There is a paradox in the power the Affordable Care Act lends to
states to devise alternative means to meet the law's goals. On the one
hand, the scope of the law's Section 1332 "innovation waivers" is sweeping:
states can propose alternatives to the law's coverage rules, funding and
subsidy formulas, and mechanisms for compelling participation, i.e.,
the employer and individual mandates.
On the other hand, the alternatives proposed in waiver applications must provide coverage "at least as comprehensive" as that defined by the ACA and protections against excessive out-of-pocket spending that render coverage at least as affordable as stipulated by the ACA. Waiver proposals must also cover "at least a comparable number" of the state's residents and must not increase the federal deficit.
Does the left hand's demand of equivalence take back the right hand's proffer of freedom of design? I posed the question to Nicholas Bagley, a health law scholar at the University of Michigan and former appellate attorney at the U.S. Department of Justice who blogs about health law and policy at The Incidental Economist.
While I was particularly interested in whether Republican governors and state lawmakers invested in demonizing the ACA could "repeal and replace" it on a state level, Bagley began by noting that the only such replacement currently known to be in planning is Vermont's bid to "establish something like a single payer scheme," which would "achieve the same objectives as the ACA when it comes to scope of coverage and cost sharing, but through a government-run insurance plan."
I noted that it's easier to imagine alternatives from the left meeting the equivalence requirements than alternative schemes floated on the right, which tend to shift more costs to consumers. Bagley agreed.
"That's not to say that it's not achievable," he said. "You'd have to know a lot about the specific scheme. But the statutory language suggests that the scheme has to provide cost sharing protections at least as extensive as those in the ACA. To the extent the goal is to give consumers more skin in the game, you're asking them to pay more out of pocket, and that might clash with the statutory command. Or it might not--an inventive state might come up with such a scheme, and a sympathetic administration might possibly find a way to approve such a plan."
In sum, however, "To the extent that the ACA allows waivers only where states have protections for cost sharing that are at least as extensive as the ACA, that will clash with one of the goals of some conservative reformers."
If there's ever a will, there should be a way
I asked if there was any way around that clash. "I'm loathe to speculate without knowing more. The statutory text would not appear to allow states to shift additional costs to consumer -- but you can't rule out the possibility that a state intent on doing so might be able to accomplish. the goal."
I asked specifically about the possibility of a state allowing insurers to offer plans with an "actuarial value" lower than the 60% mandated by the ACA for "bronze" plans, the cheapest tier available in the state exchanges. ("Actuarial value" refers to the percentage of the average patient's estimated yearly costs covered by the plan.)
Bagley allowed that a state could make an argument for it. "Maybe the cost sharing that the statute refers to refers primarily to the catastrophic caps" -- that is, the maximum out-of-pocket costs a patient or family can be liable for in a year. "I suppose I could try to gin up an argument like that. It seems to me that it's a little bit of a stretch, but I suppose it's possible."
If a red state does make a good faith effort to advance a case for cheaper and skimpier plans, Bagley suggested, "A lot will get hashed out in negotiations -- much as you're seeing in negotiations of the state Medicaid programs."
Bagley was referring to the ACA's other main waiver provision, Section 1115, allowing states to propose alternatives to the Medicaid expansion originally mandated by the ACA but made voluntary by the Supreme Court. "
Arkansas, the first state to win approval for a "private option" alternative to the Medicaid expansion, "made a claim of equivalence," Bagley noted.. "A lot of independent observers think it will be more expensive" than traditional Medicaid, but "HHS willing to give it a shot -- a good-faith try. It's so hard to project what health care spending will look like in a year or three. Either way, the plan is a product of negotiation between the state and HHS."
Medicaid waivers as model
I wondered, given the feds' flexibility thus far in response to private option Medicaid proposals, whether a state might not make an analogous argument with regard to private plan parameters -- arguing, for example, that state programs fostering Health Savings Accounts might render coverage in skimpier plans "as comprehensive" as in those mandated by the ACA.
"You could see inventive arguments about the statutory text, and inventive regulatory designs that are aimed at achieving the goals of the ACA and the waiver provisions while embracing a different vision for healthcare reform," Bagley responded. "I think the analogy is a good one...but it's very hard to know."
"But I think that you might see something of the same dynamic: a state making a proposal for something it would like to do and CMS being flexible even to point of winking at some of the assumptions underlying the data the state supplies in support of the plan."
When it comes to stitching together such data and assumptions, he added, "The inventiveness of institutional designers and lawyers knows no bounds."
