Holland & Hart Healthcare Law Blog

COLORADO FUROR OVER INTERNET SOFTWARE TAX BILL.

 The Colorado legislature has many high technology companies and consumers up in arms over the passage of HB 10-1192, which in effect imposes a sales and use tax on downloaded software in the state of Colorado. This may have some impact on Colorado companies that sell healthcare software over the internet to consumers in Colorado.

The bill taxes downloads of “standardized software,” which the bill defines as “computer software, including prewritten upgrades, that is not designed or developed to the specifications of a specific purchaser: or Computer software designed and developed to the specifications of a specific purchaser but then sold to another purchaser.”

The legislation has been met with load outcries of alarm from the Colorado technology community and those actively engaged in economic development in the state. The original bill has been modified with an expansive legislative declaration that the bill is 'not intended to alter, other than the designation of standardized software as tangible personal property, the tax treatment of what is known in the industry as "digital goods", "application service providers", software as a service" or "cloud computing"'.   

This bill was designed to reach the "Turbo Tax" crowd.  The idea is to eliminate the perceived inequality in tax application when software is sold in shops from where it is sold over the internet and downloaded.  It is one of a series of bills where the legislature is reaching to tax on line product sales.  Although the bill is self described as the repeal of an "exemption" in truth there was no "exemption."  There was no tax in the past because the tax is on "tangible personal property" and software is an intangible, except when it sold on DVD. The legislative solution is to change the definition of "tangible" to include what is "intangible."  Just redefine "white" as "black." Problem solved.  "Down" is the new "up."  Is this a wonderful country or what?  This may be an example of that wonderful definition of statutory law as “common sense as amended by the legislature.

GERMAN HEALTH CARE COST CONTROLS: A GLOBAL COMPETITIVE ADVANTAGE.

There is an interesting article in the February, 2010 issue of the McKinsey Quarterly, the on-line journal of McKinsey & Company.  The article entitled “How Germany is reining in health care costs: An Interview with Franz Knieps” provides an interesting comparison to our own struggle to control rising health care costs.  Mr.Knieps is the director general for public health care, health insurance and long term care in the German Federal Ministry of Health. 

HEALTH CARE DATA CHASE: THE ARRIVAL OF HEALTH CARE ALL CLAIMS DATA BASES.

    The Colorado legislature is about to address a proposal to develop a state health care all claims data base as part of Governor Rittter’s health care initiative package. The pending bill, HB 1330, provides for the structure and development of a claims data base in the state with the hope of joining a number of other states that have already or are in the process of developing their data bases.  

DSM –V: THE NEXT FRONTIER OF MENTAL ILLNESS (IF IT IS ILLNESS).

There is much anticipation over the soon to be released new edition of the Diagnostic and Statistical Manuel of Mental Disorders  (DSM –V) by the American Psychiatric Association (“APA.)  It is due in 2012. There are many interests involved in the development and recognition of categories of mental disorders. (There is still controversy over whether there is mental “illness,” but there is more congruence over the existence of “disorders.”  The late poet, Theodore Roethke, once wrote, “What is mental illness, but nobility of soul at odds with circumstance?”  The APA, the psychiatric profession, the pharmaceutical industry and other groups have a much bigger and more complex investment in the definition of categories of mental illness.

HOSPITAL PRIVACY BREACH -- DELIVERY OF MEDICAL RECORDS TO GRAND JURY.

 In responding to government or grand jury subpoenas for medical records, analysis under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), may not be the end of the road. HIPAA specifically authorizes a hospital to release a patient’s medical records in response to a grand jury subpoena. 45 C.F.R. Sec. 164.512(f)(1)(ii)(B). Unlike most federal statutes that pre-empt conflicting state laws, HIPAA specifically permits more stringent state medical privacy laws to pre-empt HIPAA. In the recent case of Turk v. Brian Oiler, et al., in the U.S. District Court for the Northern District of Ohio, a U.S. District Judge held that Ohio’s physician-patient privilege did not permit delivery of medical records to a grand jury and thus preempted HIPAA and exposed the Cleveland Clinic to potential exposure for delivery of the mental health and substance abuse records of the plaintiff James Turk to a state grand jury. 

What Point, Wellpoint? - Is Private Health Insurance Sustainable?

There were two interesting articles in the Wall Street Journal last week on Wellpoint, the huge health care insurer.  The Saturday/Sunday Edition highlighted an interview with Angela Braly, the CEO of Wellpoint by Joseph Rago entitled “A Wasted Opportunity.”  The Journal quoted Ms. Braly as being shocked by the pricing demands of hospitals and physicians.

“GENDER REASSIGNMENT THERAPY” CAN BE TAX DEDUCTIBLE --TAX COURT.

63 year old Rhiannon O’Donnabhain, formerly known as Robert O’Donnell, divorced father of three, former sailor, construction worker and engineer, has prevailed in tax court on her claim for the deductibility of $25,000.00 in out of pocket expenses for therapy and surgery related to converting her sex from male to female. The issue is whether 26 U.S.C. Section 213 of the federal tax code permits the deduction of sex change expenses as treatment for a “disease” or whether it was non-deductible as “cosmetic surgery.”

ILLINOIS SUPREME COURT CLOBBERS (TORT REFORM) CAPS.

    Bucking a trend in other states, the Illinois Supreme Court held this week that state liability caps imposed on non-economic damages in medical malpractice cases violated the Illinois constitution’s separation of powers clause.  It found that the legislatively imposed caps was too bold an intrusion on the powers of the judicial  branch. A number of states have already passed similar statutes that have been upheld by the highest courts in those states. See Garhart v. Columbia/Health One, LLC, 95 P 3d 571, 581-82 (Colo. 2004); Judd v. Drezga, 103 P 3rd 135 (UT 2004) and Kirkland v. Blaine County Medical Center, 49 P 3rd 115, 121-22 (ID 2000).

HEALTH INSURANCE CONTRACT PROVISIONS FUEL COST ESCALATION IN MASSACHUSETTS.

The Massachusetts Attorney General’s Preliminary Report, Investigation of Health Care Cost Trends and Cost Drivers issued on January 29, 2010 faulted the leveraged based disparities among health providers in pricing as the principal driver in health care cost increases in Massachusetts over the past five years. In particular the study noted that providers with leverage due to size, geographic location and branding had a substantial leg up in negotiations with insurance companies driving their prices in some cases at levels that doubled those of their competitors for comparable services. Interestingly, the study note a number of health insurance contract provisions that had a substantial negative impact on cost containment.

COST DRIVERS IN MASSACHUSETTS HEALTH PLAN

The Massachusetts Attorney General, Martha Coakley, issued a preliminary report on January 29, 2010 on the conclusions of her Investigation of Health Care Cost Trends and Drivers, required by a Massachusetts statute. (Yes she is the infamous Democrat who lost Kennedy’s Senate seat to Scott Brown and stymied the Obama Administration’s health care reform drive.)  The results are interesting, if not totally surprising.  The biggest driver is hospital and provider leverage on insurance companies and a steady increase in price rather than utilization over the past four or five years.