Hey, red state governors: here's an ACA "repeal and replace" plan to protect the rate-shocked

Guaranteed issue -- the guarantee that one's health or medical history won't be factored into the cost of health insurance bought on the individual market -- is one of the most popular features of the ACA. Many Republicans vowing to "repeal and replace" the law promise to keep it. But maybe they shouldn't.

Guaranteed issue is also the primary driver of the rise in health insurance premiums triggered by the ACA (the base price, that is, offset for most consumers by government subsidies). Benefits consultant Milliman estimated in March 2013 that guaranteed issue would drive the cost of insurance in California up 26.5%.  More recently, with the data for the ACA's first open season in, a NBER study by a team of health economists led by the Wharton School's Mark Pauly identified it as the primary cause of cost increases averaging 14 to 28% in 24 states. 

The rise in insurance premiums for the unsubsidized, leading to "rate shock" for some who were already buyers in  the pre-ACA individual market and earned too much to qualify for subsidies, has been Republicans' most potent attack point against the ACA. Rhetorically, they like to pin the price hike on the "essential health benefits" (EHBs) that all policies must provide under the ACA -- e.g., childbirth and mental health coverage. But the price impact of EHBs is dwarfed by guaranteed issue. Some Republicans and conservatives acknowledge this indirectly by touting state-run high risk pools for those with preexisting conditions -- a proposal that implies the end of guaranteed issue.

State high risk pools have been around for some time, and were funded as a temporary measure by the ACA to cover those with pre-existing conditions until the state insurance marketplaces were launched in 2014.  They have generally been underfunded, often prohibitively expensive and/or available to only a fraction of those who needed them.

I have a question for health economists -- or, if you prefer, a modest proposal for red state governors who would like to "repeal and replace" the ACA on a state level -- as the law allows via innovation waivers that empower states to submit plans that would meet the law's goals by alternative means. If feasible, it might be attractive to self-styled champions of the free market -- and of constituents who liked their pre-ACA insurance and couldn't keep it, chiefly because they've been drafted to subsidize insurance for the less healthy.

The bipartisan consensus on healthcare cost control

It would be inaccurate to say that there are two main methods of controlling healthcare costs. But it's fair, I think, to say that there are two poles, with an important if unproven class of measures between them.

One pole is government control over the price of medical services, procedures and products, including drugs. The means vary widely, from direct government payment of providers (the U.K.) to regional government approval of rates negotiated by all insurers (Switzerland, for hospitals). Government rate-setting is employed by every wealthy country except the United States, which is also to say every country that provides universal health insurance to its citizens. Not coincidentally, the U.S. spends two-and-a-half times the OECD per capita healthcare spending average and almost twice as much as a percentage of GDP (as of 2011).

The other pole is to offload an ever-increasing share of the healthcare tab onto consumers, causing them to restrict their healthcare consumption.  The U.S. has de facto taken this route. According to Kaiser Family Foundation research, the percentage of workers who pay an annual deductible of more than $1,000 for a single-person plan provided by the employer rose from 10% in 2006 to 38% in 2013. From 2003 to 2013, while premiums overall rose 80%, the cost of the average worker's share of the premium rose 89%, from $2,412 for a family plan in 2003 to $4,565 in 2013. According to the 2013 PwC Touchstone Survey of major US companies, 44% of employers were considering offering high-deductible health plans as the only benefit option to their employees in 2014; 17% did so in 2013.  Deductibles have also skyrocketed in the individual market, a trend accelerated by the Affordable Care Act. In the ACA exchanges, the average bronze plan's single person deductible was just over $5,000 and the average silver plan's, just under $3,000.

Can states "repeal and replace" the ACA? Nicholas Bagley on the scope of the law's "innovation waivers"

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.

Um...

Dear readers, I have another future-of-the-ACA interview in progress, to be posted tomorrow or Thursday. Hence the pause in posts. Meantime, as Woody Allen's Socrates might say, I give a (children's) poem.

Leftovers

Lint in the dryer,
dust in the corner,
hair in the shower,
crumbs in the toaster.

