Sunday, August 06, 2017

What price will Republicans extract for CSR funding and reinsurance?

If the current glimmers of bipartisanship in healthcare legislation take on any sustained shine, the primary agenda for Democrats is obvious: appropriate funding for Cost Sharing Reduction payments and for some kind of reinsurance program to replace the program that expired in 2017.

The first is simply a matter of ending sabotage: CSR is integral to the structure of the ACA marketplace and incorporated in its budget baseline. Republicans have simply exploited a drafting error to destabilize the individual market. As for reinsurance, Republicans made its necessity manifest by including generous "stability funding" in the main House and Senate "healthcare" bills -- in fact, overly generous funding designed to compensate for their various disfigurements of the market (e.g., repeal of the individual mandate and measures to reintroduce medical underwriting and non-comprehensive insurance).

To have any real hope of getting these measures passed in a Republican Congress, however, Democrats are going to have to face up to the question: What pound of flesh will they let Republicans extract as payment for these essential, common-sense fixes? It's a foregone conclusion from a progressive point of view that changes Republicans will demand will not improve the market. What concessions might actually win passage and do less harm than the fixes will do good?

The Problem Solvers, a new bipartisan group of 40 House members co-chaired by Reps. Tom Reed (R-NY) and Josh Gottheimer (D-NJ, have floated a package that includes CSR funding, reinsurance and three concessions to Republicans  (Vox summary here).

One of them, repeal of the medical device tax, is semi-bipartisan, as a lot of Democrats, including Elizabeth Warren and Al Franken, have signaled past willingness. What the hell, it's only (tax) money, demanded by a powerful lobby.

The second, scaling back the employer mandate to offer health insurance so that it only applies to companies with 500 or more employees, raised some progressive eyebrows. But in fact it's the easiest "give," in that many progressive healthcare scholars and administrators have suggested over the course  of years that this mandate is more trouble than it's worth. Austin Frakt did so back in 2013. In that year, too, Urban Institute scholars Linda Blumberg and Matt Buetgenns found that it would have little effect on coverage and costs. What it does do is impose onerous reporting requirements on businesses.

The third is a rather vaguely expressed intention that would, as worded in an op-ed co-authored by Gottheimer and Reed, "provide states with additional flexibility to enter into agreements — such as enabling the sale of insurance across state lines — that would provide more choice and lower costs." In this iteration, that seems focused primarily on making it easier for states to enter into the multi-state compacts currently authorized by the ACA. In the Vox summary linked to above, Kaiser's Larry Levitt pretty much writes this persistent Republican dream off as window dressing given the difficulty for insurers of setting up multi-state provider networks.

Earlier reports of Problem Solvers' fledgling proposals suggest that the state "flexibility" plank is more broadly focused. According to Politico, "the working group is seeking greater flexibility for state innovation. Obamacare already allows state to seek waivers from coverage rules, but the lawmakers want additional guidance on how states can take advantage of them."  While the existing waivers allow states to propose alterations to most ACA Marketplace features, 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 complaint that the ACA pretty much takes away with the left hand the flexibility proffered with the right.

Ever since the King v. Burwell lawsuit threatened to cripple the ACA marketplace, observers on the left and right have pointed toward the innovation waivers   as a potential area for bipartisan compromise. But the Republican repeal bills put forward in the House and Senate highlighted the dangers. Both bills all but compelled HHS to accept virtually any waiver request. Both bills, in different ways, included measures that would allow (or compel) states to undermine the affordability of comprehensive insurance or its availability to people with pre-existing conditions. Critics demonstrated that almost any tampering with the ACA's Essential Health Benefits would render excluded benefits unaffordable in the individual market. (Perhaps that's why Problem Solver messaging has redirected the state innovation plank toward multi-state compacts.) From a progressive point of view, "safe" ways to loosen up the ACA waiver process are hard to come by, as my discussion with Timothy Jost indicates.