State-level "repeal and replace"
Though Bagley emphasized several times that he would hesitate to speculate about the prospects of plans that no one has yet put forward, we did end up speculating a bit about specific hypotheticals.
I asked Bagley about the possibility of a state bypassing the Essential Health Benefits (EHBs) that the ACA mandates for every health plan. EHBs have been a lightning rod for Republicans, who hold them up as a burdensome federal mandate that drives up the cost of coverage. One controversial requirement is mandatory childbirth coverage for everyone of both sexes. More than one fifty-something victim of "rate shock" whose plan was cancelled last fall complained about being forced to pay for that coverage. I raised the possibility of a state proposing opt-outs for some mandatory coverages.
Bagley's first thought was that this might constitute a red line. "If you're in negotiation with a state that wanted to claim some credit for chipping away at EHB requirements, and they relaxed the restriction on covering pregnancy....if they got rid of guaranteed issue and community rating provisions, so that it's male-specific or female-specific coverage, that starts to sound like stuff that at least a Democratic administration is unlikely to go for. So whether you can wedge it within a strained reading of the statute is maybe neither here nor there."
But then he took a step back to consider really thorough redesigns. For example what if a state rejected the ban on medical underwriting -- that is, charging people different prices depending on their medical history and health -- and opted instead to put those with pre-existing conditions in a decently funded high risk pool, or cover their higher premiums via subsidies?
The provision for innovation waivers, he noted, enables states to "take all the money flows shifting from the federal government to the states -- take all of the tax credits, all the cost-sharing subsidies, take all of it and wrap it up in a kit-and-caboodle and hand it to the state, and let the state parcel it out differently than the federal government would have parceled it out. And if the state can do so in a way that achieves the same objectives as the ACA, bully for the state. I've got think that there are ways to accomplish that. There's no particular reason to think that the ACA's distribution of money or the way it structures the market are optimal -- there might be other approaches that could be could worth exploring. That's the premise; and it's a reasonable premise."
A red line for HHS
That premise led Bagley to a fundamental distinction. Think of it this way, he said: "The ACA is designed to provide a baseline level of health insurance to the vast majority of people in the United States. And .if what you want to do is reduce that baseline, the waiver provision is not necessarily going to help you very much. If what you want to do is come up with alternative ways of achieving the same baseline, the waiver provision is going to be quite helpful."
I suggested that determining which side of that dividing line a given plan falls on would raise some interesting definitional questions.
Bagley agreed. "Is it the same as the old baseline? Is it equivalent? Close enough for government work? Those are all the fights that you would expect to see."
Waiving the individual mandate
What about the individual mandate, which comes within the scope of Section 1332? Could it be replaced in a package that offers equivalent coverage to an equivalent population as the ACA?
"In principle, yes,' Bagley said. "The waiver is designed to allow states to explore alternative means of structuring their healthcare system. If you have an alternative to the individual mandate that you find more palatable, if you think it can accomplish the same goal of near-universal coverage at the requisite baseline level, then the statute absolutely affords states that possibility."
"One way to think of it is that the individual mandate operates to discourage the choice of going without health insurance. There are all sorts of ways you might go about discouraging the choice to go without. Restricting open enrollment is a good one: you might be reluctant to go without coverage for three years, even if you'd have gone bare for one, You can come up with all sorts of other sticks --or, alternatively, other carrots, such as finding money to make it even more appealing to purchase health insurance."
Will anyone try it?
In conclusion, I asked Bagley whether he could imagine a red state putting together a package that would substantially change the ACA while meeting the baseline that he had defined -- a good-faith effort to provide equivalent coverage.
He noted that so far, "we've been watching a kind of divide in how red states approach the ACA. On one hand, there's a strong current of "repeal repeal repeal" and refusal to cooperate on basics. On the other hand, some of even the most vociferous opponents are cooperating with the feds on parts of the exchanges, or on the Medicaid expansion. These are showing a more pragmatic approach: we don't like the ACA, but given that it exists, it makes sense to have the state be as involved as possible."
The question, Bagley said, is "which of these two modes of dealing with the federal government will dominate when it comes to innovation waivers? Repeal repeal repeal, or the more pragmatic -- we'll work with it so we can preserve our authority?
On that fundamental question, Professor Bagley preserved his agnosticism.
