February 2007 | Back to Table of Contents

Pulse

 

Employee or Student: Round 2

The University of Minnesota and Mayo Clinic are going another round in the fight over whether medical residents and the institutions that train them are required to pay Social Security taxes.

In December, the Minneapolis Star Tribune reported that the university and Mayo Clinic filed suit in U.S. District Court in an attempt to recover $2.8 million in Social Security contributions for some 2,000 residents at the two institutions.

The sparring between the university and the federal government began in 1990, when the Social Security Administration claimed the university owed $8 million in unpaid Social Security taxes for its medical residents in 1985 and 1986.

The university challenged the position, and in 1998 the U.S. Court of Appeals for the 8th Circuit ruled in its favor, stating that because University of Minnesota residents are students, the university didn’t have to make Social Security contributions on their behalf. In 2003, Mayo won a similar case against the Internal Revenue Service.

In order to narrow the definition of exactly who qualifies for the student exemption from Social Security contributions, the U.S. Treasury Department issued a regulation that went into effect in 2005 saying that Social Security payments must be made for any medical resident whose normal work schedule consists of 40 hours or more per week.

The university and Mayo contend the regulation is arbitrary and unreasonable. The lawsuits are seeking to recover $1.1 million paid by the university and its residents and $1.7 million contributed by Mayo Clinic and its residents.

John W. Windhorst Jr., an attorney with Dorsey & Whitney in Minneapolis who filed the lawsuits on behalf of the university and Mayo, was quoted as saying these are likely the first suits to be filed over the 2005 regulation.

Thumbs Up for Cool-Cap

A helmet-like device that’s used to cool the heads of infants who have been deprived of oxygen at birth in order to prevent or reduce brain damage has received Food and Drug Administration (FDA) approval.

The device, called Cool-Cap, maintains a steady flow of water that’s kept at a selected temperature through a cap that covers the baby’s head. Researchers, including some at Children’s Hospitals and Clinics of Minnesota, have found that cooling the brain and keeping the rest of the body at a temperature that’s slightly below normal during the first six hours of life reduces the brain’s need for oxygen and can slow down a series of events that leads to further brain damage once blood flow resumes (see “Keeping a Cool Head” in the March 2006 Minnesota Medicine, p. 22). Studies showed fewer infants who were treated with the Cool-Cap than those who were not died or had severe neurodevelopmental disabilities.

Between 5,000 and 9,000 babies are born each year with moderate to severe hypoxic ischemic encephalopathy. Until now, up to 20 percent of those infants died and 25 percent suffered permanent disability.

Olympic Medical Corporation, which manufactures the Cool-Cap, will continue to track usage and treatment outcomes as a condition of the FDA’s approval.

Pace of Spending Slows

Increases in health care spending in the United States continued to slow in 2005.

According to Centers for Medicare and Medicaid Services data, spending on health care increased by 6.9 percent that year compared with 7.2 percent in 2004, 8.1 percent in 2003, and 9.1 percent in 2002. Still, Americans enrolled in both public and private health plans spent nearly $2 trillion or approximately $6,700 per person on health care last year. That translates to approximately one out of every six dollars spent in the United States.

Authors of the report attribute the overall slowdown in spending growth to the fact that insurers have sought to rein in spending on prescription drugs by encouraging consumers to buy generic rather than brand-name medications. States have also kept drug costs in line by working together to negotiate lower prices for medications for Medicaid
recipients.

The report was published in the January/February 2007 issue of Health Affairs.

Where Does the Money Go?

Medical costs for Minnesotans with private insurance coverage increased 21 percent between 2003 and 2005, topping out at $3,204 a year, according to a study by the Minnesota Council of Health Plans using data from the state’s eight nonprofit health plans.

The High Cost of Getting Old In 2005, the average annual cost of health care for Minnesotans in their 70s or 80s ranged from $11,679 to $14,709—four to five times that of a 20-something, whose average health care cost was $3,146 per year. One in six Minnesotans was 60 years or older in 2005. Twenty-five years from now, that ratio will be one in four.

Although the majority (31 percent) of those dollars was spent on physician services, some of the biggest cost increases were seen in diagnostic imaging, prescription drugs, and emergency room services.

The number of CT scans of the chest, head, pelvis, and abdomen increased 12 percent between 2004 and 2005, and the number of MRI scans of the same regions rose 6 percent during that period. Total spending on such scans increased 13 percent—from $168 million in 2004 to $189 million in 2005.

Both the number of prescriptions filled and the cost of those medications increased between 2003 and 2005. In 2005, nearly 24 million prescriptions were filled, a 15 percent increase over 2003. The average cost per prescription grew by 12 percent for Minnesotans enrolled in private health plans and 10 percent for those in state health care programs.

Emergency room visits among Minnesotans with private insurance increased 2 percent between 2003 and 2005, but spending on such visits jumped 29 percent. For people enrolled in state health programs, the number of emergency visits grew by 21 percent and costs grew by 27 percent.