AHIP puts Medicaid first in "do no harm" plea to Republicans

Early this week, in a letter to Senate Finance Committee Chair Orrin Hatch, the America's Health Insurance Plans (AHIP), the largest association of private health insurers, basically begged Republicans to stop threatening to uninsure tens of millions in the name of reform. 

AHIP voiced support for community rating, guaranteed issue, income- and age-based subsidies, and an enforcement measure sufficient to induce people to buy insurance. In other words, for preserving the ACA marketplace with a few regulatory teaks  -- and with the AHCA's $138 billion in federal funding for state reinsurance or other "stability" measures tossed in.

Striking on its face though the health insurance industry's renunciation of medical underwriting may be, the most remarkable part of the letter comes early, in its reframing of what healthcare "reform," Republican-style, is all about. AHCA opponents have been screaming for months that at the bill's core is a $900 billion tax cut* paid for by an $800+ billion Medicaid cut. It's been hard to break through the noise with that core equation, given the AHCA drafters' high-strung debates about various proposed malformations of the individual market. AHIP puts the pieces in perspective:

We are committed to market-based solutions and public-private partnerships that improve affordability, value, access, and well-being for consumers.

Today, the Medicaid program provides coverage to almost 70 million Americans, and more than 50 million beneficiaries (over 70 percent) receive coverage through private Medicaid health plans. The individual market delivers private coverage to approximately 20 million people – about half buying coverage through state and/or federal exchanges with federal premium and/or cost sharing reduction (CSR) assistance for those eligible and the other half purchasing coverage “off exchange” with no financial assistance. While differing in relative size, the individual market and Medicaid are in fact closely related given the populations they serve. For example, many people with Medicaid are employed but do not have employer-sponsored coverage. As they move up the economic ladder, they may lose eligibility for Medicaid and thus need affordable coverage in the individual market. Conversely, if their incomes fall again due to loss of employment, income, or other reasons, Medicaid acts as an important safety net. As a starting point, it is therefore important to note that policy changes affecting Medicaid beneficiaries will have implications for the individual market and vice-versa. 

According to AHIP, then, the basic proportions of the problems posed by the AHCA's calculated damage to two markets are 70-20**  -- or, from the point of view of private insurers' served population, 50-20.  The "public-private partnerships" referenced above are a major part of private insurers' business: managed Medicaid accounts for 20% of industry revenue and Medicare Advantage for 12%, according to S&P Global (cited here). In 2014, Medicare and Medicaid made up 59% of revenue for UnitedHealthcare (too bad insurance regulators don't tie managed Medicaid contracts to participation in the ACA marketplace).

Small wonder, then, that AHIP pleads, "Any changes in Medicaid should keep the health and support needs of the program's diverse and often vulnerable beneficiary population as the top priority." That entails...

Adequate Funding to Meet the Unique Needs of Beneficiaries: Medicaid funding must be adequate to meet the  healthcare and service needs of beneficiaries and provide actuarially sound resources to state Medicaid programs and Medicaid health plans. We are concerned that key components of the proposed new funding formulas in the AHCA – such as the base year selection, annual increases tied to the consumer price index for medical care, and applying per capita caps to certain populations – could result in unnecessary disruptions in the coverage and care beneficiaries depend on. For example, Medicaid health plans are at the forefront of providing coverage for and access to behavioral health services and treatment for opioid use disorders, and insufficient funding could jeopardize the progress being made on these important public health fronts. At the same time, AHIP members are committed to reducing cost growth by using value-based care arrangements and other innovative programs to address chronic illnesses, support functional impairments, and better manage the care of the highest-need enrollees. 

AHIP's support for the existing ACA marketplace subsidy structure, or something close to it, is elaborated in the context of its assertion that Medicaid and the marketplace constitute a continuum of service to low income people. In fact, AHIP argues, if Republicans do repeal the ACA expansion, the need for ACA-like private plan subsidies will be even more acute:

As noted earlier, the individual market and Medicaid are closely related given the populations they serve. It will be critical to have a stable individual market that provides adequate tax credits, especially for low-income individuals, if large numbers of beneficiaries are made ineligible for Medicaid and move into the individual market. 

This advocacy for income-appropriate subsidies leads to a strikingly self-canceling statement when AHIP tries to verbally accommodate itself to the AHCA's flat subsidy structure:

We believe it is important to ensure the tax credit is adequate, especially for those who have lower incomes, are older, and live in areas with high healthcare costs. If the existing flat tax credit structure is employed, this could be accomplished by providing extra assistance to lower-income individuals, providing appropriate age adjustments, reflecting the geographic differences in the cost of care, and protecting consumers from excessive out-of-pocket costs. Assistance that is annually indexed with medical inflation would help maintain the value of the credit over time.

That boils down to, "if you have to go with a flat tax credit, please make sure it's not flat."

As Modern Healthcare's Shelby Livingston recently reported, health insurance CEOs have been conspicuously quiet as Republicans gear up to dismantle the ACA. Under the signature of  AHIP CEO Marilyn Tavenner -- Obama's former CMS director -- the collective message is pretty clear: don't eviscerate Medicaid; minimize your tinkering with the individual market; and give us that stability funding.

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* The CBO report estimates $664 billion over ten years in tax cuts, but also another $210 million in revenue lost from repeal of the individual and employer mandates.

** According to CMS, 75 million people are currently enrolled in Medicaid programs. According to Mark Farrah Associates, there are about 18-19 million current enrollees in the individual market.