I’m not tired of winning

Are you tired of winning? I’m not

Next fight is to make sure CMS and the Trump Administration do not sabotage the exchanges and avoids approving horrendous 1115 Medicaid waivers.

And yes, I am big footing Doug

States defining EHBs are not a show-stopper

Nicholas Bagley at the Incidental Economist has a good piece on the chaos that punting the definition of Essential Health Benefits.  I think he gets it wrong in his conclusion though:

The amendment tells each state to define what counts as essential within the state. State-defined benefits will then set a floor on what insurers can offer, arresting the race to the bottom…..

However you feel about the policy, though, the manager’s amendment is troubling. Start with its irresponsibility. The new rule would apply as of January 1, 2018. But insurers have to create and price their health plans within the next few months in order to get them approved prior to the start of open enrollment. They don’t know which services their states will say are essential and they don’t have time to wait around while their states bicker about it. Insurers are likely to walk. All of them. The individual market in 2018 will be a ghost town.

He is right.  Insurers have to submit their 2018 plans for initial approval in late June.  They have spent years now learning by doing in the individual market.  Most insurers are making fairly modest tweaks to their benefit designs, their networks, their disease management strategies and their pricing.  At this point, submitting a mildly tweaked clone of a 2017 plan is not a back breaking amount of effort.

A brand new set of Essential Health Benefits is a massive change in the work effort. Networks would need significant additions if new benefits are included.  Networks would need to be examined to identify providers that could be dropped if the actuaries and analytics teams determine that they provide now non-essential benefits and are a magnet for adverse selection.  Actuaries would be re-running their pricing models to determine what types of deductibles and other cost sharing is needed to get to a sell-able product.  The disease management team would need to shift priorities and resources as the new EHBs will give them a new profile of diseases to manage.

When insurers were building out for the October 1, 2013 launch, exploratory efforts started in 2011 and 2012.  Significant building started in the fall of 2012.  I was locked into my unhappy place to do Exchange network design and provider configuration in the second week of January, 2013 and stayed there until November 2013.

I don’t think the work load would be as severe as launching the Exchange in the first place.  But I know it is more than a 10 week project.

However there is an easy punt.  States could legislate that for the 2018 Benefit Year, the essential health benefits for the state are the same as they were for 2017.  At that point, 2019 EHB’s could be debated with enough time for insurers to actually build something.


AHCA, HSA and incoherent policymaking

I am not a fan of HSA’s.  They are a good tax shelter to healthy people with high incomes.  They can be used to cushion a one-off shock of catastrophic medical events but they are useless in reducing the cost burden of either repeated catastrophic events or chronic conditions.  At best, in those cases, it is a back door subsidy through the tax code to slightly reduce out of pocket costs where the people who get the most help need it the least.

But there is a coherent theory of change with the use of HSA in both a single year and over a lifetime.  The single year theory of change is that high first dollar expenses will lead to lower utilization with minimal real health consequences.  The lifetime theory of change is that an HSA can be built up while an individual is young and healthy and spent when an individual is old and sick.  It prefunds some of the expected health cost obligations on an individual level.

In the original version of the AHCA, the subsidies were set up so that they could be split.  If a person found a policy that cost less than the subsidy, the remaining portion of the subsidy would be deposited into an HSA.  This makes a decent amount of mechanical sense.  The young and healthy people would buy dirt cheap policies and deposit a significant amount of the subsidy into an HSA.  Over time, the HSA would grow until the cohort of people who were once young, healthy and cheap to cover are no longer young, no longer healthy and no longer cheap to cover.  At that point, the savings they had accumulated in their HSA would be available to pay for either care or premiums.

There is a major issue of founder’s debt in this scheme but if we handwave away the problem that killed Social Security privatization in 2005,it is mechanically coherent.

The Monday Manager’s amendment took away the ability of a subsidy to be split between a premium and the HSA.  This was done to get more anti-abortion votes on board.  It will have two effects.  It will limit choice as insurers have no reason to price their products underneath the subsidy point. The second is that it completely destroys the mechanical theory of change for an HSA system.  People can’t use tax advantaged dollars to pay part of their first dollar expenses in the current year.  And more importantly, the young can not partially prefund their health care expenses when they become old as they can’t rollover a partial subsidy into their HSA.

There is no coherent policy thought here.  It is an absurdity


Good news

Right now the whip counts are going in the right direction. New York Times is up to 31 Republican No’s. I am reluctant to have too much faith in that number as a good number are House Freedom Caucus who can be bought off by making the bill atrocious through provisions that will get stripped in reconciliation. But every minute that they have to spend defending this monstrosity of a bill is a win for liberals, progressives, Democrats and people who either currently need or may at any point need the protections of the ACA.

I don’t know if we’re going to win, but we’re doing a whole lot better today than I thought we would have been on November 10, 2016.

If you have a chance, call Congress.

If you have a solid No, thank them. Their interns will appreciate it.
If you have a lean No, remind them they really don’t want to throw pregnant women off of coverage nor grandparents out of nursing homes.
If they are a solid Yes, remind them that this bill has 17% support in the general public and under 40% support in Republican circles and that 2018 is not that far away.

Update 1

Feedback works people. Let Congress know that their jobs are at stake because our lives or the lives of our friends are at stake.

The individual market under AHCA V2

This is going to be a wonky, speculative post as to what the individual insurance market could look like under the AHCA as rumored to be as of 0030, March 23, 2017. I want to speculate about how insurers would do their plan designs.