Nothing’s broken,
Nothing’s breaking –
Everything’s shedding,
peeling, flaking.

Can an ACA marketplace offer too much choice? (cont.)

When it was announced last week that the Illinois ACA exchange will have 306 plans on offer next year, I wondered how much choice was too much. A couple of takeaways: 1) extrapolating from this year, the county with the most plans, Cook, will probably have about 150 plans total, and 50 silver plans, in 2015; and 2) in practice, most people probably choose from the two or three cheapest plan in a given metal level, or in two metal levels. That is, price probably simplifies the choice to a manageable pool for most buyers.

The final 2014 statistics released by HHS on Wednesday for the federal exchange states shed a bit of light on both inferences.  First, there's a mention of the highest number of silver plans available in any county this year: 67. That's even more than the most populous county in Illinois' robust market will have in 2015. Some ACA shoppers have already been confronted with a ton of choice (and others with far too little).

Second, among those who chose silver plans, 65 percent chose either the cheapest or the second-cheapest plan at that level -- the latter being the benchmark to which premium subsidies are keyed. 60 percent of those who chose bronze plans chose one of the two cheapest.  So I was right that most people narrowed their range of choices dramatically (though a substantial portion did not not).

Does the ACA shaft the working class and middle class as Robert Laszewski claims?

HHS released statistics yesterday showing that "69 percent of enrollees who selected Marketplace plans with tax credits had premiums of $100 a month or less, and 46 percent of $50 a month or less after tax credits." Among the 87% of buyers on ACA exchanges who qualified for federal subsidies, the average premium was just $82 per month.

Healthcare industry consultant Robert Laszewski is unimpressed. In a post titled "Obamacare: What About the Working Class and the Middle Class?" he writes:

The lowest income people––who pay the lowest premiums and out-of-pocket costs––are the ones who are obviously signing up. That explains why the average consumer subsidy is so high and the average net cost is so low.

As I have said on this blog before, the biggest consumer problem Obamacare has is that the plans––with their still high premiums even after the subsidy, big deductibles, and narrow networks––are not attractive to working class and middleclass families and individuals who don't qualify for the biggest subsidies.

Simply, the Obamacare plans are unattractive to all but the poorest who get the biggest subsidies and the lowest deductibles

While Laszewski's market knowledge is to be respected, he rarely backs up his assertions as to what insurance buyers allegedly want with data.  Evidence suggests that the group of Americans who earn too much to qualify for subsidies yet lack access to employer-sponsored insurance is smaller than he thinks, and wealthier than he thinks. The ACA's direct winners will continue to outnumber its direct losers -- those who will pay more for coverage in the individual market -- and get less value -- than they would have had the law not passed. Consider the following:

Raymond Scheppach: States wll take back their ACA exchanges (eventually)

Raymond Scheppach, longtime director of the National Governors Association (1983-2011) and a former deputy CBO director, is an expert on the role of the states in the formulation and implementation of public policy.  Currently a professor at the University of Virginia, he recently served as project director for a report, Cracking the Code on Health Care Costs,  produced under the auspices of UVA's Miller Center by a State Health Care Cost Containment Commission co-chaired by Michael Leavitt, former Republican Governor of Utah and HHS Secretary under George W. Bush (interviewed here), and Bill Ritter, former Democratic governor of Colorado.

The report highlights the power of state governments to shape healthcare policy, given their roles administering Medicaid, state employee benefits, and now the health insurance marketplaces established by the Affordable Care Act.  It calls on states to set targets for health care spending; promote various forms of managed care, ACOs and alternatives to fee-for-service medicine in the programs it administers; and help consumers generate competition by reporting cost and quality information about health care providers and insurers.

I spoke to Dr. Scheppach, now a professor of public policy at UVA, about current and likely future state-level healthcare reform efforts.

Scheppach noted at the outset that  state governments administer or oversee health insurance for a large swath of the U.S. population  -- with more to come as the ACA exchanges and Medicaid expansion matures. "If you add it all together, in another year or two, there will be about 75 million people in Medicaid, another 3-5 million in state and local government employees' health plans, and then there's the exchanges." (CBO projections envision 25 million ACA exchange customers by 2018.)

