Sunday, December 02, 2018

We're in Cassidy-Collinsville, Chapter 2

Last March, Peter Suderman wrote a clever column claiming that Republican changes to the ACA -- repeal of the individual mandate, creation of a parallel ACA-noncompliant individual market -- were achieving the goals of the ACA repeal/replace bills. I noted the missing piece there: defunding the ACA, in particular the Medicaid expansion and Medicaid more generally. That was the "hot-beating heart" of the failed Republican repeal bills. Instead of AHCA- light, I suggested:
In the aftermath of the 2017 assault, the ACA resembles not so much a system established by a mainstream Republican repeal-and-replace bill as it does the kind of compromise that might have emerged from a negotiation over the Cassidy-Collins bill introduced in January 2017, if negotiation over such a plan had been possible (it wasn't, because no more than a handful of Republicans were interested in the bill).

Cassidy-Collins presented states with a choice between maintaining their ACA programs, with a 5% spending haircut, or else embracing a [favored] HSA-centric Republican alternative, also funded at 95% of a state's federal funding for the ACA marketplace and Medicaid expansion. States could also opt to do nothing, dropping ACA programs entirely without penalty, or to design their own programs via ACA innovation waivers, which were left standing.

Cassidy-Collins was a hot mess, but it did preserve something approaching ACA funding levels, as well as all of the ACA's tax revenues (and Medicare payment reforms).  It might have been viewed (as I imagined last March) as a negotiating basis for the kind of "superwaiver" compromise that healthcare scholars of the left and right had bruited when funding for premium subsidies in the federal exchange was threatened by the King v. Burwell suit. Such waiver proposals would give states varying degrees of freedom to take ACA funding and design their systems as they see fit...
We are deeper in Cassidy-Collinstown now that Seema Verma's CMS has issued "waiver concepts" for states that want to design alternatives to the ACA marketplace. These concepts, introduced on Nov. 29, flesh out CMS's October bid to create the "superwaiver." The October guidance partially levels the "guardrails" constraining states seeking to design innovation waiver proposals -- and very likely abrogates the statutory language in the ACA waiver provision.*

The first of the four waiver concepts bears a strong resemblance to the favored HSA alternative that was the centerpiece of Cassidy-Collins.
Account-Based Subsidies: Under this waiver concept, a state can direct public subsidies into a defined-contribution, consumer-directed account that an individual uses to pay for health insurance premiums or other health care expenses. The account could be funded with pass-through funding made available by waiving the Premium Tax Credit (PTC) under section 36B of the Internal Revenue Code (IRC) or the small business health care tax credit under section 45R of the IRC. The account could also allow individuals to aggregate funding from additional sources, including individual and employer contributions. An account-based approach could give beneficiaries more choices and require them to take responsibility for managing their health care spending. This approach could also allow a consumer greater ability to select a plan based on the individual’s or their family’s needs, including a higher deductible plan with lower premiums.
Here's the core Cassidy-Collins alternative to the ACA marketplace, as summarized by Timothy Jost:
At its heart are the Roth HSAs, into which either the federal government or a state (at the state’s option) would deposit funds that could be used to purchase health insurance and cover cost sharing. These deposits could take the form of refundable tax credits, advanceable on a monthly basis (and which would become taxable income).

Any citizen or lawful alien residing in a state who is enrolled in a health plan and not otherwise covered by a federal health program (Medicare, Medicaid, VA, etc.) would be eligible. This apparently includes individuals enrolled in employer coverage, which would vastly expand the number of individuals receiving federal tax credits and correspondingly contract the size of the tax credits available to enrollees. The PFA explicitly appropriates the funds to cover the Roth HSA deposits to avoid the disputes over whether funds were appropriated that have resulted in litigation under the ACA....

Roth HSA deposits would be income-adjusted but would provide more help for higher-income individuals and less for lower-income individuals, as compared to the ACA, with the deposits phasing out for individuals with income exceeding $90,000 a year and families with incomes above $150,000 a year (my emphasis). 
The features in common:
  • Replace federal subsidies to be spent in a federally regulated marketplace with federal subsidies placed in a Health Savings Account that can be used to buy almost anything labelled insurance.
  • Allow the subsidized HSA to fund both premiums and out-of-pocket expenses in an indeterminate mix.
  • Dilute the subsidies now available to low- and moderate-income people who lack access to other insurance by providing subsidies from the same-sized pot, minus 5%, to a pool that includes higher income people and people with access to employer insurance.
Cassidy-Collins used Roth IRAs as opposed to conventional ones. It also allowed states to repurpose Medicaid expansion funds into the HSA-account benefit, effectively further redistributing benefits for low income people to more affluent ones, as an HSA benefit for someone with an income below 138% FPL would be far less comprehensive in covering medical expenses than is Medicaid. I assume that CMS cannot mingle Medicaid funding and marketplace funding in this way without legislation, so the waiver does not reach as far in this key respect as the legislation would have. In states that have accepted the ACA Medicaid expansion, the number of people newly enrolled in Medicaid generally -- perhaps invariably -- far exceeds subsidized ACA marketplace enrollment.

The second and third waiver concepts simply invite states to come up with their own alternative schemes in the relaxed regulatory environment create by the new guidance. In this too it resembles Cassidy-Collins, which preserved ACA innovation waivers and was attuned in general orientation to the new Republican guidance. The fourth waiver concept ratifies an excellent waiver channel already tapped by several states: reinsurance schemes largely funding by the federal government (via pass-through savings resulting from lower premiums and therefore subsidies).

In its HSA-centric favored scheme, Cassidy-Collins did partially preserve the ACA's protections for people with preexisting conditions, repealing the ACA's mandatory Essential Health Benefits but allowing medical underwriting only for those who failed to maintain continuous coverage (as did the House ACA repeal bill). In that respect it allowed a less radical dismantling of the ACA marketplace than CMS is now inviting, as the waiver concepts envision allowing subsidies to be used in the short-term market, which is medically underwritten.

When the ACA was under threat of repeal, a "superwaiver" compromise struck me as an acceptable end point, as it would preserve the ACA's core funding streams and most importantly the Medicaid expansion, which is responsible for most of the improvement in healthcare access created by the ACA. I also thought that if red states did implement their own schemes, at least they'd have a stake in trying to make them work.

With the combination of individual mandate repeal and promotion of the medically-underwritten "short-term" market now in effect, the pernicious effects are visible, as many markets are being flooded with marketing pitches for junk plans. Medicaid work requirements also may make serious inroads into expansion of access to Medicaid. As long as the funding streams and core benefit structures remain intact, though, the damage is contained, and all is reparable -- or replaceable -- if and when Democrats assume control of the presidency and Congress.


* The "guardrails" in ACA section 1332, which creates the "innovation waiver" option for states, stipulate that alternative schemes must provide coverage as affordable and as comprehensive to as many people as the default ACA structure, without increasing the deficit.  Under Obama, CMS built up the guardrails with guidance issued in 2015 specifying that alternative schemes could not harm "vulnerable" populations, such as low income, older or chronically ill enrollees. The Trump administration guidance repealed the 2015 guidance, decreeing in effect that waiver schemes could harm vulnerable populations a little, and using sophistry to decouple "coverage" from "comprehensiveness." The new guidance further asserted that proposals need only make equally affordable/comprehensive coverage "available," not "provide" it.

We're not in ACA Repeal-and-Replaceville. We're in Cassidy-Collinstown
The Democrats' next move on health care
CMS guidance on ACA innovation waivers requires an ACA-compliant benchmark

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