http://www.propharmaconsultants.com/speak.html
The November 15th, 2017 Professor Speaks episode, “ACA Individual Mandate”, is now available on YouTube and the Pro Pharma Website.
This episode addresses questions like:
The timing: The disruption caused by repealing the individual mandate would start early next year and intensify again just before next year’s midterm elections.
The bottom line: All this fallout would be impossible to ignore, putting more pressure on Congress to return to health policy whether it wants to or not — and reopening all the same internal divisions that have stymied every other health care bill.
Flashback: “You can make an argument that Obamacare is falling of its own weight — until we repeal the individual mandate,” Sen. Lindsey Graham said two weeks ago. “Then there is absolutely no excuse for us not to replace Obamacare because we changed a fundamental principle of Obamacare. So I hope every Republican knows that when you pass repeal of the individual mandate, it’s no longer their problem, it becomes your problem.”
Marketplace Confusion Opens Door To Questions About Skinny Plans
Consumers coping with the high cost of health insurance are the target market for new plans claiming to be lower-cost alternatives to the Affordable Care Act that fulfill the law’s requirement for health coverage.
But experts and regulators warn consumers to be cautious and are raising red flags about one set of limited benefit plans marketed to individuals for as little as $93 a month. Offered through brokers and online ads, the plans promise to be an “ACA compliant, affordable, integrated solution that help … individuals avoid the penalties under [the health law].”
Legal and policy experts have raised concerns that the new plans could leave buyers incorrectly thinking they are exempt from paying a penalty for not having coverage. Additionally, they say, plans sold to individuals must be state-licensed.
Apex Management Group of Oak Brook, Ill., and Pennsylvania-based Xpress Healthcare have teamed up to offer the plans, and executives from both companies say they don’t need state approval to sell them.
In California, Insurance Commissioner Dave Jones has already asked for an investigation.
“Generally speaking, any entity selling health insurance in the state of California has to have a license,” Jones said earlier this month. “I have asked the Department of Insurance staff to open an investigation with regard to this company to ascertain whether it is in violation of California law if they are selling it in California.”
Asked about a possible investigation, Apex owner Jeffrey Bemoras recently emailed a statement saying the firm is not offering the plans to individuals in California.
Bruce Benton, spokesman for the California Association of Health Underwriters, which represents the state’s health insurance agents, said his organization has not heard of Apex or Xpress and does not know of anybody who is selling their skinny plans in California.
These skinny plans — sold for the first time to individuals in other states across the country — come amid uncertainty over the fate of the ACA and whether President Donald Trump’s administration will ease rules on plans in the individual market. Dozens of brokers are offering the plans.
“The Trump administration is injecting a significant amount of confusion into the implementation of the ACA,” said Kevin Lucia, project director at Georgetown University’s Health Policy Institute. “So it doesn’t surprise me that we would have arrangements popping up that might be trying to take advantage of that confusion.”
David Shull, Apex’s director of business development, said “this is not insurance” and the plans are designed to meet the “bulk of someone’s day-to-day needs.”
In his email, Bemoras wrote that “Apex Management group adheres closely to all state and federal rules and regulations surrounding offering a self-insured MEC [minimal essential coverage] program.” He added: “We are test marketing our product in the individual environment, [and] if at some point it doesn’t make sense to continue that investment we will not invest or focus in on that market.”
Price-Tag Appeal, But What About Coverage?
The new plans promise to be a solution for individuals who say that conventional health insurance is too expensive. Those looking for alternatives to the ACA often earn too much to qualify for tax subsidies under the federal law.
Donna Harper, an insurance agent who runs a two-person brokerage in Crystal Lake, Ill., found herself in that situation. She sells the Xpress plans — and decided to buy one herself.
Harper says she canceled her BlueCross BlueShield plan, which did meet the ACA’s requirements, after it rose to nearly $11,000 in premiums this year, with a $6,000 annual deductible.
“Self-employed people are being priced out of the market,” she said, noting the new Xpress plan will save her more than $500 a month.
The Xpress Minimum Essential Coverage plans come in three levels, costing as little as $93 a month for individuals to as much as $516 for a family. They cover preventive care — including certain cancer screenings and vaccinations — while providing limited benefits for doctor visits, lab tests and lower-cost prescription drugs.
There is little or no coverage for hospital, emergency room care and expensive prescription drugs, such as chemotherapy.
Harper said she generally recommends that her clients who sign up for an Xpress plan also buy a hospital-only policy offered by other insurers. That extra policy would pay a set amount toward in-patient care — often ranging from $1,500 to $5,000 or so a day.
Still, experts caution that hospital bills are generally much higher than those amounts. A three-day stay averages $30,000, according to the federal government’s insurance website. And hospital plans can have tougher requirements. Unlike the Xpress programs, which don’t reject applicants who have preexisting medical conditions, most hospital-only plans often do. Harper says she personally was rejected for one.
“I haven’t been in the hospital for 40 years, so I’m going to roll the dice,” she said. And if she winds up in the hospital? “I’ll just pay the bill.”
