Medicaid Expansion (Pt. 1)

Right now Medicaid expansion is going fairly well. People who were previously eligible but not enrolled are signing up, and people who are newly eligible in the non-stupid states are signing up.  States with Democratic control have overwhelmingly expanded Medicaid eligibility and states with Republican control where the faction of Republicans who can count to eleven with their shoes on are the dominant players are expanding Medicaid.  Arkansas has pioneered the “private option” for Medicaid enrollment, and they look like they should be good to go on Jan. 1, 2014.

States have a variety of options as to how they manage their Medicaid programs.  States can either act as an insurance company by setting up provider networks, paying claims, researching denials and appeals, and providing member service or they can set up a series of  non-state managed care organizations.  Most states have gone the managed care route.  Expansion quality will vary across states.  The states that have been planning for expansion the longest should have the easiest time.  Ohio will most likely have a rough kick-off because they decided to expand only a few weeks ago. Michigan was also a late decider, but they are not expanding until April 1, 2014 so they should have a smoother launch than Ohio.

The managed care organizations have a significant number of tasks that need to be done for a successful expansion.

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Playing games in the corridors

Where I live, there are six health insurance entities offering Silver plans on the Exchange.  They can be divided into two groups.  The first group contains local, regional and national players who all have a history of offering large network commercial products.  Their Silver products are split between general networks and narrow networks that usually contain 50% to 60% of the general network’s providers.  The narrow networks all contain the regional high end specialty hospitals.  If I had to buy insurance from the Exchange for my family, I would expect to pay $650 to $700 per month for a narrow Silver before subsidy. 

And then there is a single insurer in the second group. It has a long history in the region selling large network commercial products.  If I had to buy their narrow Silver Exchange product, I would be looking at $447 or $463 a month as they offer two slightly different flavors of narrow Silver.  The second narrow Silver plan sets the subsidy rate in the market.  Their broad Silver price point is within a couple bucks of everyone else’s broad Silver. 

$100 of the differential can be explained by the super-narrow network that is being offered.  None of the regional specialty hospitals are in the network, most of the central city hospitals are out of the network, and the individual providers are extremely thin as well.  Reimbursement rates are similar to everyone else’s.  The remaining one hundred dollars in differential looks odd to me.  This non-obvious price differential suggests the possibility of a loss-leader strategy Read more








What she said:

I’m in between OMG got to get things done deadlines right now, so I just want to refer to a great post by Adriana McIntyre:

I’ve argued in the past that delaying the individual mandate for a year wouldn’t provoke a full death spiral; it would be an uncomfortable hiccup, but it’s not enough time for the whole market to unravel. More importantly, there are deep-in-the-weeds protections baked into the Affordable Care Act: risk adjustment, reinsurance, and risk corridors.

These programs—collectively called the “three Rs”—aid insurers if they wind up enrolling a population that is sicker and more expensive than projected. They do a crucial bit of policy work: we want plans competing on efficiency and quality, not their ability to attract the healthiest patients.

The programs have related functions, but risk corridors will play the biggest role if the individual mandate does get delayed. Their entire purpose is to stabilize premiums during the first three years of Obamacare, when it’s especially difficult for insurers to price plans.

Here’s how it works: exchange plans (QHPs) projected how much their risk pool would cost overall in 2014, their “target” cost. If they’ve significantly miscalculated—or, say, if a mandate delay causes adverse selection that they couldn’t have predicted—HHS will take action:

The risk corridor mechanism compares the total allowable medical costs for each QHP (excluding non-medical or administrative costs) to those projected or targeted by the QHP. If the actual allowable costs are less than 97 percent of the QHP’s target amount, a percentage of these savings will be remitted to HHS (limiting gain). Similarly if the actual allowable cost is more than 103 percent of the QHP’s target amount, a percentage of the difference will be paid back to the QHP (limiting loss).

There are transfer systems in place to compensate health plans that have very sick populations with funds from both health plans that have very healthy populations and the general fund (this was one of the taxes batted around but not changed during the debt default end game). This will keep health plans in business if the mandate does not work too well the first year. There are some loopholes that create perverse incentives for health plans that I’ll outline in a later post.








Dessert Topping and Floor Wax

Health insurance in the United States has a structural history of indemnity insurance.  The philosophical underpinning is that health insurance should be sufficient to pay for the activities and procedures that get a worker back on his feet and back to work after an accident or unexpected illness.  It aims to intervene in short bursts without long sustaining interventions. The goal is to get someone back to health after a temporary downturn.

