Medicare for (what do you mean…)

Austin Frakt and Aaron Carroll at the New York Times Upshot lay out the ten different Medicare for (SOMETHING) plans that are floating out there. They illuminate the trade-offs. They show the choices that the different plans are making.

And then they bring in an expert panel of some of the best health policy and health economic voices to bring some more insight to the challenges. Finally, and best of all, they ask you for your opinions on the major choices.

Below is my preference set as compared to the Medicare for (Something) plans out there.  My big priority is universal coverage.  Everything else is a detail in my mind.  Different values and different judgement will produce different results.

New Mexico goes big and goes small

New Mexico is fascinating right now on the health policy front. They are going big:

New Mexico has been working towards a Medicaid buy-in program for a couple of years now. They have outlined options and weighed some of the trade-offs. Right now an off-exchange only buy-in is the simplest lift but they are thinking about other, more comprehensive and more complex, options as well.

And New Mexico is going small:

The bill passed the house. It will expand the scope of practice for dental technicians to do more. Dental therapists have started to become common on the West Coast and the Mountain West as a way to get some services out into under-served communities including American Indian reservations. Dental therapists should put some downward pressure on provider pricing. It is a step that addresses an immediate need of taking care of teeth, an intermediate need of placing downward pressure on some medical prices, and a long term objective of reducing inflammation which should reduce negative health events.

New Mexico is going big and New Mexico is going small. Successfully changing systems of care require both. And these two things don’t need to be locked together. If you live in a state that can’t or won’t go big, you still likely live in a state that can go small. Little nudges and hip checks are useful correctives.

MLR checks this year

Given the recent news that CSR payments are very likely for Q4 2017 and somewhat likely for all of 2018, I want to reprise a post from September 2018 on Medical Loss Ratios (MLR).

MLR is part of the ACA. The regulation requires insurers to refund customers money if the small group or individual market plans spend less than 80% of net premiums on claims or quality improvement expenses and for large groups, the insurer must spend 85% of net premiums on claims or quality improvement.

MLR has not been a big deal. Insurers quickly adjusted their pricing schemes and provider contracts to minimize their MLR exposure. Individual market insurers had massive MLRs in 2014 and 2015, meh MLRs in 2016 and “normal” MLRs in 2017.

MLR is a minor story this year. It is $76 here and $122 there. If I got a $122 check in the mail, I know I won’t complain but it is not huge income shock and given insurer pricing it is not a common income shock.

However, I am expecting MLR to be a big deal in 2019 for individual market buyers. The big story on the ACA individual market pricing is that insurers massively overpriced 2018. Bob Herman at Axios has done yeoman work

Between the lines: These data suggest the Blues have raised premiums well beyond what they thought they’d ultimately pay to providers….

MLR is based on rolling three year calculation. The Fall 2019 rebates will be based on a “meh” 2016, a “normal” 2017 and a “wicked low” 2018. I think states that had mostly monopolistic insurance markets in 2017 and 2018 (including North Carolina) will be more likely to have significant and widespread MLR rebates to the individual market buyers than states with very competitive markets.

MLR rebates in 2019 will be widespread and they could be large in some states. This is going to be a fascinating economics experiment and an interesting political event.

A normal 2017 will be slightly low 2017 if another $1 to $1.5 billion dollars of CSR payments are eventually recovered by insurers.

Be a good citizen, comment on rule making

The Center for Medicare and Medicaid Services (CMS) sent out their draft Notice for Benefit Payment Parameters (NBPP)-2020 in January. This is the Exchange play book for 2020. It covers how drugs must be covered, what open enrollment looks like, how risk adjustment should work. CMS also asks for advice on two big matters: Silver Loading for CSR payments and auto-enrollment. Comments close tonight at 5:00 PM EST. They can be submitted at Regulation.Gov .

If you have domain specific knowledge, commenting on rule making is good citizenship. Agencies are required to consider advice and comment in their final rules. Sometimes they will look at a comment and say “Yep, we’ve considered it and are still making our original decisions”. Sometimes an agency will go “Oops, you’re right, what we wanted to do is well intention but a pragmatically dumb idea…. let’s revise…..” And other times they won’t look at the comments at all which will get them in trouble when they get sued for violating the Administrative Procedures Act.

Commenting is citizenship. It helps define the world in which we live in. It helps contour the possible. So comment if you can.

I’ve worked on two comments. I have advised several law students as they write an informational comment on Silver Loading. I have also submitted a comment on risk adjustment as I think that CMS is still leaving an opportunity to game prescription drug based risk adjustment due to treatment initiation strategies available and there is a likely big curveball on PrEP coming.

