Uninsurance of children, parents inched back up in 2017, report finds


Dive Brief:

  • After improving for several years, insurance gains and participation in Medicaid and the Children’s Health Insurance Program tilted downward in 2017, a new Urban Institute report shows.
  • In the first three years following implementation of the Affordable Care Act, the uninsurance rate dropped from 7% to 4.3% among children and from 17.6% to 11% among parents, or about 40% for both groups. In 2017, however, the children’s uninsurance rate inched back up to 4.6%, or an additional 281,000 uninsured children, and parents’ coverage rate stalled.
  • Uninsurance rates rose both in states with and without the ACA’s Medicaid expansion, but the increase was more pronounced in states without expansion programs.

Dive Insight:

The findings jibe with recent data from the Centers for Disease Control’s National Health Interview Survey, which showed more than 1.1 million Americans lost health coverage in 2018, pushing the total number of uninsured from 29.3 million in 2017 to 30.4 million last year. Among surveyed adults between 18 and 64 years old, 13.3% were uninsured, 19.4% had public health coverage and 68.9% had private coverage.

The trend coincides with Trump administration efforts to weaken the ACA by eliminating several mechanisms meant to stabilize payers participating in ACA exchanges and pushing stripped-down, noncompliant health plans. The result has been rising premiums and a resurgence in the number of uninsured.

Adding to uncertainty about the ACA’s future is the U.S. Department of Justice’s support for a Texas federal district court that ruled the law unconstitutional without its individual mandate penalty, which a Republican-led Congress removed in 2017. A previous Urban Institute report estimated up to 20 million Americans would lose health insurance if the lawsuit prevails — a majority of whom are currently covered through Medicaid expansions and ACA exchanges.

While the ACA remains in legal jeopardy, Democrats and presidential candidates are looking at ways to increase the numbers of insured Americans, from shoring up the ACA to implementing some type of single-payer system or “Medicaid for All.”

According to the Urban Institute, participation in Medicaid/CHIP among children increased from 88.7% in 2013 to 93.7% in 2016, and from 67.6% to 79.9% for parents. Those gains reversed in 2017, however, with Medicaid/CHIP participation dropping to 93.1% among children and remaining unchanged for parents.

Among those who did not enroll in Medicaid/CHIP in 2017, 2 million children and 1.7 million parents were eligible for the programs — versus 1.9 million and a steady 1.7 million, respectively, in 2016.

More than half of the uninsured children and parents who were eligible for the Medicaid/CHIP lived in California, Florida, Georgia, Illinois, Indiana, New York, Pennsylvania and Texas, according to combined 2016-2017 data.

Parents were more than twice as likely to be uninsured as children in 2017. For example, children’s uninsurance rate was less than 5% in most states and under 10% in nearly every state, while parents’ uninsurance was less than 5% in just four states and over 10% in close to half the states, the report says.

The decline in improvement was worse among certain subgroups. “In 2017, the uninsurance rate was nearly 6% or higher among adolescents, Hispanic and American Indian/Alaska Native children, citizen children with noncitizen parents, and noncitizen children,” according to the report. “And consistent with prior years, one in six parents or more who were ages 19 5o 24, Hispanic or American Indian/Alaska Native, below 100 percent of FPL [federal poverty level], receiving SNAP [Supplemental Nutrition Assistance Program] benefits, or noncitizen were uninsured in 2017.”







How Medi-Cal’s Fiscal Balancing Act Could Soon Become More Challenging


Many Californians know that Medi-Cal is our state’s health coverage program for residents with low incomes, including children, people with disabilities, and workers who may not get affordable health insurance through their jobs.

What many Californians don’t realize — call it Medi-Cal’s best-kept secret — is that even with the program’s rising enrollment and costs in recent years, Medi-Cal’s financial impact on our state’s General Fund (the account that receives most state tax revenues) has been relatively small. This matters because General Fund dollars support an array of vital services in addition to Medi-Cal, many of which — such as income supports and subsidized childcare for low-income working families — also promote Californians’ health and well-being. If Medi-Cal had claimed a larger share of General Fund revenues over the past decade, fewer state dollars would have been available to support other critical public supports and services.

