Balloon Juice - Anderson On Health Insurance Archives

Wave around the Waiver

by David Anderson| September 30, 20138:22 am| 57 Comments

This post is in: Anderson On Health Insurance

In the previous post, there were a couple of good questions about the Arkansas Medicaid “private option” waiver. The big one is would the Bronze plans on the Exchange be effectively useless to someone making 75% of FPL as they could not even look at the co-insurance and deductible as plausible payments.

Here is a bit more news on the Arkansas waiver (amazing what happens when one read’s the application!)

Arkansas will be submitting a SPA in addition to the submission of waiver requests for this Demonstration which includes eligibility limits for the newly covered population, updated cost-sharing requirements and the state’s selection of an ABP. Consumer cost-sharing obligations under the Demonstration will be identical to those under the State Plan for all individuals receiving the ABP. The SPA describing the ABP will include the cost-sharing design for all individuals receiving the ABP. As will be described in the SPA, Private Option beneficiaries with incomes below 100% FPL will not have cost-sharing obligations in year one of the Demonstration; Arkansas plans to submit amendments to the waiver to implement cost-sharing for Demonstration participants with incomes from 50-100% FPL to be effective in years two and three of the Demonstration. Individuals with incomes of 100-138% FPL will be responsible for cost-sharing in amounts consistent with both the State Plan and with the cost-sharing rules applicable to individuals with comparable incomes in the Marketplace. . For individuals with income between 100-138% FPL, aggregate annual cost-sharing will be capped at 5% of 100% FPL ($604 for 2014). Providers will collect all applicable co-payments at the point of care. QHPs will monitor Private Option beneficiaries’ aggregate amount of co-payments to ensure that they do not exceed the annual limit.

Let’s break it down.

Year 1, people under poverty line won’t have any cost-sharing.
Year 2 and 3 people under poverty line will have some cost sharing.
People over poverty line but MA eligible will have cost sharing up to 5% of federal poverty line.

§ 1902(a)(17): To permit the State to provide different delivery systems for different populations of Medicaid beneficiaries. The State is not requesting a waiver of comparability with respect to benefits, eligibility, or cost-sharing.

Earlier in the waiver, Arkansas is making a big deal about dealing with churn as its justification for the “private option:”

Continuity of coverage – For households with members eligible for coverage under Title XIX and Marketplace coverage as well as those who have income fluctuations that cause their eligibility to change year-to-year, the Demonstration will create continuity of health plans and provider networks. Households can stay enrolled in the same plan regardless of whether their coverage is subsidized through Medicaid, CHIP (after year one), or Advanced Premium Tax Credits.

I think this is a good policy justification for this option. We know that income variance is high at the bottom of the economic scale. Some people could have a good couple weeks of overtime at working that knock them out of one program to another, or someone who had just missed qualifying by $22 a week now qualifies after they lost the Thursday morning shift. People shifting between dissimilar plans and dissimilar networks and different providers are a problem because the continuity of their care (to use a highly technical term) sucks.

Wave around the WaiverPost + Comments (57)

Arkansas waiver news

by David Anderson| September 29, 20139:14 pm| 35 Comments

This post is in: Anderson On Health Insurance

CMS approved a waiver for Arkansas for Medicaid expansion. Instead of doing the mechanically simple thing of just expanding Arkansas Medicaid for individuals up to 133% of poverty line, Arkansas will engage in premium support. Individuals who are newly qualified for Medicaid in Arkansas will get a voucher to buy a policy on the Exchange.

The Hill blog:

Under the waiver, Arkansas will expand Medicaid to cover individuals whose income is less than 133 percent of the federal poverty line — the expansion contained in the Affordable Care Act.

But rather than placing those newly eligible residents on traditional Medicaid, Arkansas will offer them private coverage. Residents will be able to buy the private healthcare plans offered in the state’s insurance exchange — the other half of ObamaCare’s coverage expansion.

Iowa, following Arkansas’s lead, has already proposed a similar waiver, and state officials have said Arkansas’s plan could serve as a broader model.

This is big news with a couple of levels if implications:

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First, as a purely technocratic wonk, this is asinine. It is reinventing the wheel and adding some right angles to the second prototype for the hell of it. Medicaid has a system for enrollment that is scaleable and a set of providers who are willing to take it. Premium support will lead to the ineffecient use of a couple billion federal dollars over the next ten years. It will also lead to the waste of a few hundred million Arkansas dollars.

