Saturday, April 27, 2019

Let's call it 160% Medicare...Washington state public option

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[Updates at bottom: bill is on the Governor's desk]

A few days back, I noted that the state public option bill working its way through the Washington legislature provides an object lesson in how hard it is to expand the pool of people in health plans paying Medicare rates.  An early iteration of the bill had the public plan paying Medicare rates, but a version that passed the House on April 10 had upped the maximum aggregate payment rate to 150% Medicare. The Senate declined to pass this bill, and it went to conference.

Now a new version (ESSB 5526) has emerged from Senate-House conference (kindly flagged for me by Amy Lotven of Inside Health Policy, who will have a story up about it later today). And guess what -- the maximum aggregate payment rate* is up to 160% Medicare.  For reference, commercial payment rates to hospitals average 188% Medicare nationally, according to a 2017 CBO report, and about 128% Medicare for physicians, according to MEDPAC.

Further, the director of the state Health Care Authority can waive the rate cap if she "determines that selective contracting will result in actuarially sound premium rates that are no greater than the qualified health plan's previous plan year rates adjusted for inflation." The director can also waive the rate cap if a carrier contracted to provide the public option can't form a provider network that meets the stipulated network adequacy standards, or if the carrier can offer premiums 10% lower than those of the previous plan year without conforming to the rate cap.

100% Medicare, 150%, 160%.... I am reminded* of the accounting approach of Rabbit, Winnie the Pooh's friend:

     POOH  was  sitting in his house one day, counting his pots
of honey, when there came a knock on the door.
        "Fourteen," said Pooh. "Come in. Fourteen.  Or  was  it
fifteen? Bother. That's muddled me."
        "Hallo, Pooh," said Rabbit.
        "Hallo, Rabbit. Fourteen, wasn't it?"
        "What was?"
        "My pots of honey what I was counting."
        "Fourteen, that's right."
        "Are you sure?"
        "No," said Rabbit. "Does it matter?"
        "I  just  like to know," said Pooh humbly, "So as I can
say to myself: 'I've got  fourteen  pots  of  honey  left.'  Or
fifteen, as the case may be. It's sort of comforting."
        "Well,  let's  call  it  sixteen," said Rabbit. "What I
came to say was: Have you seen Small anywhere about?"

When you see draft bills on the national level looking to expand access to government-administered insurance paying Medicare rates, or 110% Medicare, or whatever, ask yourself what will happen to the stipulated rate if the bill goes through a real process toward becoming law.

P.S. Since the bill also calls for establishment of standardized health plans that carriers on the exchange must offer, and since the public option is created by contracting with one or more carriers, a I am bit stumped as to what differentiates the public option, other than the rather high rate cap. Centene, selling in Washington, probably pays provides well below 160% Medicare.

P.P.S. For further context, average benchmark premiums in the Washington state marketplace, $381/month in 2019, are well below the national average, $477. Washington has the 9th lowest premiums among 51 state markets, including D.C.

P.P.P.S. The whole thing is contingent on the legislature funding it by June, as Amy Lotven pointed out to me.

UPDATE, 4/29: The bill passed the WA House, 56-41. A Republican opponent fears it will decrease the supply of doctors -- at 160% Medicare! Imagine, again, a battle to pass a national public option paying roughly Medicare rates.
“This is an illusion of care,” said Rep. Joe Schmick, a Colfax Republican and the ranking member of the House Health Care and Wellness committee.

As it stands, he said, providers often take a mix of Medicaid or Medicare patients and patients with private insurance, with the higher-paying private plans balancing out the lower-paying public ones. Letting more people shift to lower-paying public plans would throw off that balance, and the lower rates could ultimately lead to fewer available doctors, he said.
Further update (via Gaba): the bill is now on Governor Inslee's desk
*For rural hospitals, rates have to cover at least 100% of allowable costs as defined by CMS. Primary care services must be reimbursed at at least 135% Medicare. (Most bills setting payment rates have special provisions protecting rural hospitals and bumping up primary care.)

**House at Pooh Corner, Chapter 3: In which a search is organdized, and Piglet meets the Heffalump again

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