This article first looks at how our state has expanded Medi-Cal to meet the health care needs of one in three Californians while minimizing the program’s impact on the General Fund. It then highlights key Medi-Cal financing issues on the horizon that could hamper state policymakers’ efforts to continue balancing Medi-Cal’s funding needs with those of other important public services. This article is adapted from a presentation I gave at the February 25 Medi-Cal Explained briefing hosted by the California Health Care Foundation.

As Medi-Cal Enrollment Doubled, State General Fund Support Rose Modestly

Medi-Cal, California’s Medicaid program, has seen enrollment and expenditures grow substantially since 2007–08 (PDF), the last fiscal year before the Great Recession sent California’s economy and state budget into a tailspin. Enrollment for the current fiscal year (2018–19) is expected to be 13.2 million, about double the 2007–08 level. Total Medi-Cal spending is anticipated to reach $98.5 billion, roughly $53 billion (114%) higher than in 2007–08. (All 2007–08 expenditures are adjusted for inflation.)

State General Fund dollars accounted for only $3 billion of this $53 billion increase in Medi-Cal spending between 2007–08 and 2018–19. This relatively small jump in General Fund support for Medi-Cal is remarkable in light of periodic concerns that the program is putting the squeeze on California’s General Fund budget. Instead, Medi-Cal’s spending growth has largely been supported with non-General Fund sources of revenue. Specifically, the remainder of the $53 billion spending increase between 2007–08 and 2018–19 — around $50 billion — came from federal funds ($35.3 billion) and other non-federal funds, such as state taxes paid by managed care organizations (MCOs) and fees paid by hospitals ($14.2 billion). Since 2007–08, federal funding for Medi-Cal has increased by 129%, while other non-federal funds have grown by more than 1,600%.

The substantial increase in non-General Fund support for Medi-Cal has been driven by several factors, including:

  • More generous federal cost-sharing. California and the federal government equally split the cost of services for most Medi-Cal enrollees. However, the Affordable Care Act (ACA) included more generous federal cost-sharing for certain beneficiaries. The federal government pays 93% of the cost for the Medi-Cal expansion population, which consists of low-income non-elderly adults who became newly eligible in 2014. In addition, federal dollars fund 88% of the cost for children who are enrolled in Medi-Cal as part of the Children’s Health Insurance Program (CHIP). Like a see-saw, higher federal cost-sharing leads to lower state cost-sharing, freeing up state General Fund dollars.
  • Creative financing. California has tapped into alternative in-state financing sources to support Medi-Cal, including local matching funds (such as from counties and public hospital systems), provider fees, and a tax on MCOs. These alternative sources of financing allow California to draw down more federal funding for Medi-Cal while minimizing the impact on the General Fund.
  • The 2016 state tobacco tax increase. Proposition 56 raised the state’s excise tax on cigarettes by $2 per pack and triggered an equivalent increase in the state tax on other tobacco products. Medi-Cal’s share of these revenues — roughly $1 billion per year — is primarily used to boost payments to doctors and other Medi-Cal providers, relieving the need for the General Fund to support such rate increases.

What about General Fund support for Medi-Cal as a percentage of the total General Fund budget? Medi-Cal’s share of the General Fund has increased by just seven-tenths of a percentage point over the past decade — from 13.63% in 2007–08 to an estimated 14.35% in 2018–19. Yes, Medi-Cal receives a slightly larger slice of the General Fund “pie” than it did 2007–08. But this increase has been modest given the substantial benefit experienced by millions of Californians newly covered by the program. As a result, more state dollars have been available for other public services and systems than if General Fund support for Medi-Cal had risen at a much faster pace.

