Wednesday, July 12, 2017

Not drowning but waiving: Timothy Jost on how Democrats might compromise responsibly on ACA

There's news today -- good news -- of Democrats in both the House and Senate acknowledging flaws in the ACA and proposing their own fixes (House) or exploring bipartisan fixes with Republicans (Senate).

All reports of such discussions or proposals include a couple of no-brainers: 1) a permanent reinsurance program, such as those included in both the AHCA (the House repeal/replace bill) and the BCRA (the Senate iteration), and 2) permanent assurance that the ACA's Cost Sharing Reduction subsidies will be paid, which isn't a conceptual fix, just an agreed end to Republican sabotage.

There's scarce discussion of what Democrats would give up to get Republicans to drop their deadly assault on the ACA's core features and all Medicaid as well, that is, the assault against 1) the taxes that fund the ACA's extension of health insurance access; 2) the ACA Medicaid expansion; 3) the federal government's open-ended commitment to pay its agreed share to each state for all those who are determined eligible Medicaid; and 4) income-based private market subsidies funded at ACA levels, whether structured differently or not.

One possible field of compromise is in the structure of the ACA's Section 1332 "innovation waivers," which allow states to propose variations on ACA marketplace structure to HHS. Through these waivers, states can propose alterations to almost any ACA Marketplace feature -- including repealing the individual and employer mandates, changing subsidy structure and eligibility, and altering the Essential Health Benefits that every insurance plan is required to offer. The catch is that the state seeking a waiver must demonstrate -- and convince the Medicare actuary -- that its alternative scheme will cover as many people as comprehensively and as affordably as the default structure -- and do so without increasing the deficit. Critics complain that the option effectively boils down to "you can change everything, as long as you don't change anything." That's not true, but the guardrails are pretty tight.

On the other end of the spectrum, the BCRA pretty much allows states to do what they will, as long as they describe how they will ”provide for alternative means of and requirements for, increasing access to comprehensive coverage, reducing average premiums, and increasing enrollment.” No standard of proof is required, and HHS is all but compelled to accept a waiver application. States may thus pare back the EHBs without demonstrating that they will find a way to make coverage for non-required benefits affordable.

Ever since the King v. Burwell lawsuit threatened to cripple the ACA marketplace, healthcare scholars have sometimes imagined that a "superwaiver" compromise, giving states more latitude to use ACA funding as they saw fit to get their people insured, might be a means to a bipartisan truce in the healthcare wars.  The loose waivers in both the House and Senate ACA repeal bills, however, have exposed various ways in which compromising the EHBs or (in the House bill) guaranteed issue and community rating, even with purported safeguards, would render insurance unaffordable to large numbers of prospective individual market enrollees. "Take ACA money and do what you want with it" may seem to Democrats a less acceptable price to pay for preserving ACA taxes, the Medicaid expansion, and the current marketplace structure for states that want it than it might have in, say, January (or even March). [Update: Today Lindsey Graham released a plan that would basically be an unconditional waiver to every state to take ACA-level funding as a block grant and do whatever they want with it. I gather that Cassidy appeared with him on TV to talk it up.]

Could ACA innovation waivers be loosened up in ways that would not compromise community rating and guaranteed issue for comprehensive coverage? I posed the question to Timothy Jost, Professor Emeritus of Law at Washington and Lee University.

Jost has a keen sense of the utility of the ACA waiver conditions. Of the BCRA waiver structure, he wrote, shortly after the bill's unveiling:
Unlike the House’s AHCA waivers under the MacArthur amendment, the Senate bill does not permit waivers of the ACA’s prohibition on health status underwriting. It would, however, allow comprehensive waivers of essential health benefits, out-of-pocket limits, and actuarial value requirements that would have much the same effect. Individuals with preexisting conditions would be able to get coverage, but they could be denied coverage for the pharmaceuticals or services that they would need for treatment of their preexisting conditions. Waivers of EHB could also affect large employer plans, which are only prohibited from imposing annual and lifetime limits on EHB and only required to cap out-of-pocket expenditures for EHB.
In our conversation, Jost suggested two ways that the waivers could be liberalized.  First, states could be explicitly permitted by statute to combine ACA Section 1332 (innovation waiver) proposals with Medicaid  Section 1115 waivers (authorized by Section 1115 of the Social Security Act), by which states can seek approval for "experimental, pilot, or demonstration projects that promote the objectives of the Medicaid and Children’s Health Insurance Program (CHIP) programs."

Could lawmakers, Jost wondered, "abandon the position that 1332 and 1115 waivers have to be independently budget neutral? That would allow states to move people out of Medicaid and into the individual market and vice versa as long as the whole package is budget neutral."

Combining the waivers would give states more leeway, for example, to follow Arkansas' lead in putting those eligible for the ACA Medicaid expansion into private market health plans, and have them be 100% federally funded as opposed to obtaining the 90% federal contribution to Medicaid expansion. Offsetting savings would presumably have to be found somewhere -- as, for example, in a proposal being floated in Oklahoma that would change the income range for marketplace subsidy eligibility from 100-400% of the Federal Poverty Level to 0-300%.

Last year, Obama's HHS ruled that 1332 and 1115 waiver applications could not be thus combined. The Trump HHS, headed by Tom Price, could overturn that ruling. But legislation could explicitly authorize combining the two.

Jost's second idea for retooling Section 1332 more to Republican liking would be to offer explicit encouragement to build funding for Health Savings Accounts, an eternal Republican shibboleth, into marketplace subsidy structure. This would be to take a leaf out of the Cassidy-Collins ACA amendment bill introduced in January, which offered states a choice between the current ACA marketplace structure and an alternative in which enrollees were offered high deductible accounts paired with HSAs. The most obvious way to alter ACA structure via HSA would be to replace Cost Sharing Reduction subsidies, which reduce out-of-pocket costs for low income enrollees (i.e., in the current marketplace, 57% of enrollees), with a funded HSA linked to a plan with a lower actuarial value than CSR-eligible enrollees obtain in the current marketplace.

Such initiatives could  be proposed under the current innovation waiver statute -- and in fact would be sure to be approved by Price's HHS. But again, legislation could actively encourage an HSA-centric option, i.e. make it available without waiver, as Cassidy-Collins does.

Jost is loathe to see the ACA's Essential Health Benefits tampered with, for reasons outlined in his comment on the BCRA waiver provision cited above. If Democrats felt constrained to give on this front, however, Jost outlined a path less harmful than encouraging wholesale waiver of any of the ten EHBs. "There's two parts to EHBs," he explained. "Part 2 is what needs to be covered within each category." States already have leeway to define that, but they could be given more. For example, plans could be required to cover all ten categories, but also required "to only cover one drug in each class or category. not coverage of multiple drugs. You could cover physical therapy, but only four sessions." File this proposal, such as it is, is in the if-you-have-to-do-damage-do-less-damage category.

Easing federal tyranny, as Republicans cast it, by giving states more leeway to shape their ACA marketplaces and serve ACA Medicaid expansion populations is not going to allay to some core Republican imperatives powering the repeal drive -- e.g., tax cutting and Medicaid cutbacks. But waiver loosening could be a piece of the puzzle, as would be repealing (and presumably replacing) the reviled individual mandate and (without replacement) the employer mandate. These parings of federal power, taken together, might constitute a credible consolation prize  if Republicans step back from the brink of uninsuring tens of millions.

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