PPACA and the Continuing Resolution

The continuing resolution that needs to be passed sometime soon to keep the government open will deal with PPACA.  There are currently two big things not included in the resolution.  One may prompt a veto threat (I assess that at 10% probability) and the other has been baked into the cake for over a year now.

The big new thing that is not in the continuing resolution at this time is an appropriation to fund the risk corridors.  The Hill explains:

The language, buried deep in the 1,603-page bill, is a victory for conservative opponents of the healthcare law. It would prevent new government funds from flowing to ObamaCare’s so-called risk corridors, a three-year program established to subsidize insurer losses in order to keep premiums stable.

A commonly used tool in public policy, risk corridors have become a political football since Sen. Marco Rubio (R-Fla.) highlighted the ObamaCare provision as a “bailout” in November of last year. Since then, activists with Heritage Action and other groups have repeatedly sought to kill the payments in major fiscal negotiations.

The “cromnibus” spending bill would allow the government to continue collecting payments from insurers that post better-than-expected results under ObamaCare and passing them to companies that do worse. But it would not permit the Centers for Medicare and Medicaid Services to make additional funds available for insurers that are struggling.

Risk corridors are used to create incentives for insurers to participate in fuzzily defined markets.  Insurers that price in a way that attracts only healthy populations send money to insurers who have to cover the sicker parts of the population.  Medicare Part D has permanant two-way risk corridors.  PPACA had temporary three year risk corridors authorized but the money was not appropriated to pay for them past the FY2014.  The Congressional Research Service issued an opinion that the PPACA language  was too fuzzy and did not explicitly appropriate  money to go back out.

What are the work-arounds?

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Shocking news — people able to pay, pay

More shocking news.  Obamacare is gutting another quintessential American industry that is a world leader without peer — medical debt collection.

Via Bloomberg:

HCA Holdings Inc. (HCA), the largest for-profit hospital chain, yesterday raised its forecast and reported a 6.6 percent drop in uninsured patients at its 165 hospitals, a reduction that grows to 48 percent in four states that expanded Medicaid, a top initiative of the Patient Protection and Affordable Care Act….

The law contributed as much as $13 million to LifePoint’s earnings in the second quarter, about 40 percent more than the company had expected, he said. People paying bills themselves, a proxy for the uninsured, represented just 4.8 percent of admissions, down from 7.1 percent a year earlier….

Shocking how making sure people have the ability to pay for medical care leads to them paying for medical care on time and close to the contracted rate.  The old system of haphazard payments stretched out over years leading to medical debt stress had to be superior because it created jobs for credit collection agencies to hound people for ridiculous fees, for hospital financial analysts to figure out how to smooth cash flow from good months to bad months, and for social workers to be busy as a medical emergency led to their clients entering a life emergency as every other thing that depended on decent health and pre-committed cash flows just got blown up.  Predictibability is a bad thing for all of these jobs.  We can’t have that as the extra couple of points of GDP spent on waste and passing the buck in healthcare means JOBS (TM) that will never be replaced by higher and better uses of people’s times.

Healthy PA or nothing until 2016

Atrios raises an interesting question concerning Healthy PA.  Healthy PA is the proposal by Gov. Corbett (R-PA) to expand Medicaid by using a combination of the Arkansas private option and the Michigan style health incentive/HSA program plus some gratuitous poor shaming.


I’m not sure if it’s better to just pay it and get people enrolled, or gamble on the reasonable possibility that after November a new governor will have a better plan.

I’m not a Pennsylvania political junkie, but from my understanding of Pennsylvania politics, it is extremely likely that Corbett loses this fall to any of the fairly generic/standard issue Democrats running but the Republicans are extremely likely to continue to hold one if not both chambers of the state legislature.

The biggest downside to this political gamble that the Democrats could get something better is timing.  Right now, the Corbett administration has put out a request for interest/application to Pennsylvania insurance companies.  If the goal is to have Healthy Pennsylvania running on January 1st, the health insurance companies have six months to do the prep work.  Speaking as a plumber, six months to build a brand new product with a whole lot of strange and odd business rules is an extremely aggressive timeline.  It is achievable if the Pennsylvania companies are able to keep most of their plumbers on a single task.

Now, as I understand it, the Pennsylvania governor’s term starts in mid-January.  Getting anything better than Healthy PA past at least one Republican controlled chamber will take several weeks/months.  At that point, the plumbing for expansion is several more months.  Realistically, if anything better than Healthy PA can get passed, it probably could not be implemented until at least September 2015, more likely the start date would be January, 2016.

There is a non-zero probability that a failed Healthy PA (shot down by Dems holding most of their votes away) leading to a failed straight up Medicaid expansion.

The trade-off is Healthy PA effective January 1, 2015 OR the probability of something better on either September 1, 2015 or January 1, 2016 plus the probability  of nothing.  If Healthy PA is implemented, it can be tweaked, modified and improved.  My moral sense says it is better to get a significant improvement in wellbeing for the most disadvantaged in society than to hold out for the possibility of something better but later with the chance of nothing. I’m mini-maxing here.

Hoist with His Own Teaturd

I’m not sure tribble-topped presidential aspirant Rand Paul recovers from this:

In a variety of campaign appearances that were captured on video, Paul repeatedly compared Reagan unfavorably to Carter on one of Paul’s top policy priorities: government spending. When Paul was a surrogate speaker for his father, then-Rep. Ron Paul (R-Texas), during the elder Paul’s 2008 presidential quest, his sales pitch included dumping on Reagan for failing to rein in federal budget deficits. Standing on the back of a truck and addressing the crowd at the Coalition of New Hampshire Taxpayers picnic in July 2007, Rand Paul complained about Reagan and praised his father for having opposed Reagan’s budget…”

David Corn’s Mother Jones article linked above includes six video clips of Baby Doc slagging on Reagan as a spendthrift as the younger Paul campaigned for his daddy. What Paul says about Reagan exploding the debt is all true, of course.

