Don't call it Medicaid: Don Taylor on expanding health insurance in the South

In yesterday's long look at the likely future of the ACA, one somewhat submerged sub-theme was that much of whatever change comes to the ACA is likely to be state-based.  The Obama administration has proven itself willing to bend far in granting state waivers for privatized Medicaid expansions. Broader waivers enabling states to submit plans to meet ACA coverage goals by alternative means will be available starting in 2017. The law's federalist structure is both a strength and a weakness -- enabling the stonewalling and sabotage we've seen so far, but also, via state waivers, state-specific redesigns more in keeping with a state's political culture.

Don Taylor's fascinating take on the cultural barriers to extending health insurance access in the South came toward the end of a very long piece. Allow me to re-present that section below.

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For Taylor, a lifelong southerner, the imperative to expand health insurance access in the South is personal. Taylor has sketched out various visions of long-term progressive-conservative compromise on healthcare reform (here's one) and has submitted detailed proposals to the North Carolina legislature for privatized Medicaid expansion. The chief inducement for Democrats to negotiate, he suggests, is to cover the 25-30 million people that the ACA leaves out.

 "If I were to argue for negotiation from a pro-ACA perspective," Taylor said, "I'd be most worried about the uneven rollout, with the South left out.  I'd look to come up with some way to make the South willing to expand insurance coverage." He adds that there's probably no way to do this between now and the next election in 2014 in states that haven’t already starting moving that direction.

What if the (Republican) dog catches the Obamacar(e)?

Healthcare economists Austin Frakt, Donald Taylor and Yevgeniy Feyman on the future of healthcare reform

If Republicans win both houses of Congress and the presidency by 2017, what will they do to the Affordable Care Act?

The first substantive "repeal and replace" legislative proposal offered by Republicans since the ACA passed, unveiled in outline on January 27 by Republican Sens. Tom Coburn (OK), Richard Burr (NC), and Orrin Hatch (UT), purports to settle that question by making repeal of the ACA its first provision.  The Coburn-Burr-Hatch proposal (CBH*) has led healthcare wonks on the left and right, however, to conclude the opposite: "Repeal ACA, RIP," as Donald Taylor of Duke titled his analysis.

That's because after the "repeal" provision come the come the "replace" provisions, and to greater or lesser degree most are cousins of their counterparts in the ACA. CBH subsidizes insurance for people whose earnings fall between 100% and 300% of the Federal Poverty Level (FPL); provides a functional if more porous equivalent of the individual mandate and guaranteed issue; allows adults up to age 26 to stay on their parents' plans; bars lifetime coverage caps and  policy cancellations for reasons other than fraud; semi-privatizes Medicaid; taxes employer-sponsored insurance more heavily than the ACA does; and leaves the ACA's Medicare payment reforms and cuts untouched.

CBH thus clarifies that we are in a healthcare world remade by the ACA, and any conservative proposal that purports to cover as many people as the ACA, or close to it, must retain its basic infrastructure: subsidized private insurance, with some mechanism for minimizing medical underwriting and luring almost everyone into the risk pool. In short, the first relatively fleshed-out "repeal and replace" proposal demonstrates that "replace" effectively erases "repeal."

If repeal is all but off the table, how would a GOP-controlled federal government alter the ACA? I asked three healthcare economists to consider that question: progressives Donald Taylor of Duke and Austin Frakt of the U.S. Department of Veterans Affairs and Boston University, and conservative Yevgeniy Feyman of the Manhattan Institute. There was substantial consensus among them that repeal is dead -- but also that conservative alterations of the ACA are likely. Feyman is  eager to open the individual market to a greater variety of plans than the ACA allows on its exchanges.  Frakt and Taylor have long urged compromise that could win Republican acceptance and deploy "conservative designs for progressive ends," as Frakt put it (as the ACA itself does). Both Taylor and Frakt find some provisions of CBH palatable and even desirable on the merits. (Frakt, Taylor and Feyman all blog extensively on healthcare reform: Frakt at the healthcare policy blog The Incidental Economist, where he is co-editor in chief; Taylor on his personal blog; and Feyman at Forbes.)

Query: will the doc fix bend the healthcare cost curve?

[Program note: the lede is somewhat buried here, in that the post goes from exposition to open query 5 paragraphs down. Also, see update at bottom re doc fix pay-fors]

The doc fix is in, as Sarah Kliff pithily put it. That is, bipartisan legislation unveiled on Feb. 6 would repeal the broken Medicare payment formula that has had to be patched every year -- and transition essentially all Medicare payment to doctors away from fee-for-service and into (alleged) payment-for-performance.