In which Krugman borrows Martin Wolf's scalpel, possibly via Geithner

[n.b. see update in mid-post. I seem to have misread...]

In October 2010, Financial Times columnist Martin Wolf led off a column with a heroic simile to describe Obama's economic performance:

An ambulance stops by the roadside to help a man suffering from a heart attack. After desperate measures, the patient survives. Brought into hospital, he then makes a protracted and partial recovery. Then, two years later, far from feeling grateful, he sues the paramedics and doctors. If it were not for their interference, he insists, he would be as good as new. As for the heart attack, it was a minor event. He would have been far better off if he had been left alone.

That is the situation in which Dr Barack Obama finds himself...more stimulus was needed. After all, it was quite modest: fiscal stimulus was less than 6 per cent of GDP and so accounts for less than a fifth of the cumulative deficits of 2009, 2010 and 2011, while monetary policy is caught in a liquidity trap.

The truth is not that policy was foolhardy and failed, but that it was too timid and so could not succeed.

Lo, now cometh Paul Krugman to review Tim Geithner's memoir:

More choice is coming to ACA exchanges. How much is too much?

Hooray! Based on the first state reports, more health insurers will enter more ACA state exchanges in 2015 than in 2014. In Illinois, for example, as Peter Frost reports in the Chicago Tribune, six insurers offered a total of 120 health plans in the state in 2014, whereas in 2015, eight companies (with ten brand names) will offer 306 plans.

That's good, right? Well, more competition should mean better prices, and perhaps force constructive creativity in plan design. From a consumer shopping standpoint, though, how much choice is too much? What will a state marketplace with 300 plans look like?

The first thing to recognize is that the market is different in each county, and no county will offer 306 plans. This year, with 120 plans sold in the state as a whole, Cook County, home of Chicago, had 65 plans on offer.* Other Illinois counties that I tested at random had between 36 and 51 plans.  (That's a lot. By my count, Los Angeles, CA had 36 plans on offer this year.) Extrapolating, Cook County may have 160+ plans posted next year, sorted into the four metal tiers plus catastrophic. 

Michael Leavitt on State-level healthcare reform

Beneath the furious passions aroused by the Affordable Care Act lurk broad areas of bipartisan consensus regarding healthcare reform in the United States. Lawmakers in both parties want to move payment for healthcare away from fee-for-service and toward managed care, "bundled" payment by the patient or treatment episode, and risk-based payment, in which providers are rewarded for keeping costs under target and penalized for exceeding it. Both parties also accept the premise that high deductibles and co-pays help control costs -- with lip service at least usually paid to giving patients viable choices by providing information about providers' pricing and quality.

The bipartisan zone is mapped out in a report produced under the auspices of the University of Virginia's Miller Center by a commission co-chaired by Michael Leavitt, former Republican Governor of Utah and Secretary of Health and Human Services under George W. Bush, and Bill Ritter, former Democratic governor of Colorado. Cracking the Code on Healthcare Costs, released in January 2014, focuses on the role of state governments in containing healthcare costs while improving delivery, emphasizing that states have powerful levers on both fronts.  Those levers include administration of Medicaid, state employee health programs, and the state health exchanges established by the ACA, as well as the state regulation of insurance mandated by US law and "state laws affecting market competition and consumer choice, such as antitrust enforcement and requirements for providers to report price and quality information."

The report's working assumption is that, Republican cries of "federal takeover of healthcare" notwithstanding, both the ACA and existing Medicaid rules afford governors and state legislators and administrators ample scope to shape the healthcare markets in their states. Key recommendations include setting annual overall state spending benchmarks, as Massachusetts has done; promoting "coordinated, risk-based care to the disabled and dual-eligible population" -- the most expensive Medicaid beneficiaries; and also promoting coordinated, risk-based plans in the ACA exchanges -- as well as pricing transparency and quality ratings for participating plans.

ACA is here to stay

Does the ACA significantly constrain state innovation, or encourage it? I spoke about current and potential state efforts to transform healthcare delivery with Michael Leavitt and with Professor Raymond Sheppach, project director for Cracking the Code, whose comments I'll relay in a followup post.

