Senate GOP Tax Cut Bill Heads To Full Senate With Individual Mandate Repeal

Posted on November 27, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, CBO Bill Scoring, Cost Sharing Reduction Payments, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, Individual Mandate, Medicaid, Medicaid Cuts, Medicare Cuts, Medicare DSH, Short Term Health Insurance Coverage, Tax Policy, Undersinsured, Uninsured • Leave a comment

https://www.healthaffairs.org/do/10.1377/hblog20171117.748105/full/

November 19 Update: Distributional Effects Of Individual Mandate Repeal

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.

Original Post

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.

A “Twofer” For Republicans: Additional Continuing Revenue And Elimination Of The ACA’s Least Popular Provision

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.

Behind The Coverage Loss Estimate

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.

Who Would Have The Most To Lose From A Mandate Repeal?

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.

The Involuntary Impact From ‘Voluntary’ Coverage Losses

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.

Many families can’t afford even moderate deductibles

Posted on November 24, 2017 by henrykotula • Posted in Uncategorized • Tagged Chronic Care, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Insurance Individual Market, Health Policy, High Deductible Health Plans, High Deductibles, High Premiums, High Risk Pools, Liquid Assets, Out of Pocket Expenses, Patient's Liquid Assets, Preexisting Conditions • Leave a comment

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.

Roughly 40% of all non-elderly households don’t have enough liquid assets to cover a high deductible ($3,000 for an individual or $6,000 for a family).
Among families whose income makes them eligible for the ACA’s premium subsidies, 60% don’t have enough liquid assets to cover a high deductible and 44% couldn’t cover the deductible for a mid-range plan ($1,500 for an individual or $3,000 for a family).

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.

“For many families, even if they have insurance, any significant illness could wipe out all their savings, making impossible to fix a broken car to get to work, or pay for school, or make a rent or mortgage payment,” Altman says.

The GOP’s Strategy for Killing Obamacare Now Looks Like This

Posted on November 22, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, Burden of Uncompensated Care, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Insurance Individual Market, Health Policy, High Risk Pools, Individual Mandate, Out of Pocket Expenses, Preexisting Conditions, Uncompensated Care, Underinsured, Uninsured • Leave a comment

https://www.bloomberg.com/news/articles/2017-11-22/the-gop-s-strategy-for-killing-obamacare-now-looks-like-this

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.”

BOTTOM LINE – By dropping Obamacare’s individual mandate, Senate Republicans can raise billions to pay for their tax cuts—and undercut a key part of the health-care law.

Repealing the individual mandate would do substantial harm

Posted on November 22, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, Burden of Uncompensated Care, CBO Bill Scoring, Cost Shifting, Essential Health Benefits, Gap in Health Insurance Coverage, Health Insurance Coverage Adequacy, Health Insurance Individual Market, Health Policy, High Premiums, High Risk Pools, Inaccurate Beliefs About Affordability, Individual Mandate, Medicare Disproportionate Share, Out of Pocket Expenses, Overoptimistic Perceptions of Risk, Preexisting Conditions, Uncompensated Care, Underinsured, Uninsured • Leave a comment

https://www.brookings.edu/blog/up-front/2017/11/21/repealing-the-individual-mandate-would-do-substantial-harm/?utm_campaign=Brookings%20Brief&utm_source=hs_email&utm_medium=email&utm_content=58686618

he tax legislation reported by the Senate Finance Committee last week included repeal of the individual mandate, which was created by the Affordable Care Act (ACA) and requires individuals to obtain health insurance coverage or pay a penalty. The Congressional Budget Office (CBO) has estimated that this proposal would cause large reductions in insurance coverage, reaching 13 million people in the long run.

Supporters of repealing the individual mandate have argued that the resulting reductions in insurance coverage are not a cause for concern because they would be voluntary. Rigorous versions of this argument acknowledge that individuals who drop coverage would lose protection against high medical costs, find it harder to access care, and likely experience worse health outcomes, but assert that the very fact that these individuals would choose to drop insurance coverage shows that they will be better off on net. On that basis, advocates of repealing the mandate claim that its repeal would do no harm. However, this argument suffers from two serious flaws.

The first flaw in this argument is that it assumes individuals bear the full cost of their decisions about whether to obtain insurance coverage; in fact, one person’s decision to go without health insurance coverage shifts costs onto other people. Notably, CBO has estimated that the departure of healthy enrollees from the individual market spurred by repeal of the individual mandate will increase individual market premiums by 10 percent, causing some in that market to involuntarily lose coverage and causing those who remain to bear higher costs. In addition, many of those who become uninsured will end up needing health care but not be able to pay for it, imposing costs on other participants in the health care system. Because individuals who choose to become uninsured do not bear the full cost of that decision, they may choose to do so even in circumstances where the benefits of coverage—accounting for its effects on both the covered individual and the rest of society—exceed its costs.

The second flaw in this argument is that it assumes individual decisions about whether to purchase health insurance coverage reflect a fully informed, fully rational weighing of the cost and benefits. In fact, there is strong reason to believe that many individuals, particularly the healthier individuals most affected by the mandate, are likely to undervalue insurance coverage. This likely reflects a variety of well-documented psychological biases, including a tendency to place too much weight on upfront costs of obtaining coverage (including the “hassle costs” of enrolling) relative to the benefits insurance coverage would provide if the individual got sick and needed care at some point in the future. It is therefore likely that many people who would drop insurance coverage due to repeal of the individual mandate would end up worse off, even solely considering the costs and benefits to the individuals themselves.

The considerations described above mean that, in the absence of subsidies, an individual mandate, or some combination of the two, many people will decline to obtain insurance coverage despite that coverage being well worth society’s cost of providing it. Furthermore, unless the current subsidies and individual mandate penalty provide too strong an incentive to obtain coverage that results in too many people being insured—a view that appears inconsistent with the available evidence—then reductions in insurance coverage due to repealing the individual mandate would do substantial harm.