Under the proposed legislation, three existing merit-based incentive payment programs would be consolidated. Payments to doctors will be adjusted based on a composite score of their performance compared to peers comprised of  scores in four categories: 1) quality of care; 2) resource use; 3) "meaningful use" of electronic health records (EHRs); and 4) improvement over their own past performance.* The quality measures, to be updated every year with input from "eligible professional organizations and other relevant stakeholders," are in five categories: clinical care, safety, care coordination, patient and caregiver experience, and population health and prevention.

If it passes and works more or less as designed -- two enormous ifs -- the doc fix, as I have noted before, could eclipse in impact all the toxically politicized budget wrangling of the past five years.  "Healthcare reform is entitlement reform": if Medicare cost growth is slowed significantly, our fiscal future is likely secured  If it works (or, for that matter, if it fails spectacularly), the doc fix could have more impact on the healthcare cost curve than the Affordable Care Act, since its package of consolidated performance incentives, as Sarah Kliff points out, "constitute a more significant move toward pay-for-value than is the Affordable Care Act, where those efforts are either limited to pilot programs (like the Accountable Care Organizations) or, if they are system-wide, tend to limit providers' risk to two percent or three percent of their reimbursements. Going up to nine percent [as the doc fix does by 2021] would step up the incentives in a pretty major way."

It's a supreme irony that this potentially radical long-term budget reform is strongly bipartisan -- put forward by the outgoing chair of the Senate Finance Committee, Max Baucus, and the Republican Chairs of the House Ways and Means and Energy and Commerce Committees, Dave Camp and Fred Upton. I wonder if it can stay that way. Partisanship will be in force on the unresolved matter of how to pay for the fix, which needs to be paid for only because the status quo baked an unsustainable "Sustainable Growth Rate" into long-term budget projections.** The collaboration on new payment mechanisms, however, is evidence that either a) Republicans are capable of rational thought and action when an issue is somehow sequestered from ideological dispute, or b) that both parties are in the grip of untested shibboleths regarding the potential of pay-for-performance and currently prevalent principles of its design. Probably a bit of both.

A program note: as I mentioned in a prior post, I am branching out from amateur blogging to amateur reporting.  On the prior subject on which I mentioned I would seek expert input -- "what will Republicans do to the ACA if they win both houses of Congress and the presidency by 2014?" --I have completed an article based on in-depth discussions with healthcare economists on both sides of the political spectrum that will either appear on this blog or elsewhere early next week. I plan to do the same with respect to the potential impact of the doc fix (that is, the SGR Repeal and Medicare Provider Payment Modernization Act). Let me again go open source here (my prior query drew a blogged response from Duke's Don Taylor) and pose the following questions:

The health insurance "who pays?" tug-of-war

If you're going to cut a string to a certain length, whichever end you cut, you'll still have the same length.

The first substantive "repeal and replace" legislative proposal offered by Republicans since the ACA passed, unveiled in outline on January 27 by Republican Sens. Tom Coburn (OK), Richard Burr (NC), and Orrin Hatch (UT), illustrates that basic principle on multiple fronts. That's because its core provisions are to greater or lesser degrees cousins of their counterparts in the ACA.

As Don Taylor has been pointing out for a week, the rollout of the Coburn-Burr-Hatch  proposal last Monday highlights the fact that any real attempt to replace the ACA while at least roughly matching its coverage goals will expose the GOP to the same kinds of attacks -- perhaps more from their right wing than from the Democrats -- as they've been leveling at Democrats since the ACA took shape in 2009. 

In some cases, the choices advanced in Coburn et al's so-called Patient CARE Act (following Taylor, I'll call it PCARE) may represent improvements over parallel provisions in the ACA. But all such choices involve tradeoffs -- alternate plans will have, to varying degree different winners and losers  (high taxpayers vs. subsidized insureds; young vs. old; employer-insured vs. individual market-insured; healthy vs. sick).  Many if not most of us will be on different sides of each of these divides at different points.

One feature of PCARE, or rather two interrelating features, throw the nature of these tradeoffs into relief. For years, Republicans have been screaming that the ACA forces young adults in the individual market to subsidize older participants. That's because the ACA limits the allowable extent to which the oldest participants can be charged more than the youngest to a 3-to-1 ratio, whereas pre-ACA, most states allowed ratios of  5-to-1 or more (42 states, according to AHIP). That alleged bilking of the young was at the heart of the case against the ACA's constitutionality argued in the Supreme Court in March 2012 and fueled all the cries of "rate shock" from conservative critics of the ACA in 2013. According to the Kaiser Family Foundation, the impact of the narrower age banding on young adults' premiums is pretty modest, but never mind.

The real budget battle: voucherize Medicare, or IPABize it?

