Tuesday, May 14, 2019

A major fix in Medicare for America 2.0

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Medicare for America, the sweeping healthcare reform bill that allows anyone to buy into a revamped Medicare at an income-adjusted premium, has the potential to transform U.S. healthcare into either an all-payer or a single-payer system.

The bill, first introduced by Reps Rosa DeLauro and Jean Schakowsky in December 2018 and reintroduced on May 1 this year, allows both Medicare Advantage and employer-sponsored insurance to continue, and stipulates that healthcare providers must accept (revised) Medicare payment rates from those private programs.  But because employees can opt into "Medicare" on an income-adjusted basis even if their employers offer compliant private insurance, private insurance will have to establish a real competitive advantage if it's to survive alongside the generous public program.

The headline change in the reintroduced bill is elimination of deductibles, which were modest enough in the original bill (topping out at $350 individual/$500 family). But a more significant change improves the bill's financing and provides ballast for the competition between public and private sectors.

The bill's chief engine for achievable system transformation is the two-sided employer/employee buy-in. Employers can either offer private coverage that covers at least 80% of the average enrollee's yearly costs (the plan's so-called actuarial value), for which they must cover at least 70% of the premium, or they can pay an 8% payroll tax and refer their employees to the public program. Employees can buy in to the public program on a sliding scale requiring 0-8% of income even if their employers offer compliant coverage. Preserving a viable employer-sponsored market while giving employers an affordable public option vastly reduces the need for new taxes. Allowing employees to buy in to the public program at an income-adjusted price even if the employer offers private coverage ensures that everyone has access to affordable comprehensive coverage. Costs are ratcheted down and administrative costs reduced as all payers are empowered to pay providers the same rates.

The bill's first iteration, however, contained a huge loophole for employers.  If they offered compliant coverage and an employee opted into the public program, the employer would pay nothing for that employee. Section 124 (c) reads:
An employee may opt out of a qualifying employer sponsored plan as satisfied by  subsection (b)(1) in order to enroll in Medicare for America. The employer shall be exempt from the contribution specified in subsection (b)(2) [the 8% payroll tax].
There was a caveat (also in Sec. 124 (c):
(c) EMPLOYEE CHOICE.--The Secretary of Health and Human Services shall have authority to set standards for determining whether employers or insurers are under taking any actions to affect the risk pool within Medicare for America by inducing individuals to decline coverage  under a qualifying employer sponsored plan and instead  to enroll in Medicare for America. An employer violating such standards shall be treated as not meeting the requirements of subsection (a) [offering compliant coverage]. 
But that is a weak control -- especially since the public plan offered coverage with an actuarial value considerably higher than 80% AV.*  If an employer offered the minimum, everyone would probably opt into the public plan, and the employer would get off scot-free.

That loophole has been closed in version 2.0. Section 126 (c) stipulates:
(c) EMPLOYEE CHOICE.--An employee may opt out of a qualifying employer-sponsored plan as satisfied by subsection (b)(1) in order to enroll in Medicare for America. The employer shall make a contribution equal to the contribution it shall make in order to meet the requirements established by subsection (a)(1) or (a)(2) [the cost of enrolling the employee in the employer-sponsored plan].
The language from the earlier bill empowering the HHS Secretary to police system gaming follows unchanged -- as employers might still offer different plans to different employee groups to entice targeted groups to opt into the public program.  But there is no potential free lunch for employers. They either pay at least 70% of coverage with an 80% AV for each employee, regardless of whether the employee opts in, or they pay 8% of payroll for all.

There is an elegant balance in the dual options that Medicare for America offers both employers and employees. Employers can either offer coverage under favorable conditions (paying Medicare rates to providers unless they seek a competitive advantage by paying more) or pay a tax that's less than the current cost of coverage. Employees can get public coverage far more comprehensive and affordable than what most get in the private sector now -- or opt into superior private coverage offered by an employer as an inducement.

Medicare for America would also auto-enroll all newborns as of 2023; absorb Medicaid and offer zero premium/zero out-of-pocket coverage to all enrollees with incomes up to twice the Federal Poverty Level; cap premiums for the highest income enrollees at 8% of income; and include dental, vision and long-term care in the revamped Medicare. It's a blueprint for an ambitious multi-stage remake of the dysfunctional U.S. healthcare system. In a functioning political environment, it might have a chance.

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* At first blush, the minimum coverage required of employers looks comparable to the coverage offered in the revamped Medicare at the highest income level. The employer plan must have an actuarial value of at least 80%, and the public plan must pay 80% of the reimbursement rate to providers, leaving 20% to enrollees at the top of the sliding income scale. In the public plan, however, there are no deductibles, and out-of-pocket costs are capped at $3,500 for an individual and $5,000 for a family. Moreover, a host of services, beginning with preventive and chronic disease care and generic drugs and vastly expanded in the 2019 bill, are covered at 100% of cost. Those parameters constitute coverage far above 80% AV.


2 comments:

  1. Great piece.

    Also, small typo, no? (s/b 'free lunch for employERS,' right?
    "But there is no potential free lunch for employees. They either pay at least 70% of coverage with an 80% AV for each employee, regardless of whether the employee opts in, or they pay 8% of payroll for all."

    ReplyDelete

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