The remainder of this analysis takes a closer look at the two flaws in the argument that reductions in insurance coverage caused by repeal of the individual mandate would do no harm. The analysis then discusses why these considerations create a strong case for maintaining an individual mandate.

INDIVIDUAL DECISIONS TO DROP INSURANCE COVERAGE IMPOSE SUBSTANTIAL COSTS ON OTHER PEOPLE

As noted above, supporters of repealing the individual mandate have often argued that the resulting reductions in insurance coverage would do no harm because they are the outcome of voluntary choices. One major flaw in this argument is that one person’s decision to drop insurance coverage imposes costs on other people through a pair of mechanisms: increases in individual market premiums and increases in uncompensated care. I discuss each of these mechanisms in greater detail below.

Increases in individual market premium reduce coverage and increase others’ costs

Repealing the individual mandate would reduce the cost of being uninsured and, equivalently, increase the effective cost of purchasing insurance coverage. That increase in the effective cost of insurance coverage would, in turn, cause many people to drop coverage. Because individuals with the most significant health care needs are likely to place the highest value on maintaining insurance coverage, the people dropping insurance coverage would likely be relatively healthy, on average. In the individual market, those enrollees’ departure would raise average claims costs, requiring insurers to charge higher premiums to the people remaining in the individual market.[1]

CBO estimates that, because of this dynamic, repealing the individual mandate would increase individual market premiums by around 10 percent. Those higher premiums would push some enrollees who are not eligible for subsidies out of the individual market. Higher premiums would impose large costs on unsubsidized enrollees who remained in the ACA-compliant individual market—around 6 million people—while increasing federal costs for subsidized enrollees who remain insured.[2]

CBO’s estimates are at least qualitatively consistent with empirical evidence on the effects of the individual mandate. Perhaps the best evidence on this point comes from Massachusetts health reform. Research examining the unsubsidized portion of Massachusetts’ individual market estimated that Massachusetts’ individual mandate increased enrollment in the unsubsidized portion of its individual market by 38 percent, reducing average claims costs by 8 percent and premiums by 21 percent. Similarly, research focused on the subsidized portion of Massachusetts’ market found that the mandate appears to have been an important motivator of enrollment, particularly among healthier enrollees.

Direct evidence on the effects of the ACA’s mandate is relatively scant because it is challenging to disentangle the effect of the mandate from the effect of other policy changes implemented by the ACA. However, it is notable that the uninsured rate among people with incomes above 400 percent of the federal poverty level fell by almost one-third from 2013 to 2015. This trend is consistent with the view that the ACA’s individual mandate has increased insurance coverage since these individuals are not eligible for the ACA’s subsidies, and implementation of the ACA’s bar on varying premiums or denying coverage based on health status, taken on its own, would have been expected to actually reduce insurance coverage in this group. Because this estimate applies to only a relatively small slice of the population, it cannot easily be used to determine the total effect of the individual mandate on insurance coverage, but it does suggest that the mandate has had meaningful effects.

Repealing the individual mandate could also cause broader disruptions in the individual market for some period of time. Insurers would find it challenging to predict exactly what the individual market risk pool would look like after repeal of the mandate. Some insurers might elect to limit their individual market exposure until that uncertainty is resolved, particularly since the Trump Administration has signaled an intent to pursue other significant policy changes affecting the individual market. That uncertainty could cause some insurers to withdraw from the market, potentially leaving some enrollees without any coverage options. Alternatively, insurers could elect to raise premiums by even more than they expect to be necessary (e.g., by more than the CBO 10 percent estimate cited above) to ensure that they are protected in all scenarios, with significant costs to both individuals and the federal government. It is uncertain how widespread these types of broader disruptions would be in practice, but they are possible.

It is important to note that one person’s decision about whether to purchase individual market coverage affects the premiums faced by others because of a conscious policy choice: the decision to bar insurers from varying premiums or denying coverage based on health status. Without those regulations, individual coverage decisions would have little or no effect on the premiums charged to others. But policymakers and the public have, appropriately in my view, concluded that these regulations perform a valuable social function by ensuring that health care cost burdens are shared equitably between the healthy and the sick. Having made that decision, other aspects of public policy must take account of the fact that one person’s decision to go uninsured has consequences for the market as a whole.

Some newly uninsured individuals would need care, but be unable to pay for it

Dropping insurance coverage also allows individuals to shift a portion of the cost of the care they receive onto others in the form of uncompensated care. Even in the group of comparatively healthy individuals who elect to drop their coverage, some will get sick and need health care. Some of these individuals might be able to pay for that care out of pocket, but others—particularly those who get seriously ill—would likely be unable to pay for it. In some cases, that would cause these individuals to forgo needed care, but in other cases they would receive care without paying for it, either due to the legal requirement that hospitals provide care in emergency situations or through various other formal and informal mechanisms. (Although individuals would often still be able to access care without paying for it, they would frequently still be billed for that care, with potential downstream consequences for their ability to access credit.)

Uninsured individuals receive large quantities of uncompensated care in practice. Estimates based on the Medical Expenditure Panel Survey indicate that a non-elderly individual uninsured for the entire year received $1,700 in uncompensated care, on average, during 2013. Consistent with that fact, increases in the number of uninsured individuals increase the amount of uncompensated care. In the context of the Oregon Health Insurance Experiment, a randomized controlled trial of the effects of expanded Medicaid coverage, having Medicaid coverage was estimated to reduce the amount of uncompensated care an individual receives by almost $2,200 per year, on average. Quasi-experimental research has similarly found that increases in the number of uninsured individuals in a hospital’s local area increase the amount of uncompensated care a hospital delivers and that the expansion in insurance coverage achieved by the ACA substantially reduced hospitals’ uncompensated care burdens.

