Sunday, February 24, 2019

X-factor in Medicare X: A silver plan discount?

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The Medicare-X Choice Act of 2017, introduced by Senators Bennet (D-CO), Kaine (D-VA) and Feinstein (D-CA), offers a more incremental and modest expansion of Medicare than more recently introduced Medicare expansion* bills such as the Medicare for America Act or the Choose Medicare Act.

When the bill was introduced, the last of the ACA repeal bills had just been defeated and the ACA marketplace was perceived as more fragile than it is at present. Insurers had recorded big losses in 2016 and jacked up their rates in 2017, which proved to be a year in which they returned to profitability in the individual market. The specter of "bare counties," in which no insurer participated, had just receded. The bill accordingly takes as its starting point a proposal Obama himself had floated in a 2016 JAMA article: A public option to be offered in counties where no private insurers, or just one, had opted to participate.  By 2023, however, "Medicare-X" would be offered in all counties in the individual market, and in 2024, in the small group market as well.

Medicare-X would create a public option within the ACA exchange, offering ACA-compliant coverage at ACA metal levels. It does not directly enrich ACA subsidies or expand eligibility for them. Unlike Medicare for America, Medicare-X does not allow a subsidized buy-in for employees if their employers offer ACA-compliant insurance. Nor does it touch Medicaid or existing Medicare programs.

Medicare-X  suffers from a limitation common to public options offered within the existing ACA framework: it would not necessarily improve affordability for subsidized enrollees. They would still pay the same premium for a benchmark (second-cheapest) silver plan. Downward pressure on premiums tends to compress the price spread between the benchmark and cheaper plans  -- that is, the cheapest silver plan and bronze plans offered in a given area -- and so might reduce discounts for those plans. In areas with monopoly insurers, it might provide a more attractive distribution of out-of-pocket costs, within the constraints of ACA-mandated actuarial values -- for example,  lower deductibles -- than the commercial insurer. And as Bennet pointed out in an interview with Vox's Sarah Kliff, coverage denials would likely be less of a problem in the public program, as they are in traditional Medicare.

Medicare-X does has two further strengths that should improve options for prospective enrollees in the individual and small group markets. First, unlike Choose Medicare, the public option pays Medicare rates to providers, potentially generating lower premiums for unsubsidized enrollees. Second, it requires all providers who accept Medicare to accept it. That gives it an advantage over existing low-cost exchange plans, and indeed virtually all current exchange plans, where narrow networks prevail.  For that matter, a Medicare network would effectively eliminate balance billing -- a risk faced by nearly all Americans with commercial insurance.

X-factor: Some control over price spreads?

Medicare-X also offers a potential stealth mode of improving affordability for subsidized enrollees, particularly salient in the low-competition areas in which it would initially be introduced. It's this: the public option can offer two plans at each metal level -- including silver. In a bare county, HHS could establish a significant price spread between benchmark and cheapest silver, and thus create a discount for CSR-eligible enrollees, who often find silver premiums hard to pay for. For example, at an income of $24,000 for a single enrollee, CSR-enhanced silver has an actuarial value of 87% -- higher than the average employer-sponsored plan. But a benchmark plan costs about $130 per month -- a hard swallow at that income. A monopoly insurer with control of the spread can make the cheapest silver plan considerably more affordable.

Within reason, HHS might opt to do this. The bill provides HHS with the ability to "utilize innovative payment mechanisms" currently being piloted and/or phased into traditional Medicare; different payment methods might affect plan design -- for example, to reduce out-of-pocket costs for chronic care management -- and so allow for differential pricing** between silver plans. Current rules also allow actuarial value for a silver plan to vary from 66% to 72%, creating space for a price spread between benchmark and cheapest silver.  HHS would have less control over price spreads from the benchmark in competitive counties, where it might be undersold by narrow network plans paying sub-Medicare rates to providers.

The partial control over premium spreads is a pretty modest and backhanded hack of the ACA's too-skimpy subsidy schedule. (It may not be intended by the bill's authors; the potential created by allowing two plans per metal level is my inference.) The Choose Medicare Act more generously raises the ACA benchmark to gold-level coverage (80% actuarial value instead of 70%) and extends and enriches CSR to 300% FPL instead of the ACA's current 250%. Choose Medicare also forces HHS to negotiate payment rates for its public option, capping them at the average of commercial rates paid in a given area. That's a giveaway that makes the public option much more expensive to the Treasury.

As Democrats struggle to converge on the shape of their next attempt to improve healthcare access while controlling costs, modest Medicare X holds an important position on the spectrum. For all the apparent pressure cut the Gordian knot of U.S. healthcare kludge, Democrats, should they gain control of government in 2021, likely with a narrow Senate majority at best, are going to be faced with an enormous range of urgent policy pressures and probably dire fiscal constraints. It may make sense to take a modular approach to Medicare expansion, or expansion of the realm in which government controls healthcare payment rates. Medicare-X may be too limited, but its range could be expanded  -- to large employer buy-in and employee buy-in. Subsidies could be enriched as savings are realized.  In other words, it could become Choose Medicare, but paying Medicare rates to providers. But its go-slow approach to developing and expanding a public option could also make sense. Make sure the thing works, and build it out in phases.

The Choose Medicare Act: How strong is this public option?
Medicare for All (who want or need it): A path for presidential candidates
Medicare at 50 Act: A bonanza for low income near-elderly

* Strictly speaking, none of these bills exactly "expands" existing Medicare. Medicare for America transforms it, expanding its writ, changing benefits and payment rates, and expanding revenue sources for what's now the Medicare trust fund. Medicare-X and Choose Medicare establish programs that tap the Medicare provider network (i.e., nearly every provider in the country) and, in the case of Medicare-X, Medicare payment rates. But both create parallel programs; neither expands the current program per se or taps its trust fund.

** Clarification as to how using alternative payment methods might affect plan design added 2/25.

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