When "choice" is a euphemism for "wealth"

I am a little surprised that two leading healthcare economists, Austin Frakt and Amitabh Chandra, write approvingly in The Upshot of this proposal for a new kind of health insurance:

If plans could compete on the basis of the therapies they cover, consumers could decide what they wish to pay for. This sounds complicated, but it need not be.

Health plans could define themselves at least in part by the value of technologies they cover, an idea proposed* by Professor Russell Korobkin of the U.C.L.A. School of Law. For example, a bronze plan could cover hospitalizations and visits to doctors for emergencies and accidents; genetic diseases; and prescription drugs that keep people out of hospitals. A silver plan could cover what bronze plans do but also include treatments a large majority of physicians find useful. A gold plan could be more inclusive still, adding coverage, for instance, for every cancer therapy shown to improve patient outcomes (no matter the cost) as long as it was delivered at a leading cancer center. Finally, a platinum plan could cover experimental and unproven cancer therapies, including, for example, that proton beam.

This way, nothing would be concealed or withheld from consumers. Someone who wanted proton-beam cancer treatment coverage could have it by selecting a platinum policy and paying its higher premiums. Someone who did not want to pay higher premiums for lower-value care, in turn, could choose a bronze or silver plan

The author of the proposal, Russell Korobkin, implicitly admits that it's a bit utopian, or at least a distant prospect, in that "there is very little solid information demonstrating the basic effectiveness of the majority of medical treatments recommended by physicians and other providers every day" and "where there is more than one plausible intervention, there is even less information available concerning the comparative effectiveness of possibilities."  His plan depends on creating a uniform scale of "relative value ratings" based on an existing measure, quality-adjusted life-years, "routinely used by health service researchers to compare the benefits of dissimilar interventions."

ICYRMI: Six online classics of 21st century history

"ICYMI" generally refers to something written a day or a week ago.  In recent days, I've had recourse several times to Michael Hastings' deeply reported 2012 reconstruction of Bowe Bendahl's upbringing, inner life and military career -- as well as of the negotiations for his release. It would be a mistake to suggest that everything most of us are learning now about Bendahl is in that story, but my sense is that 80 percent of it is.

That set me thinking this morning about other articles, written years ago but still online, that made a strong impression on me and that still resonate. Here's a short "in case your really missed it" list.

America's Sicilian Expedition: in the runup to the 2003 U.S. invasion of Iraq, pundits and scholars analogized the impending war to every conflict in American history, with the possible exception of the War of 1812. Some went further afield. One that struck me as a bit outlandish at the time was historian Simon Schama's essay raising the specter of ancient Athens' disastrous exercise in imperial overreach:

Seeing eye to eye on Afghanistan: Bowe Bergdahl and Robert Gates

Five days before his disappearance, Bowe Bergdahl poured out his disillusionment with the US effort in Afghanistan in a long email to his parents, quoted at length in Michael Hastings' June 2012 profile. It included this indictment:

In the second-to-last paragraph of the e-mail, Bowe wrote about his broader disgust with America's approach to the war – an effort, on the ground, that seemed to represent the exact opposite of the kind of concerted campaign to win the "hearts and minds" of average Afghans envisioned by counterinsurgency strategists. "I am sorry for everything here," Bowe told his parents. "These people need help, yet what they get is the most conceited country in the world telling them that they are nothing and that they are stupid, that they have no idea how to live." He then referred to what his parents believe may have been a formative, possibly traumatic event: seeing an Afghan child run over by an MRAP. "We don't even care when we hear each other talk about running their children down in the dirt streets with our armored trucks... We make fun of them in front of their faces, and laugh at them for not understanding we are insulting them."

Does that sound harsh? Compare Robert Gates' account in Duty: Memoirs of a Secretary at War of how he saw the U.S. war effort at just about exactly the same point, the summer of 2009:

Hey, what about Obama's threat to veto the NDAA if it maintains restrictions on prisoner transfer?

Remember Obama's May 21 threat to veto the National Defense Authorization Act if restrictions on his authority to transfer Guantanamo prisoners are not removed?

