasonable risk of illness or injury,

is to be regulated by the controls referred to in clause (i).

(B) CLASS II, SPECIAL CONTROLS.—A device which cannot be classified as a class I device because the general controls by themselves are insufficient to provide reasonable assurance of the safety and effectiveness of the device, and for which there is sufficient information to establish special controls to provide such assurance, including the promulgation of performance standards, postmarket surveillance, patient registries, development and dissemination of guidelines (including guidelines for the submission of clinical data in premarket notification submissions in accordance with section 510(k)), recommendations, and other appropriate actions as the Secretary deems necessary to provide such assurance. For a device that is purported or represented to be for a use in supporting or sustaining human life, the Secretary shall examine and identify the special controls, if any, that are necessary to provide adequate assurance of safety and effectiveness and describe how such controls provide such assurance.

(C) CLASS III, PREMARKET APPROVAL.—A device which because—

(i) it (I) cannot be classified as a class I device because insufficient information exists to determine that the application of general controls are sufficient to provide reasonable assurance of the safety and effectiveness of the device, and (II) cannot be classified as a class II device because insufficient information exists to determine that the special controls described in subparagraph (B) would provide reasonable assurance of its safety and effectiveness, and

(ii)(I) is purported or represented to be for a use in supporting or sustaining human life or for a use which is of substantial importance in preventing impairment of human health, or

(II) presents a potential unreasonable risk of illness or injury,

is to be subject, in accordance with section 515, to Premarket approval to provide reasonable assurance of its safety and effectiveness.
So the language in the two laws basically says that class II devices normally sold retail to consumers for $100 and under are excluded from the tax. I think this means that an el Cheapo is not taxed, except for the "primarily sold to consumers at retail", because I am not sure if all of these devices ARE primarily sold at retail.

I wanted them to do two things: Take out "primarily" and change the currency limitation of $100 or less to a use classification. (The currency limitation makes no sense. If you need one of the devices (used for older people) that will send the data to another location, or if a person needs a pump, why should that be taxed?)

My suggested language change was to replace:
...and is primarily sold
14 to consumers at retail for not more than $100
15 per unit,
with
...and are not commonly used by patients for outpatient monitoring, reporting or to adjust drug dosage for medical conditions such as cardiovascular or endocrine disease, or not commonly prescribed to replace nursing or trained medical care,
It makes no sense to tax such items, obviously. It also makes no sense to assume that taxing manufacturers won't boost costs to patients or insurance companies.

You have to admit that this is one epically boring blog! I bet you wish you had this much of your life back, but this is what happens when regulators get into it.

Further update: It's not just me, see the Medtronic comments. I am sure that the higher priced stuff is included, but I think the lower-priced stuff is excluded. But it is excluded only if the regulations confirm it is. And here is the best part - it is not the HHS Secretary who makes the determination under Sec. 9009 (this one), but the Secretary of the Treasury, which is why I don't want to leave this to the named regulator:
(g) SECRETARY.—For purposes of this section, the
23 term ‘‘Secretary’’ means the Secretary of the Treasury or
24 the Secretary’s delegate.
(h) GUIDANCE.—The Secretary shall publish guidance
2 necessary to carry out the purposes of this section, including
3 identification of medical devices described in subsection
4 (d)(1)(A) and with respect to the treatment of gross receipts
5 from sales of medical devices to another covered entity or
6 to another entity by reason of the application of subsection
7 (c)(2).
So I'm thinking the Secretary of the Treasury is gonna want his money and is going to be including everything he can. And the tax is retroactive to sales of medical devices after 2008. (But this is not the tax - the tax starts after 2009. This is for the reporting.):
(i) APPLICATION OF SECTION.—This section shall
9 apply to any medical device sales after December 31, 2008.
Final note: If anyone is still wondering what the heck I do for a living, this is pretty much it. I read this stuff and the regulations, and I create systems that walk you through it, that do required calculations (in banking, a lot of regulation requires calculations), that model the effects, and that make sure you don't make a dumb but incredibly costly error. Sometimes these systems even tell you how to make money from it. Banking is a very, very regulated field. Somebody's gotta do it. It's a growth industry, believe me.

If you want to know why the US doesn't have as vibrant an economy as China, it's because this sort of stuff is growing like kudzu across all industries. You want banking to be regulated. You really do not need half the regulation there is relating to many other lines of business.

So one last comment - when your regulator is the Secretary of the Treasury, and you are in the finance line, that means you aren't very regulated. But if it is for anything else, it means money, and it means that the regulations are written to maximize money you send to the Treasury, and nothing else.

This is one of the vaguest laws I've ever had to deal with. You can't tell for sure what most of it means.

Comments:
I sometimes wonder if the CIA has come up with new drugs more powerful than LSD and is providing them free of charge to our congresscritters and other members of the goobermint at no charge.Many actions by this and the prior administration are not even arguably sane.
 
Tom, I honestly believe that it was just that the leadership didn't want the individual legislators to read it because of, well, complications. And they certainly weren't going to sit down, read all this stuff and think about it.

It does get frustrating, though.