However, screw that. This is a political exercise that will make sure that tens of thousands of people who otherwise would not have gotten coverage will get coverage. A 8% or 10% inefficiency tax that allows people to benefit from Obamacare without calling it Obamacare is a net societal win. Furthermore, since it now builds in a layer of middle men that have minimal real value, there is a rentier class in Arkansas that will now be interested in keeping their income stream. A new advocate for Medicaid will be created which will make Medicaid sustainable in Arkansas.

Furthermore, several other states (Indiana and Iowa) have applied for very similar waivers from CMS. I think they will get the same waiver in the next couple of weeks. Pennsylvania’s expansion request will not be going through the same expedited approval. Pennsylvania wants to do a premium support model, but Gov. Corbett also wants to do some serious poverty shaming and lifetime limitations on both expansion and current Medicaid populations. I don’t think that waiver request has been filed yet, nor do I think that we can draw any conclusions from the Arkansas waiver to the Pennsylvania plan.

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I aint got no Satisficing

by David Anderson| September 26, 20138:54 am| 46 Comments

This post is in: Anderson On Health Insurance

Satisficing is one of my favorite concepts and words. Yes, my name is Richard Mayhew and I am a nerd of unusual size.

And in a just world, satisficing and the related concept of bounded rationality would have made Milton Friedman a very smart, very interesting thinker who had some excellent things to say about the world around us and not the economic intellectual father of the current socio-political superstructure that is around us today.

Wikipedia has a good definition and example:

Satisficing, a portmanteau of satisfy and suffice,^[1] is a decision-making strategy that attempts to meet an acceptability threshold. This is contrasted with optimal decision-making, an approach that specifically attempts to find the best option available. A satisficing strategy may often be (near) optimal if the costs of the decision-making process itself, such as the cost of obtaining complete information, are considered in the outcome calculation.

The word satisfice was given its current meaning by Herbert A. Simon in 1956,^[2] although the idea “was first posited in Administrative Behavior, published in 1947.”^[3]^[4] He pointed out that human beings lack the cognitive resources to optimize: we usually do not know the relevant probabilities of outcomes, we can rarely evaluate all outcomes with sufficient precision, and our memories are weak and unreliable. A more realistic approach to rationality takes into account these limitations: This is called bounded rationality.

And here is a good example:

Example: A task is to sew a patch onto a pair of jeans. The best needle to do the threading is a 4 inch long needle with a 3 millimeter eye. This needle is hidden in a haystack along with 1000 other needles varying in size from 1 inch to 6 inches. Satisficing claims that the first needle that can sew on the patch is the one that should be used. Spending time searching for that one specific needle in the haystack is a waste of energy and resources.

Another useful example is thinking about picking up an attractive person to hook up with as graphed against time at the bar. Early in the night, individuals may be attempting to optimize the matching process and hook-up with the most attractive person who is willing to say yes to them. As the night goes on and failure to score with the 10, the decision process changes until at last call, the decision is to hook up with whomever is willing to say yes. This is slightly different than the decision process described in A Beautiful Mind bar scene, although all of the men in that scene were engaged in satisficing decision making.

I aint got no SatisficingPost + Comments (46)

I’m being oppressed and made better off

by David Anderson| September 26, 20136:50 am| 73 Comments

This post is in: Anderson On Health Insurance, World's Best Healthcare (If You Can Afford It), All we want is life beyond the thunderdome, Assholes, Good News For Conservatives, Teabagger Stupidity, Technically True but Collectively Nonsense

Conservatives are having fun with stories like the following:

Ian Hodge, 62, is one of nearly 13,000 central and eastern Pennsylvanians who will soon need to shop for health insurance because Highmark Inc. is discontinuing their coverage at the end of the year.

Highmark has announced it is withdrawing five of its insurance plans that don’t comply with the Affordable Care Act, key parts of which take effect Jan. 1.

The hash-tag #TCOT is flinging poop under the quip “Obama lied, my health plan died”.

Let’s look at the details as to why Highmark is cancelling these plans:

The new regulations, for instance, prohibit insurers from denying coverage to applicants who have pre-existing health problems….

Highmark’s Classic Blue is a guaranteed-issue plan, meaning the Hodges and other customers were not required to inform Highmark of their health status to get coverage. But applicants couldn’t count on coverage for any pre-existing condition for their first 12 months under the plan….

Under the Affordable Care Act, beginning Jan. 1, all insurers must issue policies regardless of an applicant’s health history.

The guaranteed issue policies were Pennsylvania’s “solution” to some people with pre-exisiting conditions who fell through the cracks. The individual insurance market in Pennsylvania is segregated (until Jan. 1, 2014) into two broad groups. The first is medically underwritten individual insurance. The risk pool for medically underwritten insurance is younger and healthier than typical. The second group is the guaranteed issue group which has older and sicker individuals in it. Jan. 1, 2014 changes this paradigm as all health insurance written on or after that date will be community rated so this distinction no longer serves any purpose.

