Update on Chicago's Tax on Soda and the Department of Justice's Suit Against United Healthcare

It is time for a few updates. While I didn’t speak about Chicago specifically, I have written about taxing sugary beverages. This week, Chicago repealed its two-month-old sugary beverage tax. Forces favoring the tax are regrouping, forces opposing the tax claim a victory in stopping the momentum for taxing sugary beverages thought to “cause and contribute” to rising levels of obesity and diabetes. But to understand the decision, it is important to know a little bit more.

First, it is a penny an ounce tax, roughly in the range of 10%. Second, this was not a decision made by voter referendum; it was a decision by the Cook County of Commissioners. Third, the tax was meant to fill a budget shortfall, the window dressing as to the possible health benefits was ascribed to the tax after the fact. [1] Fourth, the tax laws are written in such a way that it was difficult to implement the tax, to begin with causing significant logistical problems.

The tax could not be assessed to distributors without them passing it along to consumers who would pay the soda tax and an additional sales tax on the purchase. And it couldn’t be assessed on the 870,000 of Chicagoans who receive federal food subsidies because it is illegal for the local government to tax their nutritional spending. [2]

So, this is neither a victory nor defeat for evidence-based policy; it is a skirmish. Neither side fought with scientific information. It seems clear that local governments will not be able to impose these burdens by fiat or without a strong advocacy for ‘healthy’ eating. Big Soda will need to recognize a “win” in Chicago will not translate to changing the minds of the ‘soda tax’ crowd. Perhaps both sides should wait for some evidence from the early adopters in Berkeley or Philadelphia about whether it improves the health of the population at risk and whether it acts as a regressive tax on one social group over another.

I also wrote about a whistleblower suit against United Healthcare earlier this year. The lawsuit alleged that United Healthcare “artificially inflated beneficiary risk scores to boost profits from its Medicare Advantage plans, a suit joined by the Department of Justice (DOJ). That suit has been dismissed. The judge’s ruling indicated that the DOJ had not proven that the disputed claims were “knowingly false,” and there was no evidence that Medicare would not have made the payments after knowing of United Healthcare’s actions. The DOJ can still refile their suit if they can demonstrate specific instances rather than alleging more generalized behavior. They have had two convictions against Freedom Health and Optimum HealthCare, so it is unclear at this point whether they will refile.  

In reading the judge’s opinion, I did note that he indicated that once a diagnosis has been entered into a patient’s medical record, it does not have to be substantiated by other physicians. One physician’s opinion is sufficient. I would like to believe that this was true, but having seen honest differences of opinion between physicians over whether a patient has congestive heart failure I do not think that is always the case. Also, there is evidence that some physicians, in using electronic health records, just cut and paste from one visit to the next, carrying errors forward. The whole episode highlights how physicians are increasingly asked to code their opinions for billing purposes; they are not trained to be coders, they are prepared to be doctors. Physicians unfortunately now have to become more engaged not in documenting the care they provide, but in making sure the coders accurately reflect their thinking and differences of opinion.

[1] “Preckwinkle [Cook County Board President] has admitted from the beginning she had a budget shortfall she needed to deal with, but sugarcoated that message with one about how this tax would make Cook County residents healthier.” Chicago Tribune 

[2] Washington Post