This plays out in benefit design.  For instance, Medicare (which follows the indemnity model) covers the first sixty days of hospitalization at a high benefit level, the next thirty at a medium level and then the regular benefit runs out.  There is a lifetime reserve of 60 days where Medicare effectively pays 50% of the base rate, and after those are exhausted, Medicare covers nothing.  My personal insurance covers 25 physical therapy sessions a year.

These are limited, acute situations that are being covered.  They are not long term nor chronic conditions where improvement is a low probability event.

Medicaid is not like Medicare or most private health insurance in this country. Medicaid is schizophrenic in its benefit design.  For relatively healthy and young people who have Medicaid, it is functionally similar to Medicare or any other insurance plan.  People go to the doctor’s office, get a prescription, and perhaps pay a small co-pay and then go home.  There is nothing unusual in Medicaid being a dessert topping here.

However, Medicaid serves a second function that no other health insurance program serves.  It is the payer of last resort for long term care in this country. Medicaid eligibility for nursing home care is fairly restrictive — people who qualify can not have a significant number of assets in their name.  Medicaid is also a floor wax.

The federal floor is $2,000 in personal assets, although states may allow higher limits, and the signing over of most personal income.  For instance a 67 year old on Social Security and needing Medicaid for nursing home care can expect to sign over 90% of their check to cover a portion of their nursing home expenses.

This dual nature of Medicaid instead creates a few odd rules.  The first is the look-back rule.  Since nursing home care is extremely expensive, Medicaid does not want to pay unless there is a clear need.  If an individual with significant assets begins to transfer the ownership of those assets to family members right before Medicaid payments begin, Medicaid will go after those assets as a transfer meant to hide assets.  Estate recovery is similar in that Medicaid can go after an estate for assets that it did not know about to cover the costs of nursing home care.

Medicaid’s ability to do so is restricted to individuals over the age of 55 and to those who get long term care.  The goal is to provide an incentive for people to pay for their own long term care via either self-funding or the purchase of private long term care insurance.

I don’t think the MA expansion changes these rules.  Individuals over the age of 55 who get regular medical coverage won’t have to see their assets or income attached.  Individuals who receive nursing home care will see Medicaid administrators going after assets and income streams if those exist.








Young adults and their parents

Ronnie Pudding in comments last night asked a good question:

Aren’t most of those young people covered by their parents’ plans?

The keeping a young adult on a parent’s group policy  is a middle and upper middle class policy sweetner. It is not a comprehensive policy to actually address access to insurance among those who can’t afford it.

NBC News relays the numbers for 2012:

Last year, an estimated 7.8 million adults between the ages of 19 and 25 were able to either join or stay on their parents’ plans, according to the Commonwealth Fund’s 2013 annual tracking survey. 

In 2011, the Census Bureau projected 21 million people between 20 and 25, and making some rough assumptions, there were probably 25 million people between 19 and 25 in 2011. 

So there are roughly 17 million people between the ages of 19 and 25 who were not receiving health insurance coverage through their parents in 2012. 

The most important thing to remember about the allowance of dependents to stay on parental group health insurance until the month of the 26th birthday is that it assumes a parent or parents is participating in group health insurance.    Furthermore, it assumes that the parent is able to afford the additional premium to keep their kid(s) on their health insurance past the 19th birthday.  I know at my company, the basic employee plan costs a low wage employee $17 a paycheck for self-coverage, but as soon as anyone is added, the per-paycheck amount increases to $102.  For middle and high wage employees, the employee costs are higher. 

If a parent is running naked and had the kids on CHIP or Medicaid until they aged out, the parent can’t help.  If the parent was on Medicaid or Medicare or was dual eligible for Medicare and Medicaid, the parent can’t help.  If a parent and a young adult don’t have a working relationship where health insurance is not a means of control, the young adult may not accept help even if the parent can provide it. 

Not all of the 17 million young adults are running around without health insurance.  Some get it through their jobs, some get it as they enlisted in the military, some get it through half decent college plans, some get it through the individual market, some qualify for Medicaid (depending on the state) and more will qualify for Medicaid in nine weeks.  The sweetner of keeping a kid on a policy is as much a shifter of coverage instead of a provider of coverage as it keeps some people off of Medicaid or the individual market or away from really bad employer provided health care.  There is a significant number of young adults who don’t have coverage today because they can’t get on their parent’s non-exisisting plan who will be looking to buy coverage over the next few months.