Iowa is covered

The Des Moines Register reports that Medica is planning to stay in Iowa. They are requesting a 43% rate increase for the individual market.

“When you find yourself as the only ones between people getting access to care and people not getting access to care, your view of the situation becomes very different,” Medica Vice President Geoff Bartsh said in a prepared statement. “We’ve filed with the intent to provide access to insurance for all Iowans, whether they are farmers, small business owners or other individuals who need coverage.”

The relatively small, Minnesota-based carrier told Iowa regulators Monday that in order to stay in the market, they would need to increase premiums by an average of 43.5 percent….
Monday was the deadline for carriers to file proposed rates for individual health-insurance policies in Iowa for 2018. Medica was the only carrier to file, state regulators said.

I was wrong on being wrong. Iowa is now a single carrier state. There are no risk adjustment problems. The only risk that Medica is bearing is that their actuaries are projecting the state market wrong or there is a cavalcade of clown cars crashing. It is a rational solution to a market design problem.

The single carrier can raise their rates high enough to cover this catastrophic claim while the post-subsidy price is low enough to actually attract normal risk as well. The off-exchange market can be competitive especially if the single on-Exchange carrier splits their filing IDs so they can use different actuarial assumptions for a more normal market.

I am not seeing anything saying that Medica is splitting their plan into an on-Exchange entity and an off-Exchange only entity. So the people who are not subsidized will be paying a lot more for their insurance.

They also need to change their strategy. In 2017, in all counties in Iowa, they offered two Silver plans. The two Silver plans have the same regulatory actuarial value at 70.7%. The two plans have minor differences in price. For a 40 year old in Warren County, there is a $6 spread between the least expensive and the new Benchmark Silvers offered by Medica. With the price increase, that will lead to a $9 spread. Medica should offer a low actuarial value plan at 66% or 67% AV with a higher deductible and keep one of the two current plans as the actual benchmark. This will lead to s bit less price shock for the off-Exchange buyers and a better deal for subsidized buyers.

The last thing of interest to me is that this makes the 1332 waiver that Iowa wants as a “rescue mission” even more contradictory in their assumptions.

There are four major guide posts for a 1332 waiver. The waiver must provide at coverage at least as comprehensive as the baseline ACA, with cost sharing protections at least as good as the ACA to at least the same number of people at no more net federal costs than the ACA.

Iowa’s argument is one of choosing a favorable counterfactual. Their counterfactual will be that their plan will meet the coverage requirements of at least as good for as many people as the ACA if one assumes that the ACA will cover no one on the Exchange because there will be no insurers on the Exchange. That is a plausible counter-factual. It is one that can be defended with a straight face.

However, let’s think about the implication of that counterfactual. In this scenario, the ACA will cover no one. Covering no one means the federal government spends no money….

Iowa has a lot of money that could be available for state innovation or BHP programs with Medica staying in the market. But now they can’t meet the qualification that the cost sharing be no worse for people under a 1332 than under the ACA. If Iowa continues down the path of a 1332, there will be even more lawyers.



Show me the waiver

The California State Senate passed the single payer bill. This is hopefully the start of the process of exploring what that actually means and how it can actually be done in a state with resources and technical sophistication.

Michael Hiltzik in the LA Times identifies the key implementation challenges:

Under the Senate bill, the “Healthy California” program would take over payment for almost all medical spending in the state. It would absorb funding currently going to federal and state programs, and relieve employers, their workers and buyers in the individual market of premiums, deductibles and co-pays….

They need multiple waivers from the federal government to refashion Medicaid (known in California as Medi-Cal), Medicare and other federally funded health programs and redirect federal dollars into their own systems….(emphasis mine)

Show me the waivers.

If there aren’t waivers, this plan is vaporware.
Read more



States, single payer and recessions

New York and California are both advancing single payer plans through their legislatures. I have a lot of questions. They both assume incredible waiver authority will be given to them. These hypothetical waivers would direct federal program funding** to a state operated pass through entity to pay for healthcare. But each of these proposals will rely on some state level general taxation.

How do these programs work in a recession?

Depending on how one does the counting, between forty six and forty nine states have a balanced budget constraint. California and New York have balanced budget constraints. There is wiggle room for a bad year or two on the margins but it is incremental.