About 100 brokers nationwide are selling the plans, and interest “is picking up quick,” said Edward Pettola, co-owner and founder of Xpress, which for years has sold programs that offer discounts on dental, vision and prescription services.
Caveat Emptor
Experts question whether the plans exempt policyholders from the ACA’s tax penalty for not having “qualified” coverage, defined as a policy from an employer, a government program or a licensed product purchased on the individual market.
The penalty for tax year 2017 is the greater of a flat fee or a percentage of income. The annual total could range from as little as $695 for an individual to as much as $3,264 for a family.
Trump issued an executive order in October designed to loosen insurance restrictions on lower-cost, alternative forms of coverage, but the administration has not signaled its view on what would be deemed qualified coverage.
Responding to questions from KHN, officials from Apex and Xpress said their plans are designed to be affordable, not to mimic ACA health plans.
“If that is what we are expected to do, just deliver what every Marketplace plan or carriers do, provide a Bronze, Silver Plan, etc. it would not solve the problem in addressing a benefit plan that is affordable,” the companies said in a joint email on Nov. 14. “Individuals are not required to have an insurance plan, but a plan that meets minimum essential coverage, the required preventive care services.”
Bemoras, in a separate interview, said his company has been selling a version of the plan to employers since 2015.
“As we see the political environment moving and wavering and not understanding what needs to be done, the individual market became extremely attractive to us,” Bemoras said.
Still, experts who reviewed the plans for KHN said policies sold to individuals must cover 10 broad categories of health care to qualify as ACA-compliant, including hospitalization and emergency room care, and cannot set annual or lifetime limits.
The Xpress/Apex programs do set limits, paying zero to $2,500 annually toward hospital care. Doctor visits are covered for a $20 copayment, but coverage is limited to three per year. Lab tests are limited to five services annually. To get those prices, patients have to use a physician or facility in the PHCS network, which says it has 900,000 providers nationwide. Low-cost generics are covered for as little as a $1 copay, but the amount patients pay rises sharply for more expensive drugs.
“I’m very skeptical,” said attorney Alden J. Bianchi of Mintz Levin, who advises firms on employee benefits. “That would be hard [to do] because in the individual market, you have to cover all the essential health benefits.”
The details can be confusing, partly because federal law allows group health plans — generally those offered by large employers — to provide workers with self-funded, minimal coverage plans like those offered by Apex, Bianchi said.
Apex’s Shull said in a recent email that the firm simply wants to offer coverage to people who otherwise could not afford an ACA plan.
“There will be states that want to halt this. Why, I do not understand,” he wrote. “Would an individual be better off going without anything? If they need prescriptions, lab or imaging services subject to a small copay, would you want to be the one to deny them?”
Some consumers might find the price attractive, but also find themselves vulnerable to unexpected costs, including the tax liability of not having ACA-compliant coverage.
Harper, the broker who signed up for one of the plans, remains confident: “As long as Xpress satisfies the [mandate], which I’m told it does, my clients are in good hands. Even if it doesn’t, I don’t think it’s a big deal. You are saving that [the tax penalty amount] a month.”
https://www.healthcaredive.com/news/skyrocketing-out-of-pocket-spending-outpaces-wage-growth/506734/
KFF researchers reviewed health benefit claims from the Truven MarketScan Commercial Claims and Encounters Database to calculate the average that members pay for deductibles, copayments and coinsurance. What they found should not surprise anyone in healthcare or with employer-based health insurance — deductibles and overall out-of-pocket health costs are rising.
The organization found patient cost-sharing “rose substantially faster than payments for care by health plans as insurance coverage became a little less generous” between 2005 and 2015.
Deductibles went from accounting for less than 25% of cost-sharing payments in 2005 to almost half in 2015. The average payments toward deductibles rose 229% from $117 to $386 and the average payments toward coinsurance increased 89% from $134 to $253 in that period.
On the plus side, copayments fell by 36% from $218 to $139 as payers and employers have moved more costs to healthcare utilization.
Overall, patient-cost sharing increased by 66% from an average of $469 in 2005 to $778 in 2015. Average payments by health plans also increased 56% from $2,932 to $4,563.
While out-of-pocket health costs have skyrocketed, wages in the same period increased by 31%.
The KFF study comes on the heels of a JPMorgan Chase Institute report that found Americans are struggling with out-of-pocket costs. In many cases, JPMorgan Chase Institute found that people are delaying healthcare payments until they get “liquid assets.” In fact, healthcare payments spike in March and April when Americans get tax refunds.
In another recent study on the topic, HealthFirst Financial Patient Survey said more than 40% of respondents are “very concerned” or “concerned” about whether they could pay out-of-medical bills over the next two years. More than half said they are worried that they might not be able to afford a $1,000 bill, 35% were concerned about a $500 bill and 16% said they’re worried about paying a bill less than $250.
Those amounts are usually well below health plan deductibles. The Kaiser Family Foundation/Health Research & Educational Trust 2017 Employer Health Benefits Survey recently found that health plan deductibles often exceed $3,000.
