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High-Risk Pools for People with Preexisting Conditions: A Refresher Course

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http://www.commonwealthfund.org/publications/blog/2017/mar/high-risk-pools-preexisting-conditions

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During the recent effort to repeal and replace the Affordable Care Act (ACA), some members of Congress and the Trump administration seemed to be experiencing a certain nostalgia for high-risk pools, which operated in 35 states before the ACA was enacted. At a CNN Town Hall Meeting in January, Speaker of the House Paul Ryan responded to a question about coverage for people with preexisting conditions by saying:

We believe that state high-risk pools are a smart way of guaranteeing coverage for people with preexisting conditions. We had a really good one in Wisconsin. Utah had a great one . . . . What I mean when I say this is, about 8 percent of all the people under 65 have that kind of preexisting condition . . . . So, by financing state high-risk pools to guarantee people get affordable coverage when they have a preexisting condition, what you’re doing is, you’re dramatically lowering the price of insurance for everybody else. So, if we say let’s just, as taxpayers—and I agree with this—finance the coverage for those 8 percent of Americans under 65 in a condition like yours, they don’t have to be covered or paid for by their small business or their insurer who is buying the rates for the rest of the people in their insured pool, and you’d dramatically lower the price for the other 92 percent of Americans.

As high-risk pools and other changes to the ACA continue to be debated, it is critical to deconstruct statements such as these and remind ourselves of how high-risk pools really worked and how unaffordable they were. It is important to remember that high rates of uninsurance and lack of affordability for all buyers in the individual market existed before the ACA, even in states with high-risk pools. In addition, policymakers seem to substantially underestimate the number of Americans with preexisting conditions who might be forced to purchase coverage through a high-risk pool if insurers are allowed to deny coverage in the marketplace.

Affordability and Costs of State High-Risk Pool Coverage Pre-ACA

High-risk pools were expensive because they concentrated people with health conditions into a single pool, with no healthy members to offset their costs. As a result, out-of-pocket costs for enrollees were very high and coverage was often quite limited, as administrators sought to limit losses and lower premiums by imposing high deductibles and cost-sharing, as well as annual and lifetime coverage caps. In state high-risk pools operating before the ACA:

  • Premiums ranged from 125 percent to 200 percent of average premiums in the individual market, yet covered only about 53 percent of claims and administrative costs nationally (Wisconsin allowed premiums up to 200 percent of average).
  • Fourteen states had plans with deductibles of $10,000 per year or higher, substantially greater than the current maximum $7,150 deductible for catastrophic plans in the marketplaces.
  • Thirty states imposed maximum lifetime limits; others had annual coverage limits as low as $75,000 per year (Utah had both a lifetime and an annual limit).
  • In 2010, the 35 state high-risk pools incurred about $2.4 billion in total costs—to cover just 221,879 people.

The U.S. Department of Health and Human Services (HHS) recently estimated that up to 17,875,000 people with preexisting conditions were uninsured in 2010. Had all of them been covered by high-risk pools, the cost would have been $194.8 billion in 2010 dollars, with premiums covering only $103.3 billion. Thus, states and the federal government would have needed to find $91.5 billion in additional funding to cover them all—much more than the up to $10 billion per year in federal assistance to states recently proposed by congressional Republicans.

Uninsured Rates When High-Risk Pools Were in Operation

In 2010, 32,939,000 people were uninsured in the 35 states that operated high-risk pools, and more than 47 million were uninsured nationally. In those states with high-risk pools, less than half of 1 percent of the total population was enrolled in them, and less than 1 percent of the uninsured population. That same year, The Commonwealth Fund found that 60 percent of people who shopped for health insurance in the individual market found it difficult or impossible to find a plan they could afford. This fact belies the claim that state high-risk pools made coverage for other people more affordable.

Percentage of Americans Under Age 65 with Preexisting Conditions

In the same Commonwealth Fund survey, more than one-third (35 percent) of those who sought insurance on the individual market reported being denied coverage or being charged a higher price because of a preexisting condition—certainly more than the 8 percent of people Speaker Ryan suggested would need to turn to high-risk pools for coverage. Indeed, based on federal survey data, HHS estimated that up to 51 percent of nonelderly Americans have preexisting conditions for which they could be denied coverage in the individual market.

