Monday, October 03, 2016

In which Obama feels the pain of the price tag he imposed on the ACA

In an interview with Jonathan Chait, President Obama rather casually ticked off his first priority for shoring up the ACA:
In my mind the [Affordable Care Act] has been a huge success, but it’s got real problems. They’re eminently fixable problems in terms of strengthening the marketplace, improving the subsidies so more folks can get it, making sure everybody has Medicaid who was qualified under the original legislation, doing more on the cost containment. But you hit a point where if Congress just is not willing to make any constructive modifications and it’s all political football, then you’re getting a suboptimal solution. 
By now, the imperative to enrich the marketplace subsidies is a matter of consensus among progressive healthcare scholars and officials. Out-of-pocket costs are just too high for prospective enrollees with incomes over 200% of the Federal Poverty Level (FPL)*, the cutoff for strong Cost Sharing Reduction (CSR) subsidies, and premium subsidies leave buyers paying too high a percentage of their income -- between 6.4% and 9.7% of income for those in the 200-400% FPL range. In August 2015, Urban Institute scholars Linda Blumberg and John Holahan put out a detailed proposal for subsidy enrichment that included raising the actuarial value of the benchmark plan to 80% from the current 70% , with richer CSR extending further up the income ladder, as well as capping premiums at 8.5% of income for all income levels. Hillary Clinton's rather vague proposal for subsidy enrichment is apparently based on Blumberg and Holahan's. ACA improvement proposals by Timothy Jost and Harold Pollack and Sabrina Corlette and Jack Hoadley also prominently feature subsidy boosts.

The inadequacy of marketplace subsidies was evident to progressives from the beginning. Complaints began when Max Baucus's Senate Finance Committee released its bill in fall 2009, with a subsidy schedule that was far skimpier than that of the House bill.** In his 2011 book about the battle to pass the ACA, Richard Kirsch, national campaign manager from 2008-12 for Health Care for America Now (HCAN), an  umbrella group formed by unions and progressive nonprofits to advocate for universal health care, pins responsibility for the skimpy subsidies primarily on Obama:

In the President’s September address to Congress, the President not only made a concession on the public option. He also said, “the plan I’m proposing will cost around $900 billion over ten years.” Yet $900 billion was not enough money to make health care truly affordable to the uninsured. Why did the President make another, preemptive concession to the bill’s opponents, one that would significantly damage his core goal? An article co-authored by Robert Pear and The New York Times White House correspondent Jackie Calmes summarized the impact nicely: “The number suggests a political and fiscal calculation to avoid the sticker shock of the trillion-dollar threshold. But it probably means that Mr. Obama could fall short of his goal of providing universal coverage for all Americans because the lower cost may force lawmakers to reduce the subsidies needed to help more uninsured individuals and small businesses seeking coverage for employees.”...

When Baucus introduced his legislation, he proposed spending only $806 billion on covering the uninsured. As a result, the cost of health coverage that would be offered to families in the new health care exchanges was much more than some families could afford  (Fighting for Our Health: The Epic Battle to Make Health Care a Right in the United States, Kindle Locations 4452-4472). 
In January 2015, when the federal ACA marketplace had been marginally functional for about a month and the first couple of million enrollees were beginning coverage, Kirsch highlighted the subsidies as the law's chief inadequacy:
The biggest problems with the law are around affordability. The way the law is structured, coverage is still not affordable for many people. And again, people’s experiences of the law will be around affordability. So people will be glad to get coverage, but they will also live with high deductible-coverage and premiums that may still be difficult to pay.

In the legislative campaign, our biggest issues with the bill concerned affordability. A lot of the cost to people was made much worse by the president’s unfortunate (to put it nicely) decision to spend less on subsidizing people because he wanted to get the cost of the subsidies under the magic 1-trillion-dollar figure.

But doing so didn’t change the debate at all; Republicans still called it a “trillion-dollar program.”  But it did mean lower subsidies for people, higher premiums, higher deductibles. It has resulted in making insurance less affordable, making the plan less popular. It’s going to shape a lot of the contours of the upcoming debate in the next few years of how we make the program work better.
It's also true that most federal benefit programs start life with inadequate funding and benefits, which are bulked up over time.  The GOP's unwavering demonization of the ACA is making even limited technical fixes impossible, however -- let alone any sweeping benefit enrichment. Obam's lament to this effect echoes that of Aetna CEO Mark Bertolini, It's possible that Republicans will slowly strangle the marketplace, if an electoral sweep doesn't give them the opportunity to kill it outright.  It's also possible that the marketplace will limp along more or less as is, with administrative fixes and some experimentation via innovation waiver in blue states, until Democrats regain control of Congress.

* In A Robert Pear article in today's NYT, Avalere Health's Caroline Pearson cites Avalere research to the effect that takeup among those potentially eligible for ACA subsidies is 81% for those with incomes under 150% and just 17% for those in the 300-400% FPL.  I do have some questions about Avalere's takeup estimates, which also include 45% takeup in the 150-200% FPL range. First, as a CMS ASPE brief published last week emphasized, NHIS survey data indicates that reductions in uninsurance rates have been roughly proportionate across all income groups. Second, Kaiser's overall estimate of takeup among the subsidy-eligible as of March 31 this year (that is, after the no-pays were culled from this year's initial enrollment figures) is 64% -- not great, but not consistent with takeup rates ranging from 45% to 17% in income brackets between 150% FPL and 400% FPL.  For one thing, with respect to the alleged 17% takeup rate in the 300-400% FPL range, a lot of people in that bracket are not eligible for subsidies and may be buying off-exchange. On the other hand, Avalere finds a takeup rate of just 26% in the 250-300% FPL range, where most (not all) people are eligible for subsidies.

** The final Senate bill did improve somewhat on the subsidies laid out in the Finance Committee bill, though they remained considerably skimpier than those specified in the House bill that passed in November 2009.

1 comment:

  1. Was Obama trying to keep the cost of subsidies under $1 trillion, or keeping the cost of entire bill under $1 trillion?

    If the former, he really succeeded........

    Exchange plan users received a total of $30 billion in PPACA advance premium tax credit (APTC) subsidies and cost-sharing reduction subsidies during the 12-month period that ended Sept. 30, 2015, according to the IRS Data Book for fiscal year 2015.