The House New Democrats Caucus released a letter to the Biden Administration outlining what they want to see in the next healthcare bill. The New Dems have 90+ members that tend to be more market friendly than the Progressive Caucus. Most of their wish list is a repeat of previous draft legislation and if we assume that the intent is to lower the costs of health insurance as paid by the consumer, most of of this makes sense. I want to break down the letter into some general sections.
Really Big Deals:
- Simplifying enrollment for an estimated 4 million people by encouraging states to auto-enroll uninsured individuals who qualify for $0 premium health plans and for 5 million people who qualify for Medicaid or CHIP;
- Capping families’ health costs with permanent expansions of the premium tax credit and other enhancements in the American Rescue Plan aimed at reducing deductibles and other out-of-pocket expenses
Making the subsidy enhancements permanent instead of temporary will, according to the Urban Institute, lead to 4.2 million fewer people being uninsured compared to the 2 year temporary boost that is current law. The big challenge from an economic perspective is that most of the enhanced subsidy money is going to people who already would have bought a plan at the previous subsidy level. The marginal cost to insure one more person is fairly high with the “throw money at the problem” approach.
I am convinced at this point, that the biggest bang for the enrollment dollar is on reducing administrative burden and making it easier for people to enroll. I think that the $80 million dollars that just was announced to support navigators for OEP-2022 will help. We have good evidence that fairly small and cheap informational nudges have enrollment impact. We know that zero premium plans reduce transaction costs for enrollment. We know that automatic re-assignment to zero-premium plans reduce enrollment loss as well. There are steps that the Biden Administration’s CMS can take administratively to reduce frictions. However, those steps are reversible if a future administration wants to either monkey wrench enrollment for ideological or budgetary grounds by imposing new ordeal costs. Writing administrative burden easing rules into laws strengthens and renders that direction far less malleable
Medium size Deals
- Incentivizing states that have not expanded Medicaid to increase coverage to newly eligible individuals with a 100 percent federal match, building on the base rate increase for expansion states under the American Rescue Plan;
- Addressing provider shortages, especially in rural, economically distressed, and underrepresented minority communities, and embracing expanded telehealth and home care under the CARES Act and the American Rescue Plan;
- Modernizing and expanding supplemental benefits and exploring innovative payment mechanisms aimed at eliminating the financial and health burdens that barriers such as poor transportation and internet access have on underserved, elderly, and rural populations and our health care system writ large;
The ARP is throwing massive amounts of money at non-expansion states to expand Medicaid. So far, a few states have explicitly said “thanks, no thanks…” This proposal would throw permanent money at the non-expansion states. If it works, this is probably better than creating a stand-alone federal program to put people into CSR-Silver plans who earn under 100% FPL as the evidence so far is cost-sharing is way higher for marginal ACA beneficiaries compared to marginal Medicaid Expansion beneficiaries. I don’t know if this will actually convince a state to expand, but it is worth a shot, in my opinion.
COVID has unleashed a massive transformation of care delivery on an emergency basis. We need to figure out what things worked well and what things we should keep on doing. Clarifying rules and payment policies in legislation would be quite useful. We also have a very fragmented non-person centric social service delivery system, so if there are ways to make a few solveable obstacles less of an impediment, this is probably a good thing.
Little but useful things
- Embracing and fostering existing value-based models which were permanently authorized under the ACA and have demonstrated the ability to simultaneously improve quality and reduce costs;
- Exploring other innovations, to increase choice and competition and close coverage gaps;
- Improving coverage and cost transparency for patient care, and streamlining the prior authorization process;
- Expanding health care savings and spending vehicles for workers and families.
Tax deductible savings vehicles are mostly subsidies for the healthy and well-off. I can see an argument that says that high deductible health plans with their tax advantages should be redefined to be “low actuarial value health plans” with the same tax advantages if we want to operate in a paradigm of patients as consumers bringing market discipline to the medical markets. I don’t think that paradigm is a particularly good one, but if we are to accept that paradigm, then getting rid of the idiocy that someone who buys an 82% AV Gold plan qualifies for a fairly valuable tax break but someone who buys a 61% AV Bronze does not because of benefit design considerations makes sense.
- Stabilizing ACA marketplaces and reduce premiums with a national reinsurance program as proposed in the State Health Care Premium Reduction Act;
Reinsurance as described in the HR 1425 is a caliper reinsurance program. It would have the federal government pay a percentage of claims between a floor level and a ceiling level. The program would be funded at $10 billion dollars per year and effectively it lowers premiums by about $10 billion dollars as premiums no longer have to cover all claims. It will lower federal spending by even more than $10 billion dollars per year as the individual contribution amount is constant and all of the gain accrues back to the treasury. People who were marginally subsidy eligible under ARP enhanced subsidies without reinsurance would become marginally subsidy ineligible with reinsurance.
This is a solution in search of a problem.
Now if the House New Dems or their policy advisors think that there is a competition problem in the market because there are pockets of people who have predictable, high net of risk adjustment and catastrophic reinsurance residual costs that render them known to be massively unprofitable to cover AND easy enough to dodge then a targeted reinsurance program could make sense. However the caliper reinsurance program proposed in HR 1425 does not operate with that assumption.
I am having a hard time figuring out what the point of reinsurance as outlined in HR 1425 actually is intended to do.
Overall, this is a policy focused opening bid that attempts to resolve real problems with plausible policies.