Related
If Republicans win it all, what will they do to the ACA? (Yevgeniy Feyman, Austin Frakt, Donald Taylor)
Raymond Scheppach on state-level healthcare reform
Michael Leavitt (former HHS Secretary) on state-level healthcare reform
Liberal Dem, conservative doc (on future of healthcare reform)
On the other hand, the alternatives proposed in waiver applications must provide coverage "at least as comprehensive" as that defined by the ACA and protections against excessive out-of-pocket spending that render coverage at least as affordable as stipulated by the ACA. Waiver proposals must also cover "at least a comparable number" of the state's residents and must not increase the federal deficit.
Does the left hand's demand of equivalence take back the right hand's proffer of freedom of design? I posed the question to Nicholas Bagley, a health law scholar at the University of Michigan and former appellate attorney at the U.S. Department of Justice who blogs about health law and policy at The Incidental Economist.
While I was particularly interested in whether Republican governors and state lawmakers invested in demonizing the ACA could "repeal and replace" it on a state level, Bagley began by noting that the only such replacement currently known to be in planning is Vermont's bid to "establish something like a single payer scheme," which would "achieve the same objectives as the ACA when it comes to scope of coverage and cost sharing, but through a government-run insurance plan."
I noted that it's easier to imagine alternatives from the left meeting the equivalence requirements than alternative schemes floated on the right, which tend to shift more costs to consumers. Bagley agreed.
"That's not to say that it's not achievable," he said. "You'd have to know a lot about the specific scheme. But the statutory language suggests that the scheme has to provide cost sharing protections at least as extensive as those in the ACA. To the extent the goal is to give consumers more skin in the game, you're asking them to pay more out of pocket, and that might clash with the statutory command. Or it might not--an inventive state might come up with such a scheme, and a sympathetic administration might possibly find a way to approve such a plan."
In sum, however, "To the extent that the ACA allows waivers only where states have protections for cost sharing that are at least as extensive as the ACA, that will clash with one of the goals of some conservative reformers."
If there's ever a will, there should be a way
I asked if there was any way around that clash. "I'm loathe to speculate without knowing more. The statutory text would not appear to allow states to shift additional costs to consumer -- but you can't rule out the possibility that a state intent on doing so might be able to accomplish. the goal."
I asked specifically about the possibility of a state allowing insurers to offer plans with an "actuarial value" lower than the 60% mandated by the ACA for "bronze" plans, the cheapest tier available in the state exchanges. ("Actuarial value" refers to the percentage of the average patient's estimated yearly costs covered by the plan.)
Bagley allowed that a state could make an argument for it. "Maybe the cost sharing that the statute refers to refers primarily to the catastrophic caps" -- that is, the maximum out-of-pocket costs a patient or family can be liable for in a year. "I suppose I could try to gin up an argument like that. It seems to me that it's a little bit of a stretch, but I suppose it's possible."
If a red state does make a good faith effort to advance a case for cheaper and skimpier plans, Bagley suggested, "A lot will get hashed out in negotiations -- much as you're seeing in negotiations of the state Medicaid programs."
Bagley was referring to the ACA's other main waiver provision, Section 1115, allowing states to propose alternatives to the Medicaid expansion originally mandated by the ACA but made voluntary by the Supreme Court. "
Arkansas, the first state to win approval for a "private option" alternative to the Medicaid expansion, "made a claim of equivalence," Bagley noted.. "A lot of independent observers think it will be more expensive" than traditional Medicaid, but "HHS willing to give it a shot -- a good-faith try. It's so hard to project what health care spending will look like in a year or three. Either way, the plan is a product of negotiation between the state and HHS."
Medicaid waivers as model
I wondered, given the feds' flexibility thus far in response to private option Medicaid proposals, whether a state might not make an analogous argument with regard to private plan parameters -- arguing, for example, that state programs fostering Health Savings Accounts might render coverage in skimpier plans "as comprehensive" as in those mandated by the ACA.
"You could see inventive arguments about the statutory text, and inventive regulatory designs that are aimed at achieving the goals of the ACA and the waiver provisions while embracing a different vision for healthcare reform," Bagley responded. "I think the analogy is a good one...but it's very hard to know."
"But I think that you might see something of the same dynamic: a state making a proposal for something it would like to do and CMS being flexible even to point of winking at some of the assumptions underlying the data the state supplies in support of the plan."
When it comes to stitching together such data and assumptions, he added, "The inventiveness of institutional designers and lawyers knows no bounds."
State-level "repeal and replace"
Though Bagley emphasized several times that he would hesitate to speculate about the prospects of plans that no one has yet put forward, we did end up speculating a bit about specific hypotheticals.