Precisely who bears the cost of uncompensated care, particularly in the long run, is not entirely clear. A portion of uncompensated care costs are borne by federal, state, and local government programs and, therefore, are ultimately borne by taxpayers. In 2013, around three-fifths of uncompensated care was financed by federal, state, and local government programs explicitly or implicitly aimed at this purpose. Increases in uncompensated care burdens are likely to lead to increases in spending on these programs. In some cases, those increases will happen automatically. For example, CBO finds that repealing the individual mandate will increase federal spending on the Medicare Disproportionate Share Hospital (DSH) program, which is intended to defray uncompensated care costs, by $44 billion over the next ten years because the formula for determining DSH payments depends on the uninsured rate. In other cases, changes may occur more indirectly, perhaps because higher uncompensated care burdens create political pressure to expand these programs (or make it harder to cut them).

The impact of uncompensated care therefore depends to a significant degree on how non-profit hospitals cope with reduced operating margins. Evidence on this point is relatively limited. However, in instances where increases in uncompensated care burdens cause providers to incur outright losses, they are likely to ultimately force facilities to close, which could reduce access to care or increase prices charged to those enrolled in private insurance by reducing competition. In instances where increases in uncompensated care burdens merely trim positive operating margins, lower margins presumably force hospitals to reduce capital investments or to reduce cross-subsidies to other activities such as medical education or research.Recent research focused on the hospital sector, which accounts around three-fifths of all uncompensated care, suggests that providers also bear a significant portion of uncompensated care costs in the form of lower operating margins. However, this does not imply that uncompensated care costs are ultimately borne by hospitals’ owners. Indeed, this research finds that reductions in operating margins in response to increases in uncompensated care occur almost exclusively among non-profit hospitals, plausibly because for-profit hospitals are adept at locating in geographic areas where the demand for uncompensated care is relatively low. (Greater distortions where providers choose to locate and what services they choose to offer may be an important cost of increased uncompensated care.)

INDIVIDUAL DECISIONS TO DROP INSURANCE COVERAGE MAY HARM THE INDIVIDUALS THEMSELVES

The argument that reductions in insurance coverage due to repeal of the individual mandate do no harm because they are voluntary has a second important flaw; specifically, this argument assumes that individual decisions about whether to obtain health insurance coverage reflect a fully informed, fully rational weighing of the costs and benefits. There is strong reason to doubt that assumption.

Economists commonly note that many people decline to take-up health even in settings where that coverage is free or nearly so. For example, analysts at the Kaiser Family Foundation (KFF) have estimated that, in 2016, there were 6.8 million people who were eligible for Medicaid or the Children’s Health Insurance Program, but not enrolled in those programs, despite the fact that these programs had negligible premiums. Similarly, for this year’s Marketplace open enrollment period, analysts at KFF estimated that among uninsured individuals eligible to purchase Marketplace coverage, around two-fifths could obtain a bronze plan for a premium of zero, but few expect all of these individuals to enroll.

This type of behavior is very challenging to explain as the outcome of a fully informed, fully rational decision-making process. The fact that individuals who do not purchase insurance coverage can shift significant costs to others, as discussed above, can help explain why some individuals value insurance at less than the cost of providing it. But these factors cannot explain why enrollees would decline to obtain coverage that is literally free to them. In principle, “hassle costs” of enrolling in coverage could explain decisions to forgo coverage in these instances, but those hassle costs would need to be implausibly large to explain a decision to forgo an offer of free insurance coverage.

Precisely why individuals decline to take up insurance coverage even in settings where it seems clearly in their interest to do so is not fully understood. This review article catalogues a wide variety of psychological biases that may play a role, but three seem particularly important in this context:

Present bias: Economists have documented that individuals generally exhibit “present bias,” meaning that they place a large weight on current costs and benefits relative to similar costs and benefits in the future. In the context of insurance coverage, this type of bias is likely to cause individuals, particularly those who are currently healthy, to place too much weight on the upfront premium and hassle costs required to enroll in health insurance relative to the benefit of having insurance coverage if they get sick at some point in the future. This may cause individuals to decline to obtain insurance coverage even when it is in their economic interest, including in instances where the premium required to enroll is literally zero.

Overweighting of small up front hassle costs appears to lead suboptimal decisions in many economic settings, but the retirement saving literature provides a particularly striking example. Simply being required to return a form to enroll in an employer’s retirement plan has been documented to sharply reduce take-up of that plan, even in circumstances where employees forgo hundreds or thousands of dollars per year in employer matching contributions by declining to participate.

Overoptimistic perceptions of risk: One core function of health insurance is to provide protection against relatively rare, but very costly, illnesses. Indeed, a large fraction of the total value of a health insurance contract is delivered in those states of the world. In 2014, around 5 percent of the population accounted for around half of total health care spending.[3] But because these events are comparatively rare, many individuals, particularly healthier individuals, may have difficulty forming accurate perceptions of the risks they face. Research on Medicare Part D has found that individuals tend to place too much weight on premiums relative to expected out-of-pocket costs when choosing plans, providing some evidence that individuals do indeed underestimate risk (although research focused on insurance products other than health insurance has concluded that individuals may sometimes overestimate risk). Like present bias, misperceptions of risk can cause hassle or premium costs to receive too much weight relative to the actual benefits of coverage.

Inaccurate beliefs about affordability: Enrollees could also have inaccurate information about the availability of coverage. Survey evidence has suggested that, as of early 2016, almost 40 percent of uninsured adults were unaware of the existence of the ACA’s Health Insurance Marketplaces. Additionally, approximately two-thirds of those who were aware of the Marketplaces had not investigated their coverage options, with most saying that they had not done so because they did not believe that they could afford coverage. Individuals’ beliefs about whether coverage is affordable may be accurate in some instances, but it is likely that they are not accurate in many other cases. Inaccurate beliefs may cause many individuals to fail to investigate their coverage options, including some who are eligible for free or very-low-cost coverage.

REDUCTIONS IN INSURANCE COVERAGE FROM REPEALING THE INDIVIDUAL MANDATE WOULD DO SUBSTANTIAL HARM

The factors identified above provide strong economic rationale for implementing some combination of subsidies and penalties to strengthen the financial incentive to obtain health insurance coverage. These policy tools can compensate for the fact that individual decisions to go without coverage do not account for the ways in which those decisions increase costs for others. Similarly, in many (though not all) instances, financial incentives can help counteract psychological biases that cause individuals to go without insurance coverage even when it is against their own economic interest.

