Friday, April 07, 2017

If Republicans had created the ACA marketplace...

As House Republicans paint the fingernails of the AHCA zombie with a little reinsurance gloss, let's take a 20-second irony timeout.

An amendment layered into the zombie AHCA yesterday would create an "invisible risk" program, funded with  $15 billion for the years 2018-2026, that would pick up costs above a certain threshold (as yet undefined for enrollees in individual market health plans.

That program would exist "within" the AHCA's Patient and State Stability Fund (PSSF) program, which allocates $115 billion over nine years for states to spend as they will to stabilize their markets. State options, as summarized by Avalere Health, include "providing financial assistance for high cost individuals, incentivizing insurer participation in their markets, reducing the cost of insurance, promoting access to preventive services, and reducing out-of-pocket costs for patients." The $15 billion allocated to the "invisible risk" fund is additional. Thus, $130 billion is allocated to stabilize markets from 2018-2026.

As was immediately obvious when the AHCA text was released, the ACA marketplace's problems would essentially be over if Republicans allocated $100 billion ( later raised to $115 and now to $130 billion) for states to use to stabilize their markets.  At least, its problems would be over in states that chose to take their allocation and provide the required match, which does rise over the funding period. And all states would probably do so if the marketplace were no longer a focus of Republican hatred.

The stability fund largess inserted in the AHCA is pretty breathtaking in light of Republicans' nonstop attacks, verbal and substantive, on the ACA's risk control measures.  From the beginning, Republicans excoriated the ACA's three risk control programs, two of which expired after three years, as insurer "bailouts" -- notwithstanding that those programs were modeled on permanent programs that a Republican Congress created for private insurers participating in the Medicare prescription drug program created in 2003. Those programs are reinsurance (expired after 2016), risk corridors (expired after 2016) and risk adjustment (permanent).

The marketplace's problems are attributable in large part to Republicans defunding the risk corridor program, depriving insurers of a total of about $8.3 billion owed in 2014 and 2015. In this program, insurers who take in premiums that exceed claims beyond a certain threshold pay in; insurers whose claims exceed premiums by the same margin get reimbursed. It was designed to be revenue neutral -- but if there were more losers than winners (as has been the case), the federal government was primed to make up the difference. In omnibus budget bills passed in 2014 and 2015, however, Republicans added a provision blocking HHS from using money in its budget to fully fund the risk corridor payments (Marco Rubio loudly took credit for this and did play a role). HHS ended up paying only 12% of the money owed to insurers; those payments are now in limbo, as insurers have sued to recover.  The government's failure to make good on the risk corridor payments pushed many of the ACA marketplace's co-ops over the edge and doubtless played a role in major insurers' decisions to cut back participation or withdraw from the marketplace.

Republicans lambaste the ACA marketplace on grounds that it's not stable, that premiums are unaffordable and rising uncontrollably, that deductibles and out-of-pocket expenses are too high. To attack those problems, they crafted a repeal bill that renders coverage unaffordable for the majority of current marketplace enrollees -- with much higher out-of-pocket costs, premiums that don't adjust for income, and increased age rating that would render coverage unaffordable for all but affluent prospective enrollees over, say, 50.

Their real purpose was to defund the ACA, repealing taxes and penalties that would reduce federal revenue by almost $900 billion over ten years, according to CBO.  But they introduced the AHCA in the name of making coverage more affordable.

Republicans do know how to take care of insurers in any program that's not created by Democrats however. As Sabrina Corlette and Jack Hoadley have highlighted, when Republicans created the Medicare Part D prescription program in the Medicare Modernization Act of 2003, they also showered what's now called the Medicare Advantage program with love, boosting payment rates as well as creating new kinds of plans that allowed for more robust provider networks. At the time, the private Medicare market was more stressed than the ACA marketplace is now, having lost half its participating plans and a quarter of its enrollees in the years immediately prior. Shored up with Republican largess, the program bloomed like a rose: enrollment more than doubled from 2005-2010.