Reality Check

The reality is that high-risk pool coverage was prohibitively expensive and there is little evidence to suggest that the existence of such pools made coverage less costly for others in the individual insurance market. Without substantially more federal funding than currently proposed, these facts are not likely to change. People with preexisting conditions may have “access” to coverage, but most will not be able to afford it and those who can will face limited benefits and extremely high deductibles and out-of-pocket payments.

Who Would Gain Under the Proposal to Expand Health Savings Accounts?

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http://www.commonwealthfund.org/publications/blog/2017/apr/gains-under-proposal-to-expand-health-savings-accounts

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The U.S. House of Representatives leadership’s bill to repeal and replace the Affordable Care Act (ACA) would have significantly expanded the use of health savings accounts (HSAs), which people can use to save tax-free money to pay for certain medical expenses. This effort isn’t new and it’s not likely to go away just because a vote on the House bill, the American Health Care Act (AHCA), has been tabled. Amendments to the tax code to encourage HSAs have been a staple of Republican health care proposals, and the HSA provisions in the House legislation were introduced as a standalone bill last year.

Why all the interest? HSA proponents suggest the accounts offer cost savings and give consumers freedom to spend their money how they see fit. An HSA must be paired with a high-deductible health plan (HDHP), and there is evidence that the combination of an HDHP and HSA does reduce health care spending—by leading consumers to skip care, both needed and unneeded. Yet there is little basis to conclude that HSAs expand access to care, or that the tax benefits these accounts promise reach most Americans. In practice, most financial advantages have accrued to the top 5 percent of earners, who can afford to contribute to the accounts during the year and reap larger gains at tax time.

HSAs: The Basics

HSAs were created in 2003 in legislation establishing a Medicare prescription drug benefit. They are tax-preferred savings accounts funded by consumers and sometimes their employers. Consumers can contribute to an HSA only if they are enrolled in an HDHP, which in 2017 is an individual or group health plan that has a deductible of at least $1,300 ($2,600 for a family plan). Unlike other savings vehicles established under federal law, HSAs provide what amounts to triple tax benefits: contributions are tax-deductible; account funds are invested and grow tax-free; and withdrawals are tax-exempt (if they are used for qualified medical expenses).

HSAs are far more attractive to higher-income individuals, who are more likely to have sufficient income to fund the accounts and gain a greater tax benefit than are lower-income individuals subject to lower tax rates. In 2013, tax filers with income above $200,000 were 10 times more likely to claim a tax deduction for HSA contributions than those with incomes below $50,000, and the tax-advantaged contributions these high earners made were, on average, more than twice as large. A study of HSA take-up in the group market from 2005 to 2012 found similar results and observed, perhaps unsurprisingly, that high-income households were substantially more likely to fund their HSAs fully (with their own dollars and contributions from employers) than were middle- and lower-income filers.

Enhanced HSAs on the Horizon?

The AHCA would have expanded use of HSAs by authorizing higher tax-free contributions (increasing the amount from $3,400 to $6,550 for an individual plan) and more tax-free uses for funds. The AHCA also would have cut in half the penalty for withdrawals for nonmedical expenses.

Other proposals would provide similar and sometimes greater benefits to account holders. Legislation previously authored by Health and Human Services Secretary Tom Price would increase HSA contribution limits while also making it easier to shelter those funds and other retirement savings from taxes when they are transferred to heirs. Senator Rand Paul’s (R–Ky.) ACA replacement bill would go still further, erasing the requirement that HSAs be linked to a high-deductible plan and eliminating contribution limits altogether.

There is little doubt these expansions would encourage HSA take-up. Likewise, the proposals would make HSAs even more attractive as savings and estate planning vehicles for high-income households—particularly those who earn too much to contribute to other tax-advantaged retirement accounts and those who have maxed out such contributions. At the same time, the financial services companies that manage these accounts would reap substantial benefits, too.

Looking Ahead

HSAs are already growing under current law: by 2017, nearly 21 million accounts held more than $41 billion in assets, while the cost of the program to taxpayers has steadily increased and will nearly double by 2020. The AHCA would have dramatically accelerated this trend, causing federal spending to shoot up nearly 50 percent over the first three years following enactment and by a total of more than $19 billion by 2026.