This discussion does not, of course, speak directly to how large subsidies and penalties should be. At least in theory, it is possible to overcompensate for the factors catalogued in the preceding section by creating too large an incentive to obtain coverage and thereby causing too many people to become insured. This occurs if the cost of the additional health care individuals receive when they become insured plus the administrative costs of providing that coverage exceeds the health benefits of the additional health care and the improved protection against financial risk.

Estimating the optimal size of subsidies and penalties is beyond the scope of this analysis. However, it is notable that virtually no one in the current policy debate is arguing that the United States insures too many individuals. Furthermore, there is reason to doubt that this is an empirically relevant concern. For example, the research on Massachusetts health reform by Hackmann, Kolstad, and Kowalski that was discussed earlier used their estimates to calculate the “optimal” mandate penalty to apply to unsubsidized enrollees. They conclude that just offsetting adverse selection justifies a mandate penalty similar in size to the one included in the ACA; also accounting for either uncompensated care or imperfections in consumer decision making could justify a considerably larger penalty.

It therefore seems difficult to justify repealing the individual mandate on the grounds that current policies provide an excessive overall incentive to obtain insurance coverage. Of course, policymakers might believe that it would be preferable to swap the mandate for larger subsidies, perhaps because they believe that it is inappropriate to penalize individuals for not obtaining coverage. In principle, sufficiently large increases in subsidies could offset the reduction in insurance coverage that repealing the individual mandate would cause. But such an approach would require large increases in federal spending since it would keep insurance enrollment at its current level by providing larger subsidies to each enrolled individual. In any case, the Senate Finance Committee bill does not take this approach. Rather than increasing spending on insurance coverage programs to mitigate coverage losses, the bill uses the reduction in spending on coverage programs caused by repealing the mandate (which results from lower enrollment in those programs) to finance tax cuts.

The biggest health issue we aren’t debating

Posted on November 22, 2017 by henrykotula • Posted in Uncategorized • Tagged Cost Sharing, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, Increased Employee Cost Sharing, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.axios.com/the-biggest-health-issue-we-arent-debating-2511098849.html

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Thanksgiving is always a time to think about those in need. How about, then, a group we don’t worry about enough: the many lower and moderate income Americans who can’t cover their cost sharing if they get sick? It raises the question: How much cost sharing is too much?

The bottom line: High deductible plans, which require people to pay large amounts out of pocket before their medical bills are covered, are a good deal for some middle and upper income people. But many lower and moderate income Americans simply don’t have $1,500 to $3,000 to pay for the colonoscopy that might save their life, or a stress test that might reveal the heart disease which is the cause of their chest discomfort.

The details: The chart, drawn from a new study, tells the tale: More than four in in 10 households with private coverage and incomes between 150% and 400% of the federal poverty line do not have enough liquid assets to cover a deductible of $1,500 for single people and $3,000 for families.

That’s not a high deductible plan, but about the average in an employer-provided insurance plan.
Sixty percent couldn’t cover deductibles double those amounts, which are not uncommon, especially in the individual insurance market.
Ninety percent of insured households with incomes of 400% of poverty or more could meet a typical employer insurance deductible, but just 37% of lower income household with incomes under 150% of the poverty level could.

For many families, even if they have insurance, any significant illness could wipe out all their savings, making impossible to fix a broken car to get to work, or pay for school, or make a rent or mortgage payment.

Congress has passed no law declaring that the country will go with high deductible coverage as its main approach to health insurance. There has been no meaningful debate about its pros and cons. But as deductibles and other forms of cost sharing have inched up year by year, the nature of insurance has changed.

The people to worry about most are the ones who are least equipped to deal with that change. There may be someone who fits that bill around your Thanksgiving table.

Podcast: ‘What The Health?’ Tax Bill Or Health Bill?

Posted on November 18, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, CBO Bill Scoring, Children's Health Insurance Program (CHIP), Cost Sharing Reduction Payments, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Insurance Individual Market, Health Insurance Market Uncertainty, Health Policy, Healthcare Debate, High Premiums, High Risk Pools, Individual Mandate, Preexisting Conditions, Tax Policy, Underinsured, Uninsured • Leave a comment

https://khn.org/news/podcast-what-the-health-tax-bill-or-health-bill/?utm_campaign=KFF-2017-The-Latest&utm_source=hs_email&utm_medium=email&utm_content=58570997&_hsenc=p2ANqtz-90FnDooDrGIdtTTHP8VfZovw1vS_Y_js4RdDwCCIwslKGDgrqu1yZ6bbcLJ5AbWfyJaM2B3HhQ9fR9txLD5dY-TnO3HA&_hsmi=58570997

Republican efforts to alter the health law, left for dead in September, came roaring back to life this week as the Senate Finance Committee added a repeal of the “individual mandate” fines for not maintaining health insurance to their tax bill.

In this episode of “What the Health?” Julie Rovner of Kaiser Health News, Sarah Kliff of Vox.com, Joanne Kenen of Politico and Alice Ollstein of Talking Points Memo discuss the other health implications of the tax bill, as well as the current state of the Affordable Care Act.

Among the takeaways from this week’s podcast:

The tax bill debate proves that Republicans’ zeal to repeal the Affordable Care Act is never dead. The new congressional efforts to kill the penalties for the health law’s individual mandate could seriously wound the ACA since the mandate helps drive healthy people to buy insurance.
One of the most overlooked consequences of the tax debate is that it could trigger a substantial cut in federal spending on Medicare.
A $25,000 MRI? That’s what one family paid to go out of their plan’s network to get the hospital they wanted for the procedure for their 3-year-old. Such choices are again drawing complaints about narrow networks of doctors and hospitals available in some health plans.
Although they don’t likely say it in front of cameras, many Democrats are relieved at President Donald Trump’s choice to head the Department of Health and Human Services, former HHS official Alex Azar.
Federal officials have given 10 states and four territories extra money to keep their Children’s Health Insurance Programs running but it’s not clear what couch they found the money hidden in.
And in remembrance of Uwe Reinhardt, a reminder that he always stressed that a health care debate was about more than money — it was about real people.

