Thursday, May 25, 2017

CBO: Some states will kill protections for those with pre-existing conditions -- and oh yes, the AHCA still eviscerates Medicaid

In late April, Matthew Fiedler explained in a Brookings brief that the MacArthur amendment to the AHCA, which allowed states to subject people who fail to maintain continuous coverage to medical underwriting, would not just affect those who fail to maintain continuous coverage. Fiedler's summary:
...the framework created by the waiver would allow states to effectively eliminate community rating protections for all people seeking individual market coverage, including people who had maintained continuous coverage.

In brief, healthy people would have a strong incentive to “opt out” of the community-rated pool and instead pay a premium based on health status. With healthy enrollees opting out of the community-rated pool, community-rated premiums would need to be extremely high, forcing sicker individuals—including those with continuous coverage—to choose between paying the extremely high community-rated premium or being underwritten themselves. Either way, people with serious health conditions would face prohibitively high premiums. As a result, community rating would be eviscerated—and with it any meaningful guarantee that seriously ill people can access coverage.
The CBO analysis of the amended AHCA released yesterday reproduces this argument:

A second type of waiver would allow insurers to set premiums on the basis of an individual’s health status if the person had not demonstrated continuous coverage; that is, the waiver would eliminate the requirement for what is termed community rating for premiums charged to such people. CBO and JCT anticipate that most healthy people applying for insurance in the nongroup market in those states would be able to choose between premiums based on their own expected health care costs (medically underwritten premiums) and premiums based on the average health care costs for people who share the same age and smoking status and who reside in the same geographic area (community-rated premiums). By choosing the former, people who are healthier than average would be able to purchase nongroup insurance with relatively low premiums.

CBO and JCT expect that, as a consequence, the waivers in those states would have another effect: Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all—despite the additional funding that would be available under H.R. 1628 to help reduce premiums. As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs. That instability would cause some people who would have been insured in the nongroup market under current law to be uninsured. Others would obtain coverage through a family member’s employer or through their own employer. 
In the pre-ACA individual market, while about a third of enrollees paid above-market premiums because of pre-existing conditions, about a third (36%) also paid below-market rates based on their medical status, according to a 2009 AHIP survey.  Fiedler does note that a state could require rates in the medically underwritten market to be higher than in the guaranteed issue pool, defending against the opt-in to medical underwriting, in which case the bad effects would be limited to the many who fail to maintain continuous coverage.

CBO further affirms that by waiving the ACA's Essential Health Benefits, as the MacArthur amendment also allows, states could render the coverage for services such as  maternity care and mental health or substance abuse treatment prohibitive. CBO estimates that roughly one sixth of the population lives in states that would waive the medical underwriting ban and make major changes to EHBs.

The new CBO report necessarily focuses mainly on the effects of this weakening of protections for people with pre-existing conditions in the individual market, since that's what was new in the bill. News coverage inevitably follows suit. That allows Republicans to continue to use angst over pre-existing conditions as a smokescreen to cover their even more damaging Medicaid cuts, which remain essentially unchanged, now totaling an estimated $834 billion over ten years, with per-capita caps continuing to erode the federal contribution forever after. Here's how David Leonhardt describes the strategy that Republicans are consciously, unconsciously or semi-consciously pursuing:
Here’s where we get to the Upton maneuver. The House managed to pass its bill only after Fred Upton, a Michigan Republican, offered a proposal purporting to fix one of the bill’s highest-profile problems, related to pre-existing conditions.

Never mind that the proposal was only a superficial improvement. Never mind that the full bill was still opposed by conservative, moderate and liberal health care experts. Upton’s proposal allowed House members to claim they had “fixed” their bill. It gave them an excuse to vote yes.

Watch for similar moving of the goal posts in the Senate. There, Republican leaders are likely to brag about the ways they have improved the House bill or early versions of their own bill. They will also point to problems in insurance markets, some of which President Trump is deliberately creating, as reason to do something.
In particular, "moderate" Republican senators are likely to boast if they secure some delay in the Medicaid expansion or some mitigation of the per capita caps, such as exempting Medicaid's services to the elderly from them. That's the pattern that Republican "defenders" of Medicaid have exhibited so far, as I've argued here and here.

Meanwhile, I fear that tug-of-war over rules for the individual market will continue to serve as a smokescreen for destroying Medicaid.


  1. I am certainly not going to assume any benevolence on the part of Republicans, but let me float an idea anyways.

    1. We know that by allowing medical underwriting, premiums will become affordable for millions of healthy individuals. I do not mind seeing these persons become better off.

    2. Of course the tough question is what happens to sick persons. Therefore, let me ask this question:

    How much money would it take to hold down the premiums for sick people to what the premiums are today? (assuming that tax credits in some form will continue)

    This premium subsidy would have to go up each year, because the sick persons' policies will be subject to adverse selection.

    Has anyone done these numbers? Let's say there are 3 million persons who must stay in a community rated pool after we re-introduce underwriting. Do we need $8,000 a person to hold down their premiums?

    1. Charles Gaba estimates 9 million on private insurance, 13 million eligible but not on private insurance. Let's say we get 15 million who are trying to get private insurance. Of those, 3 million, a fifth, get rejected because they're too expensive.

      The top fifth of the people incur 82% of health costs. Health costs for the under-65 are something like $6K per person. If the bottom 4/5ths are charged their costs, they would cost about $1.5K per person. The top fifth would cost $24K per person. $8K/person won't do it.

      The bigger the risk pool, the more expensive the top 3 million of it. If we assume all 22 million people eligible for private insurance want to buy it, then 3 million is about the top 15%. Each costs about $30K.

  2. here is a conservative spin on high risk pools.....