Keep swimming, just keep swimming

Keep on swimming, keep on calling


Update 1
Keep on calling:

The vulnerable Republicans are getting squeezed hard, so time to pop them like a zit three days before prom.

Call Congress

Medicaid is the key. The AHCA is still cutting $800 billion plus from Medicaid over a decade and this is the point of resistance for the Tuesday Morning Group, a group of 40 to 50 less conservative Republicans who are likely to represent districts that are vulnerable in wave elections.

Let them know that this is important and that killing Medicaid kicks them out of a job in 2018.

With Chaffetz going out for surgery, Ryan can afford to lose 21 votes assuming every Democrat shows up. (Any Democrat who is not in the ICU or at the funeral of spouse and does not vote should be primaried). The House Freedom Caucus might still have two or three No Votes, Rep. Massie from Tennessee is still a NO vote. The Tuesday Morning Group needs to supply at least seventeen or eighteen No votes to defeat the legislation.

Call Congress and tell them what you think…

Double counting: reinsurance and risk adjustment

A friend of the blog raised a very interesting point about the current state reinsurance efforts. These efforts don’t modify risk adjustment coefficients. This leads to double counting of claims leading to risk based payments. This is a major problem with a couple of solutions.

We need to get deep into the weeds of chasing money like a rabbit at a greyhound track.

First, risk adjustment is zero sum at the state level. A dollar that Plan A receives is a dollar that Plan B gives up. Risk adjustment works by assigning a risk score to a collection of diagnoses. That risk score is then multiplied against average premium and a few standardization factors to calculate the individual’s risk value. The company’s risk values are summed and normalized against the state wide risk profile. If the company has less than state level risk, they pay into the risk adjustment fund which then pays their competitors who have more than state wide average risk.

Hemophilia receives a risk score of about 52 times average monthly premium to treat. In a state with an average premium of $500, that means this patient receives a risk value of $26,000 per month or $312,000 per year. A portion of that $312,000 covers ongoing maintenance medication that everyone receives. A portion covers catastrophic costs as a bad bleed can quickly run to a million dollar month.

Minnesota’s new reinsurance program pays a portion of claims that run from $50,000 to $250,000. That means a Hep-C cure will be paid for via risk adjustment and reinsurance. That means the maintenance prescriptions for a hemophiliac will be paid for by both risk adjustment and reinsurance. This means solid tumor cancers will be paid partially for by both risk adjustment and reinsurance.

Double counting is a problem on a market stabilization level and a political level. It needs to be fixed.

When I worked for UPMC Health Plan, the last three years had me focusing a significant chunk of my time on Medicaid risk adjustment. Pennsylvania Medicaid had revenue neutral risk adjustment like Exchange and a high cost risk sharing pool. These two elements of risk played nicely with each other. Risk adjustment was capped to be no more than approximately $75,000. Everything after $75,000 was put into a high cost risk sharing pool where money was spread around to cover unusually high expense cases. A dollar of spend was only ever going to be at risk for pool smoothing purposes once.

Minnesota or any other state that is thinking of using an aggressive reinsurance scheme to stabilize pricing needs to re-calibrate their risk adjustment co-coefficients to prevent double-dipping where the same dollar of spend will be credited to both risk adjustment values and reinsurance. They can also choose to apply risk adjustment corrections to the claims data that is used to trigger reinsurance payments. Both require local technical expertise, political will and time to implement.

As more states think about reinsurance, they also need to think about how they do risk adjustment. There are solutions, they just need to find the local solution that works.

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Time to call the Senate

At this point, the AHCA as revised is on the knife’s edge to get out of the House. The Senate is where the highly anticipated battleground was always going to be. Time to light up their phones.

The great question on policy is Medicaid. There are a number of Republican senators (Portman, Heller are case examples) who represent Medicaid Expansion states whose Republican governors were not on board with the AHCA in March. These are the pressure points.

My read is if the AHCA gets out of the House it solely functions as a vehicle to get to conference committee with whatever the Senate wants to do. So let’s tell the Senate what you think.

Update 1

Call the Tuesday Morning Group and let them know what you think…

Time to call Congress

The AHCA has more lives than a serial killer in a horror movie franchise.

The House Freedom Caucus has an agreement to make the bill worse by allowing states to completely opt out of guarantee issue and essential health benefits.