Medi-Cal’s Big Financing Issues Create Uncertainty for Medi-Cal and the General Fund

Over the past decade, state policymakers have deftly balanced the needs of a growing Medi-Cal program with those of other public services and systems. However, Medi-Cal faces a number of near-term financing issues that could make this balancing act more challenging in the coming years. These financing issues include:

  • Reductions in federal cost-sharing. The federal government is scheduled to reduce its share of costs for CHIP-funded children as well as for adults enrolled in Medi-Cal starting in 2014 under the ACA. The state’s share of CHIP costs will increase in two steps, rising from 12% to 23.5% on October 1, 2019, and then to 35% on October 1, 2020. For the expansion population, the state’s share of cost will rise from 7% to 10% on January 1, 2020, where it will remain unless revised by Congress. Upon full implementation, these changes will increase annual state General Fund spending on Medi-Cal by more than $1 billion compared to 2018–19, according to estimates from the state’s nonpartisan Legislative Analyst’s Office (LAO).
  • The pending expiration of the MCO tax. California’s MCO tax expires on June 30, and Governor Gavin Newsom is not proposing to extend it. If the MCO tax expires, California would forgo a net annual General Fund benefit of $1.5 billion, based on the current structure of the MCO tax package. These dollars could help to pay for a number of state policy advances, including efforts to move California closer to universal health coverage. The governor “has not laid out a convincing rationale” for declining to seek an extension of the MCO tax, according to the LAO. If the tax were allowed to expire, annual state General Fund costs for Medi-Cal would ultimately increase by well over $1 billion but without any additional benefit to the Medi-Cal program. Instead, state General Fund dollars would simply replace lost MCO tax revenues in order to keep the program whole.
  • The pending expiration of two major federal waivers. California’s current Section 1915(b) waiver expires on July 1, 2020. Under this waiver, counties are allowed to deviate from standard Medicaid rules and provide or arrange for a broad array of “specialty mental health services” for eligible Medi-Cal beneficiaries. In addition, California’s Section 1115 Medi-Cal 2020 waiver expires at the end of 2020. Under this waiver, the federal government is providing the state with billions of dollars to help improve access to care as well as to transform how care is delivered. Will the Trump administration agree to renew these waivers without significantly reducing federal funding or imposing new requirements that California would find objectionable? Time will tell.
  • The next recession. Medi-Cal could face spending cuts when the next recession comes and policymakers seek ways to close budget shortfalls. Fortunately, California has been building up its reserves. The state expects to have more than $15 billion in its constitutional reserve, the Budget Stabilization Account, by the end of 2019–20. In addition, Governor Newsom wants to add $700 million to the state’s new Safety Net Reserve for Medi-Cal and CalWORKs. (The balance now is $200 million.) These reserves will reduce the need for state budget cuts during the next downturn, although Medi-Cal would not be guaranteed a specific share of the funds. State reserves will be crucial to shoring up Medi-Cal’s budget because the federal government may do little to help states pay for their rising Medicaid costs when the next recession arrives.

One of the biggest challenges — and opportunities — that California lawmakers and the governor face each year is allocating the state’s limited General Fund revenues among many vital priorities. The financing issues that Medi-Cal is facing — and how these issues are resolved — will help to determine whether policymakers can continue improving the Medi-Cal program while also ensuring that other vital public services are adequately funded.




Changing Healthcare’s Culture of Overtreatment a Challenge


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More focus on accepting uncertainty is needed, expert says

Medical schools and healthcare workplaces should try harder to change the culture around medical overtreatment, according to Barnett Kramer, MD, MPH.

“Some of the solution may be at the training level of health professionals,” Kramer, director of the cancer prevention division at the National Cancer Institute, in Bethesda, Md., said at a briefing Thursday sponsored by Kaiser Health News. “The number one problem identified by medical historian Kenneth Ludmerer is insufficiency of training for uncertainty in medical school; his thesis was that [this] led to systematic overuse of testing and overtreatment. If neither the physician nor the patient are trained to think [about] and accept uncertainty, then almost always our medical culture is going to lean in one direction, so education in probabalistic thinking [is important].”