Mr. Hodge from the article was paying $1041.85 per month for him and his wife for Highmark Classic Comprehensive Blue.

I only could easily find the 2012 product sheet for this plan. It looks like the 2012 version at that rate for a married couple would have an in-network deductible of $3,000 with co-insurance above that at 80% on the next $30,000 for total family potential out of pocket of $9,000. After $30,000 in medical expenses, the plan covers everything after that. Pre-exisiting conditions are not covered for the first year.

That coverage is not too good. It is inadequate and unaffordable coverage under Obamacare regulations. Under Obamacare, the policy above is Catastrophic at best.

Looking back to yesterday’s data dump from HHS, the lowest Gold plan in Pennsylvania for a 27 year old is $205 per month. Given that rates can not vary by age by more than a factor of 3, that Gold plan for Mr. and Mrs. Hodges can not be more than $615 per month per person. Buying as a family will probably reduce that rate to be equal to what they are paying now. This calculation does not include any tax subsidy. Gold would be a massive improvement in coverage over what they have now.

Using the Kaiser Family Foundation Zip code specific calculator, Silver plans are available to a family of 2 in a random Lancaster County zip code for $5,070 under the typical case scenario, total costs for the family of two without tax credits would be no more than $10040 before subsidy. That is significantly less than the $13,000 in premiums the Hodges are currently paying. Throw in the fact that the value of coverage has increased dramatically, the Hodges will be significantly better off.

Stop the oppression by improving the material condition of people….

(updated a math error)

I’m being oppressed and made better offPost + Comments (73)

Time to make the donuts

by David Anderson| September 25, 201311:17 pm| 23 Comments

This post is in: Anderson On Health Insurance

The Donut Hole in Medicare Part D (the prescription drug benefit) is slowly going away. Medicare Part D has four tiers of coverage.

Here is the 2013 benefit design:

Deductible phase where Medicare pays 0% (2013 $325)
Basic coverage where Medicare pays 75% ($325.01 to $2,970)
Donut hole where Medicare pays 2.5% ( $2,970.01 to $4,700) (Medicare has negotiated large discounts with providers)
Catastrophic coverage where Medicare pays 95% of costs ($4700.01 to infinity and beyond)

There is a reasonable non-spite rationale for this benefit design. I don’t think the rationale works well as it was implemented as the donut hole was too high to discourage drug use that could be safely discouraged.

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The idea behind the donut hole in the benefit design was to discourage “over-use” of drugs by the medium to high intensity users while still providing help to people who are truly screwed. This is fairly common benefit design in most health insurance plans.

However the problem is that the donut hole applies to people who most likely suffer from chronic conditions. The idea of a 97.5% coinsurance amount is that it will discourage people from buying unnecessary pills. The problem is that people who are hitting that level of payments need those pills. Discouraging people with chronic conditions from buying the drugs that they need leads to higher long run costs as manageable conditions become unmanaged acute crisis situations.

This is a significant problem with most deductible/co-pay/co-insurance plans.

The deductible/low co-insurance incentive structure makes sense for people like me and my family who are reasonably healthy and have no long term chronic conditions. We have the ability to absorb a one-off hit and we can anticipate that any hit is a one off, isolated event at this time in our lives.

It does not make sense for a college friend of mine. She was/is manic-depressive and her manic-depression was smoothed out when she was taking her prescribed regimen. She was, as most college students are, severely cash constrained. Her insurance had a combined $100 a month co-pay for her medications. Her solution to being flat broke was to stretch out her medication by either splitting pills in half (the more ‘successful’ system) or initially taking a full dose every other day. These systems led to one involuntary mental health commitment and two voluntary mental health commitments.

After her second voluntary commitment, her case manager figured out that the government could have saved several thousand dollars a night if she was able to get her meds for free. And amazingly, the case manager was right and fought like a tiger to get a modified care plan that got my friend her psych drugs at no cost share. The last I heard, my former friend was in a pretty good place at the total cost of $1,200 per year instead of $2,500 a night.

Benefit designs that are good (enough) for most people fail miserably when insurance moves from covering unexpected events to managing chronic conditions. People have relatively narrow time horizons and irrationally high discounts on the future in all cases. People in situations of scarcity are not optimizing complex multi-variate problems of life. They are managing single satisficing solutions with minimal regard to interaction impacts. Putting people who, systemically are costly, at the position to choose rent over needed medication is a good way to save money in year one but spend way more in year two.

