September 3, 2020
The Governor continues to focus on running the state under emergency conditions for COVID-19 matters and the Legislature returned from their summer hiatus on September 1 for a few weeks.
First the good news — Michigan’s economy is rebounding; therefore, State government revenues are up by $2 billion more than expected at last May’s Consensus Revenue Estimating Conference. Now the bad news — the deficit is still $1.5 billion for the fiscal year starting October 1 according to the House Fiscal Agency. But with enhanced unemployment benefits ending and other federal relief stalled in Congress, budgeteers are cautious. An effective vaccine for COVID-19 and improved treatments are factors that could return the economy to some semblance of normality. COVID-19 containment through universal acceptance of mask-wearing, social distancing, testing, tracing, and other measures is a huge factor in immediate economic recovery. Still, a memo from the Senate Fiscal Agency said the School Aid Fund is estimated to see a 2020-21 year-end balance of $372.2 million. The General Fund year-end balance is estimated, at this point, to see a small deficit of $384.6 million.
The administration of Governor Gretchen Whitmer and Republican legislative leaders continue to negotiate the framework of the 2020-21 fiscal year budget but have not yet come to an agreement on targets for each department and major budget area. The Governor and the Legislature need to have a budget enacted prior to the start of the new fiscal year on October 1.
The Governor and the Legislature came to agreement on the FY 2019-20 budget in July using new federal moneys, budget cuts, and rainy day money to balance the budget.
President Donald Trump signed an executive order (EO) on August 8 authorizing the U.S. Treasury to allow companies to defer payroll taxes for those employees making less than $100,000 a year from September 1 through December 31. The Social Security payroll tax (FICA tax) — levied at 12.4 percent and split equally between employers and employees on wages up to $137,700 — funds the Social Security Trust Funds which in turn provides benefits for retirees. Social Security protects nearly 70 million Americans from income loss in retirement and upon disability or death of a family provider.
A payroll tax holiday provides tax relief to those working, but in a time of high unemployment, provides no relief at all for the unemployed. Additionally, stay-at-home parents and retirees receive no benefit from a payroll tax holiday. A full discussion of the pros and cons and history of payroll tax holidays can be found at the Tax Foundation Website.
Trump said at the EO signing that if he’s re-elected in November, he may extend the deferral and terminate the tax for some workers, moving funding for Social Security to the general revenue appropriation process. That would fundamentally alter the “earned benefit” nature of Social Security. He would need Congressional approval to make such a change.
The Social Security program’s chief actuary issued an analysis requested by four Democratic U.S. Senators on August 24 warning that if payroll taxes were eliminated and not replaced with other revenue, the Social Security retirement trust fund would run dry in 2023. The Social Security Disability Insurance trust fund would be depleted even sooner — in the middle of next year.
In practice, many employers may choose not to participate in the payroll tax holiday program fearing liability if Congress does not support with legislation the President’s initiative.
2021 Cost-of-Living Adjustment (COLA) — Don’t look for a big COLA increase in 2021. Experts are looking for about a 1 percent increase starting in January 2021, and possibly less based on inflation forecasts.
If the increase in Social Security is small enough, some retirees may get a small break on their Medicare Part B premiums. The law says that if the COLA for Social Security is less than the increase in Medicare Part B premiums, then the premiums would be reduced to prevent a decrease in Social Security retirement benefits. This provision could prevent as many as 43 million beneficiaries, or 70 percent, from having increases in Medicare Part B premiums larger than their Social Security COLA. Those who have monthly benefits of about $900 or lower would likely be protected.
Even under the so-called “hold harmless” provision of Social Security law, if the COLA is small enough, beneficiaries would effectively get no annual benefit increase. And under the law’s provision, only Medicare Part B premiums are covered.
The hold harmless provision only applies to current beneficiaries who have the standard Part B premium deducted from their Social Security benefits. Those who pay their Part B premiums directly to Medicare, as well as high-income beneficiaries who pay more than the standard premium for Part B, are not covered by the provision.
REDISTRICTING COMMISSION CHOSEN
On August 17, Michigan’s inaugural members of its first Michigan Independent Citizens Redistricting Commission were selected by random drawing. The Commission was established after voters approved its creation in 2018. The selection, which was livestreamed on YouTube and conducted by Department of State staff and Rehmann LLC, the accounting firm tasked with winnowing down a list of nearly 10,000 applications to 180 semifinalists.
Those selected were: Democrats M. Carlo Rothhorn, 48, of Lansing; Juanita Curry, 72, of Detroit; Dustin Witjes, 31, of Ypsilanti; and Brittni Kellom, 34, of Detroit. Republicans selected were Erin Wagner, 54, of Charlotte; Cynthia Orton, 54, of Battle Creek; Douglas Clark, 73, of Rochester Hills; and Rhonda Lange, 47, of Reed City. Claiming no affiliation with any political party and selected were Janice Vallette, 68, of Highland; James Decker, 59, of Fowlerville; Richard Weiss, 73, of Saginaw; Steven Lett, 73, of Interlochen; and Anthony Eid, 27, of Orchard Lake.
Ten of the selected commissioners identify as white, two identify as Black, and one as Middle Eastern. Of the 13, six are women and seven are men. The average age of the commission is around 54 years old, with the oldest among them 73 years old and the youngest being 27 years old.