Another issue is “knowing when you don’t have to make a decision then and there,” he continued. For instance, “there are situations where we’re learning it’s uncertain what the best way to go is, but there’s pretty good evidence that waiting and seeing what the natural history of the disease is, is acceptable, and sometimes that’s very difficult.”

A third consideration “is to try to keep the discussion focused on what is known about the particular disease,” Kramer said. “There’s a famous saying that ‘If thought corrupts language, the opposite is certainly the case.’ So as soon as you have an entity with the word ‘cancer’ or ‘carcinoma’ in it, sometimes that shuts off the ability to really understand and get informed about what the disease really is.”

“There is some movement … to change the name of some of the things we call cancer,” he added. “If we have enough biological information to know they don’t act like a routine cancer, that at least moves the word off the table and you can focus on what’s known and what’s not known, and try to handle the uncertainties.”

Malpractice liability concerns, especially when combined with clinical uncertainty, also can contribute to overtreatment, said Ranit Mishori, MD, MHS, a family physician and professor of family medicine at Georgetown University here. “There are days when I go home and ask myself again and again and again, ‘Should I have ordered that test? I think I probably shouldn’t have, but is that patient going to sue me?’ God forbid they’ll be the one patient in 1,000 coming down with that rare form of prostate cancer.”

That situation happened to a physician friend of Mishori’s. “He followed all the guidelines about PSA [prostate-specific antigen] testing, and this one person was the person he didn’t test who ended up having prostate cancer and sued the heck out of him,” she said. “Do you think my friend continued with not offering PSA testing to all his other patients? For a while it was a very difficult decision for him.”

Although critics have complained for decades about the problem of physicians overtesting and overtreating because they’re afraid of malpractice suits, not much has changed, Mishori told MedPage Today. She added that the probability of being sued seems to be geographically dependent. “If you’re in rural Arkansas, you’re less likely to be sued, but if you’re in Washington, D.C., and everybody and their sisters are lawyers, it’s something that goes through your mind a little bit more.”

Another problem is that one test often triggers a cascade of testing, said Saurabh Jha, MD, a radiologist and associate professor of radiology at the University of Pennsylvania. He cited a case in which a woman came into the hospital with a suspected pulmonary embolism. A CT scan ruled out that possibility, “but then I did something else which led to cascade of investigations: I measured the main pulmonary artery, and it was 3.3 cm.” Since the threshold for suspecting pulmonary hypertension is 3.1 cm, Jha said in his report that the patient possibly had pulmonary hypertension, and also added the limitations of his conclusion. Because Jha was a resident at the time and most patients passed into others’ care, he then forgot about the case.

Later on, however, another hospital staff member told him that his diagnostic conclusions had resulted in a “cascade of investigations” for that patient. “What I began to realize later on was that the chances of actually picking somebody up with pulmonary hypertension using that number is overwhelmed by causing false positives and putting somebody through a train of investigations,” he said. “Since then, I have begun to be more judicious with measuring, realizing that anything printed in a report can be like a Greek tragedy — very difficult to reverse afterwards.”

Jacqueline Kruser, MD, a pulmonologist and critical care physician at Northwestern Memorial Hospital, in Chicago, called the phenomenon of this testing cascade “clinical momentum.” “We see this for acutely ill patients,” she said. “When they come to the hospital and are admitted to the intensive care unit (ICU), everyone who takes care of you is laser-focused on the acute problems that brought you there … Most importantly, they want to act quickly to fix them, and the environment is designed to fix things rapidly — we can get lab tests back in minutes and rush someone to the operating room in an hour.”

