Thursday, February 21, 2019

A hole in the heart of Medicaid/Medicare buy-in plans

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A catch-22 bedevils Medicaid or Medicare buy-in plans designed to co-exist with the ACA marketplace, whether on the state or national level.

On one hand: If the public option is integrated into the marketplace and conforms to ACA benefit and subsidy levels, it won't help subsidized buyers much. They will still pay the same premium for the same level of benchmark plan benefits. The affordability of their options besides the benchmark plan depends on price spreads -- how much less or more other options cost compared to the benchmark. It's highly unpredictable how a public option will affect those spreads -- unless the silver public option plan is the cheapest in that market and way cheaper than the benchmark.

A public option may help unsubsidized buyers by providing a low-overhead choice and possibly stimulating lower unsubsidized premiums across the board. That helps the federal treasury too. But it may compress premium spreads and so make subsidized buyers' choices worse. The problem for subsidized buyers (over 85% of enrollees on ACA exchanges and over 60% of enrollees in ACA-compliant plans) is that the marketplace is under-subsidized. Premiums and out-of-pocket costs are just too high at income levels above 150% FPL.

On the other hand: Creating a cheap program available outside the marketplace that buyers can use ACA subsidy dollars to pay for will cannibalize the marketplace. An example would be a Medicaid buy-in that leverages low provider payment rates to offer 90% AV coverage (or 80% AV) for the cost of a 70% AV benchmark marketplace plan. Governor Tim Walz of Minnesota has just proposed something along these lines, discussed below (though I don't know what its cost would be relative to gold/silver plans). The only conceivable reason to stick with marketplace coverage under that circumstance would be to obtain a better provider network -- and the networks in marketplace plans are generally quite narrow.

New Mexico is getting close to putting up a Medicaid buy-in available to currently unsubsidized buyers, including those in the family glitch and undocumented residents as well as those who earn too much to qualify for subsidies (bill text here). Those who would qualify for ACA subsidies if not for immigration status or an offer of insurance from an employer (family glitchers) would pay subsidized ACA benchmark premium rates, with the state footing the remainder of the bill.

This limited buy-in seems well designed. An estimated 4,000-6,000 people with incomes above 400% FPL, or with incomes above 200% FPL who are currently ineligible for marketplace subsidies, are expected to enroll (out of a total enrollment of about 24,000). Fewer than that would be pulled out of the current individual market. On-exchange enrollment in New Mexico stood at 45,000 as of Jan. 3, with probably about 9,000 unsubsidized, based on 2018 totals. About 20,000 are enrolled off-exchange.

It will be wonderful if New Mexico steps up to the plate for those left out of the ACA subsidy structure. To improve the core ACA marketplace offering, however, it seems to me that "buy-in" is the wrong framework. You have to restructure the whole marketplace, and leverage Medicaid or Medicare payment practices to offer more AV for the money. This is a simple matter of provider payment rates: marketplace plans mostly pay commercial, as opposed to Medicaid, Medicare or something in between.

If you're going to offer more affordable options to those currently in the marketplace, the new option may have to replace the ACA marketplace -- or, if it sounds gentler, restructure it. The Basic Health Programs currently running in Minnesota and New York, available to people with incomes in the 138% -200% FPL range and to legally present noncitizens with incomes below 138% FPL, provide a model. In both states, the BHP features a choice of plans fielded by pretty much the same insurers that participate in the marketplace. In both states, the BHPs offer higher AV for less money than enrollees in the 138%-200% FPL band would get in the marketplace -- in New York, dramatically so. In both states the BHP plans pay providers sub-Medicare rates -- Medicaid + 20% in New York, essentially Medicaid in Minnesota.

Could either state basically replace its ACA marketplace (and individual market) by expanding eligibility for the BHP? To offer the BHP to buyers above 200% FPL and create a  subsidy/benefit structure different from the ACA's would require an ACA innovation waiver -- which, if approved, would also entail a 5% haircut in federal contribution.

Minnesota has been sniffing at buy-ins or extended eligibility for MinnesotaCare, its BHP, since 2016. Governor Tim Walz has just proposed, in tandem with state-based subsidies to those who don't qualify for ACA subsidies, a 90% AV public option modeled on MinnesotaCare, to be offered on the Minnesota exchange. That's interesting; it wouldn't affect premium spreads below the benchmark.* Would it be priced low enough to cut deeply into or even  wipe out sales of silver and gold plans?  Can the low provider rates pay for 20 points of AV?

MinnesotaCare has a good reputation and good provider networks. Would this plan basically swallow the unsubsidized market?  Should it?

* Because Minnesota has a BHP, eligibility for marketplace subsidies begins at 200% FPL. That means that Cost Sharing Reduction is a negligible factor, as no one is eligible for its two highest levels (94% and 87% AV). If the public option is price competitive with gold and/or silver plans, it will dominate them, at 90% AV.  

1 comment:

  1. Thanks for your thoughtful comments.

    I live in MN so I am watching this first-hand. I like the drift from new Governor Tim Walz, but I fear he is on thin ice. Funding for the existing Minnesota Care plan is on thin legislative ice this year, and he is talking about an expansion?

    Extending subsidies to persons over 400% of poverty is a great idea, and I have been pounding the drum on that for a long time. But it does cost money. If a person earns $50,000 a year and their premiums are capped at 10% of income, that is a $5,000 cap. If they are 60 years old and their full premium is $800 a month, then they will get a $4600 subsidy.

    And that is fine with me, but if 30,000 Minnesotans suddenly get a $4600 subsidy, that is $138 million of new spending. That is not a trivial amount in state government. It might need new taxes, and Walz may not be able to get new taxes.

    Two final comments:

    1. The private insurers in MN might be glad to be cannibalized. They have mainly lost money on the ACA.

    2. I had no idea that the New Mexico ACA market was that small. It is nuts to have such small states running their own exchanges.