I asked Bagley about the possibility of a state bypassing the Essential Health Benefits (EHBs) that the ACA mandates for every health plan. EHBs have been a lightning rod for Republicans, who hold them up as a burdensome federal mandate that drives up the cost of coverage. One controversial requirement is mandatory childbirth coverage for everyone of both sexes. More than one fifty-something victim of "rate shock" whose plan was cancelled last fall complained about being forced to pay for that coverage. I raised the possibility of a state proposing opt-outs for some mandatory coverages.
Bagley's first thought was that this might constitute a red line. "If you're in negotiation with a state that wanted to claim some credit for chipping away at EHB requirements, and they relaxed the restriction on covering pregnancy....if they got rid of guaranteed issue and community rating provisions, so that it's male-specific or female-specific coverage, that starts to sound like stuff that at least a Democratic administration is unlikely to go for. So whether you can wedge it within a strained reading of the statute is maybe neither here nor there."
But then he took a step back to consider really thorough redesigns. For example what if a state rejected the ban on medical underwriting -- that is, charging people different prices depending on their medical history and health -- and opted instead to put those with pre-existing conditions in a decently funded high risk pool, or cover their higher premiums via subsidies?
The provision for innovation waivers, he noted, enables states to "take all the money flows shifting from the federal government to the states -- take all of the tax credits, all the cost-sharing subsidies, take all of it and wrap it up in a kit-and-caboodle and hand it to the state, and let the state parcel it out differently than the federal government would have parceled it out. And if the state can do so in a way that achieves the same objectives as the ACA, bully for the state. I've got think that there are ways to accomplish that. There's no particular reason to think that the ACA's distribution of money or the way it structures the market are optimal -- there might be other approaches that could be could worth exploring. That's the premise; and it's a reasonable premise."
A red line for HHS
That premise led Bagley to a fundamental distinction. Think of it this way, he said: "The ACA is designed to provide a baseline level of health insurance to the vast majority of people in the United States. And .if what you want to do is reduce that baseline, the waiver provision is not necessarily going to help you very much. If what you want to do is come up with alternative ways of achieving the same baseline, the waiver provision is going to be quite helpful."
I suggested that determining which side of that dividing line a given plan falls on would raise some interesting definitional questions.
Bagley agreed. "Is it the same as the old baseline? Is it equivalent? Close enough for government work? Those are all the fights that you would expect to see."
Waiving the individual mandate
What about the individual mandate, which comes within the scope of Section 1332? Could it be replaced in a package that offers equivalent coverage to an equivalent population as the ACA?
"In principle, yes,' Bagley said. "The waiver is designed to allow states to explore alternative means of structuring their healthcare system. If you have an alternative to the individual mandate that you find more palatable, if you think it can accomplish the same goal of near-universal coverage at the requisite baseline level, then the statute absolutely affords states that possibility."
"One way to think of it is that the individual mandate operates to discourage the choice of going without health insurance. There are all sorts of ways you might go about discouraging the choice to go without. Restricting open enrollment is a good one: you might be reluctant to go without coverage for three years, even if you'd have gone bare for one, You can come up with all sorts of other sticks --or, alternatively, other carrots, such as finding money to make it even more appealing to purchase health insurance."
Will anyone try it?
In conclusion, I asked Bagley whether he could imagine a red state putting together a package that would substantially change the ACA while meeting the baseline that he had defined -- a good-faith effort to provide equivalent coverage.
He noted that so far, "we've been watching a kind of divide in how red states approach the ACA. On one hand, there's a strong current of "repeal repeal repeal" and refusal to cooperate on basics. On the other hand, some of even the most vociferous opponents are cooperating with the feds on parts of the exchanges, or on the Medicaid expansion. These are showing a more pragmatic approach: we don't like the ACA, but given that it exists, it makes sense to have the state be as involved as possible."
The question, Bagley said, is "which of these two modes of dealing with the federal government will dominate when it comes to innovation waivers? Repeal repeal repeal, or the more pragmatic -- we'll work with it so we can preserve our authority?
On that fundamental question, Professor Bagley preserved his agnosticism.
Related
If Republicans win it all, what will they do to the ACA? (Yevgeniy Feyman, Austin Frakt, Donald Taylor)
Raymond Scheppach on state-level healthcare reform
Michael Leavitt (former HHS Secretary) on state-level healthcare reform
Liberal Dem, conservative doc (on future of healthcare reform)
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