Plus, for “extra credit,” the panelists recommend their favorite health stories of the week they think you should read, too.

Insurers Can Bend Out-Of-Network Rules For Patients Who Need Specific Doctors

Posted on November 16, 2017 by henrykotula • Posted in Uncategorized • Tagged CBO Bill Scoring, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Risk Pools, Insurance Narrow Network, Out of Network Coverage, Out of Pocket Expenses, Preexisting Conditions, Underinsured • Leave a comment

https://khn.org/news/insurers-can-bend-out-of-network-rules-for-patients-who-need-specific-doctors/?utm_campaign=KHN%3A%20Topic-based&utm_source=hs_email&utm_medium=email&utm_content=58529177&_hsenc=p2ANqtz-85eIov6h_xyFiUgaAQ4fPQfmFKIGc3Hy-dk3J1iXBI7lQ6d8lPFgPXXyeWrMceH2mGmhwxT0ZSLJVK3aeIMHcE7YGtbg&_hsmi=58529177

The Affordable Care Act has so far survived Republican attempts to replace it, but many people still face insurance concerns. Below, I answer three questions from readers.

Q: I have a rare disease, and there is literally only one specialist in my area with the expertise needed to treat me. I am self-employed and have to buy my own insurance. What do I do next year if there are zero insurance plans available that allow me to see my specialist? I cannot “break up” with my sub-specialty oncologist. I must be able to see the doctor that is literally saving my life and keeping me alive.

If the plan you pick covers out-of-network providers, you can continue to see your cancer specialist, although you’ll have to pay a higher percentage of the cost than if you were seeing someone in your plan’s network.

But many plans these days don’t provide any out-of-network coverage. This is certainly true of plans sold on the health insurance exchanges.

The situation you’re concerned about — that a specialist you consider crucial to your care isn’t in a plan’s provider network — isn’t uncommon, said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

If this happens, you can contact your plan and make the case that this particular provider is the only one who has the expertise to meet your needs. (Unfortunately, you probably can’t get this coverage assurance before you sign up.) Then ask your plan to make an exception and treat the out-of-network specialist as if she were in network for cost-sharing purposes. So, if in your plan an in-network specialist visit requires a $250 copayment, for example, the plan would agree that’s what you’d be charged to see your out-of-network specialist.

Or not. It’s up to the plan officials, and they may argue that someone in network has the expertise you need. If you disagree, you can appeal that decision.

But it may not come to that, said Corlette.

“Plans are prepared for this — the good ones are, anyway,” she said. “My understanding is that it’s pretty routine to grant exceptions for narrow subspecialties.”

Q: My company has asked employees to pay the Cadillac tax rather than putting the burden on the company. They are also telling us not to worry because it will never happen, but want us to agree that if it does we will take on the cost. Can they do that?

Let’s step back for a minute. The so-called Cadillac tax is a 40 percent surcharge on the value of health plans above the thresholds of $10,200 for single coverage and $27,500 for family plans.

A few months ago when it looked as if the ACA was going to be replaced, many employers believed, as yours apparently still does, that the Cadillac tax would never become effective. Both the House and Senate bills delayed the tax until 2026, and a lot can happen between now and then. With the collapse of efforts to repeal the ACA, however, the tax is on the front burner once again, said J.D. Piro, who leads the health and law group at benefits consultant Aon Hewitt. It’s set to take effect in 2020.

Under the law, insurers or employers would be responsible for paying the tax, but experts say the costs would likely be passed through to enrollees (whether or not you explicitly agree to absorb them). So it may not matter how you respond to your employer.

Also, employers who don’t want to pay the surcharge might sidestep the issue by reducing the value of the plans they offer, said Piro. For example, they could increase employee deductibles and other cost-sharing, make coverage less generous or shrink the provider network.

“That’s simplest way to avoid the tax,” he said.

Q: I need to purchase affordable health insurance for my two daughters who are 19 and 17. Is Trump insurance available yet? I need something I can afford and everything is so expensive.

President Donald Trump never put forward a proposal to replace the ACA. Instead, he backed the House and Senate replacement versions, which ultimately failed. But those versions might not have addressed your concerns, and you could have several options through the ACA.

“Coverage wouldn’t necessarily have been cheaper,” said Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

Under the Senate bill, for example, the nonpartisan Congressional Budget Office predicted that average 2018 premiums for single coverage would be 20 percent higher than this year’s. In 2020, however, premiums would be 30 percent lower than under current law, on average. But deductibles and other out-of-pocket costs would be higher for most people under the Senate bill, according to the CBO.

Premiums for young people would generally have declined. The bill would have allowed insurers to vary rates to a greater degree based on age, resulting in lower premiums for young people. In addition, premium tax credits generally would have increased for young people with incomes above 150 percent of the poverty level.

Your current coverage options under the ACA depend on your family situation. If you have coverage available to you through your employer, you can keep your daughters on your plan until they turn 26. For many parents, this is the most affordable, comprehensive option.

If that’s not a possibility, assuming the three of you live together and you claim them as dependents on your taxes, you may qualify for subsidized coverage on the health insurance marketplace next year. Your household income would need to be no more than 400 percent of the federal poverty level (about $82,000 for a family of three). You can apply for that coverage in the fall.

If you live in one of the 31 states plus the District of Columbia that have expanded Medicaid coverage to adults with incomes below 138 percent of the poverty level (about $28,000 for a family of three), you could qualify for that program. You don’t have to wait for open enrollment to sign up for Medicaid.