Steven Dennis of Bloomberg has a good fast analysis of the changes:

Most of the House Freedom Caucus is most likely on board with this bill. That reduces the firm no’s that are not in the HFC down to about 20. The No’s from March need to hear from you again. The unknowns and the shaky yeses need to hear from you.

They also need to be reminded of the following:

There is a minimal blocking coalition of Republican representatives who sit in seats that voted for them and Hillary Clinton. Time to remind them that they can’t survive an electorate that is nine points more Democratic in 2018 than it was in 2016. They know that, but let’s remind them.

So time to call Congress again.

I am convinced that any Republican only health care bill will either pass by 3 votes or fail by at least 15 votes.

Cutting subsidies to spend more on subsidies

That is what the Kaiser Family Foundation is projecting. If Cost Sharing Reduction (CSR) subsidies are eliminated with enough time for insurers to price the change into their 2018 products, the federal government will spend on net more money on Exchange than if they are funded.

How does this happen?

CSR subsidies are narrowly means tested. People who make between 100% and 150% of Federal Poverty Line (FPL) get an actuarial value (AV) bump to 94% of AV instead of the standard 70% Silver plan. People who between 150% and 200% FPL get bumped to an 87% AV plan. People who make between 200% and 250% FPL get bumped to a 73% AV plan. Anyone who makes more than 250% FPL does not get a CSR subsidy.

If CSR subsidies are pulled, insurers are still obligated to provide the CSR bumps. Their choices are to either raise rates or run for the hills. Wesley is the finance director at a small insurer.

Kaiser has projected that raising rates to pay for CSR without receiving CSR subsidies means a 20% index rate increase. This would apply to all buyers of Silver plans. The least expensive Silver plan would increase by 20%. Far more importantly, the benchmark Silver plan would increase by 20%. In some regions, like Alaska, this does not matter, everyone who was subsidy eligible was already receiving subsidies. However in low cost regions like Pittsburgh, subsidies currently fade out for younger buyers around 300% FPL. A 20% increase in the benchmark will qualify these buyers for subsidies that they otherwise would not have received.

This transmission mechanism is why I have not been too worried about CSR for 2018 as the premium tax credit structure provides a lot of protection for people who make under 400% FPL and buy on Exchange. The people who will be hurt will be off-Exchange or more generally non-subsidized buyers and even then carriers who can split their business into an on-Exchange pseudo CSR filing ID and an off-exchange non-pseudo CSR filing ID can provide protection as well as carriers who only operate off-Exchange. The key question has been if the Exchanges can limp to 2018 without CSR blowing them up.

At this point, it looks like the Exchanges can at least limp intact to the end of 2017. Once there, insurers can price in whatever they need to guard against sabotage.

Medical Marijuana, Medicaid and drug testing regimes

Health Affairs has an interesting paper that looks at Medicaid pharmacy spending differentials depending on state medical marijuana laws. It has an interesting finding:

We found that the use of prescription drugs in fee-for-service Medicaid was lower in states with medical marijuana laws than in states without such laws in five of the nine broad clinical areas we studied. If all states had had a medical marijuana law in 2014, we estimated that total savings for fee-for-service Medicaid could have been $1.01 billion

There are two caveats with this estimate. The first is not every state has a medical marijuana law although the number of states with this type of law is increasing. Secondly, Medicaid Fee for Service is a shrinking means of service delivery. More and more states are moving more of their Medicaid population and spending to Medicaid managed care organizations. Managed care increases the impact of the laws diverting prescription drug. A realistic all sources Medicaid estimate is at least double if not triple the fee for service estimate on my back of the envelope guess.

This is interesting as hell. I wonder how full legalization and decriminalization efforts change state spending on prescription drugs as those steps dramatically lower the retail cost of marijuana compared to the medicalization schemas.

More importantly, how does this work in a world of Medicaid 1115 waivers where the states want to test Medicaid beneficiaries for illegal drug use? Are they just testing for everything but marijuana? Are they testing for everything, sending people who ping positive for weed to expensive treatment and costing their Medicaid systems significantly more money due to both treatment and increased pharmacy costs?

How does this work? And should we as a society encourage medication substitution with medicalized marijuana?

I have no good answers for that.

**Bradford, A. C., & Bradford, W. D. (2017). Medical Marijuana Laws May Be Associated With A Decline In The Number Of Prescriptions For Medicaid Enrollees. Health Affairs. doi:10.1377/hlthaff.2016.1135