584 Vetoes

Howdy folks. Fee-for-service Medicare is roughly half a trillion dollars a year. Ever wondered where Medicare claims actually go? Ask a doctor or a policy person who pays Medicare claims and you’ll get some version of a giant mailroom at CMS headquarters. That’s not how it works.
The claims are processed by a small handful of private companies called Medicare Administrative Contractors that have regional, state-based monopolies for claims processing. You’ve never heard of yours. You also don’t have a say in which one you use.
Brian Miller and I are joined by Karen Jackson, former Deputy Chief Operating Officer at CMS. Karen is one of the few people who can credibly say, “CMS does a good job, but it can also do better.” She’s now a SHIP counselor and sits on several healthcare boards, so she sees the beneficiary end of it too.
We discuss Medicare Administrative Contractors (MACs) and their paper (with Luke Anderson), “The Forgotten Opportunity: Improving Traditional Medicare Operations.”
They suggest that beneficiaries should be able to choose their contractor, which could only happen if the regional monopolies had to allow additional contractors to process claims. It’s a competition idea for the half of Medicare where there is currently no competition at all.
What’s in the episode
[1:44] Karen’s path from presidential management intern to Deputy COO and how Medicare contracting reform got tucked into the 2003 prescription drug law.
[4:12] Medicare history and how the Blue Cross/Blue Shield plans originally ended up running so much of the program.
[6:06] Brian compares MACs to the third-party administrator his state health plan board hires. Same structure, about a hundred times smaller.
[7:41] Medicare is around $1.1 trillion. Half goes out as capitated payments to Medicare Advantage plans. The other half runs through fee-for-service.
[9:51] Who actually cuts the check? Not CMS. Treasury does, after every payment clears what was once the largest general ledger accounting system in the world.
[11:00] Why your claim can’t be paid the day you leave the office. Authorization can happen fast, but other considerations slow it down, including the cash flow management across the whole federal government and the 14-day payment wait time.
[13:30] Congress told CMS to pay the right amount on the right day and never asked it to have a payment strategy.
[15:27] What a Medicare Administrative Contractor (MAC) really is.
[16:48] Medicare Administrative Contractors, explained. Provider enrollment, claims intake, state-grouped jurisdictions, separate specialty contractors for home health and medical equipment, and the local edits that let a contractor in California behave differently than one in Florida.
[18:41] MACs have responsibility for specific jurisdictions, done at the state level. Roughly 99.99 percent of claims arrive electronically. The last hundredth of a percent is really expensive.
[21:10] Is CMS running Medicare, or are the contractors? Karen’s answer is more interesting than yes or no.
[22:31] Brian asks about the structural trap. A half-trillion-dollar safety net program with a sole-source operational contract means anything you break, you break for real. Karen makes the case for why CMS is right to be careful.
[27:11] “It should just work, because when it doesn’t work, it’s kind of catastrophic.”
[28:56] Why nobody at CMS is touching this right now. Provider tax thresholds, Medicaid work requirements, the inpatient-only list, site-neutral payment, 340B edits. The operational staff are busy.
[33:18] Karen’s proposal. Let a beneficiary actually talk to the entity adjudicating their claim instead of bouncing between offices.
[35:48] Let beneficiaries elect a contractor every year instead of being assigned one by geography.
[37:19] How you’d pay for it. Fold the program integrity contractors back into the MACs, then return the savings to beneficiaries three ways. A Part B premium rebate, higher payments to rural hospitals and hard-to-find specialists, or coverage for new technology where there’s no national coverage determination yet.
[38:43] What could CMS do administratively today, and what would take an act of Congress?
[43:14] Could you hand this to AI? Karen’s answer is about traceability and trust.
[46:23] There is no trade association for beneficiaries who want a better claims processor. Who would champion their proposed change?
Thanks for listening! Subscribe for free to hear more nerdy conversations about healthcare and the federal budget.