State tax revenue tends to be cyclical. Consumption and income taxes tend to go up when the economy is growing and down when the economy is in a recession. California heavily relies on capital gains taxation. New York relies on taxing Wall Street bonuses. Both of those are cyclical revenue sources.

Healthcare demand is responsive to recessions as well. Bad times lead to fewer elective surgeries and for more things to be deferred until they really are needed. The primary channel for that is through the increase in cost-sharing. The California and New York proposals don’t have the cost sharing that could shift demand in time.

So my question is what happens to a state with a reasonably strong balanced budget constraint and state run single payer when there is a significant recession? Demand and costs will stay roughly constant. Revenue crashes. This dynamic opens a big financing gap. That gap must be closed. The methods to close that gap are massive provider payment cuts, increased taxes (which is probably a bad choice on a cyclical basis), increased cost-sharing, eliminating some covered services or borrowing for operational reasons. States have some wiggle room to borrow for operational costs but they don’t have the ability to borrow 20% of their operational budget in a year for several years straight. Is it reasonable to assume that the states can access federal fiscal capacity to borrow as they have already accessed all federal healthcare money in a hypothetical waiver?

How does this work in a recession?

Help me out here, please!

** By the way, does that federal waiver money come with Hyde restrictions?

*** Any state single payer proposal post should always end in a Cato-esque “ERISA delenda est”



California single payer

California is studying a single payer system. It is doing the homework to make explicit the assumptions that are needed to make the system work. Modern Healthcare has some details:

SB562 would guarantee health coverage with no out-of-pocket costs for all California residents, including people living in the country illegally. The state would contract with hospitals, doctors and other healthcare providers and pay the bills for all residents similar to the way the federal government covers seniors through Medicare.

The measure envisions using all public money spent on healthcare — from Medicare, Medicaid, federal public health funds and “Obamacare” subsidies. That’s enough to cover about half of the $400 billion cost, according to the legislative analysis.

The rest would come from higher taxes on businesses, residents or both. It would take a 15% payroll tax to raise enough money, the analysis said.

Matt Bruenig makes one very good point before I want to look at some details:

After the implementation of single payer, the report says, health expenditures in the state of California would total $400 billion per year, or 15 percent of the state’s GDP. This is 3 percentage points lower than the share of GDP the US overall spends on health care.

I have a couple of questions about the finances.

Does the analysis assume or not assume the AHCA will be passed? If it does not assume the AHCA, there is a potential $10 billion Medicaid annual gap in the financing. More importantly it is assuming some incredibly complex and currently not authorized in law much less by rule making waivers.

What happens when there is a recession? California has a balance budget constraint. Wage and capital gains income taxes tend to be pro-cyclical. They go up in good times and crash in bad times. How is this program financed in bad years?

Finally, we need to look at the distributional fight inherent within universal access programs. Single payer is exceptional for the fifty two year old making $11 an hour with either no benefits or Bronze level benefits. It is not as good of a deal for a twenty nine year old independent contractor making $39,000 a year who has a cheap policy in the individual market. It is a really bad deal for the mid-40s couple making $200,000 with exceptional coverage through work.

The American political system is most responsive to people who have a lot to lose, people who have power and people who can mobilize significant resources. In this case, that is an apt set of descriptors for the mid-40s couple making very good money.

Single payer is hard. California is trying to make explicit the trade-offs needed to get a single payer system off the ground. There are choices to be made with winners and losers from each choice made. And each set of people whose current situation is changed for the worse will scream.

Update 1 And oh yeah, how does this play nicely with ERISA, the controlling law on most employer sponsored benefits including health insurance?



The Republican Health Care Plan: ER’s For The Poor

In their ongoing effort to make America sicker and to ensure that more Americans die before their time, Trump and his Republican party have decided to spend more money to cover fewer people less well in Florida:

The shift involves funding that the federal government provides to help hospitals defray the cost of caring for low-income people who are uninsured. Under a deal with the State of Florida, the federal government has tentatively agreed to provide additional money for the state’s “low-income pool,” in a reversal of the previous administration’s policy.

The Obama administration balked at providing more money to help hospitals cope with the costs of “uncompensated care” for people who could be covered by Medicaid. If Florida expanded Medicaid eligibility, the Obama administration said, fewer people would be uninsured, and hospitals would have less uncompensated care.

This is, of course, not a health care policy. It’s simply the latest accomplishment in the fundamental goal of Republican politics since 2009:  anything the Black guy did must be undone.

