Hillary Clinton's just-released package of proposed health reform proposals is very...Hillary Clinton. It's got a lot of moving parts and takes incremental whacks at a pervasive problem -- ever-rising out-of-pocket medical costs for the insured -- from multiple angles. On the one hand, it layers complexity on complexity. On the other hand, its patches are tailored to provide complementary plugs to different holes in coverage that deter people from obtaining needed care and drain thousands from their earnings. And by the way, the most powerful ideas are are well below the top line.
Pocket patches
The two lead proposals are aimed directly at the relentless rise in health plan holders' out-of-pocket costs for care. To reduce insureds' "skin in the game" that has become in many cases a pound of flesh, Clinton would
a) mandate that every plan provide for three "sick visits" before the deductible kicks in -- which "could save over $100 per year" for a person with private coverage*; and
b) provide a refundable tax credit of up to $5,000 per family for people whose "qualifying out-of-pocket health expenses" exceed 5% of income.
The first proposal is a bit of a band-aid: what if that subsidized sick visit reveals a condition requiring thousands of dollars of care? That's where the second proposal kicks in: the tax credit potentially covers all, most, or a good chunk of a high deductible. In effect, it's a kind of as-needed government-funded health savings account. It's designed for those who can't already take advantage of the medical expense deduction available to those who spend more than 10% of their income on medical expenses ( a deduction, not a refundable credit).
Full fathom five the submerged state lies
Since most Americans get their insurance through their employers, the tax credit amounts to a further government subsidy for employer-sponsored insurance. In a broad sense, perhaps it giveth what the controversial Cadillac tax on the most expensive employer-sponsored plans (scheduled to take effect in 2018) taketh away -- perhaps redistributing the proceeds to those with skimpier coverage.
The credit increases the government's share in the existing three-way split of medical costs between the employee, the employer and the government. An employee could conceivably have a high deductible plan, an employer-funded health savings account, and a tax credit to pay expenses the account doesn't cover (if costs were very high and the employer contribution to the account was skimpy). The credit could also work for buyers of plans with high deductibles in the individual market. In fact, the possibility of accessing the credit might encourage some people to choose higher deductible plans.
The three pre-deductible sick visits are layered on top of the ACA's mandated free preventive care, which includes a host of screenings for conditions including diabetes, depression, high blood pressure, colorectal cancer, etc. The refundable tax credit adds to a mix that includes employer-sponsored health savings accounts, existing tax breaks for medical expenses and (for the self-employed only) health insurance, and cost-sharing reduction subsidies for low-income buyers on the ACA exchanges. That's a lot of buckets to die of thirst amidst.
Bye-bye drive-by billing?
A third proposal takes a whack at another source of high medical expense: out of network billing. It would "ensure [a plan holder]will be required to pay no more than in-network cost-sharing for any care received in a hospital in their plan’s networks and for any emergency services in a true emergency." That's admirably simple and more comprehensive than most state-law attempts to deal with the national disgrace of drive-by-billing by out-of-network providers in hospitals (and therefore, it's hard not to suspect, unpassable).
In antitrust we trust
The potentially most powerful proposal doesn't come till page 3. It has the advantage of not requiring any legislation:
As Phillip Longman and Paul S. Hewitt noted in February 2014 in Washington Monthly, hospital mergers have risen steadily from 52 in 2009 to 105 in 2012. In 2014, more than 100 mergers were completed, according to Irving Levin Assocates. A Robert Wood Johnson literature review, cited by Longman and Hewitt, found that hospital mergers in already-consolidated markets often lead to price increases of more than 20%. Hospitals are meanwhile gobbling up physician practices, which also often leads to soaring prices.
A recent study by Harvard Law professor Einer Elhauge suggests more generally that consolidation, not only in industry but among mega institutional investors, may be a major factor driving the increase in inequality. That may be nowhere more true than in an industry said to account for about a sixth of the U.S. economy. Hillary Clinton has access to an enormous brain trust studying causes of galloping inequality and potential remedies. Here's hoping that if elected she does place a premium on antitrust enforcement -- in healthcare, and everywhere.
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* The 'sick visit' proposal is similar to a benefit that the California ACA marketplace requires of bronze plans, the lowest tier, which in California will carry $6,000 deductibles in 2016. California mandates that the first three doctor visits be available at the price of a copay before the deductible kicks in. In bronze plans in 2016, the copay is $70 for a primary care visit, $90 for a specialist, and $120 for urgent care.
