Sunday, March 01, 2015

Republican can do what they will to American healthcare -- by accepting the Affordable Care Act

Ask Republicans how they will reform the health insurance market if they succeed in repealing the Affordable Care Act and you will not get a substantive "replace" plan. You will, however, hear three desiderata: 1) give states more control of their insurance markets; 2) give insurers more freedom to design plans outside ACA-imposed constraints; and 3) give consumers in the individual insurance market more choice (though the ACA marketplace shelves in most regions at present are not what you would call bare).

If Republicans were sincere about changing the market in this direction, they would have enormous leverage to do so, both by working within the ACA's essentially federalist (or "state-deferential") structure and by negotiating changes to the law that Democrats would surely accept in exchange for an end to dead-end opposition.

Let's count the ways that Republicans in state government and Congress could shape the health insurance markets to their liking, starting with the tamest and moving toward the most aggressive.

1) Form state exchanges or partner with the federal government. The point here is not to build a cool website (though state exchanges can more easily integrate with the state's Medicaid and other benefits-delivery systems) but to shape the state's insurance market. While the ACA does mandate actuarial levels and Essential Health Benefits (EHBs), it left the states considerable leverage to shape the latter. States also retain authority under the ACA to certify Qualified Health Plans (QHPs) for the marketplace and set the rules under which rates and rate hikes are approved. Most Republican-led states ceded these vital functions to the federal government.

2) Reshape Medicaid while taking federal money to expand it: This is the one ACA reform that a number of Republican governors and legislatures have undertaken, negotiating "private option" variations on Medicaid with HHS under ACA Section 1115 waivers. Arkansas, Iowa, Michigan, Indiana and Pennsylvania have negotiated waivers that put those eligible for Medicaid under the ACA expansion in private plans and/or include features including co-pays, premiums, health savings accounts, and incentives for healthy behaviors.  HHS has proved itself quite flexible in negotiating waivers for these variations, though there are some lines the department won't cross, such as requiring job search activities or drug testing for enrollees. While the Kaiser Family Foundation lists seven states as having Medicaid expansion "under discussion," 15 states wholly or partly controlled by Republicans remain dead-set in refusal.

3) "Repeal and replace" the ACA -- on a state-level. Almost everything Republicans say they would like to do to reshape the insurance market can be done within a given state via ACA Section 1332 waivers, which empower states to propose alternative schemes (effective in 2017) to meet the law's coverage goals. States can apply to alter to the law's coverage rules, funding and subsidy formulas, and mechanisms for compelling participation, i.e., the employer and individual mandates, on condition that they 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. Though altering fundamental features of the law while meeting its goals poses something of  a Rubik's Cube problem, HHS flexibility on the Medicaid front suggests that even a Democratic administration would accept some rather creative accounting in exchange for a concerted state effort to get its citizens insured (see Nicholas Bagley on the likely extent of HHS flexibility).

4) Amend the law -- for a price.  There are legislative changes to the ACA that Democrats desperately want, changes that most or many Democrats would acknowledge as improvements, changes that Democrats would readily accept as the price of Republican acceptance of the law as a whole, and changes that Democrats would accede to under intense pressure, such as an adverse ruling in King v. Burwell banning the flow of subsidies through the federal exchange, or a Republican electoral sweep (leaving Democrats with a filibuster-capable minority if Republicans don't kill the filibuster entirely). These include, taking these categories in the order presented: 1) fixing the "family glitch," which excludes those who can afford individual but not family coverage offered by their employer from obtaining subsidies in the ACA marketplace; 2) rewriting or scrapping the employer mandate; 3) adding to the ACA marketplace menu "copper" plans that offer even skimpier coverage than the ACA's lowest-tier bronze-level plans; 4) giving states more control or essentially a free hand in defining coverage rules including EHBs and actuarial levels; and 5) finding alternatives to the individual mandate. These do exist: they include a three-legged stool of "continuous coverage" protection from medical underwriting, default enrollment of low-income or financially distressed residents in catastrophic plans covered entirely by premium subsidies, and open enrollment periods at long intervals.

Most Republicans will not confess publicly that they're not interested in finding a way to make health insurance affordable for all Americans. They cannot unite around a start-from-scratch replacement for the ACA because there's really no alternative that's more market-friendly than the ACA's basic architecture: a subsidized private-plan marketplace made affordable to all (above the Medicaid-eligible income threshold)  by subsidies and guaranteed issue, and rendered financially viable  via carrots and sticks that draw the vast majority of the uninsured into the market.  The changes that conservatives who accept the near-universal coverage goal might genuinely like to see -- less control over plan design, still more "skin in the game"for the insured, more state control -- can all be accomplished within the framework of the law.  The only goal that can't be reached by such means is a "catastrophic success" in partisan political warfare.

Update, 3/2: Michael Leavitt, George W. Bush's pragmatic HHS Secretary, recently sketched out for me how Republicans might force changes along these lines under pressure of a Supreme Court ruling for the plaintiffs in King v. Burwell, which would invalidate premium subsidies credited through the federal exchange, Yesterday Republican lawmakers Orrin Hatch, Lamar Alexander and John Barrasso floated a lightly sketched "plan" to salvage the subsidies post-King that looks a lot like Leavitt's scenario: authorize the subsidies but change the state marketplace structure and give states more control over their health insurance markets. Ezra Klein scoffs that there's no way the GOP House would "instantly vote to keep the subsidies flowing." That's probably true, but Leavitt envisions a process of steadily ratcheting pressure (as millions lose or are threatened with imminent loss of their subsidies) and a negotiation shaped by "which way public opinion breaks," which is as yet unpredictable.

Can states "repeal and replace" the ACA? Nicholas Bagley on scope of "innnovation waivers"
Michael Leavitt on state-level healthcare reform
Raymond Schappach: States will take back their exchanges (eventually) (a pre-King read)

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