Back to Basic

John Jacobi over at HealthLawProfBlog is going over some interesting future implementation challenges with PPACA. One of the reforms that he sees as a critical piece of the puzzle is the expansion of Basic health plans:

First, and most obviously, states and advocates should be examining the Basic Plan Program, which will finally be ready for roll-out in 2015. The Program, authorized by § 1331 of the ACA, is a public health insurance program intended to bridge the gap between Medicaid and subsidized private insurance for people with income between 138% and 200% of FPL. It could serve two purposes: It could reduce “churn” between Medicaid and private insurance as insureds’ income fluctuates in the low range, therefore minimizing disruption in ongoing access to providers. It could also improve the affordability of coverage by allowing states to piggy-back on their Medicaid provider networks and premium structure, allowing Program participants rich coverage with little or no out-of-pocket cost. There are downsides: the Program would reduce the exchange’s pool, perhaps increasing per-enrollee costs and threatening actuarial destabilization of the individual plan market; and Medicaid provider networks are already fragile in many states. But faced with the risk of cost-based attrition and/or low service utilization by low-income exchange enrollees, states will want to consider this option.

From a mechanical point of view, Basic plans have significantly more flexibilty than Medicaid in benefit design and implementation choices, and providers may be more willing than the professor thinks to join the Basic networks. 

The big thing that we talked about last week was how providers see their accounts receivable situation:

The ideal patient from an account recievables perspective pays a very high percentage of the billed charge with a high degree of certainty and a short turn around time and minimal haggling.  Excluding celebrity rehab centers and $40,000/year per person coverage, there are few payers who meet this provider ideal.  Everything else is a trade-off…

An individual hit with a cancer diagnosis  with a 20% co-insurance and a $5,000 annual out of pocket limit will easily run up $25,000 in contracted rate charges in the first round of treatment.  They might have 5G lying around, they might not.  They’ll be in a similar situation as people with high deductibles who are described below. 

People with commercial insurance but very high deductibles will see their contracted rates be fairly high.  A provider has a low probability of seeing the entire deductible in a single lump sum within 30 days of service.  The more likely scenario is that an HSA or FSA is emptied out to pay a significant chunk of the contracted rate lump sum, and then either a credit card payment is made (good for the provider, bad public policy) or $45/month for the next 5 years is used to pay the lump sum….

 Platinum, Gold and cost-sharing Silvers are closer in behavior to good commercial insurance in the first scenario.  Since most people on the Exchange qualify for some subsidies, the probability of people having a full deductible in cash lying around is fairly low.  This can explain some of the narrowness of networks as providers may not be willing to take either the lower than commercial but higher than Medicare contracted rates OR they are worried about their ability to get quickly paid in full so they opt out of some networks that are designed to be low premium cost but high out of pocket plans.  Small group employer sponsored insurance with high deductibles will also fall into this bucket. 

After this, Medicaid will pay quickly but at a low rate….

A Basic plan will pay out quickly and it will pay out in full.  Basic plans tend to have higher reimbursement rates for providers than Medicaid, so Basic should be preferable from an AR perspective than Medicaid expansion.  The relevant question is how does Basic compare to a a very good or merely good cost-sharing assistance Silver plan as those are the plans that are most likely being bought by people who would qualify for Basic coverage.  My state’s Basic program has a nominal deductible and two dollar co-pays for most non-preventative services.  The best Silver cost-sharing assistance plans for a single adult will see $500 deductibles and another $1,000 in out of pocket expenses.  From an AR perspective, providers will see all of their lower reimbursement rate from BASIC but have to chase people down in cost sharing Silver.  I don’t think docs will avoid Basic plans for AR reasons.

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20 replies
  1. 1
    Just Some Fuckhead, Thought Leader says:

    Christ Jesus, this site sucks big donkey balls now. Way to go, John. You could have at least gotten some interesting front pagers who could do more than one trick before you went AWOL.

  2. 2
    Fred Fnord says:

    @Just Some Fuckhead, Thought Leader: How can we miss you if you won’t go away?

  3. 3
    japa21 says:

    Richard, I didn’t expect to see you today based on your earlier post. Anyway, glad you put this up.

    Though, as you could probably tell, I work in the Insurance industry, this part of the business is above my pay grade and I appreciate the knowledge you share with all of us.

  4. 4
    J R in WV says:

    Gee, I hope you got a nap between the 7 am post and this one!

    Also, Congrats on the young’en, they’re something to be proud of…

  5. 5
    grrljock says:

    Richard, thanks for another thoughtful entry in your PPACA series. I appreciate them.

  6. 6
    Fred Fnord says:

    The best Silver cost-sharing assistance plans for a single adult will see $500 deductibles and another $1,000 in out of pocket expenses.