Pocket patches
The two lead proposals are aimed directly at the relentless rise in health plan holders' out-of-pocket costs for care. To reduce insureds' "skin in the game" that has become in many cases a pound of flesh, Clinton would
a) mandate that every plan provide for three "sick visits" before the deductible kicks in -- which "could save over $100 per year" for a person with private coverage*; and
b) provide a refundable tax credit of up to $5,000 per family for people whose "qualifying out-of-pocket health expenses" exceed 5% of income.
The first proposal is a bit of a band-aid: what if that subsidized sick visit reveals a condition requiring thousands of dollars of care? That's where the second proposal kicks in: the tax credit potentially covers all, most, or a good chunk of a high deductible. In effect, it's a kind of as-needed government-funded health savings account. It's designed for those who can't already take advantage of the medical expense deduction available to those who spend more than 10% of their income on medical expenses ( a deduction, not a refundable credit).
Full fathom five the submerged state lies
The credit increases the government's share in the existing three-way split of medical costs between the employee, the employer and the government. An employee could conceivably have a high deductible plan, an employer-funded health savings account, and a tax credit to pay expenses the account doesn't cover (if costs were very high and the employer contribution to the account was skimpy). The credit could also work for buyers of plans with high deductibles in the individual market. In fact, the possibility of accessing the credit might encourage some people to choose higher deductible plans.
The three pre-deductible sick visits are layered on top of the ACA's mandated free preventive care, which includes a host of screenings for conditions including diabetes, depression, high blood pressure, colorectal cancer, etc. The refundable tax credit adds to a mix that includes employer-sponsored health savings accounts, existing tax breaks for medical expenses and (for the self-employed only) health insurance, and cost-sharing reduction subsidies for low-income buyers on the ACA exchanges. That's a lot of buckets to die of thirst amidst.
Bye-bye drive-by billing?
A third proposal takes a whack at another source of high medical expense: out of network billing. It would "ensure [a plan holder]will be required to pay no more than in-network cost-sharing for any care received in a hospital in their plan’s networks and for any emergency services in a true emergency." That's admirably simple and more comprehensive than most state-law attempts to deal with the national disgrace of drive-by-billing by out-of-network providers in hospitals (and therefore, it's hard not to suspect, unpassable).
In antitrust we trust
The potentially most powerful proposal doesn't come till page 3. It has the advantage of not requiring any legislation:
Vigorously enforce antitrust laws to scrutinize mergers and ensure they do not harm consumers. For several years, consolidation and mergers have risen in the health industry – both on the provider side and on the insurer side. Mergers should be beneficial for consumers. Hillary Clinton will appoint regulators and ensure full funding so that America’s antitrust authorities have the resources and vigor to monitor the changing industry landscape and to move quickly to investigate mergers or business practices that could harm consumers.Clinton puts the first emphasis on insurer consolidation -- in the news because of two pending megamergers. Arguably, hospital and other healthcare provider consolidation -- e.g., hospitals buying physician practices -- is the greater driver of cost hikes. By incentivizing "coordinated care" and funding Accountable Care Organizations, the ACA has turbo-charged a longstanding trend toward provider consolidation.
As Phillip Longman and Paul S. Hewitt noted in February 2014 in Washington Monthly, hospital mergers have risen steadily from 52 in 2009 to 105 in 2012. In 2014, more than 100 mergers were completed, according to Irving Levin Assocates. A Robert Wood Johnson literature review, cited by Longman and Hewitt, found that hospital mergers in already-consolidated markets often lead to price increases of more than 20%. Hospitals are meanwhile gobbling up physician practices, which also often leads to soaring prices.
A recent study by Harvard Law professor Einer Elhauge suggests more generally that consolidation, not only in industry but among mega institutional investors, may be a major factor driving the increase in inequality. That may be nowhere more true than in an industry said to account for about a sixth of the U.S. economy. Hillary Clinton has access to an enormous brain trust studying causes of galloping inequality and potential remedies. Here's hoping that if elected she does place a premium on antitrust enforcement -- in healthcare, and everywhere.
--
* The 'sick visit' proposal is similar to a benefit that the California ACA marketplace requires of bronze plans, the lowest tier, which in California will carry $6,000 deductibles in 2016. California mandates that the first three doctor visits be available at the price of a copay before the deductible kicks in. In bronze plans in 2016, the copay is $70 for a primary care visit, $90 for a specialist, and $120 for urgent care.
Thanks for the summary. The tax credit for large out of pocket expenses is very promising, in that it takes the sting out of bronze plans and silver plans for those over 200% of poverty.
ReplyDeleteOf course it is a kind of grotesque American kludge, in which we give some people subsidies to buy skimpy coverage, and then we need to give them another subsidy when they actually use that skimpy coverage for a serious illness.
Still and all, this is a promising program.
Do you have any idea how much it would cost, who will be taxed to pay for it, and how it would work in practice?