The Congressional Budget Office estimated that the AHCA would have reduced insurance coverage dramatically, especially among Americans with low incomes. Moreover, the people most likely to need assistance paying for coverage and out-of-pocket costs—those with incomes under 200 percent of poverty, or around $24,000 for a single person—are the least likely to benefit from the bill’s approach to making coverage more affordable: HSAs. Given an ACA replacement’s potential impact on federal spending and coverage, spending billions of dollars on a program that primarily helps those least likely to need assistance purchasing coverage and paying out-of-pocket costs warrants scrutiny.

How the American Health Care Act’s Changes to Medicaid Will Affect Hospital Finances in Every State

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http://www.commonwealthfund.org/publications/blog/2017/jun/how-changes-to-medicaid-will-affect-hospital-finances-in-every-state

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The American Health Care Act (AHCA), as passed by the U.S. House of Representatives, will reduce federal spending on Medicaid by more than $834 billion over the next 10 years. And the recently released Senate bill appears to cut Medicaid even more deeply. In addition to repealing the Medicaid expansion, the bills place caps on the federal dollars that states receive to provide health insurance to millions of low-income Americans, including the elderly, disabled, and people with opioid addiction.

We modeled the impact of this loss of Medicaid funding on U.S. hospitals and found that, over the next 10 years, hospitals in all states, but especially hospitals in Medicaid expansion states, will see an increase in uncompensated care—a treatment or service not paid for by an insurer or patient. We also saw declines in hospitals’ operating margins, particularly among hospitals in expansion states. Rural hospitals in nonexpansion states also would face marked operating margin decreases.

In the interactive state-by-state maps below, we present the estimated impact of the Medicaid provisions in the House-passed AHCA on the finances of all U.S. hospitals. The hospitals in the District of Columbia and the 31 states that expanded Medicaid are projected to see a 78 percent increase in uncompensated care costs between 2017 and 2026. Eleven of these states will see uncompensated care costs at least double between 2017 and 2026. For example, Nevada hospitals will see a 98 percent increase, West Virginia a 122 percent increase, and Kentucky a 165 percent increase.

In addition to growing uncompensated care, our projections indicate that under the AHCA, hospitals in most states will experience a decline in Medicaid revenues, even though the law restores Medicaid disproportionate share hospital (DSH) payments. Hospitals in Medicaid expansion states may experience a 14 percent drop in Medicaid revenues between 2017 and 2026, compared to a 3 percent anticipated reduction among hospitals in the 19 states that did not expand. Some states may see more dramatic drops. Arkansas hospitals, for example, are estimated to see a 31 percent decline in Medicaid revenue over the next 10 years.

 

Why and How to Avoid High-Risk Pools for Americans with Preexisting Conditions

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http://www.commonwealthfund.org/publications/blog/2017/jun/how-and-why-to-avoid-high-risk-pools

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The American Health Care Act (AHCA)—the U.S. House of Representatives’ bill to repeal and replace the Affordable Care Act (ACA)—would allow states to apply for waivers to reduce existing consumer protections and provide funding for states to set up high-risk pools or other mechanisms for people with preexisting conditions who have lapses in their coverage. In previous posts, I have talked about the high costs and meager coverage associated with high-risk pools that operated before the ACA and the fact that their use did not significantly reduce costs for other people who buy their own health plans in the individual market. Moreover, the Congressional Budget Office analysis of the AHCA finds that the funding it makes available to states for the high-risk pools is inadequate.

In a recent commentary for Annals of Internal Medicine on high-risk pools, I note that people with preexisting conditions constitute roughly 51 percent of Americans. Here, let’s explore who might end up in a high-risk pool, what their experiences might be, and policymakers’ alternative options for stabilizing the marketplaces.

The U.S. Department of Health and Human Services (HHS) estimated that 23 percent of Americans with preexisting conditions had a period of uninsurance in 2014, often because of job changes or periods of financial instability. Young people reaching age 26 who transition off their parents’ coverage also sometimes experienced gaps in coverage—and some of them have preexisting conditions. Should the AHCA become law, individuals with preexisting conditions and lapses in coverage who live in states that obtain waivers to allow insurers to charge people based on their health would likely end up in high-risk pools.