The President applauds Ranking Member Adam Smith for his continued stalwart leadership in standing up for our values and national security by advancing the cause of closing the detention facility at Guantanamo Bay. By eliminating unwarranted and burdensome restrictions relating to the transfer of Guantanamo detainees, his amendment would further our efforts to move past this chapter in U.S. history. We urge the House to adopt the Smith Amendment and put an end to the ongoing harm to the nation’s security that results from the operation of the facility at Guantanamo Bay, Cuba.

This Administration has repeatedly objected to statutory restrictions that impede our ability to responsibly close the detention facility and pursue appropriate options for the detainees remaining there, including by determining when and where to prosecute detainees, based on the facts and circumstances of each case and our national security interests. In hundreds of terrorism-related cases – and as illustrated once again this week – our federal courts have proven themselves to be more than capable of administering justice.

John McCain is Obama's Sal Maglie

Back in February, John McCain told Anderson Cooper he would support "some sort of exchange" for Bowe Bendahl -- at a time when it was public knowledge, explained by Cooper on the same show, that the exchange being negotiated was for the five Taliban detainees who later were in fact exchanged.  Now McCain says that the done deal is  "ill-founded," that it is "putting the lives of American servicemen and women at risk," and  that the five traded detainees are "the hardest and toughest of all" and "wanted war criminals."

I am reminded of the sage advice offered by Seattle Pilots pitching coach Sal Maglie in Jim Bouton's 1969 memoir Ball Four:

In the clubhouse meeting yesterday on the Oakland Athletics Sal Maglie said about Reggie Jackson, “Once in a while you can jam him.” I could just see the situation. Reggie Jackson up. Pitcher throws one high and inside, perfect jam pitch. Jackson leans back, swings and puts it into the right-field bleachers. And Sal screams from the bench, “Not now, goddammit, not now!” (Kindle locations 4403-4406).

It's not necessarily inconsistent to have been in favor of negotiating but now to balk at the terms of the actual deal struck. McCain did leave himself some wiggle room in his February exchange with Anderson Cooper: 

COOPER: Would you oppose the idea of some form of negotiations or prisoner exchange? I know back in 2012 you called the idea of even negotiating with the Taliban bizarre, highly questionable.
SEN. JOHN MCCAIN (R), ARIZONA: Well, at that time the proposal was that they would release -- Taliban, some of them really hard-core, particularly five really hard-core Taliban leaders, as a confidence- building measure. Now this idea is for an exchange of prisoners for our American fighting man. I would be inclined to support such a thing depending on a lot of the details.

Cue the WilllieHortoning

If you wonder why Obama cut Congress out of the endgame of his negotiation for Bowe Bergdahl, tune in to the late Michael Hastings' account of the politics as of June 2012, in his great reconstruction of Bergdahl's tale:

Officially, Bowe remains a soldier in good standing in the United States Army. He has continued to receive promotions over the past three years, based on his time in uniform, and he now holds the rank of sergeant. Unofficially, however, his status within the military is sharply contested. According to officials familiar with the internal debate, there are those in both Congress and the Pentagon who view Bowe as a deserter, and perhaps even a traitor. As with everything in Washington these days, the sharp political discord has complicated efforts to secure his release.

"The Hill is giving State and the White House shit," says one senior administration source. "The political consequences­ are being used as leverage in the policy debate." According to White House sources, Marc Grossman, who replaced Richard Holbrooke as special envoy to Afghanistan and Pakistan, was given a direct warning by the president's opponents in Congress about trading Bowe for five Taliban prisoners during an election year. "They keep telling me it's going to be Obama's Willie Horton moment," Grossman warned the White House. The threat was as ugly as it was clear: The president's political enemies were prepared to use the release of violent prisoners to paint Obama as a Dukakis-­like appeaser, just as Republicans did to the former Massachusetts governor during the 1988 campaign. In response, a White House official advised Grossman that he should ignore the politics of the swap and concentrate solely on the policy.

"Frankly, we don't give a shit why he left," says one White House official. "He's an American soldier. We want to bring him home."