What happens when the federal government eliminates health coverage? Lessons from the past


After much secrecy and no public deliberation, Senate Republicans finalized release their “draft” repeal and replace bill for the Affordable Care Act on June 22. Unquestionably, the released “draft” will not be the final version.

Amendments and a potential, albeit not necessary, conference committee are likely to make some adjustments. However, both the House version – American Health Care Act (AHCA) – and the Senate’s Better Care Reconciliation Act (BCRA) will significantly reduce coverage for millions of Americans and reshape insurance for virtually everyone. The Congressional Budget Office (CBO) is expected to provide final numbers early the week of June 26.

If successful, the repeal and replacement of the Affordable Care Act would be in rare company. Even though the U.S. has been slower than any other Western country to develop a safety net, the U.S. has rarely taken back benefits once they have been bestowed on its citizenry. Indeed, only a small number of significant cases come to mind.

My academic work has analyzed the evolution of the American health care system including those rare instances. I believe historical precedents can provide insights for the current debate.

The doctor is out: PCP availability beyond 2020


In 2020 and beyond, under the Senate’s BCRA, the working poor will have a very hard time finding primary care providers (PCP) who will schedule appointments with them. Providers, rightly, fear bad debt from high deductible plans. They will discriminate on the ability to pay upfront.

In the NEJM, Karin Rhodes, Genevieve Kenney, and Ari Friedman looked at PCP appointment availability in the from the end of 2012 to Spring 2013. They found that appointments were usually quickly available if the person had insurance and unavailable if they were cash paying patients who could not afford the median price of services.**

The overall rate of new patient appointments for the uninsured was 78.8% with full cash payment at the time of the appointment (Figure 2). The median cost of a new patient primary care visit was $120, but costs varied across the states, as indicated in the figure legend. Only 15.4% of uninsured callers received an appointment that required payment of $75 or less at the time of the visit, because few offices had low-cost appointments and only one-fifth of practices allowed flexible payment arrangements for uninsured patients.

Why does this matter in the BCRA environment?

The baseline plan will be a plan with a $7,500 deductible for a single person. For people with means, paying $120 for a PCP visit is unpleasant but not onerous. If I had to do that this afternoon, I would grumble as I pull out a credit card. I would pay that credit card off tomorrow after I got the transaction points. Not everyone can do that.

Craig Garthwaite raises a good point this morning:

Primary care providers will seek to minimize their net bad debt.

Michael Chernew and Jonathan Bush looked at how bad debt accumulates as a function of out of pocket expenses at professional offices.

The median PCP cash visit price is a large payment in the Chernew/Bush schema. Most of it will be paid as people with means take out their credit card, their HRA debit card, or their HSA card and swipe it through the machine. But a simple PCP visit will produce significant chasing and write-downs. The study is limited as it only looked at people who were commercially insured. It excludes most low income people who are in the Medicaid gap on an income qualification basis by design. The average income in the study group is highly likely to be higher than the income of people who would move from Medicaid to benchmark plans. Even so, there is significant chasing and write downs. I would predict that applying 100% first dollar obligations on people with even less income than the study population will lead to more provider bad debt. This is because these programs are income qualified and if a person income qualifies for these programs, they probably don’t have a spare $120 floating around or easy access to cheap, revolving credit.

If we assume that some normal PCP visits will include some extra services that increase the contracted payment rate to $200 or more (very large obligations in Chernew/Bush) significant sums will be written down and off. For provider practice viability concerns, providers will very aggressively screen against people with very high deductible insurance who can’t pay the entire amount of the contracted rate price up front at the receptionist desk. This is a very patient unfriendly system.

Most payment reform models focus on delivering more primary care. The objective is to substitute cheap primary care for expensive specialist, inpatient hospital stays and post-acute rehabilitation. This is the concept behind value based insurance design. VBID is supposed to encourage the routine, low cost, regular maintenance of chronic conditions in outpatient or community settings instead of having people end up in the hospital for preventable admissions.