When I saw Pelosi's "pass this so you can find out what's in it" comment I saw red.

I just broke two splitting mauls this morning, which gives a pretty accurate indication of my state of mind. I didn't mishit them either.
 
"I just broke two splitting mauls this morning, which gives a pretty accurate indication of my state of mind."

Yep, we're all P.Oed and the dems wonder what the fuss is all about. Aaaaarrrggghhh!!

It seems the bill may purposely be vague because they are going to leave it to HHS, Treasury, and the various commissions and boards to fill in the details. If so, the CBO score really is meaningless.

I use a C-PAP machine for sleep apnea. The only kind that works well for me is an auto-set model, which is the top of the line. Medicare will not pay for that machine so I have to buy it out of pocket. Now I'll have to pay a tax as well on the next one I buy. (They last about five years - mine is four years old.) What really frosts me about this is that the medical device company where I get my Medicare approved masks, tubes, filters and other supplies charges Medicare double what I could buy those supplies for on the open market. They charge Medicare $1400 dollars for a single pressure C-PAP machine that I could buy on the open market for $350. There is something rotten in Denmark in this situation. I have called Medicare and asked about this. Their explanation, "The prices are normal and customary charges." What?? This is one reason I'm sure there is money to be saved by rooting out fraud and waste in Medicare.
 
Jimmy - I don't know the answer either on Medicare and devices. It does seem like a racket. Medicare approves those prices, but you're right that they generally seem to be much higher than the market cost.

As for your C-PAP machine, this is an excise tax on the mfr, not an end-user tax. It will, of course, end up costing the buyers or insurance companies more.

But I'm not sure that you in particular will pay more. You might not. Most medical manufacturers will probably go up and down the line of products allocating their extra costs as the product market will bear.

I'm thinking that the pure necessity items (like the cheaper blood sugar monitors) will end up bearing most of the cost. Because the people buying those things are mostly doing so out of pocket and out of necessity. This would make them the Giffen good in the market. If less people have insurance to cover these items, or more people have higher deductibles/more copays, then sales of the lowest cost product will grow and costs will generally rise.

Of course you can't tax manufacturers and expect them to eat the cost, but the cost per unit sold doesn't necessarily show up in the unit that is generating the tax. It shows up in the goods that will bear the cost increase with dropping revenue.

Alternatively, the insurance guidelines could be written to say that such items are a "preventive" item. That would be good, but in that case we can certainly expect manufacturers to raise prices.
 
I've always believed in the law of unintended consequences particularly when it comes to massive legislation.

Congress? They never heard of that law. If the had, they certainly would not do things like this misbegotten HCR bill.

Instead of breaking two splitting mauls, I went to the gym and vented my spleen by pushing some heavy iron. I can feel it tonight. But it's a good soreness.
 
When I saw Pelosi's "pass this so you can find out what's in it" comment I saw red.

That must've been China.

How can any honest person make such a statement as Pelosi's and expect to live? If there was ever a "no confidence" condition, that statement was it. The President should have lambasted her publicly for a comment like that until she apologized. Even the opposition made barely a stink about it.

It's clear that representative government has ceased to exist in the USA.
 
As for your C-PAP machine, this is an excise tax on the mfr, not an end-user tax.

So the result will be to suppress labor costs by moving the manufacturing overseas. Then they can put a tariff on the importer.

The eternal middleman always ensures prices go up.
 
Charles - Tom was wondering about the sanity of the tax. Well, the excise tax is really sort of a closet tariff.

For companies paying income tax in the US, it should be tax deductible which would lower their income taxes. For companies who just sell to the US, it's just a tax.

In the long run, US production might get a slight net gain on this.

However in the short run, I don't think most of the cheaper stuff is made here or by US companies. Thus I expect costs to increase to the people who can least afford it.
 
"... And the tax is retroactive to sales of medical devices after 2008 ... "
===================

Can't we use THAT to claim the whole bill is unconstitutional? "No ex-post-facto laws" and all that?
 
Interesting business, M_o_M. Any chance you need or know someone that needs a helper? While I always have software engineering to fall back on, I'd love to find something entirely different which requires strong analytical skills but not require 2 years to get credentialed for.
 
A_Nonny_Mouse.

Not really. I always go to the end of the section for implementation dates, but they changed the tax date to start in 2010. However, weirdly, now they've got the associated reporting of medical sales starting in 2009.

I think this is probably an oversight; this part of the bill has been around for a long time.
 
AllanF - not right now, but I'll keep it in mind. Please send me an email to maxedoutmama2 @ hotmail.com so I know how to contact you.
 
Diabetes today is a major problem in the UK and in the rest of the world; the treatment of which costs millions of pounds for which purchasing medical insurance for diabetics is a good solution.
 
Diabetes today is a major problem in the UK and in the rest of the world; the treatment of which costs millions of pounds for which purchasing medical insurance for diabetics is a good solution.
 
So the result will be to suppress labor costs by moving the manufacturing overseas. Then they can put a tariff on the importer.
 
But I'm not sure that you in particular will pay more. You might not. Most medical manufacturers will probably go up and down the line of products allocating their extra costs as the product market will bear.
 
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