Research has shown that the greater out-of-pocket costs and limited coverage associated with high-risk pools led to enrollees forgoing needed care and experiencing worse outcomes. In fact, before the ACA, high-risk pool enrollees in Kansas were eight times more likely to transition to federal disability programs than members of the general population with these conditions.

Current Medicaid beneficiaries also would be affected. The Congressional Budget Office analysis of the AHCA estimated that 14 million fewer people would have Medicaid coverage as a result of the federal funding cuts. Many of them would be forced to look to the individual insurance market to gain coverage, yet half of these former Medicaid beneficiaries would have serious preexisting conditions. Given the historically very high costs for consumers associated with high-risk pools, the majority of these individuals would likely go uninsured instead. Many would end up using the emergency room to access care once their needs become urgent, and their uncompensated health care costs would be borne by others with insurance. Some would likely suffer serious health consequences, even preventable deaths.

Supporters of the AHCA suggest that the legislation gives states more options to design coverage for their citizens, thereby better meeting their needs. Section 1332 of the ACA, however, already gives states a great deal of flexibility in designing their marketplaces while still providing comprehensive and affordable coverage. Indeed, both Alaska and Minnesota are pursuing 1332 waiver programs to specifically address concerns about high-risk individuals by implementing reinsurance programs, rather than segregating people with preexisting conditions into high-risk pools. These programs would maintain the overall larger pool of insured people in the state while protecting insurers against catastrophic costs. Reinsurance programs, such as the one temporarily instituted under the ACA for its first three years, have historically been proven to bring down premium costs for everyone. Given that reinsurance programs are a more effective and evidence-based mechanism for stabilizing the individual insurance market, state policymakers should strongly consider pursuing these programs under the existing ACA rules instead of establishing high-risk pools. And, federal policymakers should acknowledge and support this mechanism to strengthen the marketplace, bring down costs, and encourage participation by insurers.

 

Senate’s Updated ACA Repeal-and-Replace Bill Will Still Leave Millions Uninsured

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http://www.commonwealthfund.org/publications/blog/2017/jul/senate-updated-aca-repeal-and-replace-bill?omnicid=EALERT1242189&mid=henrykotula@yahoo.com

Yesterday, Senate Republicans introduced an updated version of the Better Care Reconciliation Act (BCRA), their proposed repeal and replacement of the Affordable Care Act (ACA). The revised bill makes changes aimed at winning over Republicans who oppose the bill.

The Congressional Budget Office (CBO) projections of the updated bill’s effects on coverage and the federal budget are not available yet, but it is still likely to significantly increase the number of uninsured Americans — and raise health care spending for low- and moderate-income people. While the updated bill would leave the ACA’s taxes on higher-income people in place, providing an estimated $231 billion in additional revenue over the original bill, Senate Republicans do not propose using the funds to significantly increase the affordability of coverage for low- and moderate-income Americans. And the new version of the BCRA still dramatically cuts and reconfigures the Medicaid program.

The revised bill leaves the original BCRA’s provisions intact, including a phase-out of the ACA Medicaid expansion starting in 2020 and smaller premium tax credits compared to the ACA that make coverage less affordable for low-income people. (For a more complete overview of provisions, see our original post on the CBO score for the bill.)

The CBO estimated in June that the combined effects of these provisions would increase the number of people without health insurance by 22 million by 2026. The coverage losses would be borne disproportionately by people with low and moderate incomes and particularly older adults who purchase their own coverage. The revised bill is unlikely to change those fundamental outcomes.

One of the biggest criticisms of the BCRA is that it would roll back the coverage expansions under the ACA aimed at lower- and moderate-income Americans and give the savings to higher-income people by repealing two taxes that helped fund the expansions. The bill responds to that criticism only by keeping those taxes in place; it doesn’t use the proceeds to make coverage more affordable for less economically privileged Americans.

New Tax Revenue Used for Small Changes

Instead, the bill uses some of that extra revenue to allow people to use health savings accounts (HSAs) to buy health insurance. But HSAs are pre-tax savings accounts whose tax benefits increase with income. Moreover, people with low and moderate incomes are unlikely to have the excess income required to finance an HSA in the first place. This means the tax benefits from this change would flow to higher-income Americans.

The bill provides about $70 billion in new funds for states to reduce premiums through mechanisms like reinsurance. And while this money would certainly help stabilize markets, it’s not enough to make coverage sufficiently affordable for the 22 million people projected to lose health insurance under the BCRA. Moreover, the full amount of the increase appears to be transferred for use in an amendment to the bill, described below.