All that said, I think it's fair to assume that either there will be no ACA legislative fix including CSR appropriation and (possibly) reinsurance or Republicans will exact a steep price for those measures. This weekend, Mitch McConnell indicated as much -- while semi-blessing the announced intention of Senate HELP Committee Chair Lamar Alexander and ranking member Patti Murray to hold hearings in support of a search for market stabilization measures: "If the Democrats are willing to support some real reforms rather than just an insurance company bailout, I would be willing to take a look at it,"

Perhaps Avik Roy, healthcare consultant to Republican pols, has the most realistic take on what that price may be -- as well as a little messaging help for team GOP. Republican senators have cast federal CSR funding as a "bailout" of insurers. Roy acknowledges that that is false, as insurers have to provide the benefit without pricing it in as long as federal reimbursement continues. He recasts the funding as a bailout for the ACA's drafters, who mandated CSR, and directed the Treasury to fund it, and budgeted for it, but neglected to make the appropriation mandatory, as they did with premium tax credits. While a responsible Congress would always have appropriated funding for the mandated benefit, and fixed the law to assure continuous funding, such a fix could uncharitably be cast as a bailout for a drafting error. Ditto for re-instituting reinsurance, which the ACA provided only for the first three years of marketplace operation.

As for the price paid for CSR and reinsurance, here's Roy's: a) repeal of the individual mandate and replacement with a six-month waiting period for those who go uninsured and then seek individual market coverage, and b) repeal of the ACA limit on "age-banding" -- the extent to which insurers can charge the oldest adults in the market more than the youngest -- to a 3:1 ratio. Pre-ACA, the individual market norm was generally 5:1.

The individual mandate may indeed emerge as the focal point of  Republican demands. It was the grounds for their challenge of the ACA's constitutionality; it's reviled as an impingement on personal freedom; and it's unpopular.  Last January, in a detailed healthcare compromise proposal, Urban's Blumberg and John Holahan suggested replacing the mandate with a late enrollment penalty of the sort currently in force for Medicare Parts B and D. While the authors plainly considered any mandate replacement inferior to the mandate itself, it was a piece they were willing to sacrifice to preserve the ACA's other core structures and funding. The chief ill effect -- a rise in premiums, projected by CBO at 15-20% -- would be offset in part by a new reinsurance program, as well as by any substitute that proved at least partly effective at pulling people into the market and keeping them there when they have no alternative coverage.

Perhaps mandate repeal won't be the price demanded by Republicans for market stabilization. Alexander has stated that any solution passed by Congress for 2018 "also should also include greater flexibility for states in approving health insurance policies." That takes us back to the ACA innovation waivers. I'll return to that playing field in days ahead.


  1. If the Dems give up something substantial like the individual mandate, they'd better get permanent, substantial reinsurance. Not something that lasts three years; hemophilia is not going to be cured in 2021. Not a tiny amount of money that won't lower premiums appreciably. Not a slush fund that could be diverted anywhere. A permanent, substantial amount of money that goes to insurance companies to pay for expensive people and lower premiums for everyone.

  2. Forcing insurers to participate in the exchange as a condition of getting Medicaid/Medicare contracts is a good one too, and politically lovable. They should also require participation in rural areas as the price of metro participation/Medicaid-Medicare contracts.

  3. I endorse the reinsurance suggestion. It has been largely forgotten during the recent debates that the federal government pours billions into reinsurance for Medicare Advantage and Part D drug plans.
    And guess what? Premiums have remained low. Medicare Advantage premiums for some plans have been zero or $25 a month for years. The Humana Part D plan has been $17 a month for years.
    And how is this achieved? By enrolling younger and healthier people? Not at all! A 90 year old in bad health can buy any Advantage or Part D plan without any undewrwriting.
    The lesson is this:

    When you get into guaranteed issue, the key to low premiums is large subsidies.

    Now Medicare is seen as "good welfare", for the seniors, and the ACA is seen as "bad welfare", for lazy minorities. This is the real source of unequal funding.