Rising Health Insurance Costs Frighten Some Early Retirees

Posted on November 16, 2017 by henrykotula • Posted in Uncategorized • Tagged Chronic Care Management, Early Retirement, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, High Risk Pools, Higher Premiums, Out of Pocket Expenses, Preexisting Conditions, Underinsured • Leave a comment

https://khn.org/news/rising-health-insurance-costs-frighten-some-early-retirees/?utm_campaign=KHN%3A%20Topic-based&utm_source=hs_email&utm_medium=email&utm_content=58529177&_hsenc=p2ANqtz-85eIov6h_xyFiUgaAQ4fPQfmFKIGc3Hy-dk3J1iXBI7lQ6d8lPFgPXXyeWrMceH2mGmhwxT0ZSLJVK3aeIMHcE7YGtbg&_hsmi=58529177

Don and Debra Clark of Springfield, Mo., are glad they have health insurance. Don is 56 and Debra is 58. The Clarks say they know the risk of an unexpected illness or medical event is rising as they age and they must have coverage.

Don is retired and Debra works part time a couple of days a week. As a result, along with about 20 million other Americans, they buy health insurance in the individual market — the one significantly altered by the Affordable Care Act (ACA).

But the Clarks are not happy at all with what they pay for their coverage — $1,400 a month for a plan with a $4,500 deductible. Nor are they looking forward to the ACA’s fifth open enrollment period, which runs from Wednesday through Dec. 15 in most states. Many insurers are raising premiums by double digits, in part because of the Trump administration’s decision to stop payments to insurers to cover the discounts they are required to give to some low-income customers to cover out-of-pocket costs.

“This has become a nightmare,” said Don Clark. “We are now spending about 30 percent of our income on health insurance and health care. We did not plan for that.”

Karen Steininger, 62, of Altoona, Iowa, said her ACA coverage not only gave her peace of mind but also helped her and her husband, who is now on Medicare, stay in business the past few years. But they too are concerned about rising costs and the effect of the president’s actions.

The Steiningers are self-employed owners of a pottery studio. Their income varies year to year. They now pay $245 a month for Karen’s subsidized coverage, which, like the Clarks’, has a $4,500 deductible. Without the government subsidy, the premium would be about $700 a month.

“What if we make more money and get less of a subsidy or just if the premiums increase a lot?” Karen Steininger asked. “That would be a burden. We’ll have to cut back on something or switch to cheaper coverage.”

The experiences of the Clarks and the Steiningers point to an emerging shortfall in the ACA’s promise of easier access to affordable health insurance for early retirees and the self-employed. Rising premiums and deductibles, recent actions by the Trump administration, and unceasing political fights over the law threaten those benefits for millions of older Americans.

“These folks are rightly the most worried and confused right now,” said Kevin Lucia, a health insurance specialist and research professor at Georgetown University’s Health Policy Institute in Washington, D.C. “Decisions about which health plan is best for them is more complicated for 2018, and many people feel more uncertain about the future of the law itself.”

At highest risk are couples like the Clarks who get no government subsidy (which comes in the form of an advanced tax credit) when they buy insurance. That subsidy is available to people earning up to 400 percent of the federal poverty level, or just under $65,000 for a couple. Their income is just above the amount that would have qualified them for a subsidy in 2017.

Premiums vary widely by state. Generally, a couple in their late 50s or early 60s with an annual income of $65,000 would pay from $1,200 to $3,000 a month for health insurance.

Premiums rose an average 22 percent nationwide in 2017 and are forecast to rise between 20 and 30 percent overall for 2018.

In an analysis released this week based on insurers’ rate submissions for 2018, the Kaiser Family Foundation found that individuals and families that don’t qualify for a subsidy but are choosing plans on the federal marketplace face premiums 17 to 35 percent higher next year, depending on the type of plan they choose. (Kaiser Health News is an editorially independent program of the foundation.)

A similar increase would be expected for people who also buy on the marketplaces run by some states or buy directly from a broker or insurance company.

The substantial premium increases two years in a row could lead fewer people to buy coverage.

“I’m really worried about this,” said Peter Lee, CEO of Covered California, the exchange entity in that state. “We could see a lot fewer people who don’t get subsidies enroll.” He said that California has taken steps to mitigate the impact for people who don’t get subsidies but that “consumers are very confused about what is happening and could just opt not to buy.”

There are already signs of that, according to an analysis for this article by the Commonwealth Fund. The percentage of 50- to 64-year-olds who were uninsured ticked up from 8 percent in 2015 to 10 percent in the first half of 2017. In 2013, the figure was 14 percent.

Indeed, the ACA has been a boon to people in this age group whether they get a subsidy or not. It barred insurers from excluding people with preexisting conditions — which occur more commonly in older people. And the law restricted insurers from charging 55- to 64-year-olds more than three times that of younger people, instead of five times more, as was common.

The law also provided much better access to health insurance for early retirees and the self-employed — reducing so-called “job lock” and offering coverage amid a precipitous decline in employer-sponsored retiree coverage that began in the late 1990s.

Only 1 in 4 companies with 200 or more workers offered any kind of coverage to early (pre-65) retirees in 2017 compared with 66 percent of firms in 1988, reported the Kaiser Family Foundation. And the vast majority of small firms never did offer such coverage.

Overall, before the ACA became law, 1 in 4 55- to 64-year-olds buying coverage on their own either couldn’t get it at all because of a preexisting condition or couldn’t afford it, according to AARP.

“The aging but pre-Medicare population was our major reason to support the ACA then and it still is now,” said David Certner, director of legislative policy at AARP. “This group benefited enormously from the law, and we think society and the economy benefited, too.”

Just how many 55- to 64-years-olds have been liberated from job lock by the ACA has yet to be fully assessed. But recent data show that 18 percent of people ages 55 to 64 who were still working in 2015 got coverage through the ACA marketplaces, up from 11.6 percent in 2013, according to an analysis for this article by the Employee Benefit Research Institute.

Also, a report released in January 2017 by the outgoing Obama administration found that 1 in 5 ACA marketplace enrollees of any age was a small-business owner or self-employed person.

A bipartisan effort is underway in Congress to provide dedicated funds to woo enrollees to healthcare.gov and help state agencies explain changes in the law for 2018 triggered by the Trump administration. But the fate of the proposed legislation is uncertain.

The Clarks said they’ll look carefully at options to keep their premiums affordable in 2018.