And it’s not wise to underestimate the Republican base’s capacity to ignore facts and focus on shiny objects: That’s how they came to deify the folksy, addled, debt-exploding Z-grade actor as an exemplar of fiscal rectitude in the first place.

But imagine the field day Paul’s primary opponents will have parading this heresy before the cameras at every debate. The message that Reagan actually was a profligate spendthrift won’t sink in, but the fact that Paul unfavorably compared Baby Jeebus Reagan to Satan’s Valet Carter sure will.

Complexity is costly — PA Medicaid Expansion

Pennsylvania is currently a limited Medicaid eligibility state.  The governor, Republican Tom Corbett, has filed an 1115 waiver application with Health and Human Services for the Arkansas style ‘private option’ expansion.  The expansion would give individuals who make less than 138% of Federal Poverty Line (FPL) subsidies to cover the full cost of their cost-sharing assistance Silver plans (96% actuarial value) while current Pennsylvania Medicaid has close to a 98% actuarial value.  The original waiver filed last month has the following conditions on eligibility:

  • Income determined once a year
  • Premiums of$25 for a single adult or $35 for married couple for households over 100% FPL.
  • Wellness program
  • Job Search requiremetns with termination from coverage as a sanction (p.36 of the waiver)

As I said yesterday, HHS is quite willing to grant significant flexibility for Medicaid expansion waivers as long as there is no poor shaming and everything in the waiver has some logical connection to either health quality or health costs.

The last requirement for job search with termination of coverage if an individual fails to meet the requirements does not meet the WHAT THE FUCK test for health quality or health costs.

The Corbett Adminstration seems to have been quietly hit with a clue stick, and they’re proposing a new alternative that is structured as an incentive instead of a punishment.  Newly enrolled individuals would be able to see their premiums reduced if they worked.

  • 40% off for full time work
  • 25% off for 20 to 29 hours of work per week
  • 15% off for either less than 20 hours of work per week or job search participation.

If this is approved ( I don’t think it will be), then this will be an expensive fiasco.  It is an added layer of complexity to an already complex population base.  Complexity costs money in general, and the job search step-function of eligibility and benefit design means claims will have to be regularly manually re-processed.  That is expensive.

I’ll explain the details below the fold.

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Taking a Hatchet to healthcare (Pt. 3)

The first two parts of this series have looked at the private market for health insurance and the government programs.  Medicare is essentially unchecked while Medicaid gets a whole lot stingier.  The private market is allowed to exclude and underwrite in some circumstances while the federal government backs away from a lot of regulation. 

The most fascinating part is the financing mechanism.  Obamacare expanded coverage through a combination of generous tax credits and Medicaid expansion.  The CBO scored that this expansion was paid for by a combination of cutting down on Medicare Advantage payments and a wide variety of taxes such as the medical device excise tax, the Cadillac plan tax, sun tanning tax, the reinsurance tax and income tax surcharges on high income individuals and families.  The Hatch plan repealed Obamacare and all the taxes (interestingly, it also repeals a major student loan reform package, no mention of what is supposed to replace that system) but it claims to be deficit neutral so it has to pay for its limited subsidies somehow.

And the way it does is a doozy that immediately shows how politically not viable this proposal is:

Section 601: Capping the Exclusion of An Employee’s Employer-Provided Health Coverage

our proposal caps the tax exclusion for employee’s health coverage at 65 percent of an average plan’s costs. The value of employer-sponsored health insurance would be capped and indexed to grow at an annual rate of CPI +1.

So what does that mean? 

My health insurance just got a whole lot more expensive for me.  That is the short story.  My health insurance according to box 12DD cost $13,000 last year to cover my entire family.  That is 100% pre-tax dollars.  This proposal would make some of that post-tax dollars.  If average means average family plan, the average was $16,351 in 2013.  65% of that means $10,600 would be tax deductible.  The remaining $5,800 for the average person in an average family plan would be taxable.   Personally, I would be paying taxes on an additional $2,400 worth of compensation.  Some people with expensive plans would be paying taxes on a new $7,000 or $10,000 compensation that they don’t see in cash.  Most people would be paying taxes on significantly larger chunks of previously untaxed compensation. 

Furthermore, in the out years, the value of the exclusion gets weaker as either the health plan stays within the budget constraint of CPI+1 by significantly paring back coverage, or the average health plan costs increase and all of those increases shift to taxed compensation.   Again, this fits with the basic Republcian diagnosis of the “problem” that Americans have it too easy and too good and don’t have to worry about bankruptcy every time they blow out their knee while looking for their cat. 

From a build the system from scratch perspective, this is not a bad idea.  However, we aren’t building a system from scratch.  We’re tweaking a legacy system.  And given previous decisions, this translates into a massive tax increase for anyone who gets decent coverage through work and in the long run much lower acturial value of work provided coverage.

Using a bigger net

Right now, one of my company’s competitors is running a series of radio ads.  The ads tout that in the small and medium group market segments, 90% of their groups renewed last year.  The implication is that 90% of their customers/decision makers are happy, so your small company should buy their product.

Being an employee of a major competitor what I hear is 10% of their customers are pissed off enough to engage in the very expensive, time consuming, disruptive no-fun task of changing insurance companies, but hey, that is just me. 

As a policy blogger, I also hear the reasoning why so many preventative care procedures weren’t covered in the pre-Obamacare world.

The theory of change for preventative care as a cost control measure is that wide spread but small costs to treat a population in order to prevent a small number of people from that population from requiring very expensive treatment leads to a net cost reduction.  There were two problems with this idea from a pre-Obamacare insurance company business model perspective.  Read more