Similarly the $45 billion proposed in the revised bill for opioid treatment wouldn’t come close to meeting the full health care needs of an estimated 220,000 people with opioid use disorder who are at risk of losing their coverage through the ACA’s Medicaid expansion and the marketplaces.

More Underinsured and Damage to the Individual Market

Another major criticism of the BCRA is that it would significantly increase deductibles and copayments in the individual market. But rather than improving cost-protection, the new bill doubles down by making it possible for people to use premium tax credits to buy even skimpier, catastrophic coverage. While this will result in cheaper plans for healthy people, it would only serve to increase the number of Americans who are underinsured. Yet, because the bill doesn’t make the BCRA’s premium tax credits more generous, it is hard to see how insurance with deductibles that could consume the majority of a low-income family’s income will entice more people to buy it.

But even if there are small gains in coverage under the revised bill, they would likely be more than offset by the damage inflicted on the individual market through an amendment modeled on one by Senator Cruz. By letting states allow insurers to sell ACA-noncompliant policies, the amendment would split the individual market into two pools — one with healthy risks and one with sicker risks. As the insurance industry has already pointed out, this would create the conditions necessary for a true premium death spiral in the individual market, and widespread losses of insurance. To combat this, the amendment appears to borrow the $70 billion in new funds for market stabilization in the revised bill to help states that opted to do this reduce premiums. But based on the U.S. experience with high-risk pools, the funds would likely fall well short of what would be required.

Looking Forward

The ACA has led to millions of people gaining health insurance, many for the first time in their lives. National survey data indicate that this expanded coverage has triggered population-wide declines in cost-related problems getting needed care and reports of problems paying medical bills. But the nation is nowhere near achieving high-quality health care that is affordable for all Americans. In proposing bills that would reverse the small but significant improvements realized so far under the ACA, Senate and House Republicans will only push a better health care system further beyond our reach.

The Golden Rule, With a Twist

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http://www.leadershipdigital.com/edition/daily-operations-leadership-2017-07-13?open-article-id=6864960&article-title=the-golden-rule–with-a-twist&blog-domain=rapidstartleadership.com&blog-title=rapidstart-leadership

The Golden Rule with a Twist

 

 

Why are nurses at Tufts Medical Center striking?

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http://www.masslive.com/news/boston/index.ssf/2017/07/why_are_nurses_at_tufts_medica.html

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Fixing Our Most Pressing Health Insurance Problems: A Bipartisan Path Forward

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http://www.commonwealthfund.org/publications/blog/2017/jul/fixing-health-insurance-problems-bipartisan-approach?omnicid=EALERT1241668&mid=henrykotula@yahoo.com

With Senate Republicans mired in seemingly intractable disagreements about how to proceed with health reform—which may very well not be resolved by the latest Senate draft bill, Majority Leader Mitch McConnell suggested on July 6 that a bipartisan short-term fix may be needed for the problems of the individual health insurance market. In fact, opinion polling reveals wide public support for bipartisan health reform. And bipartisanship in health policy is not a fantasy—both the 2015 Medicare Access and CHIP Reauthorization Act (MACRA) and the 2016 21st Century Cures Act passed with wide bipartisan majorities.

How could a bipartisan solution happen? First, it must focus on the individual market, where we face an immediate crisis. Long-term changes to the employer-sponsored coverage market and the Medicare and Medicaid programs, which together cover the vast majority of Americans, can be debated, but nothing needs to change right now. Moreover, sharp ideological divisions between Republicans and Democrats (and within both parties) as to the path forward with respect to public programs and the employer market make short-term consensus unlikely.

Second, we need solutions that can be implemented immediately through existing programs. We do not have time to extensively rewrite federal regulations or implement state-based systems for providing premium and cost-sharing assistance to address pressing problems facing us now.

And third, we may need to accept short-term increases in federal spending to get us through the immediate difficulties, as we have when our country has faced other crises. In the long term, we must cut health care spending growth generally. But in the short term, simply shifting the burdens to individuals who will lose insurance coverage or face much higher deductibles and premiums is not acceptable.