That could be a problem not just for those individuals. Providers and hospitals are already struggling with sagging reimbursements and payer cost-saving measures and policies. More bad debt would only make matters worse.
Increases in cost-sharing payments continue to outpace wage growth
Rising cost-sharing for people with health insurance has drawn a good deal of public attention in recent years. For example, the average deductible for people with employer-provided health coverage rose from $303 to $1,505 between 2006 and 2017.
While we can get a sense of employees’ potential exposure to out-of-pocket costs by looking at trends in deductibles, many employees will never reach their deductibles and other employees may have costs that far exceed their deductibles. In addition to deductible payments, some employees also have copayments (set dollar amounts for a given service) or coinsurance payments (a percentage of the allowed amount for the service). To look at what workers and their families actually spend out-of-pocket for services covered by their employer-sponsored plan, we analyzed a sample of health benefit claims from the Truven MarketScan Commercial Claims and Encounters Database to calculate the average amounts paid toward deductibles, copayments and coinsurance.
We find that, between 2005 and 2015, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell. As can be seen in the chart below, over this time period, patient cost-sharing rose substantially faster than payments for care by health plans as insurance coverage became a little less generous.
The MarketScan claims database contains information about health benefit claims and encounters for several million individuals each year provided by large employers. The advantage of using claims information to look at out-of-pocket spending is that we can look beyond the plan provisions and focus on actual payment liabilities incurred by enrollees. A limitation of these data is that they reflect cost sharing incurred under the benefit plan and do not include balance-billing payments that beneficiaries may make to health care providers for out-of-network services or out-of-pocket payments for non-covered services. We use a sample of between 933,000 and 14.8 million enrollees per year to analyze the change from 2005 to 2015 in average health costs for covered benefits overall, the average amount paid by health benefit plans, and the average amounts attributable to deductibles, copayments, and coinsurance. The analysis of costs for each year was limited to enrollees with more than six months of coverage during that year.
From 2005 to 2015, the average payments by enrollees towards deductibles rose 229% from $117 to $386, and the average payments towards coinsurance rose 89%, from $134 to $253, while average payments for copays fell by 36%, from $218 to $139. Overall, patient cost-sharing rose by 66%, from an average of $469 in 2005 to $778 in 2015. During that period, average payments by health plans rose 56%, from $2,932 to $4,563. This reflects a modest decline in the average generosity of insurance – large employer plans covered 86.2% of covered medical expenses on average in 2005, decreasing to 85.4% in 2015. Wages, meanwhile, rose by 31% from 2005 to 2015.
Individuals in the top 15 percent of health spenders (who together account for 75.1% of total health benefit costs for the sample), had substantially higher out-of-pocket costs, averaging $2,766 in 2015, including $1,302 in coinsurance payments, $1,006 in deductible spending, and $458 in copays. The growth in cost-sharing for this group was similar to the sample overall. As of 2015, 6.5% of all enrollees had deductible payments that exceeded $1,500 and 8.4% had overall cost-sharing payments that exceeded $2,500.
The relatively high growth in payments toward deductibles is evident in the changes over time in the distribution of cost sharing payments: deductibles accounted for 25% of cost sharing payments in 2005, rising to 50% in 2015. Conversely, copayments accounted for nearly half (46%) of cost sharing payments in 2005, falling to 18% in 2015. The increase in coinsurance over the period from 29% of total employee cost-sharing in 2005 to 33% in 2015 may reflect the strong growth over the period in plans that qualify a person to establish a health savings account; these plans are more likely to have coinsurance than copayments for physician services. Patients are more sensitive to the actual price of health care with deductibles and coinsurance than they are with copays, which are flat dollar amounts. The other difference between a copay and a deductible is that copays may add up over time, while a deductible may need to be met at once, causing affordability challenges.
While average payments towards deductibles are still relatively low in the context of total household budgets, they have increased quite rapidly. Deductibles are the most visible element of an insurance plan to patients, which may help explain why consumers continue to show concern about their out-of-pocket costs for care. Although health insurance coverage continues to pay a large share of the cost of covered benefits, patients in large employer plans are paying a greater share of their medical expenses out-of-pocket. And, while health care spending has been growing at fairly modest rates in recent years, the growth in out-of-pocket costs comes at a time when wages have been largely stagnant.
From a healthcare consumer perspective, it increasingly strikes one that the healthcare insurance market is a story of haves and have-nots.
The haves include those that work for companies of a certain size, at which the companies can access insurance at very expensive but somewhat rationalized costs (think $16,000 to $20,000 per family per year, with employees contributing roughly $5,500), people on Medicare, and — crazily enough — people on Medicaid. (Again, the concept of a “have” here solely relates to the availability of healthcare coverage. It is by no means meant to understate the challenge of being in such poverty to be eligible for Medicaid.)
The have-nots include a vast number of people trying to buy insurance directly from insurance companies. Here, one increasingly hears that whether one is rich or poor, the costs are horrendous. Family costs for PPO plans seem to fall in the $20,000 to $25,000 range for many families, and even higher for those with preexisting conditions.