Time to make the donutsPost + Comments (23)

The rates are in

by David Anderson| September 25, 201311:37 am| 331 Comments

This post is in: Anderson On Health Insurance

Health and Human Services has released the rates for the federally run Exchange marketplaces in 36 states. They are really good:

http://aspe.hhs.gov/health/reports/2013/MarketplacePremiums/ib_marketplace_premiums.cfm

Here are the big take-aways:

$145 a month for the cheapest Bronze plan for a 27 year old making $25,000 a year is definately affordable
Family coverage at either 2nd cheapest Silver or cheapest Bronze is extraorinarily affordable —
Competition does wonders
Networks matter, some pricing will be higher in outlier counties compared to core counties.

This thing is going to work.

The rates are inPost + Comments (331)

Does that network make my wallet look skinny…

by David Anderson| September 24, 20137:09 am| 54 Comments

This post is in: Anderson On Health Insurance, hoocoodanode

One of the pleasant surprises of the Obamacare exchange roll-out has been reported premiums are coming in significantly below CBO projections. That means two things. The first is that more people will be able to afford coverage as the sticker price is lower, and the subsidy should drop out of pocket coverage costs even more. The second is that the subsidy cost is lower which means the total cost of the program should be lower than anticipated.

Hoocoodanode that markets actually work reasonably well when information asymetries are smoothed out, search costs are lowered, and there is a common framework of understanding?

Shocking. We’ll go below the fold to look at a major driver of lower than expected premiums.

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Premium projections are coming in low for two reasons. The first is that a significant number of new entries and pre-exisiting players are able to price some of their product provider networks at either Medicaid plus a kicker or Medicare plus a kicker instead of standard commercial rates. Medicaid rates are effectively marginal cost rates while Medicare rates are effectively average cost rates for physical health. Commercial rates are whatever the market bears.

This is the immediate and proximate cause.

The root cause is that quite a few insurers are offering “narrow” networks. Narrow networks offer only a percentage of the total providers an insurer has contracted with to members in a particular plan. California has seen some high cost and high prestige providers excluded from all Exchange products becuase the Exchange products are trying to compete on cost.

some premier provider networks also are absent from the exchange — although that decision may have been out of their hands.

Cedars-Sinai wasn’t included in any exchange plans, and UCLA Medical Center’s network also was mostly excluded, Terhune also reports.

The rationale for leaving the providers off many payers’ lists: They cost too much. Cedars-Sinai is among the most expensive hospitals in the nation, based on the list price of its procedures, and UCLA Medical Center’s charges also rank above average.

Going narrow or going skinny (I’ve heard both terms) is a signficant cost saver as the New York Times reported yesterday:

In New Hampshire, Anthem Blue Cross and Blue Shield, a unit of WellPoint, one of the nation’s largest insurers, has touched off a furor by excluding 10 of the state’s 26 hospitals from the health plans that it will sell through the insurance exchange.

Christopher R. Dugan, a spokesman for Anthem, said that premiums for this “select provider network” were about 25 percent lower than they would have been for a product using a broad network of doctors and hospitals.

Narrow networks for Exchanges are a significant cultural shift for insurance carriers that had previusly been focused on the commercial employer group market. There, the network imperative has been to build as broad of a network as possible. The logic behind this drive is that cost is a component of the buy/no buy decision for an employer group. A bid has to be within the ballpark of the other bids to be considered. However cost is not the only driver of the buy/no buy decision. A group whose CEO has a particular cardiologist and chiropracter that she likes to go to is far more likely to go for a plan that includes those two providers than a plan that is 1.7% cheaper but does not include those providers. A group whose employees are concentrated within 10 minutes of a community hospital is far more likely to choose a plan that gives in-network access to that hospital rather than a slightly cheaper plan that does not contract with that hospital. This drive for expansive networks is expensive as commercial carriers don’t want to say no to a provider. They can pass on the costs of any high cost provider that was key in winning a major contract across several thousand groups.

This does not work on the Exchange. The primary modeling assumption has been the Exchanges are offering basically identical products within a metal band and consumers are highly price sensitive because they don’t have a ton of money to begin with, those consumers will be looking for cost as a primary buy/no buy decision point. Networks will be adequate or better, but they will be narrower to drive down costs.

Does that network make my wallet look skinny…Post + Comments (54)

Tide comes in. Tide goes out. You can’t explain that.

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Peak wingnut was a lie.

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FFS people, this was a good thing. take the win.

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Hot air and ill-informed banter

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Wave around the Waiver

Arkansas waiver news