Today, Timothy Jost proposes that yet another fail-safe control  built into the Medicare Part D program could solve the ACA marketplace's most acute immediate problem -- regions in danger of having no participating insurer. Noting that Part D's "3Rs" were better funded than the ACA marketplace's, as well as being made permanent, Jost continues:
But the Part D program contained another very important provision that unfortunately was not duplicated by the ACA. The law provided that if two or fewer insurers offered coverage in any rating area, the U.S. Department of Health and Human Services (HHS) could adjust the parameters of the risk corridor program to provide more generous support to insurers that offered coverage. If this was not enough to attract insurers to a rating area, HHS could contract with a “fallback” insurer to provide coverage. The fallback insurer effectively acts as a third-party administrator by offering a provider network and processing claims, with HHS bearing the full risk....

Congress could create a fallback program for counties in which no insurer applies to provide qualified health plans for 2018 or 2019. HHS would contract with an insurer to provide administrative services with the government bearing the risk. Prime candidates for contracting would be insurers already offering coverage in the off-exchange market in the state or insurers participating in the Federal Employees Health Benefits Program (FEHBP). Many insurers offer third-party administrator services to employer-sponsored self-insured plans and would be able to offer similar services for a fallback plan.
One can debate the merits of filtering public insurance subsidies through privately run programs. If that's the chosen method, though, risk controls and fallbacks need to be adequate to the task. Public-private partnership may not be the most efficient way to deliver healthcare benefits. But when Republicans do it, they know how to keep everyone fat and happy -- or at least they used to.  As Jost wrote previously about Medicare Part D:
the Part D premium stabilization programs have played a key role in allowing insurers to keep premiums low and profits high, even though insurers have had to return some of the profits to the program. Low premiums (and premium increases) and high profits have made the program popular both with consumers and insurers...

The Part D program also has remained affordable and popular because of the large subsidies the program enjoys. As already noted, federal subsidies cover 74.5 percent of program costs for individuals with incomes up to $85,000 and $170,000 for couples. This has made Part D affordable for almost all moderate and higher-income eligible enrollees...

in the end, Part D’s generous premium stabilization programs and subsidies explain much of its success, while the limits placed on the ACA 3Rs and subsidies undoubtedly have contributed to many of the program’s problems.
If Republicans could be made to own the ACA marketplace, it too would bloom like a rose -- after Republicans dropped their signature tons of fertilizer.

Update, 7/3: Per this summary in John McDonough's Inside National Health Reform, the costs of Medicare Part are broadly comparable to those of the ACA -- and include $11 billion per year in reinsurance. All deficit-financed:
In 2009, the Part D program cost $53.3 billion—$19.9 billion was for the low-income subsidy, $18.8 billion for the cost of the direct subsidy for all enrollees, $10.9 billion for reinsurance for the highest-cost enrollees, and $3.7 billion for the subsidy to employers who maintain retiree drug coverage. Between 2010 and 2019, the expected federal cost for Part D will total nearly $1 trillion. The law was written so that these costs are financed through general revenues. Unlike those who drafted the ACA, Part D’s Republican designers made no effort in the 2003 law to offset the cost.

McDonough, John E.. Inside National Health Reform (California/Milbank Books on Health and the Public) (p. 172). University of California Press. Kindle Edition.

1 comment:

  1. Thanks for an excellent post. I have been beating the drums on this rank instance of Republican hypocrisy for some time, to little effect I am afraid but thanks again.

    As you say, Part D and Medicare Advantage have been bailed out by cash infusions with no controversy or hesitation.

    And there is one more element of contrast. Part D and Med Advantage were not accompanied by any tax increase. All the spending has effectively been "put on the card."

    By contrast the ACA was to be paid for by actual taxes. (there was some ugly double-counting of Medicare reductions, plus taxes on insurers that just get passed on to insureds, but there were at least $35 billion a year in new taxes on the wealthy.) And boy, have the Democrats had to pay for this small fiscal honesty.

    The operative principle in Repubican health spending at least appears to be that no spending is too much when it goes to seniors, who are by definition 'deserving' -- whereas every nickel of spending on 'those people' is to be attacked, especially when it is sponsored by a President who by birth is one of 'those people' himself.