    Really? I was just looking at this in California and the best cost-sharing Silver plan (94 AV I think?) had no deductible, $3 copay for primary care, $5 for specialty care, $3 for generic drugs up to $9 for ‘non-preferred’ non-generics.

    Out-of-pocket maximum of $2250, though. That’s $750 more than your $500-deductible-and-$1000-more plan. Interesting.

  7. 7
    JGabriel says:

    Richard, I think I’ve said this before, but I don’t always comment much on your threads simply because insurance is a topic on which I don’t have a lot of knowledge — but I always always read your posts and appreciate the information and analysis. So, thanks again for a good, informative, post on the ongoing ACA implementation.

  8. 8
    Lori Wallace says:

    Pretty sure I’ve only commented here a couple of times, but I wanted to tell Richard that I always read his ACA posts. Always. Much appreciated and please ignore the naysayers. Also, a baby! Congrats on that accomplishment, too.

  9. 9
    Roger Moore says:

    @Fred Fnord:
    I think what you’re talking about is an Enhanced Silver plan rather than a regular Silver. People who are getting big subsidies to the point they’re almost Medical eligible are effectively getting subsidies to their deductibles and copayments as well as to the premiums. Otherwise the plans wouldn’t be affordable even if the premiums were free. Those plans are called “Enhanced Silver”, and they’re part of the way California seems to be trying to deal with the problem Richard is describing.

  10. 10
    Fred Fnord says:

    @Roger Moore: That’s not a California thing, as far as I know. It is what Richard called a ‘cost-sharing assistance Silver plan’: a Silver plan with cost-sharing as well as premium assistance. The 94 AV refers to 94% Actuarial Value. See here and here.

    Here’s an example of one from Indiana, limited to people between 100% and 150% of the federal poverty level. Here is one from Wisconsin.

  11. 11
    richard mayhew says:

    @Just Some Fuckhead, Thought Leader:

    Fuckhead — you know that anything bylined by me has an 88% chance of being a healthcare/health insurance post, 2% general political punditry, 5% soccer/sports and 5% about my kids. If you’re bored of my beat, I’m easy enough to ignore.

  12. 12
    Ruckus says:

    @richard mayhew:
    If he ignored you he couldn’t make snide comments.

  13. 13
    BBA says:

    How easily can an uncooperative state fuck this up? Because they will, regardless of how good a policy it is. As shown by the states that refuse Medicaid expansion even as it bankrupts their own hospitals, spite can be an overwhelming force.

  14. 14
    Sublime33 says:

    I have been following the health care issue for 30 years. There is such a lack of reliable information and outright lies out there and it is great to see objective information as to what is going on.

    In my opinion, the biggest mistake Obama made was that he should have named it “Patriot Care” or “Liberty Care” or “Reagan Care”. I am 57 years old and I never cared who got credit for the change as long as it happened.

  15. 15
    Fred Fnord says:

    @Sublime33: He should have named it ‘Patriot Care’ instead of ‘Affordable Care’?

    Because he DIDN’T name it ObamaCare. He fought that name for years. The Republicans named it that.

  16. 16
    rachel says:

    @richard mayhew: Well, he is just some fuckhead.

  17. 17
    Just Some Fuckhead says:

    16 comments and at least 4 of them were generated by me, Mayhew. You need to get a clue. No one gives a shit about your insider schtick. I guarantee at least half the readers think you are part of the problem and the other half are only concerned whether or not you have any pets.

  18. 18
    Fred Fnord says:

    @Just Some Fuckhead: I have to admit, you are entertaining. It’s so funny to watch a presumably adult man get so angry at someone for writing about health care policy.

  19. 19
    mclaren says:

    Once again, Richard Mayhew is lying to you.

    Let’s run through Mayhew’s lies:

    [1] He regales us with a stupefyingly complex discussion of all the problems and complexities of the minutia of implementing the ACA. What Mayhew doesn’t tell us is that these minutia and complexities were specifically demanded by the health care providers and doctors and hospitals and medical devicemakers and insurers when the ACA was being drafted.

    The reason for all this complexity is obvious: to hide costs.

    The ACA’s implementation is insanely and unnecessarily complex, and all these ridiculously intricate problems arise, because that’s how you hide the grotesque profits the health care providers and doctors and hospitals and medical devicemakers and insurers are making.

    Mayhew doesn’t tell us that he falsely claims it’s “unrealistic” to sweep all this crazy complexity out of America’s health care system and substitute a single-payer nationalized system because talk about “realism” is just a cover-up for a narrow viewpoint that deliberately excludes any political or social changes inimical to the obscene profits of Mayhew’s company.