My risk adjustment comment is below the fold.

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Judge tells insurers owed CSR: ASK FOR MO MONEY

Amy Lotven reports on a critical case slowly making its way through the courts. Insurers are suing the federal government for Cost Sharing Reduction payments that they contend they are owed. President Trump cut off these payments in October 2017 in the hope/expectation that it would damage the ACA individual market. It has strengthened the market instead as subsidized buyers earning between 200-400 percent of the Federal Poverty Level are seeing tremendous discounts, the best discounts.

I’ll quote from the article (behind a paywall) for more context:

The U.S. Court of Federal Claims handed issuers major wins in four cost-sharing reduction (CSR) cases, including a class action suit brought by Wisconsin’s Common Ground Health Cooperative in which Judge Margaret Sweeney ruled that the government is responsible for reimbursing plans unpaid CSRs in 2017 as well as in 2018, despite the silver-loading workaround. Sweeney issued that decision on Friday (Feb. 15), the same day she ruled in favor of Texas non-profit Community Health Choices and Maine Community Health Options.
Sweeney had certified Common Ground as a class action in April; as of January there were 91 issuers involved, according to Health Affairs.

Charles Gaba has a good summary of the ruling at

Basically, the judge is saying that while the #SilverLoading workaround is very clever and does solve the problem on paper, it doesn’t make any difference legally or contractually. The federal government owes the insurance carriers the CSR reimbursement payments for 2018 regardless of whether they found another way to cover their CSR expenses… udge Sweeney just ordered that Community Health Choices is entitled to be reimbursed for all of the CSR funds they paid out in 2018 even though they jacked up their premiums to cover that amount.

Everyone can agree that full payment of CSR for the last quarter of 2017 is reasonable. Insurers did not have a chance to mitigate the damage. The shock of this ruling is that the judge is saying that even though insurers were able to (mostly if not completely) mitigate the CSR termination damage in 2018, they are still owed the full amount. This is surprising to me.

I am assuming that this decision will be quickly appealed. I am assuming that this set of cases will eventually make it to the Supreme Court as it is one hell of a huge pot of money under dispute. Nicholas Bagley at The Incidental Economist has been aggressively tracking the legal implications of this series of disputes notes that the mitigation question is fascinating for lawyers:

The proper measure of expectation damages, then, is the full amount of promised reimbursement. That amount will continue to accrue for every month that Congress refuses to appropriate the money. If that’s right, the question isn’t whether Congress will pay the cost-sharing payments. It’s when.

But matters may not be so simple. In measuring damages, the Court of Federal Claims will also inquire into mitigation—a principle that might be familiar to you if you’ve ever thought about breaking a lease on an apartment. Although your landlord can sue you for any rent owed for the months remaining on the lease, he also has a duty to find a new tenant. If he does, you only have to compensate your landlord for the time that the apartment was empty. The landlord has mitigated his losses.

The same principle should kick in here. Silver loading has allowed insurers to sidestep most of the harm associated with the loss of the cost-sharing subsidies. Insurers haven’t hemorrhaged customers; instead, they’ve adapted. Indeed, some insurers are better off now than they were before: as premium subsidies increase, they’ll get more customers signing up for their gold and bronze plans.

In short, insurers have mitigated a large part of their losses. Giving them the full amount of the cost-sharing money wouldn’t put them in the same position they would have been in if the federal government adhered to its promise. It would give them a windfall. Contract law doesn’t require the courts to make contracting parties even better off than they would have been in the absence of a breach.

* * *

That doesn’t mean that insurers will lose. The default rule is still that insurers should be paid what they were promised, and the onus is on the government to prove that they’ve mitigated their losses. That’s not an easy burden to discharge: it’s hard to know what the world would have looked like if the cost-sharing payments had been made, so it’s hard to know whether any given insurer is better off or worse off now that they’ve been terminated. The factual inquiries will be demanding.

Besides a likely SCOTUS ACA case that is not existential to the functioning of the law (a new experience), the outcome of this case will be an intriguing split of benefits. If the ruling stands, insurers will collect a windfall that all accrues to net profitability. A significant portion of that windfall will be distributed to consumers in the form of MLR rebates even as the modestly subsidized (200-400 percent FPL) see great deals. If the government position prevails where 2017 is paid out and 2018 is mostly if not entirely mitigated, then the insurers benefit from a one-off cash infusion and small MLR rebates are paid out.