The immediate problem that needs to be addressed is that it appears that individual market coverage will not be available in 40 counties in Nevada, Ohio, and Indiana for 2018. An additional 1,300 counties, representing about one-quarter of marketplace enrollees, may have only one insurer next year. The number of “bare” or single-insurer counties changes from week to week, and these numbers may improve, but it is also possible that more counties will lose insurers by 2018. Moreover, some individual market insurers are requesting double-digit premium increases for 2018 for the second year in a row.

The cause of this crisis is no secret. Insurers and insurance regulators have repeatedly pointed to the regulatory uncertainty driving insurer withdrawals and premium increases. In particular, confusing signals from the administration as to whether it will reimburse insurers for the cost-sharing reductions they are required to offer low-income consumers under the Affordable Care Act (ACA) and enforce the individual mandate has left insurers very nervous about the individual market’s future. Decreased exchange enrollment and a fear of a less healthy risk pool also have insurers feeling insecure.

What can be done? First, Congress should immediately enact a mandatory appropriation to cover the cost-sharing reduction reimbursements through 2020. Not only the major insurer trade organizations, but also the National Association of Insurance Commissioners, the National Governors Association, and the United States Chamber of Commerce have identified this as an urgent necessity. Because the cost of this initiative is already included in the budget baseline, the appropriation would not even have budget consequences.

Second, Congress should ensure coverage for bare counties. The Federal Employees Health Benefits Program (FEHBP) offers private insurance coverage from multiple insurers in every county in the nation. For 2018 and 2019 only, the largest two FEHBP insurers in any county should be required as a condition of continued participation in the program to offer at least one silver-level plan though the federal exchange in all counties that would otherwise be without coverage. These plans should be eligible for premium tax credits and could otherwise charge actuarially appropriate premiums.

Third, Congress should appropriate the short-term premium stabilization funding included in the Senate’s Better Care Reconciliation Act (BCRA), providing $50 billion in reinsurance funds directly to insurers over the next four years. Reinsurance payments of $15 billion for 2018 and 2019 could significantly reduce individual market premiums for those years, as reinsurance did in the first three years of the ACA.

Fourth, Congress should reinstitute the ACA’s risk corridor program for 2018 and 2019 for any county with fewer than two insurers. The Republican’s 2003 Medicare Modernization Act included a risk corridor program to share risk with insurers that experienced unanticipated losses. It remains in place today. Congress essentially defunded the ACA’s risk corridor program in 2015, causing insurers to experience huge losses and driving some to insolvency. The program should be reinstated and funded for 2018 and 2019. Congress should also suspend the ACA’s health insurer tax for insurers that offer individual market coverage in bare and single-insurer counties.

Fifth, Congress should leave the individual mandate in place until it can devise a credible replacement. The House-passed American Health Care Act would impose a 30 percent premium surcharge on people who failed to maintain continuous coverage or allow states to permit insurers to charge higher premiums to such enrollees with preexisting conditions. The Congressional Budget Office (CBO) determined that these penalties would discourage healthy consumers from enrolling, and that allowing health status underwriting would destabilize the market. The CBO also concluded that the Senate’s solution of a six-month lockout period for consumers who lacked continuous coverage would be ineffective. The ACA’s individual mandate penalty is too small, was phased in too slowly, and has not been adequately enforced, but for the time being it is all we have to encourage healthy people to enroll in coverage. Until someone comes up with a better solution, it should be left in place.

Sixth, Congress should rework the premium tax credit formula for 2018 through 2020 to allow younger enrollees to claim more generous tax credits. The BCRA would do this, but would reduce tax credits for older people, discouraging healthy boomers from enrolling. In the short term at least, insurers need all the healthy enrollees they can get, regardless of age.

Finally, every consumer should be able to fully deduct the payments they make to purchase individual market premiums (i.e., not the costs covered by premium tax credits). Self-employed individuals are already allowed to do this. Senate Republicans are reportedly considering legislation that would allow individuals to pay premiums through tax-subsidized health savings accounts, but why require a consumer to go to the trouble of establishing an account and paying associated fees when they could simply pay premiums tax free?

As Senator McConnell has acknowledged, bipartisan action may be needed to address our most pressing problems in the health insurance market. Practical solutions are available. Congress should adopt them immediately and by consensus, and then debate the longer-term future of our health care system.