The major policy planks that would influence plan design are the following:

  • Guarantee issue at a universal price (community rating)
  • No Essential Health Benefits
  • No actuarial value requirements
  • 5:1 premium rating
  • Risk adjustment is either ineffective/easy to game or gone
  • Fixed, age based subsidies
  • No ability to transfer surplus subsidies to HSA

Smart insurers will bifurcate their product design.  They can’t underwrite their way to a healthy risk pool so they will use benefit design to segment it instead.

The first stream of product design will be aimed to cover very little.  The primary objective of these plans are to be priced at the subsidy point.  They will be very narrow networks with no major academic medical centers involved; their benefits will be designed to drive away sick people with chronic conditions.  For instance, asthma inhalers or insulin or Epi-Pens might not be covered.  Hep-C drugs would not be covered.  Maternity care would not be covered except after a $15,000 stand-alone deductible. They will use donut benefit designed principles where the first couple of PCP visits are no cost sharing but everything else comes with $300 co-pays and $20,000 deductibles.  Utilization is designed to be very low and the population that will choose these policies will have to be very healthy.

The selling point for this plan is that it is free out of pocket after the subsidy AND it is sufficient to not incur the continuous coverage 30% premium penalty.

For the 50% of the population that drives 3% of the spend, this will be sufficient for most people as long as they don’t get hit by a bus nor come down with cancer during the policy year.

The other path of coverage is a full service insurance for the sick.  It is a privatized and non-inclusive high cost risk pool.  It will offer a network with top tier hospitals, it will cover chemotherapy.  It will cover the cost of chronic disease management.  It will look a lot like the insurance people get from their jobs.  It will be massively out of reach for most people with chronic conditions as the subsidies will be grossly inadequate and the cost of care for some conditions are more than half the median income of an American family.  But “access” to a good policy will be there.

There are a lot of moving parts so this is purely speculation but if I was working for an insurer, that is the strategic choice that is clear given the rules of the AHCA.

ACHA EHB CBO state of play

Right now there are three primary possibilities for the ACHA tomorrow:

1) No vote is taken as more wrangling and tweaking occurs
2) Vote fails as the combination of Tuesday Morning Group Republicans and the House Freedom Caucus vote against the bill from both ends of the Republican caucus. This is where we were most likely to have been at at 1800 EST on March 22, 2017
3) ACHA advances as the House Freedom Caucus gets a major policy concession, the elimination of Essential Health Benefit requirements.

#3 is what I want to discuss. It would produce a massive cluster. The bill needs to go through the Senate as a reconciliation bill with several significant requirements. One of those requirements is the items are germane to the budget. Since the other parts of the bill have stripped the link between premiums and subsidies, lower premiums are not germane to the budget. It will get stripped.

More importantly, the optics will look ugly. The Congressional Budget Office

If there were no clear definition of what type of insurance product people could use their tax credit to purchase, some of those insurance products would probably not provide enough financial protection against high medical costs to meet the broad definition of coverage that CBO and JCT have typically used in the past—that is, a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals.

IF Essential Health Benefits are dropped from the bill, the CBO will project that insurers will respond by offering very skinny benefit packages (no maternity or substance abuse inpatient services for instance as both qualify as high cost events) that are targeted to be priced at precisely the subsidy value. If there is no regulation as to what a carrier needs to include with a given maximum out of pocket requirement, two things will happen. A lot of people who otherwise would not use their subsidy would use their subsidy. And most people who are buying mostly on price will be buying policies that the CBO does not deem to be insurance.

Jed Graham has been bird-dogging this angle hard:

Because the GOP bill would mostly retain ObamaCare coverage rules, insurance would be unaffordable for lower-income and older adults with the new, smaller tax credits on offer, so some 30 million people wouldn’t claim the GOP tax credit averaging $3,000 in 2020 and rising with inflation. That would add up to more than $600 billion in unclaimed subsidies through 2026, or roughly the same $600 billion amount by which House Speaker Paul Ryan’s plan cuts taxes. Those unspent subsidies go a long way to explaining why CBO found that the American Health Care Act would reduce deficits by $323 billion over a decade.

So the end result if Title 1 is the price of passage is the following:

  • Guarantee failure in the Senate
  • Adds to the deficit immediately
  • Adds millions more people to the ranks of the uninsured as defined by the CBO over and above the 24 million that is the current score

/Dave Anderson +3

Update 1:
And it looks like Option #3 is on the table


Update 2

Dave +3.5

Health Policy notes

Just a few points as everyone should be calling their House representatives right now.

First, Kaiser Family Foundation is looking at the implied deductibles of the AHCA compared to the ACA:

Secondly, this is under-reported this week, we need to be aware that attempts to lower the cost of care in Medicare will be made much more difficult under this administration.

The CMS has delayed the expansion of a major bundled payment pilot, Comprehensive Care for Joint Replacement, and the implementation of its bundled payment initiatives for cardiac care from July 1 to Oct. 1, 2017, according to an interim final rule posted to the Federal Register. It also delayed, for a second time, the effective date of a final rule laying out the implementation of CJR and other bundled payment programs, from March 21 to May 20, 2017.

The agency also delayed its Cardiac Rehabilitation Incentive Payment Model and is also weighing whether to push back implementation of all bundled payment initiatives even further, until 2018. These programs are mandatory, and different from the voluntary Bundled Payments for Care Improvement initiative, which is not affected by the interim rule.

So get off of this blog, and start calling Congress.