This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit church.substack.com

Howdy folks. This is a good one.
Think you have the solution for Medicare’s budget problems? Not so fast! There’s a gauntlet standing in your way ready to say no.
My colleague Brian Miller walks us through every committee, every lettered agency, and every interest group that will weigh in on your idea before it can go into effect.
What’s in the episode
[2:05] Why talk Medicare: A trillion dollars a year, but 55 percent of it is paid for with general fund revenue. That’s the share not paid for by payroll taxes or premiums.
[4:03] The committees of jurisdiction for Medicare.
[7:01] The differences between the fee-for-service (FFS) and Medicare Advantage approaches. I like Brian’s pizza shop analogy.
[8:48] Medicare started with FFS. MA was a reaction and provides delegated flexibility.
[12:36] Inside CMS and the alphabet soup of agencies that all get a say.
[15:16] A tour of agencies that weigh in on healthcare policy, from CBO to OMB.
[17:40] The major interest groups and why healthcare has way more than 584 vetoes.
[21:40] Who sets the prices for the government? Plus, the RUC’s role.
[24:06] How often do you think prices should be allowed to change in healthcare markets?
[25:42] The “Jupiter-like gravity” of fee-for-service, and why the patient experience remains terrible.
[30:21] The neat thing Utah is doing with automated prescription refills.
[33:42] The case against central planned price-setting and why prices should change more than once a year.
Thanks for listening! Subscribe to learn more about healthcare policy.



This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit church.substack.com

“The hospital industry didn’t like competition. Physicians were being competitive. So it got banned.”
Howdy folks. Today I’m joined by Brian Miller, our new visiting fellow at the Hoover Institution, to talk about the Affordable Care Act’s effective ban on new physician-owned hospitals.
Brian is an associate professor of medicine at Johns Hopkins, a MedPAC commissioner, and the vice chair of the North Carolina State Health Plan board. He’s a practicing hospitalist who has also done tours at CMS, the FTC, and the FDA.
The existing ban on physician-owned hospitals from billing Medicare patients
On this episode, Brian and I discuss the ban on new physician owned hospitals (POHs) that was put in place in the Affordable Care Act. Section 6001 of the ACA prevents new POHs from billing Medicare services. Why technically new POHs are allowed to open and charge commercial or non-Medicare patients, the lack of Medicare patients has effectively frozen new supply of physician-owned facilities.
Case in point: There were roughly 250 POHs operating when the ACA passed in 2010. There are still roughly 250 today.
What’s the case for the ban?
The ban was pushed by the hospital industry as a way to prevent competition for its services. The hospital industry’s argument went like this: physicians, if turned loose to own hospitals, physicians would cherry-pick the healthiest and best-insured patients, stand up boutique specialty facilities without emergency rooms or labor and delivery, and starve community hospitals of the volume that cross-subsidizes their unprofitable services.
Why it doesn’t hold up
Brian walks through the argument piece by piece, and very little of it survives contact with the data.
* Cherry-picking is a risk-adjustment problem, not a business-model problem. If the patient mix at one facility is sicker, pay that facility more. Medicare does this constantly. We chose to ban a business model instead of fixing a payment formula.
* Half of physician-owned hospitals were full-service community hospitals with emergency rooms, OB-GYN, general surgery, primary care, the works. The other half were specialty hospitals, and even there the cardiac POHs are operationally full-service (you can’t really cherry-pick when people walking into your ER are having a heart attack).
* Specialization is a feature of competitive markets, not a flaw. And it’s allowed for everyone except physicians. Imagine if we didn’t let lawyers own their law firms. Or workers own parts of their own businesses.
* Post-ACA POHs that opened without Medicare went bankrupt. A 2016 Health Affairs study tracked POHs that tried to operate after the ban. Only using commercial patients wasn’t enough. After all, Medicare patients are an enormous part of the market for medical care.
* The cross-subsidy argument is, in Brian’s words, “absolute hogwash.” Running a business on the premise that one profitable line covers a permanently unprofitable line isn’t running a business, it’s running a fiefdom. Hospitals can and should make every line of service viable on its own. And if they can’t, allow competition elsewhere to provide the service.
Ultimately, the ban on new physician-owned hospitals is an anti-competitive measure that has further consolidated the market and driven up prices for everyone.
What Congress (or CMS) could do to fix it
Brian lays out a menu of policy fixes, ranked roughly from modest to ambitious:
* CMS rule making to expand the existing “high Medicaid need” exception. Real but small, and reversible by the next administration.
* A rural carve-out that would repeal the ban in geographies with a minimum drive time to the nearest hospital.
* A joint-venture carve-out that would allow physician-owned specialty hospitals if they include a non-physician hospital partner.
* A community-hospital carve-out that repeals the ban for physician-owned hospitals that meet the Medicare definition of a full-service hospital (24/7, ER, etc.).
* A full repeal of Section 6001, optionally paired with a small Medicare rate haircut to address residual risk-adjustment concerns.
* Stark Law reform in managed care settings. This would let physicians self-refer to their own facilities when there’s already utilization review and prior authorization to police induced demand.
The bipartisan case for allowing new physician-owned hospitals
The fun thing about this issue is that it scans differently to different audiences. To a market-oriented Republican it means more entry, more competition, lower prices, and more small-business formation. To a more progressive office, it’s that workers (the doctors, nurses, and pharmacists actually delivering the care) should be able to own a piece of the business.
The cost of inaction, meanwhile, has been a decade-plus of hospital consolidation. With ownership off the table, independent physicians have one realistic exit: sell their practices to the big hospitals. The hospital systems that lobbied to ban physician ownership are the same systems that have absorbed those practices and raised prices on the way.
Ultimately, this is yet another case of politicians trying to lower prices by centrally planning the market, but ultimately just artificially stifling supply that would otherwise be happily provided. The results are obvious.
What’s in the episode
[0:16] Introducing Brian Miller: New Hoover visiting fellow, associate professor at Johns Hopkins, MedPAC Commissioner, and NC State Health Plan vice chair
[2:40] What Section 6001 of the ACA actually does and why it ended up in the bill
[4:23] The cherry-picking argument and why risk adjustment is the right tool
[5:51] A tour of the physician-owned hospital market: community POHs vs. cardiac vs. orthopedic vs. general surgical specialty hospitals
[8:15] Why specialty hospitals deliver higher quality at lower cost
[10:05] What happened to the POHs that tried to operate without Medicare after the ban
[14:35] The market already segments, just not under physician ownership
[15:49] Why the cross-subsidy argument is “absolute hogwash”
[25:38] Policy menu: what CMS could do via rulemaking, and why it’s not enough
[27:14] Statutory options: rural carve-outs, joint ventures, community-hospital carve-outs, full repeal
[28:54] Stark Law reform in managed care settings
[32:01] Is this a partisan issue? (Less than you’d think…)
[34:11] How the ban accelerated hospital consolidation and the corporate employment of physicians
[37:30] What happens after repeal? Timelines, joint ventures, and why incumbents should welcome the competition
Send us your feedback or policy questions by emailing feedback [at] 584vetoes.com or finding me on Twitter @TomVChurch and Brian at @DrBrian4Health
Thanks for listening and reading. Subscribe for more episodes on ways to improve fiscal policy.