    [2] Mayhew never addresses the real problem with the ACA — the fact that medical care remains unaffordable even for people covered under the ACA.

    [The] problem is the out-of-pocket cap. The ACA shrinks the out of pocket limit for our guy making $21,006 per year by two-thirds, to about $2395. But is his care now affordable? Maybe not. Plans can mix and match their patient cost-sharing as between the copayments and deductibles that go into the patient share. So, while on average an individual making $21,006 per year will pay only 13 cents per dollar of service provided, in any individual case his out-of-pocket costs might practically bar him from service. Michelle Andrews explained this last year in Kaiser Health News:

    Insurers have some flexibility in how they structure their plans to meet cost-sharing reductions. But in states that will require plans to standardize deductibles, copayments and coinsurance amounts, it’s possible to see how out-of-pocket costs may vary.

    In California, for example, a standard silver plan will have a $2,000 deductible, a $6,400 maximum out-of-pocket limit and a $45 copayment for a primary care office visit. Someone whose income is between 150 and 200 of the poverty level, on the other hand, will have a silver plan with a $500 deductible, a $2,250 maximum out-of-pocket limit and $15 copays for primary care doctor visits.

    That $500 deductible could loom large when the rent bill is coming due. And in many states, there is far less uniformity and transparency, allowing for even greater barriers.

    Even more brutally, Mayhew does a bait-and-switc you by concentrating his discussion entirely on the unfortunate (mostly red-state) sick people caught in the gap between low income but not low enough to qualify to Medicare. So doing, Mayhew creates the false and dishonestly misleading impression that the ACA has solved problems of health care affordability in America and the only issues remaining involve cleaning up the coverage gap twixt medicare and low-poverty-level income.

    But Mayhew is lying to you — because even people on Medicare still often can’t afford basics like needed medication. Medicare doesn’t pay for 100% of medications or 100% of health care procedures. There are still some out-of-pocket expenses, and with drugs and medical procedures in America as insanely overpriced as they now are, even a small percentage of the cost left as out-of-pocket can blow right through your bank account unless you’re rich.

    Mayhew casually speaks about a “$6500 deductible.”

    The average American family has $3800 in their bank account, and that has to pay for mortgage, gasoline, car insurance, and all the rest. How the fuck is the average person supposed to come up with $6500 to pay for some goddamn medical procedure?

    Superwealthy CEOs like Richard Mayhew have no inkling of what life is like for ordinary Americans. Superwealthy rich one-percenters like Mayhew get ferried around in air-conditioned limousines and dine on caviar and lobster bisque at exclusive restaurants and their health care consists of “getting snipped” (Mayhew’s own words) with a vasectomy, probably so his latest mistress won’t be able to file a paternity suit when he dumps her for a younger college student.

    But out here in the real world, the average American is sinking fast into total poverty. This idle talk of “$6500 deductibles” might as well be a discussion of gold-plated superyachts and personal helicopters. Out here in the real world, the average American can’t afford anything close to a $6500 deductible for any kind of medical procedure, because the average American is now having a tough time just affording food:

    … last month, it should have became glaringly obvious that a cheap imports-based economy not only was disastrous for the economy as a whole, but was becoming so for the Big Box retailers themselves. What other conclusion can be drawn from a May 19 CNBC.com report that Wal-Mart’s biggest problem in this miserable economic recovery is its customers? According to correspondent Krystina Gustafson, the world’s Number One retailer has suffered through five straight quarters of declining same-store sales largely because its low- and middle-income customer base is “facing stagnant wage growth and simply can’t afford to spend on discretionary items—or in some cases, food.” As a result, Wal-Mart’s tried-and-true strategy of repeatedly cutting prices is no longer so effectively squeezing revenues — much less profits – out of this solidifying stone.

    Source: “(What’s Left of) Our Economy: Cheap Imports Backfire on America’s Retailers,” 3 June 2014.

    Email John Cole.

    Tell him to fire Richard Mayhew and eject him from this blog. Superwealthy creeps who write intricate articles detailing the nuances of paying unaffordable sums like $6500 deductibles for health care are punks, bitches, and total assholes with no concept of what life is like for real Americans out here in the real world. Clowns like Mayhew belong in the pages of FORBES magazine where they can trade insider-baseball details on tax avoidance with their helicopter-commuting buddies.

  20. 20
    mclaren says:

    @Fred Fnord:

    It’s so funny to watch a presumably adult man get so angry at someone for writing systematically telling self-serving lies about health care policy in a fractically failed effort to justify his unjustifiably outrageous unearned income built on the backs of impoverished sick people.

    There. Fixed that for ya.

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