“Florida is just being paid by taxpayers not to expand Medicaid,” said Andrew M. Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services from March 2015 to January of this year. “The low-income pool is essentially a slush fund,” Mr. Slavitt said, “and it’s a really inefficient way to pay for medical care.”

But hey, maybe it could it work, right?

Come on! This is the Florida Republican establishment we’re talking here.  If it ain’t nailed down, it’s getting stolen:

Two House Democrats from Florida, Debbie Wasserman Schultz and Kathy Castor, said that after receiving the commitment of federal funds, the Florida Legislature was now moving to adopt a budget that includes cuts in state Medicaid spending. “It’s outrageously irresponsible,” Ms. Wasserman Schultz said.

Ms. Castor said that “it would be more efficient to expand Medicaid so people would have coverage, rather than running up huge bills at hospitals that need to seek reimbursement from the low-income pool.”

Ladles and Jellyspoons:  your modern Republican party.  It’s better to pay more money to achieve less than it is just to make government work with the tools it has.  There is no compromise with these folks.

Ni shagu nazad!

Image: Sebastian Vrancz, Soldiers plundering a farm during the Thirty Years’ War, 1620

ETA:  Sorry, David, for poaching on your patch!



Basic Health Plans and hoping for chaos

States that want to start a Basic Health Plan in 2019 have an incentive to root for non-fatal market chaos in 2018 rate filings.

The Basic Health Plan (BHP) is effectively enhanced Medicaid Managed Care for the Exchange population that earns less than 200% of the Federal Poverty Level. States receive 95% of the funds that would have been spent on Exchange premium and cost sharing subsidies with geographic and demographic adjustments.

Currently, we are hearing that insurers may file very high rates because they don’t know what the 2018 on-Exchange rules or risk pool will look like. Very high rates will be composed of the combination of increasing medical trend which is a normal part of a rate filing and an uncertainty component. The uncertainty component will be large enough to cover an insurer’s obligations if they are required to offer Cost Sharing Reduction (CSR) actuarial value boosts without getting paid for them. The uncertainty component will be large enough to cover a risk pool that shrinks significantly as outreach by Healthcare.gov is curtailed or ineffective and mandate enforcement messaging disappears. The uncertainty component is the insurance insurers will take out to cover themselves from sabotage.

The uncertainty component is specific and limited to only the individual market.

The current rules are from the February 29, 2016 Federal Register. BHP subsidies are not adjusted for changes in premiums due policy uncertainty. The assumption in the current rules is that Exchange costs increases are driven only by medical trend.

This produces an opportunity for states that want to start a BHP in 2019. If we assume the ACA’s structure fundamentally exists in 2019 states could receive a cash windfall if they elect to build a BHP using 2018 QHP rates as the funding baseline. 2018 QHP rates will be very high and most of that increase will be due to policy uncertainty and not underlying medical trend. The current rules do not recognize a policy uncertainty adjustment so the states would get a block grant equal to 95% of the inflated Exchange expense. The underlying trend of expenses in a BHP would be normal and the block grant would be more than sufficient to cover expenses. The surplus could either be used to enhance benefits with a BHP, provide a one shot infusion of funds to opioid efforts or other public health/social determinants of health programs.

By 2020, the uncertainty premium is most likely wrung out of the baseline Exchange rates that drives the BHP funding stream so it is only a one or two year play but there is a good chance a lot of extra money is out there for states that want to start their own Basic Health Plan in 2019.



Oklahoma’s 1332 application

Oklahoma is preparing a 1332 State Innovation Waiver for a customized ACA implementation in the state. It is an interesting concept and as the AHCA has failed to progress, I can see quite a few conservative states go down the 1332 route to tweak the ACA to fit local political and economic needs. And I’m okay with that.

So let’s see what Oklahoma identifies as the problem and what they then want to do with it:

Oklahoma continues to face a number of challenges related to providing individuals with access to affordable, quality, and sustainable health care coverage. Particularly telling of the necessity of swift intervention is the exodus of all but one carrier from Oklahoma’s individual insurance market for plan year 2017, premium increases in excess of 75% on average for plan year 2017, and participation of only 31% of eligible individuals for plan year 2016

They want more competition, more choices, lower premiums and more people covered. Those sound like reasonable objectives, so how will they do that?

They have a two year plan. Read more