From a provider perspective, Medicare is a mixed bag depending on the type of provider. From a hospital’s perspective, it seems to be fine overall. From a physician’s perspective, many seem to find it woefully inadequate.
One of the great challenges of the ACA is it set up an additional healthcare system of subsidies around insurance markets, mandates and so forth. It added complexity and costs, but also helped provide an additional basket of coverage for a good deal of uninsured Americans.
Regardless of political perspectives, rather than building another healthcare finance system, it seems that a simple approach would be to build on an existing system that, while imperfect, seems to work fairly well.
As an ardent capitalist at heart, the idea over the years of expanding a government program of any sort, including Medicare, has always led me to a negative conclusion. I.e., would it cause the kind of regression in our healthcare system that exists in systems in England or Canada, where care is famously inadequate or requires waiting months for certain types of care?
In contrast, at some point, does the cost of healthcare for those who don’t work for a large company and aren’t eligible for Medicare or Medicaid make the system so expensive that there is good reason to offer a Medicare option for such people? This demographic makes up a large part of the population, and it seems that the private insurance market is offering them only very expensive choices for health plans.
Much of my sense of the cost of private healthcare insurance comes anecdotally — from listening to diverse family and extended family around the Thanksgiving table, for instance. That stated, I do sense the cost of insurance for a family has moved from quite expensive to extremely and back-breakingly expensive. Sadly, I’m losing confidence that the core free market can fix it.
https://www.healthaffairs.org/do/10.1377/hblog20171117.748105/full/
Late in the day of November 17, 2017, the Congressional Budget Office released a letter it had sent to Senator Ron Wyden, ranking member of the Senate Finance Committee, on the Distributional Effects of Changes in Spending Under the Tax Cuts and Jobs Act as of November 15, 2017 as they are affected by repeal of the Affordable Care Act’s Individual Responsibility Provision. The letter updated the analysis the JCT had released on November 15 of the distributional effects of the Tax Act that had focused solely on the effects of the legislation on revenues and refundable tax credits. The update also addressed changes the repeal of the mandate would cause in other federal expenditures, including cuts in Medicaid, cost-sharing reductions (which CBO sees as mandatory spending and thus includes in its analysis), and Basic Health Program spending, as well as increases in Medicare disproportionate share hospital payments.
The analysis concludes that under the Tax Bill, federal spending allocated to people with incomes below $50,000 a year would be lower than it would otherwise have been over the next decade. For example, CBO projects federal spending for people with incomes under $10,000 will be $9.7 billion less in 2027 than it otherwise would have been, spending on people with incomes from $10,000 to $20,000 will be $9.8 billion less; spending on people with incomes from $20,000 to $30,000 will be $8.7 billion less, spending on people with incomes from $30,000 to $40,000 will $3 billion less; and spending on people with incomes from $40,000 to $50,000 will be $1.2 billion less. The CBO calculated these figures by calculating the number of people who are projected to drop Medicaid enrollment in each income category and their average Medicaid cost considering age, income, disability status, and whether they gained coverage under the ACA.
More controversially, the CBO determined that individuals with incomes above $50,000 would benefit from the repeal. People with incomes between $100,000 and $200,000 would receive $1.7 billion more and people with incomes over $1 million would receive $440 million more. These increases are due to the increased expenditures on Medicare that will result from the bill, half of which the CBO distributed evenly across the population and half of which it allocated in proportion to each tax filing unit’s share of total income. As the increased Medicare disproportionate share payments are in fact paid directly to providers to cover their costs for serving the uninsured, who will predominantly be low-income, this seems to be an odd way to allocate these expenditures, although it is apparently standard CBO cost allocation practice, and ensuring that hospitals are not overwhelmed by bad debt does benefit people from all income categories.
The CBO specifies that it only considered the cost of the spending or spending reduction to the government, not the value placed on that spending by the recipients of the coverage it would purchase. A person who fails to enroll in Medicaid because the mandate is dropped is unlikely to value it at its full cost. Moreover, and importantly, the CBO did not take into account the cost of the mandate repeal to those who will feel it most acutely—individuals who are purchasing coverage in the individual market without subsidies who will face much higher premiums if the mandate is repealed.
The CBO also failed to consider the medical costs that will be incurred by individuals who drop health insurance coverage or the costs to society generally of a dramatic increase in the number of the uninsured.
On November 16, 2017, the Senate Finance Committee approved by a party-line 14-to-12 vote a tax cut bill that will now be sent to the full Senate. The bill includes a repeal of the penalty attached to the Affordable Care Act (ACA)’s individual responsibility provision. This provision requires individuals who do not qualify for an exemption to obtain minimum essential coverage or pay the penalty.
The repeal of the individual mandate was included in the tax bill for two reasons. First, the Joint Committee on Taxation (JCT) scored the repeal as reducing the deficit by $318 billion over ten years. This repeal would provide enough savings, including continuing savings in years beyond 2027, to allow Republicans to permanently reduce the corporate tax rate without increasing the deficit by more than $1.5 trillion or otherwise violating budget reconciliation requirements. Second, it would allow Republicans to get rid of the least popular provision of the ACA, making up in part for their failing to repeal the ACA despite a summer of efforts.