Surprise Medical Billing — A package of bills intended to combat the potential for surprise out-of-network charges for medical procedures, House Bills (HBs) 4459, 4460, 4990, and 4991, was reported from the Michigan Senate Insurance and Banking Committee on September 2. An earlier version passed the House in June. Insurers have voiced support for the bills while physician groups have expressed concerns over proposed provisions related to arbitration provisions.
Non-participating, out-of-network providers are those who are not a part of a patient’s health insurance plan network or refuse to accept Medicaid or Medicare payments. They may be a specialist consulted in a medical case or even a medical emergency transport company. The bill they may send a patient can in some cases be more than all the other costs of a procedure, and because they are not part of a plan, the patient is required to pay the bill themselves. Patients need to ask their providers and those with whom their providers sub-contract whether they are in-network for our health plan.
The Michigan Association of Health Plans has stated research shows that 9 percent of emergency room visits generate an out-of-network charge and 13 percent of hospital admissions do.
Nursing Home Issues — During the pandemic, nursing homes in Michigan and throughout the country have been heavily impacted by COVID- 19. State data shows about one in three coronavirus-related deaths in Michigan are nursing home residents. There have been more than 8,200 confirmed cases of COVID-19 among nursing home residents and more than 2,000 resident deaths related to the virus.
Governor Whitmer has faced criticism over the decision to house residents who tested positive for the coronavirus in the same nursing homes as non-infected residents, though in separate wings or locations with different staff. Critics argued the move creates an unsafe situation for seniors. Whitmer has said officials wanted to make sure patients discharged from hospitals had a place to go. In June, Governor Whitmer created a task force to help the State’s response to COVID-19.
The task force released 28 recommendations to create a better statewide coronavirus response to outbreaks in nursing homes and long-term care facilities on September 1.
Recommendations — The recommendations focus on four major areas, including placement of residents, available resources, staffing, and quality of life — areas in which several Republican lawmakers have criticized the State and Governor Whitmer during the COVID-19 crisis.
Many of the recommendations were reinforced by the independent Center for Health and Research Transformation (CHRT), which also concluded that the State’s initial regional hub strategy was logical and appropriate during the pandemic. CHRT wrote that there was no significant evidence of transmission of COVID-19 between patients admitted from hospitals to nursing home residents in hub facilities; that nursing home resident COVID-19 prevalence positively correlated with county COVID-19 prevalence rates for both hub and non-hub nursing homes; and that COVID-19 infection rates in nursing homes correlated with staph infection rates, consistent with community prevalence.
Additionally, the report prioritizes testing supplies and timely results for nursing facilities, while recognizing the need to protect residents who have not yet contracted COVID-19 and the needs of family members who have not been able to visit nursing home residents since mid-March.
In July, Governor Whitmer vetoed a bill that would have created separate facilities for COVID-19 patients only.
On September 2, a package of ten bills concerning nursing homes and other congregate care facilities was introduced in the Michigan House. In a statement about the bills, the bipartisan group of House members said the bills would implement a series of requirements to ensure more transparency around nursing homes and other care facilities. Those include making it clear where complaints can be filed, requiring specific data to be reported, and notification if a resident or employee tests positive for a communicable disease. The bills were referred to the House Families, Children and Seniors Committee. The nursing home bills are HB 6137 through 6146.
COVID-19 Liability Protections — The House Judiciary Committee held a first hearing on a package of bills providing liability protections for new coronavirus-related lawsuits. Businesses and other entities that “make good faith efforts” to protect customers and employees from COVID-19 would have a safe harbor defense from lawsuits seeking to recover damages. The bills are HB 6030-6032 and HB 6101.
Prescription Reform — The House Health Policy Committee held a first hearing on eight prescription drug reform bills designed to lower drug prices for patients and make manufacturer costs more transparent while helping independent pharmacists reduce their prescription distribution costs. The bills are HB 5937 — 5945. Testifying before the committee were representatives from the AARP, the Michigan Association of Health Plans, the Pharmaceutical Research & Manufacturers of America, the Pharmaceutical Care Management Association, the Michigan Pharmacists Association, and the Department of Insurance and Financial Services.
The most dramatic testimony was from representatives of independent, non-chain pharmacists. That testimony asserted that three major pharmacy business manager groups control an 80 percent share of the market, and that without further regulation and transparency rules, those groups would continue to increase the cost of medications for pharmacies, patients, and employers.
Melissa Siefert from the AARP testified that drug prices are out of control, with brand name drugs increasing 57.8 percent between 2012 and 2017, while inflation has only increased by 13.3 percent. Seifert said the U.S. is the only nation in the world that allows drug advertisements at a cost of $6 billion. Drug prices in the U.S. tripled compared to European neighbors she testified.
Karin Gyger, legislative director for the Department of Insurance and Financial Services, said the department opposes the package as written, though it recognizes the legislation would be the first step toward regulating pharmacy benefit managers as it would grant the State authority to oversee them. Gyger suggested language changes to further protect consumers, setting standards for approval and denial of applications, addressing violations under the new act, and a time frame for pharmacy business managers to process appeals.
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