Noting that the emerging Republican budget strategy seems to be stalemate -- refuse to approve any new taxes, consequently give up on entitlement reform, and blame Obama, Jonathan Chait notes that this strategy makes a kind of sense. That is, it locates the long-term budget battle where it belongs, on the means of controlling healthcare costs:

This may sound like a cynical strategy. And it is. But it’s not a purely cynical strategy. It reflects an important intellectual development on the right. Capretta is advocating not just the classic no-taxes-ever approach that has defined the party for years, but also its newer (or newly fervent) belief in privatizing health-care services.

The main driver here is Paul Ryan, whom Capretta advises. (Yuval Levin, another Ryan favorite, makes a similar, though less openly cynical, no-deal argument for the Weekly Standard.) Ryan has accepted the argument, traditionally pushed by Democrats, that the main driver of long-term budget deficits is not the aging population but skyrocketing health-care costs. Ryan has decided that the only possible answer to the problem is to turn Medicare into a system of subsidized private insurance, and that the wonders of competition between insurance firms will dramatically suppress cost inflation (“the way it always works when the consumer is in charge,” he says).

What's truly cynical is not Ryan's ideological faith in the competition fairy, but his demonization, in the illustrious McCaughey-Bachmann-Palin tradition that is now general GOP dogma, of other more proven means of controlling healthcare costs. Chait continues:

The price of dealing with an extremist opposition?

There is a meme gathering steam on the left -- whether triggered by Ezra Klein or by multiple people in the know or making the same deduction -- that Obama will accede to raising the Medicare eligibility age as the price for pretty much getting his way on taxes (and stimulus)?  Here's how Don Taylor compressed the logic in a tweet: 

it is only thing Rs have on health. Inevitable & some D political advantages per ACA even tho bad policy

My first thought in response was, "since Republicans always toss in "means-testing" when they talk up entitlement "reform," why not "means-test" the eligibility age? As Paul Krugman has pointed out repeatedly, "Gains in life expectancy have been very strongly correlated with income and class; those with lower incomes and lower status...have seen very small gains in life expectancy." So perhaps eligibility could be tied to income or assets. That might create some marginally perverse incentives, but that only underscores what a dumb idea raising the eligibility age is in any case (it will raise total healthcare spending, as Sarah Kliff has demonstrated).

Misrepresentation of the ACA in the Supreme Court: a postscript

In April and May,  during the countdown to the Supreme Court decision on the constitutionality of the Affordable Care Act, I did everything I could to highlight the material misrepresentation of the individual mandate in oral argument by Michael Carvin, counsel to the law's opponents.  To serve his argument that the ACA forces young and healthy individuals to buy insurance far in excess of their needs, Carvin  asserted, "Congress prohibits anyone over 30 from buying any kind of catastrophic health insurance" (p. 105). That was wrong on two counts: 1) the ACA allows not only adults under 30, but older adults who can show financial hardship, to buy bare-bones catastrophic coverage offered outside the ACA's insurance exchanges; and 2) the cheapest plans on offer in the exchanges provide coverage of an actuarial value low enough to be considered "catastrophic coverage" by most experts, including the Kaiser Family Foundation.


Via Don Taylor, I learned just last week that the plaintiffs' broader claim that the ACA forced people to buy insurance in excess of their needs was misleading on yet another count. The ACA contains a little-known option for states that want to provide affordable to those ineligible for Medicaid yet poor enough that the cheapest option within the insurance exchanges may prove a financial hardship. States may opt to establish a federally-funded Basic Health Plan (BHP). A March 2011 McKinsey report summarizes:

Don Taylor envisions a distant healthcare compromise; might Justice Kennedy impose something like it next month?

At present it would seem that there is no common ground between the parties on healthcare -- though the Democrats built the ACA on Republican ground, which the GOP fled (and rhetorically bombarded) as soon as the Dems set foot on it.

Nonetheless, looking down the road and seeking the contours of a future compromise, Don Taylor, in his new book Balancing the Budget is a Progressive Priority, identifies Democrats' top priority as universal coverage, and Republicans', insofar as they have one, as ensuring that everyone has "skin in the game," i.e. is on the hook for some of the medical expense they generate.  He therefore envisions this future deal:

• Universal catastrophic coverage implemented through Medicare, with gap insurance available to persons wanting it (no mandate!) via state based exchanges
• With a massive deductible (I suggest $10,000/persons; $15,000/family to maintain a key role for private insurance; far larger out of pocket exposure than Bronze level cover in the ACA)

While such further compromise might strike most progressives as equal parts unlikely and undesirable, it caught my eye because, as I have noted repeatedly, there's an outside chance that Justice Kennedy (as swing vote) may impose something akin to it in the Supreme Court's ruling on the constitutionality of the mandate.