The savings that will supposedly result from the repeal of the individual mandate come entirely from individuals losing health coverage which the federal government would otherwise help finance. A cost estimate released by the Congressional Budget Office (CBO) on November 8, 2017 projected that repeal of the mandate would cause 13 million individuals to lose coverage by 2017, including five million individual market enrollees, five million Medicaid recipients, and two to 3 million individuals with employer coverage.
The CBO estimated that this loss of coverage would result in reductions over ten years of $185 billion in premium tax credits and $179 billion in Medicaid expenditures and a change in other revenues and outlays of about $62 billion, primarily attributable to increased taxes imposed on people who would lose employer coverage. (The increases would be offset by $43 billion in lost individual mandate penalty payments and a $44 billion increase in Medicare disproportionate share hospital payments to hospitals that bore the burden of caring for more uninsured patients.)
The total reduction in the federal deficit, in the opinion of the CBO, would be $338 billion over ten years. (The difference between the $318 billion in savings in the JCT tax bill score and the $338 billion in the earlier CBO/JCT individual mandate repeal cost estimate is presumably due to the fact that the Finance bill would only repeal the mandate penalty, not the mandate itself, and some individuals would presumably continue to comply with the mandate even without the penalty because it is legally required.) The JCT also projects that the repeal of the mandate will effectively result in a tax increase for individuals with incomes below $30,000 a year because of the loss of tax credits that will accompany the loss of coverage, further tipping the benefits of the tax cut bill toward the wealthy.
At first glance, the estimate that 13 million would lose coverage from the repeal of the mandate, including five million who would give up essentially free Medicaid, seems improbable. Moreover, supporters of the tax bill contend that no one would be forced to give up coverage—coverage losses would all be voluntary. And, the argument continues, most of the people who are now paying the mandate penalty earn less than $50,000 a year, so repeal of the mandate will in fact be beneficial to lower-income individuals.
In fact, the CBO’s estimates of coverage losses (and budget savings) may be too high. The November 8 CBO estimates were lower than earlier estimates, and the CBO admits that it is continuing to evaluate is methodology for estimating the effect of the individual mandate. There is substantial confusion regarding the mandate requirement. A fifth of the uninsured, according to a recent poll, believe that the individual market is no longer in effect while another fifth do not know whether it is or not. Compliance with the mandate may already be slipping—the Treasury Inspector General reported in April that filings including penalty payments were as of March 31 down by a third from 2015. Part of the potential effect of repeal is already being felt.
Although the mandate repeal would not go into effect until 2019, media coverage will surely cause even further confusion and even more people to drop coverage, likely dampening enrollment for 2018 in the open enrollment period currently underway.
S&P Global released a report on November 16 estimating that only three to five million individuals would lose coverage from the mandate repeal. Coverage losses of this magnitude, however, would only result in savings of $50 to $80 billion over the ten-year budget window, meaning the tax bill would add another $240 to $270 billion to the deficit and put it in violation of the budget reconciliation rules.
Whatever the level of loss of coverage under a mandate repeal, it is reasonable to believe that it would be extensive. The CBO estimated that repeal of the mandate would drive up premiums in the individual market by 10 percent. Without the mandate, healthy individuals would drop out, pushing up premiums for those remaining in the market. Unlike the increases caused by the termination of cost-sharing reduction payments, this increase would likely be loaded onto premiums for plans of all metal levels and onto premiums for enrollees across the individual market, including off-exchange enrollees. Moreover, repeal of the mandate would likely cause another round of insurer withdrawals from the individual market as insurers concluded that the market was just too risky. Insurers left as the lone participant in particular markets without competition to drive down premiums would likely raise their premiums well above 10 percent.
The biggest losers from a mandate repeal would be individuals who earn more than 400 percent of the federal poverty level and thus bear the full cost of coverage themselves. These are the farmers, ranchers, and self-employed small business people who have traditionally bought coverage in the individual market. They are also include gig-economy workers and entrepreneurs who have been liberated by the ACA from dead-end jobs with health benefits to pursue their dreams. Their increased premiums might well offset any tax cut they receive under the bill.
If members of these groups are healthy, they might be able to find cheap coverage through short-term policies which the Trump Administration has promised to allow to last longer than the current three month limit and to be renewable. But those policies will not cover individuals with preexisting conditions. And if healthy individuals are allowed to purchase full-year “short-term” coverage without having to pay an individual mandate penalty, even more healthy people will leave the individual market, driving premiums up even higher as the individual market becomes a high risk pool for individuals not eligible for premium tax credits. As premiums increased, so would premium tax credits, driving up the cost for the federal government.
The CBO estimate that five million will lose Medicaid coverage seems questionable, as Medicaid coverage is essentially free for most beneficiaries. But, particularly in Medicaid expansion states, there is a thin line between individual market and Medicaid eligibility, and many people who apply for individual market coverage find out that they are in fact eligible for Medicaid. Without the mandate, fewer are likely to apply at all. Moreover, Medicaid does not have open enrolment periods—people can literally apply for Medicaid in the emergency room, and many do. Without the mandate many will likely forgo the hassle of applying (or more likely reapplying) for Medicaid and only get covered when they need expensive hospital care. But they will thereby forgo preventive and primary care that could have obviated an emergency room visit or hospitalization.
