Tennessee’s Medicaid block grant

Earlier this week, Tennessee unveiled a partial Medicaid block grant/shared savings proposal.  I don’t think it will be going anywhere as the proposal has significant legal hurdles but we should look at the high points.

  • Block grants shift Medicaid from an entitlement with open federal match funding to chunks of cash with far less marginal flexibility
  • Tennessee proposal is not a full block grant
    • significant carve-outs
      • dual eligible, foster care and folks with intellectual and developmental disabilities
      • prescription drug spend
  • Tennessee would take on significant new technological and pricing shock risk (think Hep C on steroid problem)
  • Legally, it is likely to be banana-pants so the end result is a lot of billable hours for the attorneys.

With the exemptions, the people who are likely to be under the shared savings proposal are kids, pregnant women and disabled individuals.

Block grants transfer shock risk from the federal government that has no balance budget constraint to states which almost always have balanced budget constraints. Balanced budget constraints bite hardest in economic crisis.
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Churn, baby, churn

At the Health Affairs blog, Jamie Daw, Katy Kozhimannil and Lindsay Admon examine insurance churn among mothers in the time surrounding the birth of a child.

An analysis of the 2005–13 Medical Expenditure Panel Survey found that prior to implementation of the Affordable Care Act (ACA), nearly 60 percent of pregnant women experienced a month-to-month change in insurance type in the nine months leading to delivery, and half were uninsured at some point in the six months following birth

Why does this matter?

  • The health of mom influences the health of the baby
  • Churn from one type of coverage to another is disruptive and costly
  • Medicaid (especially in non-expansion states) has a very short off-ramp for post-partum moms

There is a split in uninsurance of the mother between Medicaid expansion and Medicaid non-expansion states as we should expect by now.

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Fixing Medicare Part D

At the New England Journal of MedicineDrs. Stacie Dusetzina, Nancy, Keating and Haiden Huskamp review several of the possible redesigns for Medicare Part D.  Right now Medicare Part D is not truly insurance.  It is a payment assistance program that has insurance like features for broad segments of the population but there is ongoing catastrophic exposure.  This catastrophic, open ended exposure is becoming more and more important as ultra-high price drugs are becoming more common and more broadly prescribed.

Right now, Medicare Part D has a deductible, then a region of spending where there is a 25% coinsurance paid by the patient, and after that first co-insurance level, a smaller, but never capped 5% coinsurance paid by the  patient. For most people, this is not too relevant as they are not taking $100,000 or more year drugs.  But for the folks who are on $100,000 to $500,000 year drugs and more importantly are on them for the rest of their  lives, it is a significant failure of insurance as it is not protection against a tail risk, but protection against a mid point of the distribution.

There are three proposals to provide some catastrophic protection.  These proposals all have trade-offs.  If we are holding actuarial value constant and providing a catastrophic  limit to the few people with very expensive claims, then the money has to come from somewhere.  And that somewhere is from people who have lower levels of claims or the entire covered population.

Holding lower claim spending benefits constant means higher premiums or a new infusion of federal money.

Medicare as it is currently constructed is a weird set of choices that have their roots in either the 1964 Blue Cross and Blue Shield business model or jello wrestling between Capital Hill and the Congressional Budget Office to get a good enough score. Without supplements, Medicare is not true protection against catastrophic claims. It is usually good enough for most enough, but not good enough for the most unusual. Medicare Part D just shows this even more bluntly than it is evident in the hospital component of Medicare.

Gold is going the distance, going for speed

Gold plans in the ACA are higher actuarial value plans than non-CSR silver and all bronze plans. The benefit design should be better for people with high costs. The trade-off is that these plans have higher premiums. More protection for higher monthly premiums is a standard trade-off. But this is not always true.

  • Gold can have the same maximum out of pocket limit as bronze and catastrophic plans
  • Difference is the speed of hitting the out of pocket max
  • Speed of claims matter

As part of a series of productively procrastinating steps I had taken when I should have been writing a grant this week, I was thinking about risk adjustment under silverloading.  That led me to wonder how many gold plans have a maximum out of pocket limit equal to the maximum allowable limit?  I used Healthcare.gov public use files for 2019 to estimate the percentage of 14 digit Plan IDs at each metal level had a maximum out of pocket limit equal to the 2019 maximum allowed out of pocket costs of $7,900 for a single individual.  In order to get a quick and dirty sense of scope, the unit of analysis is county/plan ID combination for both the denominator and numerator.  If I was publishing this in a peer review space, I would have done some type of weighting scheme.


Roughly a third of gold plans/county combinations have an out of pocket maximum for a single individual of $7,900.  Three fifths of bronze plans have the same out of pocket maximum and all catastrophic plans have the same maximum allowable out of pocket maximum.

There are a couple of things going on here.  The big thing is a combination of distance  (total claims spend) and speed of reaching the out of pocket max varies by metal tier.

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Arizona, MLR and pay-fors?

Charles Gaba is pulling estimates for Medical Loss Ratio rebates in all states. He posted some eye-popping numbers from Arizona.

Individual market MLR rebates skyrocketed from 101,000 enrollees receiving $16.2 million last year to 96,000 receiving a whoping $92.3 million…averaging $959 apiece!
Nearly all of this comes from Health Net of Arizona…operating under the “Ambetter from Arizona Complete Health” (Ambetter, aka Centene, bought out Health Net last year…confused yet?).

It is a single insurer, Centene/Ambetter/HealthNet, that is driving almost all of the Medical Loss Ratio rebates for 2016-2018 that are currently being paid out now. Some folks will be getting checks back that are much larger than the net of subsidy premiums that they paid in.

  • Medical Loss Ratio can be seen as the difference between how an insurer priced and how it should have priced with perfect information
  • MLR rebates to subsidized buyers can be seen as a double dip on top of premium tax credits
  • Switching the landing spot of MLR rebates for subsidized folks to the US Treasury could be a significant pay-for

MLR rebates are paid to policy holders who had a plan during the last year of the three year cycle.  The rebate is a gap filler between the actual claims expense ratio to the floor ratio of 80% in the individual and small group markets.  The rebates are sent to each policy holder in proportion to the total gross premium that they generated for the insurer.  Older buyers with large families who bought more expensive plans get a larger rebate check than a single twenty two year old buying the cheapest plan possible.

This does weird things that we need to think about.

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