However, although that works well for most patients, “what we worry about is, what about the patients who have different goals [than just getting things fixed] — they want to avoid invasive procedures or burdensome treatment, or they want to be with family, eating what they want to eat?” she said. “All those cascading interventions might not accomplish those goals for that patient.”

The hospital isn’t necessarily designed to focus on those issues, Kruser said. In an ICU, for example, it’s hard to find “enough chairs for everyone to sit down with the patient in the room — with their family, their doctors — and talk about what’s most important to them.”

ACA Marketplace Premiums Grew More Rapidly In Areas With Monopoly Insurers Than In Areas With More Competition


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 It pays to have an insurance monopoly
Also from Health Affairs: The level of competition among insurance companies has affected Affordable Care Act premiums more than any other factor.

By the numbers: Premiums are 50% higher this year in areas with just one insurer than in areas with two insurers.

  • “The presence of a monopolist insurer was the strongest, and most precise, predictor of 2018 premiums,” the study says.
  • Other factors commonly associated with higher premiums — like hospital concentration and the health of the people who live there — showed significantly smaller effects.

How it works: Jessica Van Parys, the Hunter College economics professor who conducted the study, suggests that insurers underpriced their ACA offerings in the first few years to capture market share, then raised their prices over the years.

  • Costs and regulatory uncertainty largely kept new competitors from entering those monopolized markets.


Stabilizing and strengthening the individual health insurance market


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Stability has long been an issue for the individual health insurance market, even before the Affordable Care Act. While reforms adopted under the ACA initially succeeded in addressing some of these market issues, market conditions substantially worsened in 2016.

Insurers exited the individual market, both on and off the subsidized exchanges, leaving many areas with only a single insurer, and threatening to leave some areas (mostly rural) with no insurer on the exchange. Most insurers suffered significant losses in the individual market the first three years under the ACA, leading to very substantial increases in premiums a couple of years in a row.

For a time, it appeared that rate increases in 2016 and 2017 would be sufficient to stabilize the market by returning insurers to profitability, which would bring future increases in line with normal medical cost trends. However, Congress’s decision to repeal the individual mandate and the Trump Administration’s decision to halt “cost-sharing reduction” payments to insurers, along with other measures that were seen as destabilizing, created substantial new uncertainty for market conditions in 2018.

This uncertainty continues into 2019, owing both to lack of clarity on the actual effects of last year’s statutory and regulatory changes, and to pending regulatory changes that would expand the availability of “non-compliant” plans sold outside of the ACA-regulated market. These uncertainties further complicate insurers’ decisions about whether to remain in the individual market and how much to increase premiums.

In “Stabilizing and strengthening the individual health insurance market: A view from ten states” (PDF), Mark Hall examines the causes of instability in the individual market and identifies measures to help improve stability based off of interviews with key stakeholders in 10 states.

The condition of the individual market

In the states studied—Alaska, Arizona, Colorado, Florida, Iowa, Maine, Minnesota, Nevada, Ohio, and Texas—opinions about market stability vary widely across states and stakeholders.

While enrollment has remained remarkably strong in the ACA’s subsidized exchanges, enrollment by people not receiving subsidies has dropped sharply.

States that operate their own exchanges have had somewhat stronger enrollment (both on and off the exchanges), and lower premiums, than states using the federal exchange.

A core of insurers remain committed to the individual market because enrollment remains substantial, and most insurers have been able to increase prices enough to become profitable. Some insurers that previously left or stayed out of markets now appear to be (re)entering.

Political uncertainty

Premiums have increased sharply over the past two to three years, initially because insurers had underpriced relative to the actual claims costs that ACA enrollees generated. However, political uncertainty in recent years caused some insurers to leave the market and those who stayed raised their rates.

Insurers were able to cope with the Trump administration’s halt to CSR payments by increasing their rates for 2018 while the dominant view in most states is that the adverse effects of the repeal of the individual mandate will be less than originally thought. Even if the mandate is not essential, many subjects viewed it as helpful to market stability. Thus, there is some interest in replacing the federal mandate with alternative measures.