Said Don Clark, “If we get to a point where we have a $10,000 deductible and pay 40 percent or more of our income for health insurance, I’m not sure what we’ll do. We can’t afford that.”

Maine Medicaid expansion vote seen as ‘Obamacare’ referendum

Posted on November 6, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, Medicaid, Medicaid Expansion, Out of Pocket Expenses, State Referendum, Underinsured, Uninsured • Leave a comment

https://www.apnews.com/59f70b01af374560baccce244cca0b3d/Maine-Medicaid-expansion-vote-seen-as-‘Obamacare’-referendum

Image result for maine

The roiling national debate over the government’s proper role in health care is coming to a head in a state more commonly known for moose, lobster and L.L. Bean.

On Nov. 7, voters in Maine will decide whether to join 31 other states and expand Medicaid under former President Barack Obama’s Affordable Care Act. It is the first time since the law took effect nearly four years ago that the expansion question has been put to voters.

The ballot measure comes after Maine’s Republican governor vetoed five attempts by the politically divided Legislature to expand the program and take advantage of the federal government picking up most of the cost.

It also acts as a bookend to a year in which President Donald Trump and congressional Republicans tried and failed repeatedly to repeal Obama’s law.

Activists on both sides of the issue are looking at the initiative, Maine Question 2, as a sort of national referendum on one of the key pillars of the law, commonly known as Obamacare. Roughly 11 million people nationwide have gained coverage through the expansion of Medicaid, the state-federal health insurance program for lower-income Americans.

Republican consultant Lance Dutson called Maine’s initiative a national bellwether in which the needs of the people could trump political ideology.

A pillar of former President Barack Obama’s health care law faces a test in Maine, where voters will decide whether to expand Medicaid. If voters pass the initiative, Maine would become the 32nd state to accept the expansion. (Oct. 31)

“People believe there are good parts to Obamacare and bad parts to Obamacare. And without taking Medicaid expansion, we are leaving one of the good parts on the table while still suffering from the bad parts of it,” said Dutson, who supports Question 2.

Maine may not be the last state to put the Medicaid question before voters. Expansion proponents in Idaho and Utah have launched similar efforts in those states aimed at the 2018 ballot.

If the initiative passes, an estimated 70,000 people in Maine would gain health coverage. The issue is personal to many in an aging, economically struggling state with a population that is smaller than the city of San Diego.

Nature painter Laura Tasheiko got dropped from Medicaid three years ago after successfully battling breast cancer. Since then, she has relied on the charitable services of a hospital near her home in Northport, a seaside village of less than 2,000 people about 100 miles northeast of Portland.

She worries about having another serious health problem before she is eligible for Medicare when she turns 65 next year.

“Some of the after-effects of the chemo can be severe, like heart failure,” she said. “Having no insurance is really scary.”

Maine’s hospitals support the Medicaid expansion and say charity care costs them over $100 million annually. The initiative’s supporters have reported spending about $2 million on their campaign, with hundreds of thousands of dollars coming from out-of-state groups. By comparison, the lead political action committee established to oppose the measure has spent a bit less than $300,000.

Among those who say Maine will benefit from the expansion is Bethany Miller. She said her adult son, Kyle, needed Medicaid because he couldn’t afford subsidized monthly insurance premiums even though he was working.

She remembers watching as her son’s eyes went hollow and his body turned skeletal in the weeks before he died, at age 25, from a diabetic coma a year ago.

“He had a job, but he didn’t make enough money to pay for his basic needs and his insulin, and he couldn’t live without his insulin,” said Miller, who lives in Jay, a small paper mill town about 70 miles north of Portland.

LePage, a Trump supporter, is lobbying furiously against the initiative. He and other critics warn that the expansion will be too costly for Maine, even with the federal government picking up most of the tab. After 2020, the state’s share of paying for the expansion population would be 10 percent.

LePage warns that he would have to divert $54 million from other programs — for the elderly, disabled and children — to pay for Medicaid expansion.

“It’s going to kill this state,” he said.

LePage said he considers Medicaid another form of welfare and wants to require recipients to work and pay premiums.

Maine currently serves about 268,000 Medicaid recipients, down from 354,000 in 2011. LePage credits the drop to his administration’s tightened eligibility restrictions.

If Question 2 passes, the Medicaid expansion would cover adults under age 65 with incomes at or below 138 percent of the federal poverty level. That’s $16,643 for a single person or $22,412 for a family of two.

State Rep. Deborah Sanderson, a Republican, said Maine is already struggling to serve its rapidly aging population as nursing homes shutter and rural hospitals struggle.

“I get accused on occasion of trying to pit one population of folks against another,” she said. “It’s a case of only having a certain amount of resources to take care of a large number of needs.”

Finances are a concern in a state marked by factory closures and sluggish wage growth.

But with more people living on the margins, advocates of the expansion say that is all the more reason to extend the benefits of Medicaid. About 8 percent of Maine residents do not have insurance, a little less than the national percentage.

Democratic Sen. Geoffrey Gratwick, a retired rheumatologist, said he has seen many patients throughout his career who did not have health insurance and came to him with a disease already in its late stages. He voted for all five Medicaid expansion attempts.

“They are just as good people as you or I, but their lives will be shorter and they will be sicker,” he said. “Compassion, common sense and our economic interest demand that we get them the health care they need.”

Nathalie Arruda and her husband, Michael, are in that group that is sometimes without insurance. They live in the farming community of Orland, halfway between New Hampshire and the state’s eastern border with New Brunswick, Canada.

The couple run a computer business and rely on herbal teas and locally grown greens to stay healthy as they fall in and out of Medicaid eligibility. LePage restricted Medicaid eligibility for adults with dependents, like the Arrudas.

“There have absolutely been times when my husband or I have put off getting something looked at that we probably should have because we didn’t have coverage,” Arruda said.

In Miller’s view, her son would still be alive if LePage had signed one of the Medicaid expansion bills sent to him by the Legislature.

When Kyle turned 21, he was one of thousands who lost MaineCare coverage under the governor’s reforms. She said he juggled construction jobs but couldn’t afford his $80 subsidized monthly premium for private insurance.