This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit church.substack.com

Howdy folks. Congress is barreling toward a “one-big-beautiful” reconciliation bill, so Danny and I go through the good, the bad, and the missing from the House and Senate versions. President Trump swears no one is leaving D.C. until the bill is done by July 4. We just want to know how to plan our tax bills for the year.
The House voted to keep nearly all of the 2017 Tax Cuts and Jobs Act in place, sprinkled in some spending cuts to Medicaid, and shipped H.R. 1 to the upper chamber. The Senate promptly ripped out every HSA tweak, sweetened the pot with permanent full expensing for business investment, and punted the rest back across the rotunda. Meanwhile the CBO’s dynamic score says the package raises debt more once growth and higher interest rates are both tallied, meaning it doesn’t come close to paying for itself.
What looks good?
* Medicaid provider-tax cap: the House’s 6 % limit and the Senate’s tougher 3.5 % version would finally crack down on states’ favorite Medicaid gimmick.
* Full expensing: letting firms deduct new equipment upfront is one of the few truly pro-growth ideas.
* HSA/ACA fix & direct-primary-care clause in the House version: solves a regulatory glitch so exchange customers with sky-high deductibles can finally open HSAs, and lets everyone use HSA dollars for a DPC membership.
What doesn’t?
“No tax on tips,” “no tax on overtime,” and a grab-bag of new credits look great in press releases but blow holes in the base and lead to marginal-rate cliffs.
We also talk about the “16 million people will lose coverage” estimate going around. Roughly 5 million are able-bodied adults who would rather skip 80 hours a month of job-search or training, another 1½ million are undocumented enrollees that some states currently finance, and the rest fail new eligibility or verification checks. That’s a far cry from mass expulsions of vulnerable patients.
What’s missing?
We discuss a handful of Medicare changes that are omitted but will need to be addressed eventually.
* Medicare site-neutral payments.
* Medicare Advantage “up-coding” reforms and a bigger bite of Part B & D premiums for high-earners.
* Small but important changes to federal-worker pension contributions, SNAP sanity checks, and other small entitlements that quietly add up.
Veto of the Week: Grover Cleveland’s 1886 smack-down of a special pension boost for Civil War veteran John Taylor, because not every benefit needs an increase. A neat parallel to today’s senior programs that have quietly become very generous.
What’s in the Episode
[02:06] - House vs. Senate: Key Differences in the Bill
[05:59] - Economic Implications of Tax Cuts
[09:56] - Spending Cuts and Medicaid Reforms
[12:48] - Medicaid Provider Tax Cap
[19:30] - How Many People Will Lose Health Insurance?
[24:45] - Discussing HSA Changes - Expand Enrollment
[27:30] - Direct Primary Care and Health Savings Accounts
[31:00] - No Tax on Tips, No Tax on Overtime
[35:07] - Addressing Medicare and Missing Spending Cuts
[42:45] - Non-Medicare Spending Cuts
[45:53] - Veto of the Week: "The rate he was receiving was commensurate with the degree of his disability, a board of surgeons having reported that he was receiving a liberal rating."


