Spending more to cover less — fiscal responsibility in Utah edition

Utah’s governor just signed into law a limited Medicaid expansion that the legislature passed over the past ten days. The new law overturns the full expansion that voters approved in November.


Utah’s voter-approved Medicaid expansion initiative was replaced Monday with a program that is more restrictive, initially more costly, and contingent on a series of uncertain federal concessions.

Utah lawmakers and Gov. Gary Herbert, though, say the bill is more economically sound over the long term.

Senators voted 22-7 to adopt the House version of SB96, which launches a partial medicaid expansion April 1 and would revert to full expansion only in the event that federal administrators reject multiple requests for Affordable Care Act waivers.

Over the short term, this bill will cost Utah more money.  The Affordable Care Act provides for a 90% long term federal match (and a 93% match in 2019) for full expansion of Medicaid to 138% of the Federal Poverty Level (FPL).  Partial expansions to 100% FPL don’t qualify for that full match.  Instead, the feds will pay the standard match, which in the case of Utah is 68% of the incremental costs.  Utah will be on the hook for 32% of the costs of a smaller population.

Utah thinks that they will get a waiver from the Center for Medicare and Medicaid Services (CMS).  This waiver will contain the now “typical” work requirements but also two new major elements:  A cost control cap with an associated enrollment cap and the full ACA enhanced matching rate.  Those two elements have never been approved before.

Adrianna McIntyre, Allen Joseph and Nicholas Bagley reviewed partial expansion logic in the New England Journal of Medicine in the summer of 2017.  They noted the financing mechanics and incentives for states to avoid the 100-138% FPL population in the Medicaid pool:


Why were states interested in these partial expansions? Starting in 2020, states are responsible for covering 10% of the costs associated with the Medicaid expansion. Because of a drafting mistake, however, the ACA says that the 100-to-138 population can receive subsidies to purchase a private health plan on the exchanges — but only if they are ineligible for Medicaid.3 For those people, the federal government bears the entire cost of subsidizing private coverage, with no contribution from the states. As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges…

On the practical side, many states would probably demand similar waivers. Unlike the federal government, states are obliged under their constitutions to balance their budgets every year. They will welcome the chance to reduce Medicaid obligations and alleviate budgetary strain. Hospitals, physicians, and other providers will probably support partial expansion because private insurers pay them better than Medicaid does.

Partial expansion would not just shift a financial burden to the federal government; it could also increase the size of that burden. Arkansas’s decision to enroll beneficiaries in private plans increased expansion costs by 24%; in other states, the disparity between Medicaid and private costs could be much higher. Between premium subsidies and supplemental cost-sharing reductions, the federal government will probably shoulder more than 90% of the price tag for this costlier coverage, with beneficiaries picking up the difference….

CMS has denied a partial expansion for Arkansas.  CMS has also never offered to pay the enhanced ACA rate for BadgerCare in Wisconsin.  BadgerCare is a waiver program that extends Medicaid to Wisconsin residents who earn up  to 100% FPL.

Utah’s new law is betting that CMS will establish precedent that transfers large costs back to the federal government and dramatically increase the likelihood that several more non-Expansion states will expand.  The first assumption is a hard assumption under any administration.  The second assumption is a difficult assumption under this administration.  If the enhanced match rate is not authorized, Utah will default back to a full expansion after a little more than a year.

UPDATE 1: Adrianna McIntyre and I have a new piece at Health Affairs Blog that look into the policy implications.  We build off of her framework from NEJM and incorporate silver loading effects.


States, policy innovation and proofs of concept

Many states are proposing a series of experiments with their health care markets that are aimed at expanding coverage, increasing actuarial value, and limiting provider payments.

Medicaid Buy-ins

  • New Mexico
  • Nevada

Public Options with Medicare-like rates

State based mandates

  • New Jersey
  • Massachusetts
  • Vermont
  • California
  • Maryland

Downpayment Plans

  • Maryland

Expanded Subsidies

  • California


I agree completely with Adrianna.

These states will provide evidence of what can work, what trade-offs are real versus illusive, what some of the unexpected interactions may be, and the challenges of figuring out how to cover more people for roughly the same cost.  The liberal  experience in health policy from 1994-2007 was a long consensus building session as to what could be done within self-identified political constraints and limitations.  Massachusetts with a large Democratic super-majority in both chambers of the legislature was the proof of concept of the three legged stool approach.  The three legged stool was a combination of guaranteed issued/community rated insurance that was backed by significant low-income subsidies to make the insurance affordable and a mandate to get and keep healthy people in the risk pool.  Medicaid was the base of the coverage expansion with the private market taking more of the load up the income scale.  The three major Democratic primary contenders in 2007 all bought into variants of this plan and the major veto players in the Democratic Senate caucus were also on board.

I think that the states are limited in what evidence they can provide on a pure single payer system.  They don’t have the counter-cyclical fiscal capacity nor the expectation of seeing waivers approved to unlock significant federal fund flows for that project.  However they can test the impact of expanding subsidies, offering government price leveraged plans and using Medicaid further up the income scale.  These are all needed and worthwhile policy experiments.


Medicaid buy-in support

Friend of the blog, Emma Sandoe and other researchers in Boston, ran a poll on Medicare for All and Medicaid Buy-in programs.

The results are interesting on several metrics:

Medicare for All has about 36% support and 38% opposition. That is a steep hill to climb to build a majority coalition.

Medicaid Buy-in has a majority in at least tepid support and very little passionate opposition.