He struggled to pay medical bills from emergency room visits, Miller said.

Before Kyle died last November, he had landed a steady job at a plastics factory that promised health insurance. He didn’t live long enough to get the coverage, falling into a diabetic coma.

“He started rationing his insulin so he could buy food,” his mother said. “And it cost him his life.”

Trump and the Essential Health Benefits

Posted on November 3, 2017 by henrykotula • Posted in Uncategorized • Tagged ACA, Bad Debt Expenses, Cheap Health Insurance, Delegation of Powers, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Policy, HHS, High Deductible Health Plans, High Premiums, High Risk Pools, Out of Pocket Expenses, Preexisting Conditions, Uncompensated Care, Underinsured, Uninsured • Leave a comment

Trump and the Essential Health Benefits

Image result for essential health benefits

On Friday, HHS released a proposed rule that would make a number of adjustments to the rules governing insurance exchanges for 2019. The rule is long and detailed; there’s a lot to digest. Among the most noteworthy changes, however, are those relating to the essential health benefits. They’re significant, and I’m not convinced they’re legal.

By way of background, the ACA requires all health plans in the individual and small-group markets to cover a baseline roster of services, including services falling into ten broad categories (e.g., maternity care, prescription drugs, mental health services). Taken as a whole, the essential health benefits must be “equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary.”

The ACA’s drafters anticipated that HHS would establish a national, uniform slate of essential health benefits. Instead, the Obama administration opted to allow the states to select a “benchmark plan” from among existing plans in the small group market (or from plans for state employees). The benefits covered under the benchmark were then considered “essential” within the state.

At the time, Helen Levy and I concluded that HHS’s approach brushed up against the limits of what the law allowed. We noted, among other things, that the ACA tells HHS to establish the essential health benefits—not the states. And it’s black-letter administrative law that an agency can’t subdelegate its powers to outside entities, states included.

At the end of the day, however, Helen and I concluded that the Obama-era regulation passed muster. Our rationale bears repeating:

Although a federal agency cannot delegate its powers to the states, it “may turn to an outside entity for advice and policy recommendations, provided the agency makes the final decisions itself.” Here, the secretary gave the states a constrained set of options (e.g., choose a benchmark plan from among the three largest small-group plans in the state) and retained the authority to select a benchmark for any state that either does not pick a benchmark or chooses an inappropriate one. As such, the secretary remains firmly in control. Nothing in the ACA prevents her from deferring to states that select benchmark plans from among the few options she has provided. That choice to defer is itself an exercise of her delegated powers.

The Trump administration’s proposed rule would vastly enlarge this Obama-era subdelegation. For starters, the rule would allow a state to adopt another state’s benchmark, or part of a state’s benchmark, as its own. Michigan, for example, could borrow Alabama’s benchmark plan wholesale, or it could incorporate Alabama’s benchmark for mental health and substance use disorder treatment. More significantly, the rule would allow a state to “selec[t] a set of benefits that would become the State’s EHB-benchmark plan.”

You read that right: if the rule is adopted, each state can pick whatever essential health benefits it likes. No longer will it be choosing from a preselected menu; it’ll be picking the essential benefits out of a hat. In so doing, the proposed rule looks like it would unlawfully cede to the states the power to establish the essential benefits.

This extraordinary subdelegation of regulatory authority is subject only to the loosest of constraints: benefits can’t be “unduly weighted” toward any one benefit category or another, and the benchmark must “[p]rovide benefits for diverse segments of the population, including women, children, persons with disabilities, and other groups.” The selected benefits also can’t be more generous than the state’s 2017 benchmark (or any of the plans the state could have selected as its benchmark), but that’s a ceiling, not a floor, so states have lots of room to pare back.

The only meaningful constraint is that the benefits covered by the state’s benchmark must be “equal to the scope of benefits provided under a typical employer plan.” But another portion of the proposed rule would hollow out that requirement:

[W]e propose to define a typical employer plan as an employer plan within a product (as these terms are defined in §144.103 of this subchapter) with substantial enrollment in the product of at least 5,000 enrollees sold in the small group or large group market, in one or more States, or a self-insured group health plan with substantial enrollment of at least 5,000 enrollees in one or more States.

In other words, HHS is saying it will treat as “typical” any employer plan, in any state, that covers more than 5,000 people.

This looks like an innocuous change. It’s not. If the rule is adopted, it means that a single outlier plan can now count as typical, even if it’s way stingier than any other plan in the market. It also makes me wonder if HHS already has in mind some large employer with an unusually narrow health plan—maybe some hospital-based “administrative services only” plan, as Dave Anderson speculates. If so, voilá, the states can all ratchet down their essential benefits to that plan’s level.

I don’t think that’s legal. To know if a slate of health benefits is typical, you have to know something about how many health plans cover those benefits and how many don’t. The proposed rule eschews that comparative inquiry, and instead defines typicality with reference to the number of people who are covered by a single plan. Some random self-insured plan that excludes appendectomies could be treated as typical, even if it’s the only plan in the nation that does so.

In other words, HHS wants to define a “typical employer plan” to include atypical plans—which the agency emphatically cannot do. Yes, plans that enroll 5,000+ people are less likely to be outliers than smaller ones. But in a country as big and complicated as ours, there are bound to be some idiosyncratic quirks even in large plans. Those quirks would all be considered typical under HHS’s rule.

This definitional change, combined with the choose-your-own-adventure option to devise a benchmark, means that states will have wide authority to water down the essential health benefits requirement. Whether that’s good or bad is hard to say. Requiring plans to cover lots of services assures comprehensive coverage, but it also raises the cost of insurance. Because there’s no single “best” way to strike the balance, I think there’s a lot to be said for giving states the freedom to choose for themselves.

Wise or not, however, I’m skeptical that the Trump administration’s effort to hollow out the rule governing essential health benefits is legal. If HHS presses ahead with the rule, it could face tough sledding in the courts.

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HENRY KOTULA

A Healthcare Leadership Blog

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