This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit church.substack.com

Howdy folks. Yesterday President Trump announced “reciprocal” tariffs on almost every country in the world. Make no mistake, these tariffs are large. We’re using quotation marks around “reciprocal” because the tariff rates announced did not match up at all with any country’s actual tariffs imposed on American goods.
Instead, the tariff calculations were based on trade imbalances rather than actual rates. The administration tried to dress up the calculation with additional parameters, but those parameters canceled out. (Also, an elasticity of 4?!)
What is the administration thinking? Is it a negotiating tactic? If so, we doubt they have clear grievances with every single country on the list. Commerce Secretary Lutnick says employment is going to go up. We’ll see.
What can Congress do about it? They could vote to take away tariff authority. Senators Grassley (R) and Cantwell (D) have introduced legislation to have unilateral tariffs expire if not approved by Congress.
We discuss the reconciliation and the Senate’s budget resolution. Romina Boccia sums up our thoughts. No the current policy baseline, no to raising deficits even more.
When it comes to what to extend in the TCJA, Danny and Josh Rauh say extend the stuff that leads to growth, skip the parts that are mostly just spending via the tax code.
We recount the two conferences we hosted at Hoover last month, one from the Fiscal Policy Initiative and one from the Healthcare Policy Working Group. The former was depressing (a debt crisis is a real possibility!) and the latter was full of fun healthcare reform options.
Finally, we’ve just put a poll in the field about the Tax Cuts and Jobs Act that we should be able to discuss in two weeks. How much does the American public know what’s in it and what do they think about it? Stay tuned for an episode that covers the results.
What’s in the Episode
[0:40] - Trump’s tariff announcement
[2:06] - Danny talks about how border adjustment taxes are accounted for with the tariffs
[3:43] - The tariffs announced are actually based on trade imbalances, not tariff rates
[5:00] - Real world tariff rates versus alleged tariff rates
[6:50] - If you get the tariff revenue, then you aren’t helping out domestic manufacturers
[10:28] - Even if they go away, they will have long negative effects
[11:30] - What is the administration actually trying to achieve with the tariffs?
[14:14] - What can Congress do about these tariffs?
[15:29] - How bad does it have to get for the GOP to turn on Trump’s tariffs?
[17:33] - What should the Federal Reserve do in response?
[18:55] - How would we know if tariffs have a negative effect?
[21:46] - Discussing the Senate budget resolution
[26:00] - Why adopting the current policy baseline is a terrible idea
[29:00] - What we’re looking for when it comes to TCJA extensions and what Congress should consider extending
[31:30] - Hoover hosted two conferences from our Fiscal Policy Initiative and our Healthcare Policy Working Group
[34:21] - A lesson on state abuse of Medicaid provider taxes
[36:22] - Upcoming poll of the American public on the Tax Cuts and Jobs Act, following up on our tariff poll
[37:09] - Veto of the week: “Experience has shown that the trade of the East is the key to national wealth and influence. The opening of China to the commerce of the whole world has benefited no section of it more than the States of our own Pacific Slope.”
[38:22] - Send us your feedback or policy questions by emailing feedback@584vetoes.com or finding me on Twitter @TomVChurch


This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit church.substack.com