Finally, in many families, parents are insured in the individual market but children are on Medicaid or CHIP. Without the mandate, the parents may forgo coverage, causing the children to lose coverage as well—and with it access to preventive and primary care.
Even if these coverage losses are “voluntary,” they will affect many who continue to want coverage. As already noted, as healthy people leave insurance markets, costs will go up for those who remain behind. Some of these will be people who really want, indeed need, coverage but will no longer find it affordable, and who will thus involuntarily lose coverage. Indeed, this effect may extend beyond the individual market. As healthy individuals drop employer coverage, costs may go up for those employees left behind.
Moreover, the voluntarily uninsured will inevitably have auto accidents or heart attacks or find out that they have cancer. Many will end up receiving uncompensated care, undermining the financial stability of health care providers saddled with ever higher bad debt, and driving up the cost of care for the rest of us.
Republican repeal bills offered earlier this year included other approaches to encouraging continuous enrollment—imposing health status underwriting or late enrollment penalties on those who failed to maintain continuous coverage, for example. The tax bill includes no such alternatives, nor could it. It may be possible that states could step into the gap. Massachusetts, for example, had an individual mandate penalty even before the ACA; it was the model for the ACA. The District of Columbia Exchange Board has recommended that D.C. impose its own individual mandate tax if the federal mandate ceases to be enforced. Perhaps other states will step into the gap. But I am not counting on many doing so.
The individual mandate is there for a reason. It is intended to drive healthy as well as unhealthy individuals into the individual market and thus make coverage of people with preexisting conditions possible. It has been a significant contributor to the record reductions in the number of the uninsured brought about by the ACA. Without the individual mandate, the number of the uninsured would once again rise. Maybe not by 13 million, but nonetheless significantly.
https://www.healthaffairs.org/do/10.1377/hblog20171116.24714/full/
Is a deal on health care possible? Conventional wisdom says no. “Repeal and Replace” is dead, and Republicans have moved on. So have many Democrats, toward pursuit of a single-payer plan that’s going nowhere on Capitol Hill but energizes the party’s core. Last month, President Donald Trump said he’ll “dismantle” the Affordable Care Act (ACA) on his own—and backed this up with executive orders that risk the stability of the insurance exchanges.
Democrats are angry that Trump and congressional Republicans want to repeal the ACA and roll back its expansion of health insurance coverage. Republicans are angry that Democrats pushed “Obamacare” through Congress on a party-line basis, and they see the ACA as big government running amok. Both parties are positioning themselves for primaries, and neither shows much interest in the risky work of compromise.
We’re alarmed. One of us is a Cato Institute-friendly “free-market”eer who wrote a book arguing (tongue in cheek) that Medicare is the work of the Devil. The other helped to develop President Barack Obama’s 2008 campaign health plan and believes that failure to ensure everyone’s access to health care is an assault on human decency. But we’ve come together because we believe that failure to resolve the present impasse will have hugely destructive consequences for millions of Americans’ access to health care—and for our national confidence in our political system’s capacity to function.
President Trump has cut off cost-sharing reduction subsidies to insurers and issued a directive to allow coverage options less comprehensive than the ACA requires—measures that threaten to unravel the individual and small-group markets by incentivizing younger and healthier people to exit. Meanwhile, the uncertainty that besets federal funding under the ACA for Medicaid expansion poses huge fiscal risks for states, as does Congress’s failure, so far, to renew funding for the Children’s Health Insurance Program (CHIP). And over the longer term, soaring private and public spending on medical services that deliver doubtful value erodes US productivity and well-being.
We think a bipartisan “grand bargain” to stabilize the US health care system is feasible—if key decision makers can move beyond showmanship and spite. To this end, we outline a deal that: honors but balances the competing values at stake, steadies both market and public mechanisms of medical care financing, and puts the nation on a path toward sustainability in health spending.
Our grand bargain builds on federalism. Vastly different values, priorities, and interests stand in the way of nationwide health policy uniformity. Allowing states to sort out controversial matters within broader limits than the ACA now imposes would permit creative policy alternatives to unfold and encourage local buy-in. We needn’t and shouldn’t mandate definitive answers to bitterly contested questions that can be reasonably negotiated at the state or local level. Instead, we should open political and market pathways for the emergence of answers to these questions over time.
Moving to this long game will require all sides to pass on their pursuit of a quick political win. Doing so is the key to moving from cycles of backlash and volatility to a system that builds confidence and delivers high-quality, compassionate health care to all.
With these basic principles in mind, we propose the following seven steps:
Republicans should end their campaign to roll back the ACA’s Medicaid expansion, and Democrats should stand down on their quest for single payer. Both pursuits inspire true believers but will go nowhere on Capitol Hill for the imaginable future.
