Expanding the footprint of Medicare payment rates is hard: Washington State edition

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It's ironic that the path for healthcare reform preferred by allied U.S. healthcare industries is embodied in a bill introduced by Elizabeth Warren.

The Partnership For America's Health Care Future, a coalition of major hospital, health insurance, physician and pharma trade groups formed to preemptively nuke any expansion of pubic insurance, would like government to spend more to insure more people and lower their out-of-pocket costs. But they want government to do this while paying commercial rates to providers. Robert Pear summarizes:

The coalition, like President Trump, attacks any proposals that smack of socialized medicine. But it also has a positive agenda. It wants to expand Medicaid under the Affordable Care Act in Texas, Florida and other states that have yet to do so. It wants to expand federal subsidies under the health law so insurance will be affordable to more people. And it wants to stabilize premiums by persuading states to set up reinsurance programs, using a combination of federal and state funds to help pay the largest claims.

While preserving the core ACA structure, Warren's bill removes the ACA's income cap on eligibility for premium subsidies and gives a major boost to ACA premium and cost sharing subsidies at all income levels. While it would tighten insurers' margins a bit, and impose stricter standards on their provider networks, it would boost enrollment and the federal government's share of premiums paid. Insurers should be happy with it,  notwithstanding the rhetorical broadside against insurers with which Warren introduced the bill. It should also be attractive to providers, since it does not impose caps on provider payment rates. .

Should Democrats gain control of the presidency and both houses of Congress, boosting ACA marketplace subsidies -- and, to a certain extent -- eligibility -- should be relatively easy. What won't be easy: expanding the footprint of public insurance that pays Medicare rates (or less) to providers (an exception is Medicaid expansion, for which the target population generally lacks access to commercial insurance).

The current drive in Washington state to add a public option to the state's ACA marketplace illustrates the pressure to limit the footprint of Medicare rates. The  second iteration of the bill (S.B. 5526), introduced in a state senate subcommittee on February 19, stipulated that rates paid to providers by the public plan would not exceed Medicare rates, except for rural and critical care hospitals. A version that passed the House on April 10, however, allows rates up to 150% of Medicare.

In an interview back on April 1, state Senator David Frockt, sponsor of the public option bill in the Senate, expressed reservations about paying Medicare rates:

I became convinced that Medicare rates alone are probably not the right metric. Certainly, I think that would be a little low, but I don’t think that means there should be no rate or no rate mechanism to help put some sideboards around the way these plans should be issued.

For example: Can the plans build out adequate networks at certain levels? Well, they’re going to have to pay, probably, higher rates for hospital specialties — those are, typically, much higher. But, they should be able to have somewhat lower rates, I would think, for primary care. And so, the question is: Should everything be Medicare rates, or should you have some kind of aggregate average so that you can have some flexibility in the way the plans design their networks?

I am concerned about making sure these plans, whoever participates here, will be able to build out adequate network. So, I think that’s a legitimate concern.

Unlike the federal government, a state lacks the authority to require healthcare providers that accept Medicare to accept a public option in the ACA marketplace. The threat of  network inadequacy is one practical manifestation of the political pressure brought to bear by healthcare providers against any expansion of the population in plans paying Medicare rates -- even a small one. As Frockt points out, "all of the spending in this market [the state individual market] is about 1.5 percent of the total federal health care spending in the state." Yet he sees extending Medicare rates in that small market as impracticable. 

One alleged political/market reality that Frockt highlights, incidentally -- that Medicare rates might be imposed on primary care providers but not on hospital specialties -- is the inverse of good policy.  It's pretty universally acknowledged by healthcare scholars that primary care providers are underpaid relative to specialists. Various public option bills that limit overall payment rates to providers carve out an exception for primary care.

The endgame hasn't been reached in Washington. The Senate refused to concur in House amendments to the public option bill, and has asked for a House conference.  I don't know whether provider payment rates are a sticking point. But it seems unlikely that a bill stipulating Medicare rates will become law.

Meanwhile, on the national front, the so-called Partnership for America's Health Care Future is primed to train fire on any bill that creates a new program paying Medicare rates, even if it's available to just a sliver of the population. As Robert Pear reported in the article cited above:

When members of Congress unveiled legislation to let people age 50 to 64 buy into Medicare, the coalition conflated it with proposals to put all Americans into Medicare.

“This is a slippery slope to government-run health care for every American,” said David Merritt, an executive vice president of America’s Health Insurance Plans, a lobby for insurers.

The Medicare at 50 bill would limit subsidy eligibility to people aged 50-64 who are eligible for ACA marketplace subsidies -- i.e., those who lack access to employer-sponsored insurance or Medicaid. That's probably about 5 million people or less. But, slippery slope, you know.

In a similar vein, as I noted last month, the American Hospital Association commissioned a study that appears to exaggerate the likely impact of a relatively limited Medicare expansion bill, the the Medicare-X Choice Act introduced in 2017 by Senators Bennet and Kaine, and reintroduced early this month. Medicare-X establishes a public option paying Medicare rates and requires all provider that accept Medicare to accept it. But subsidy eligibility is limited to those who currently qualify for subsidies in the ACA marketplace, and the subsidies themselves are not improved. It thus would probably not radically affect affordability in the current individual market. It does offer a buy-in to small businesses and thus could have a significant impact in that small market (currently estimated at about 14 million enrollees). But the claim that the public option would suck some 35 million people out of commercial coverage seems overblown.

By whatever means, U.S. healthcare needs to be pushed toward all-payer if not single-payer rate-setting.  But none of the means to advance that goal will be implemented without a fight.