Yet, under the very understandable incentives of primary care physicians wanting to stay in business, access to primary care for the working poor who would have several thousand dollar deductibles that apply to all services, will be greatly restricted because of the cost barrier. If we want all members of our shared society to have decent health and decent lives, should want people to have easy and ready access to primary care. This bill creates strong business incentives to create barriers to primary care access.

Like the AHCA, the Senate’s health care bill could weaken ACA protections against catastrophic costs


Image result for catastrophic health

Editor’s Note:This analysis is part of USC-Brookings Schaeffer Initiative on Health Policy, which is a partnership between the Center for Health Policy at Brookings and the USC Schaeffer Center for Health Policy & Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

On Thursday, Senate Republicans unveiled the Better Care Reconciliation Act (BCRA), its Affordable Care Act (ACA) repeal bill. One provision of that legislation would greatly expand states’ ability to waive a range of provisions of federal law that affect health insurance. As both my Brookings colleague Jason Levitis and Nicholas Bagley have explained in pieces published earlier today, states would need to meet only very weak standards in order to obtain a waiver under the Senate bill, and waivers could have wide-ranging implications for the extent and affordability of insurance coverage.

One potential effect of these state waivers is weakening a pair of protections against catastrophic costs included in the ACA. In particular, states can directly use this expanded waiver authority to eliminate the requirement that individual and small group plans cap annual out-of-pocket spending. States can also indirectly weaken or effectively eliminate both the ACA’s requirement that plans limit out-of-pocket spending and its ban on individual and lifetime limits by setting a definition of “essential health benefits” that is weaker than the definition under current law. Both of these protections against catastrophic costs apply only with respect to care that is considered essential health benefits, so as the definition of essential health benefits narrows, the scope of these protections narrows as well.

Allowing states to change the definition of essential health benefits unavoidably weakens these protections against catastrophic costs in waiver states’ individual and small group markets. But waivers’ effects could also cross state lines and weaken these protections for people covered by large employer plans in every state.[1]  Under current regulations, large employer plans are allowed to choose the definition of essential health benefits in effect in any state in the country for the purposes of determining the scope of these protections against catastrophic costs. If the Trump Administration maintains that approach as it implements the BCRA and even one state uses the waiver process under the BCRA to set a lax definition of essential health benefits, then these protections against catastrophic costs could be weakened or effectively eliminated for people working for large employers nationwide.

The potential effects of the the BCRA waiver provisions on the ACA’s protections against catastrophic costs are essentially identical to those of a waiver provision included in the House-passed American Health Care Act (AHCA), which I have written about previously. The only substantive difference is that the Senate version would allow states to directly waive the out-of-pocket maximum requirement for some plans; under the House-passed bill, states could only affect this requirement indirectly by changing the definition of essential health benefits.

The remainder of this blog post examines these issues in greater detail.

Changes to state innovation waivers in the Senate health bill undermine coverage and open the door to misuse of federal funds


Image result for essential health benefits

Editor’s Note:This analysis is part of USC-Brookings Schaeffer Initiative on Health Policy, which is a partnership between the Center for Health Policy at Brookings and the University of Southern California Schaeffer Center for Health Policy & Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

On June 22, Senate Republicans released their much-awaited health reform bill, the Better Care Reconciliation Act of 2017 (BCRA). Much attention has rightfully focused on the bill’s myriad changes to the Medicaid program and to subsidies for the purchase of private insurance. But the legislation also makes potentially highly impactful changes to state innovation waivers, which are included in section 1332 of the Affordable Care Act (ACA).

Under current law, section 1332 provides broad flexibility for states to waive key ACA provisions so long as health coverage is not jeopardized and federal deficits not increased. Waivers can affect a wide range of provisions, including the premium tax credit, the definition of essential health benefits, the requirement that insurance plans cap annual out-of-pocket spending, and the requirement for states to operate a Marketplace, among others.

The changes in the Senate bill would upset this structure, removing the coverage-related guardrails and thereby opening the door for states to pursue waivers that would result in substantial losses in health coverage and affordability. The weakened guardrails would also allow states significant latitude to misuse federal health care dollars.