Because most insurers have become profitable in the individual market, future rate increases are likely to be closer to general medical cost trends (which are in the single digits). But this moderation may not hold if additional adverse regulatory or policy changes are made, and some such changes have been recently announced.

Many subjects viewed reinsurance as potentially helpful to market conditions, but only modestly so because funding levels typically proposed produce just a one-time lessening of rate increases in the range of 10-20 percent. Some subjects thought that a better use of additional funding would be to expand the range of people who are eligible for premium subsidies.

Actions to restore stability

Concerns were expressed about coverage options that do not comply with ACA regulations, such as sharing ministries, association health plans, and short-term plans. However, some thought this outweighed harms to the ACA-compliant market; thus, there was some support for allowing separate markets (ACA and non-ACA) to develop, especially in states where unsubsidized prices are already particularly high.

Other federal measures, such as tightening up special enrollment, more flexibility in covered benefits, and lower medical loss ratios, were not seen as having a notable effect on market stability.

Measures that states might consider (in addition to those noted above) include: Medicaid buy-in as a “public option”; assessing non-complying plans to fund expanded ACA subsidies; investing more in marketing and outreach; “auto-enrollment” in “zero premium” Bronze plans; and allowing insurers to make mid-year rate corrections to account for major new regulatory changes.


The ACA’s individual market is in generally the same shape now as it was at the end of 2016. Prices are high and insurer participation is down, but these conditions are not fundamentally worse than they were at the end of the Obama administration. For a variety of reasons, the ACA’s core market has withstood remarkably well the various body blows it absorbed during 2017, including repeal of the individual mandate, and halting payments to insurers for reduced cost sharing by low-income subscribers.

The measures currently available to states are unlikely, however, to improve the individual market to the extent that is needed. Although the ACA market is likely to survive in its basic current form, the future health of the market—especially for unsubsidized people—depends on the willingness and ability of federal lawmakers to muster the political determination to make substantial improvements.



The future of healthcare: Finding the opportunities that lie beneath the uncertainty


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Healthcare is a dynamic industry with significant opportunity, but cost concerns, uncertainty, and complexity can also make it an unnerving one. Substantial upside exists for players that can deliver value-creating solutions and thrive under uncertainty.

The intrinsic demand for healthcare services continues to rise in the United States, given population aging, the increasing prevalence of chronic disease, and the search for a higher quality of life. In addition to increasing demand, three other major factors make healthcare a dynamic industry with significant opportunity:

  • Consumers, employers, and the government continue to see the financial burden of healthcare grow faster than their incomes or revenues—a long-standing gap unlikely to change soon. Furthermore, new challenges, such as the ongoing opioid crisis, continue to emerge. The result has been a continuing search for fresh solutions and reforms,  which has kept—and will keep—the industry in a state of flux.
  • Major tectonic shifts are occurring, not only in regulations but also in three other areas: technology (both medical science and technology and the onward march of big data, advanced analytics, machine learning, and digital), industry orientation (the move toward B2C and rapidly rising consumer expectations), and reallocation of risk across the value chain. These forces are fundamentally altering the structure of the industry and basis of competition.
  • The available headroom for improvement in healthcare (by most estimates, over $500 billion within the $3 trillion US healthcare economy) provides significant opportunity for value creation.1

Industry growth, major changes, and strong value-creation potential make healthcare an exciting industry. At the same time, cost concerns, uncertainty, and complexity make it an unnerving one. Substantial upside exists for players that can deliver value-creating solutions and thrive under uncertainty. Indeed, our recent research into industry profit pools indicates that, on average, the industry is delivering value-creating solutions and consequently showing attractive profit growth. Between 2012 and 2016, total over-all healthcare industry profit pools (earnings before interest, taxes, depreciation, and amortization, or EBITDA) grew at a faster rate than the combined EBITDA of the top 1,000 US companies.