Did the Trump administration just open a back door to to a massive "Medicare" buy-in?

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The Trump administration has potentially shaken up American health insurance markets by finalizing a new rule allowing employers of all sizes to fund employees' health insurance premiums in the individual market in lieu of offering them access to an employee-sponsored group health plans. They can do this by funding Health Reimbursement Arrangements (HRAs), currently used for medical expenses excluding premiums for individual market plans, to fund individual market premiums to any level they choose -- e.g., to roughly the percentage of premiums they currently contribute to group health plans.

Many healthcare scholars and stakeholders worry that the alternative will be particularly attractive to employers with older, sicker employees, or that large employers will find ways to send sicker employees to the individual market. As a defense against that, the rule stipulates that a given employee group (sliced various ways, e.g., part-time vs. full time) can't be offered a choice between a group health plan and the individual market -- the employer must offer either/or. The rule also suggests (pdf pg 9) that the narrow provider networks prevalent in the individual market would be more attractive to healthier than to sicker populations -- and presumably, such preferences would influence the choices employers offer.

The administration forecasts that over ten years, about 11 million people will access HRAs to enroll in individual market coverage, while the number of people covered in employer-sponsored plans will drop by about 7 million (current ESI enrollment is about 150 million). The impact on the individual market would be major, but on the employer group health market, relatively modest.

But the HRA rule potentially cracks the door for a future Democratic Congress and president to vastly expand access to public insurance within the current Affordable Care Act structure. Suppose the next Congress, enabled by a Democratic president, injects into the ACA marketplace a national public option, paying Medicare rates to providers or some adjusted version of them, and requiring providers who accept Medicare to accept the public option?

The public option we really need

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I have argued, recently and also over time, that a public option introduced into the current ACA marketplace without a change in marketplace structure can only do so much good

The marketplace's dominant flaw is that it's under-subsidized, and a public option won't make coverage more affordable for subsidized buyers. If you're a solo person earning $31,000 per year and have to pay $220/month for a public plan with an actuarial value of 70% -- likely with a $3000 deductible --that's not going to look much more attractive than comparable private plans. The public plan may drive down base premiums and so help unsubsidized buyers.

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.

The Choose Medicare Act: How strong is this public option?

The Medicare for America Act, introduced last December by Reps Rosa DeLauro (CT-03) and Jan Schakowsky (IL-09), is a halfway house -- or two-thirds-way house -- to single payer -- and arguably a complete route to all-payer.  This bill (summary here) creates a revamped Medicare that auto-enrolls all children born in 2022; allows employers and employees to buy in; and folds in Medicaid and senior Medicare. It preservers a role for private insurance, via Medicare Advantage and the remaining option for employers to provide private insurance.

The bill would effect a less radical and somewhat more gradual transformation of American healthcare than Bernie Sanders' Medicare for All bill -- but a sweeping, sudden and very expensive transformation nonetheless, undertaking to transform Medicaid, senior Medicare, and long-term care (for which it provides coverage) as well as the individual and employer markets (the latter would be empowered to pay Medicare rates, set at 110% of current Medicare in the new public program). Insurers should be able to ultimately live with it; providers would fight it tooth and nail.

For those more comfortable with more incremental change, the Choose Medicare Act introduced by Senators Jeff Merkley (D-OR) and Chris Murphy (D-CT) last April (summary here) has a somewhat similar architecture but does not a) autoenroll newborns, b) fold in Medicaid, c) include long-term care or d) much change senior Medicare, except to add a yearly cap on out-of-pocket expenses to traditional Medicare.  What it does do:

How Democratic candidates should talk about healthcare

The moderate/establishment candidate for the Democratic nomination in New Jersey's 7th Congressional District (a seat very much in play), Tom Malinowski, takes what in my view is an admirably substantive, focused, big-picture healthcare position:

On healthcare, Malinowski said he “does not support Medicare for all, but the idea of a Medicare option for all is worth exploring.” He said he’s spoken to many people who appreciate having healthcare options and he “would not force anyone to give up private health insurance which many Americans are happy with,” though he added that expanding a Medicare option could eventually lead to a single-payer type of system if people chose it voluntarily.

This more or less describes the Center for American Progress's Medicare Extra proposal and the Merkley-Murphy Choose Medicare Act. Those proposals in turn hark back to early versions of the public option, in which a Medicare-ish program was an 800-pound gorilla that private insurance was privileged to compete against if insurers or employers so chose. Some versions envisioned permanent competition between commercial/employer insurance and a public plan, while others expected a phase-out of private insurance (I discussed some of the variations here.)

Either way, my own view is that a public plan that employers and individuals can buy into provides a viable path either to a de facto all-payer system, in which commercial insurers pretty much have to pay similar rates to the public plan to survive, or to single payer.  And merits aside, I think Malinowski does a nice job in short space capturing both the conservative and the transformative appeal of a strong public option set alongside employer-based insurance. It's too bad that Democrats backed away from this model.