This is interesting on several levels.

The first is that Medicaid’s branding seems to be stronger than Medicare’s branding.

Secondly, Medicaid buy-in is much easier to implement in at least some states. Right now New Mexico is aggressively pursuing a buy-in investigation. I think Nevada may be tempted to go down that path. Implementation requires a state to be in favor of a buy-in program and a friendly reading of waiver authority from the Center for Medicare and Medicaid Services (CMS). That duality may not be satisifed at the moment but a friendly to this type of waiver CMS is an easier lift than a Medicare for All friendly trifecta.

Medicaid buy-in programs are envisioned as supplements or complements to the Exchange/Marketplace structure. Emma and I looked at the different evaluation questions that need to be asked about these programs last March in Health Affairs:

There are two different policies that can be described as Medicaid buy-in programs. The first would be creating a new eligibility category for direct purchase of Medicaid by individuals with all of the attendant rights, obligations, and services that flow through Medicaid. This version of Medicaid buy-in requires modifications to state plan amendments and likely will require an 1115 waiver. The other policy would be to use the framework of Medicaid managed care contracts and networks to create metal plans for purchase on the Marketplace. Policy makers must identify which type of Medicaid buy-in they intend to use to communicate clearly their goals and objectives. Below, we present the various goals that policy makers may seek to achieve with Medicaid buy-in programs and how these goals should be evaluated…

  • Improve Coverage For The Current Individual Market
  • Provide Options For People Living In Regions With Limited Choices Of Health Plans 
  • Improve The Viability Of The Private Insurance Marketplace
  • Reduce Premiums For Consumers In The Private Insurance Market
  • To Provide People With A Guarantee Of Coverage With State-Mandated Consumer Protections
  • Improve The Financial Viability And Contracting Power Of The Medicaid Agency

A well-designed Medicaid buy-in program won’t achieve all of these goals. It may only intend to achieve one or two of these goals.

I think that Medicaid buy-in is one area of promising state-level experimentation that has a reasonable chance of implementation before 2023. The fact that there is a broad base of support and little concentrated opposition merely increases the probability of state level experimentation. This is where the action will be over the next couple of years for states, politicians, and activists that want to continue to expand coverage.

Preparing for 2021

New Mexico is preparing for an ambitious future for health policy. Louise Norris notes that New Mexico is looking to move off of Healthcare.gov and open up their own state based exchange.

In order to reduce user fees, the exchange board considered the issue during a September 2018 board meeting, and voted unanimously to transition to a fully state-run exchange in time for the 2021 plan year.

The exchange will put out a request for proposals in early 2019, as they work to find a vendor to create their state-run enrollment platform. The system will be live by the fall of 2020, in time for the open enrollment period for 2021 coverage (November-December 2020).

There are two good reasons to go down this path. The first is the obvious one: it’s cheaper than using Healthcare.gov. Healthcare.gov charges 3.5% of premium as an Exchange fee for states that don’t do anything on their own, and a 3.0% of premium Exchange fee for states that manage significant elements of the enrollment process. New Mexico is one of the “partnership” states that uses the Healthcare.gov front-end but manages a lot of their own back-end. 3.0% of premium is not a good deal. The same fee level would either be used to fund significantly more outreach, advertising and navigators or the same level of outreach and support that Healthcare.gov provides could be funded at a much lower fee which would slightly reduce baseline premiums.

Secondly, New Mexico is getting ambitious. They are the leading innovators in doing the actual hard work of figuring out how a Medicaid buy-in proposal. This would be effectively a state based public option. This would be a major rejiggering of the New Mexico individual market.

The Center for Medicare and Medicaid Services (CMS) has repeatedly stated under both the Obama and the Trump administrations that they can’t do much with the back-end of Healthcare.gov to support unusual or aggressive waiver requests. If New Mexico moves towards a Medicaid buy-in model, their open enrollment, subsidy structure and eligibility structures would be unique. The only way that can work within an Exchange framework is if New Mexico can customize the exchange that their citizens and residents see.

So, this is both an effort to reduce premiums through either attracting a healthier risk pool or lower costs of attracting the current risk pool AND a necessary step in building the infrastructure to support a Medicaid buy-in program.

Purdue Pharma and the Justice Department Knew About Oxycontin in 2006

Purdue Pharma knew the dangers that Oxycontin presented, and so did the Justice Department, as early as 2006. But the George W. Bush Justice Department decided not to prosecute.

Based on their findings after a four-year investigation, [federal] prosecutors recommended that three top Purdue Pharma executives be indicted on felony charges, including conspiracy to defraud the United States, that could have sent the men to prison if convicted.

But top Justice Department officials in the George W. Bush administration did not support the move, said four lawyers who took part in those discussions or were briefed about them. Instead, the government settled the case in 2007.

Of course, current Purdue Pharma officials play down that something a decade ago could have anything to do with today’s opioid crisis.

“It would have been a turning point,” said Terrance Woodworth, a former Drug Enforcement Administration official who investigated Purdue Pharma in the early 2000s. “It would have sent a message to the entire drug industry.”

The Sackler family, who have endowed many museums, have been intimately involved in Purdue Pharma from the start. I’ll never feel the same about those museums.

A spokesman for Sackler family members involved with the company, Linden Zakula, declined to comment. Richard Sackler, who is now a director of Purdue Pharma, also declined to comment.

There were plenty of warnings. The article has much more detail – a long read. It’s the New York Times, but one of the places where they’ve done a good job.

And open thread!