Give states more flexibility to design their Medicaid programs and to govern their insurance exchanges. One approach would be to simply allow states complete flexibility to design their own coverage rules. Alternatively, we could give states more flexibility but ensure, via federal law, that Medicaid and plans sold on the exchanges provide affordable access to effective preventive, diagnostic, and therapeutic services. States could also be allowed but not required to offer a public option through their exchanges. Instead of an all-or-none answer to the public plan question, the nation would have a framework for market-driven, state-by-state resolution. Similarly, states should be allowed to decide whether to prohibit, permit, or require enrollment of Medicaid beneficiaries in private plans. Finally, when it comes to care that serves culturally contested purposes—including, but not limited to, gender reassignment or confirmation and late termination of pregnancies for nontherapeutic reasons—states should be given autonomy to go their own ways. More federalism will achieve greater stability than would temporary nationwide imposition of one or another approach by whichever party happens to hold the electoral upper hand.
An expanded role for tax-protected health savings should have bipartisan appeal. We propose that every lawful US resident be auto-enrolled in a health savings account (HSA), funded through a refundable tax credit, scaled to income and family size. People could opt out but would lose this credit if they did. Few would do so, enabling HSAs to become a means for pursuing both market discipline and social equity.
Sacrilege, you’re surely thinking, if you’re a Democrat who’s spent seven-plus years defending the mandate, the ACA’s most disliked element. But the mandate isn’t needed to keep healthy people in community-rated risk pools—it’s the intensity of the incentives, whether framed as penalties or subsidies, that matters. Even the mandate’s most outspoken economist-defender, Jonathan Gruber, concedes that high-enough subsidies for the purchase of insurance can substitute for it.
Such subsidies could be supplied in conservative-friendly fashion by allowing all who buy coverage on the exchanges to put HSA funds (including the tax credit we urge) toward their premiums. Sign-up for coverage could also be made more user-friendly through auto-enrollment, subject to opt-out, in “silver” plans (for tax filers who aren’t otherwise covered and aren’t Medicaid eligible). A more robust approach might condition the refundable HSA tax credit on tax filers’ purchasing insurance (or not opting out of auto-enrollment).
There is bipartisan support for restoring the ACA’s cost-sharing reduction subsidies and extending CHIP. Although annual appropriations are the norm, Congress should guarantee funding for the cost-sharing reductions for a two-year period, with automatic renewal for an additional two years if per capita subsidies rise by no more than the Consumer Price Index (CPI) during the prior two years. By so doing, Congress can reaffirm its authority over appropriations while helping to stabilize markets for individual coverage. Likewise, Congress should renew CHIP’s funding for several years—we urge three as a compromise—to both stabilize state budgets and secure health care for the millions of children who depend on this program.
A long-term effort to contain spending growth is essential for US fiscal stability and consumer well-being. The ACA created a framework for doing this. The Independent Payment Advisory Board (IPAB) can limit Medicare spending, subject to congressional veto, if growth exceeds target rates. And the 40 percent “Cadillac tax” on high-cost private health plans will cover a rising share of the private market as medical costs increase. Together, these policies have the potential to contain clinical spending by capping demand. But there’s bipartisan opposition to both. The IPAB, which hasn’t yet been established, and the Cadillac tax, now delayed until 2020, are fiercely opposed by stakeholders with lots to lose, and they’re at high risk of repeal.
A grand bargain should follow through on both of these strategies, plus add similar restraints on Medicaid spending and on the amounts spent to subsidize coverage through the exchanges. Most other nations employ global budgeting to control health spending. For reasons of federalism, public philosophy, and market structure, global budgeting isn’t an option for the US. But a coordinated scheme of restraint, based on the best available behavioral and economic modeling, could apply similar braking power to our entire health economy. There’s plenty of room for argument about design details (that is, should per capita growth targets be based on the CPI? The CPI plus 1 percent?) and methods of restraint (that is, the IPAB approach? Spending caps for public programs? The Cadillac tax versus caps on tax deductibility of insurance premiums?). Continued bipartisan evasion will only make the problem worse.
Much more must be done to use health care resources wisely as constraints tighten. Tying financial rewards closely to clinical value via paymentpractices, market exclusivity policies, and other incentives will be critical—and will require the clearing of legal and regulatory obstacles. Voluntary action must also play a role: The grand bargain we’ve sketched here creates myriad opportunities for providers, patients, and insurers to gain by insisting on value from a sector of the economy that too often fails to deliver it.
To be sure, politics could foil all efforts to forge compromise. But there is a way forward. Our proposals achieve much that is important to both the ACA’s fiercest critics and staunchest defenders. They work in concert to address the political and market crises that immediately threaten our health care system, while laying the foundation for a long-term approach to control medical spending’s unsustainable growth.
Reproduced from Kaiser Family Foundation analysis of the 2016 Survey of Consumer Finance; Note: Liquid assets include the sum of checking and saving accounts, money market accounts, certificates of deposit, savings bonds, non-retirement mutual funds, stocks and bonds; Chart: Axios Visuals
A lot of low-income families can’t afford even a moderate deductible, yet deductibles continue to rise in almost all forms of insurance, Kaiser Family Foundation president Drew Altman writes in his latest Axios column.
Why it matters: High deductibles are everywhere, and they’re only getting higher. Many ACA plans have relatively big deductibles and Republicans’ alternatives would push them higher. They’ve been getting bigger and bigger in employer plans, too.
The mandate to buy health insurance is the broccoli of Obamacare—the part you have to accept if you want the goodies, like affordable coverage of people with costly pre-existing conditions. Now Senate Republicans are saying you don’t have to eat your broccoli anymore. They eliminate the penalty for lack of coverage in their version of the $1.5 trillion tax cut bill, which they aim to vote on after Thanksgiving.
Could removing the penalty, which effectively kills the individual mandate, possibly make sense? Health-care economists describe the mandate as a necessary evil. Without it, they say, healthy people will roll the dice and choose to go uncovered, leaving insurance pools made up of sicker, older people who are costlier to cover. But the impact of the requirement is regressive. Well-off families generally get health insurance through their employers, so those who pay the tax for noncoverage tend to be poorer, some working two or three jobs to make ends meet.
For Senate Republicans, killing the individual mandate is a beautiful twofer. First, it’s a way to limit the red ink from their tax package. The Joint Committee on Taxation estimates ending the mandate would save $318 billion over 10 years, because the people who dropped coverage wouldn’t get subsidies. Savings would continue after 2027. That’s crucial because under the Byrd rule, a measure can pass the Senate with a simple majority only if it doesn’t add to deficits beyond 10 years. Second, gutting the mandate would partially fulfill Republicans’ long-standing objective of getting rid of Obamacare entirely.
The downside for Republicans is that the repeal gambit has breathed new life into the pro-Obamacare coalition, which argues that Republicans are financing tax cuts for the rich by reducing the number of people with health insurance. “Adding ACA repeal to the corporate tax giveaway has fanned the flames of resistance into a roaring inferno,” says Ben Wikler, the Washington director of MoveOn.org, a liberal activist group. The Congressional Budget Office said on Nov. 8 that repealing the mandate would increase the number of uninsured Americans by 13 million and raise premiums by 10 percent “in most years” of the next decade.
Within hours of Senate Republicans’ announcing their intentions to kill the mandate, a coalition of trade groups for doctors, hospitals, and insurers urged them not to, warning that doing so would raise premiums. In Virginia, a CNN exit poll showed health care was voters’ top issue by more than 2 to 1. Democrat Ralph Northam won voters most concerned about health care 77 percent to 23 percent en route to his decisive election as their next governor.
This leaves Republicans in an awkward spot. While they crave the savings that come from repealing the mandate, they don’t love the reason why—namely, millions fewer people would be insured. That’s something they’ve always insisted wouldn’t happen. As recently as July, two White House officials wrote a Washington Post op-ed ridiculing the notion that millions of people “value their insurance so little that they will simply drop coverage next year following the repeal of the individual and employer mandates.”
Republicans are trying to have it both ways. Utah Senator Orrin Hatch, chairman of the Senate Finance Committee, said that dropping the mandate wouldn’t cut Medicaid. The CBO predicts that of the 13 million people who drop coverage, 5 million will be current Medicaid recipients. Senator Claire McCaskill, a Missouri Democrat, balked. “Where do you think the $300 billion is coming from?” she asked Hatch. “Is there a fairy that’s dropping it on the Senate?”
It’s not just the Republicans who have a complicated relationship with the mandate. Democrats need it to make Obamacare hang together, yet they know it’s unpopular and regressive. Seventy-nine percent of the 6.7 million households that paid the mandate tax for 2015 had incomes under $50,000, and 37 percent made below $25,000, according to Internal Revenue Service data. Republicans tweak Obamacare’s defenders by arguing that if financially hard-pressed families want to drop their policies—and lose the government subsidies that go with them—that’s their right.
Democrats say the mandate gets people to do something that’s in their best interest and keeps emergency rooms from being swamped by uninsured sick people. (Republicans used to make this argument.) But the mandate is also a way to get healthy families to subsidize less-healthy ones, rather than just cover their own risks. That’s what makes it unpopular. “That’s sort of the trap,” says Christopher Pope, a senior fellow at the conservative Manhattan Institute.
Also, the mandate probably isn’t as effective as Democrats have argued. In its Nov. 8 report, the CBO said that for its next estimate, it’s changing its model for how people behave. While results won’t be ready until after Congress wants to finish the tax bill, it said, the effects “would probably be smaller than the numbers reported in this document.” In other words, it won’t reduce coverage as much—or save as much money. It could be that Obamacare needs to rely less on the stick (mandates) and more on the carrot (subsidies that hold down the cost of premiums).
A new CBO estimate that played down the impact of mandate repeal could work out quite nicely for the Republicans. They could point to the Joint Committee on Taxation’s current high estimate for savings to pay for the tax cut, and then next year’s lower estimate of coverage losses from the CBO to claim that eliminating the mandate wasn’t so harmful after all. “Politics is a funny business,” says Pope. “You use whatever weapon you can grab hold of.”
HENRY KOTULA 