We're in Cassidy-Collinsville, Chapter 2

Last March, Peter Suderman wrote a clever column claiming that Republican changes to the ACA -- repeal of the individual mandate, creation of a parallel ACA-noncompliant individual market -- were achieving the goals of the ACA repeal/replace bills. I noted the missing piece there: defunding the ACA, in particular the Medicaid expansion and Medicaid more generally. That was the "hot-beating heart" of the failed Republican repeal bills. Instead of AHCA- light, I suggested:

In the aftermath of the 2017 assault, the ACA resembles not so much a system established by a mainstream Republican repeal-and-replace bill as it does the kind of compromise that might have emerged from a negotiation over the Cassidy-Collins bill introduced in January 2017, if negotiation over such a plan had been possible (it wasn't, because no more than a handful of Republicans were interested in the bill).

For high out-of-pocket costs in employer plans, 3 shock absorbers

The Kaiser Family Foundation's annual Employer Health Benefits Survey was released this week. There are no big surprises. Premium growth remains relatively modest compared to the immediate pre-ACA era - 3% for single coverage and 5% for family -- though still outstripping wage growth. The percentage of workers covered by employer insurance is stable, as is total ESI enrollment, at 152 million. 79% of workers are offered coverage, and 76% take it up -- similar to last year.

Kaiser does emphasize continued rapid growth in deductibles: the average annual deductible has increased 53% in five years. That's a proxy for out-of-pocket costs continuing to rise. Here I want to quickly point out three partially mitigating factors.

1. Increase in HSAs and HRAs (Section 8) - the percentage of workers who hold these accounts dedicated to paying medical expenses, which are linked to high deductible health plans (HDHPs), spiked from 20% in 2014 to 29% in 2016 and has stayed at that higher level. Since employers generally fund these accounts, they partly offset high deductibles while also shrinking the employee's premium. In 2018, the average employer contribution to an HRA for a single person plan, $1149, outstripped the average employee share of the premium, $1142, and covered about half the average deductible, $2245. The average contribution to an HSA, $603, covered more than half the employee's average premium share, $1024, and about a quarter of the deductible. For family coverage, the average HRA employer contribution was $2288, and the average HSA contribution was $1073. HRA contributions are bigger because these accounts are "use it or lose it" for the employee -- whereas an employee owns an HSA, and contributions are tax-sheltered.

We already have the high deductibles...so would adding HSAs hurt?

In my last post I suggested that among the destructive White House demands to alter the Alexander-Murray ACA stabilization bill, one concept -- encouraging takeup of High Deductible Health Plans linked to HSAs -- might be a reasonable concession for Democrats to consider.

My reasoning boiled down to this: Once you have a deductible higher than the HDHP threshold of $1350 individual/$2700 family  -- as well over half of individual market enrollees do -- it doesn't hurt to add the tax-free HSA to help people cope with the expense.

Today I asked Yevgeniy Feyman, a Manhattan Institute adjunct fellow and senior research assistant at the Harvard School of Public Health, for ways to encourage HDHP/HSA takeup in the ACA marketplace. His suggestions:

• Create a seamless process for establishing an HSA -- so that once you sign up for an HSA eligible HDHP, you would be redirected into a pipeline for creating an HSA.


• Simplify the rules by which a high deductible plan can be eligible for linkage to an HSA. At present, no services except the ACA-mandated free preventive services can be covered until the medical deductible is reached. In a family plan, the full family deductible has to be reached before coverage kicks in. These rules could be loosened. At the far end of easing, "you might end up permitting anyone to have an HSA, and just cap contributions at their deductible or max OOP."

Mulvaney's ACA demands: Give him one out of three?

As David Anderson argued in The New York Times on Saturday, at this point Republicans need an ACA stabilization deal more than Democrats do, so Democrats have no real imperative to accede to Trump's ridiculous demands,

In brief: the damage from CSR uncertainty in 2018 is already done; CSR is priced into premiums; most states have adopted a "silver load" strategy to mitigate the damage (concentrating the premium increases in silver plans, the plans with which CSR is available); and pricing in CSR over the longer term actually produces a fiscally wasteful but genuine boost to subsidies for the more affluent among the subsidy-eligible, who really need extra help (making gold plans available for roughly the cost of silver).

The chief motive for Democrats to push for a deal is to win a measure of Republican buy-in and ownership, and therefore stability. That should keep more insurers in. And an appropriation for federal CSR reimbursement in 2019 should drive premiums down, dramatically, i.e. by almost as much as CSR uncertainty (and then stiffing) drove them up this ear. That's potentially a political win for Republicans. But Democrats are inhibited in their political calculations by a desire to, you know, make good insurance affordable for more people.

Given that desire, Democrats would be crazy to yield on repeal of the individual mandate, which would trigger another premium surge and more adverse selection, or on enabling a parallel market in non-comprehensive and medically underwritten insurance, which would also damage the risk pool for comprehensive plans.

There is, however, one White House ask that Democrats might consider addressing in some form. As reported by Axios' Sam Baker, OMB Director Mulvaney made these demands on Fox News Sunday:

What might moderate Republicans do to the ACA?

From the release of the AHCA on March 4 to Sunday night's amendments to Graham-Cassidy, Republican repeal bills have got ten worse and worse -- more conducive to individual market chaos, more draconian in Medicaid expansion rollback and per capita capping of federal medicaid payments. All of the bills would reduce the ranks of the insured by more than 20 million. Which suggests a question: what would a "good" partial repeal bill look like?

To some extent that's a nonsense question. The ACA embodies a Democratic concession to a core conservative concept: That there's inherent virtue in establishing a competitive insurance market, that doing so will drive down costs and improve healthcare quality (i.e., that insurers can make providers deliver better care more cheaply). The ACA's flaws are in any case all in a conservative direction. Real fixes would include bigger subsidies, including via reinsurance; some means of capping the rates insurers pay providers, as in Medicare Advantage or Medicaid managed care; rules more or less compelling providers to accept the insurance (i.e., if they accept Medicare); and strong incentives for insurers to participate in the market (tied to their eligibility to participate in managed Medicaid or Medicare Advantage markets).

A genuinely moderate Republican would not accept such changes but would seek to amend rather than repeal/replace the ACA -- not just in the short term, as Lamar Alexander has called for, but for the long term, as Susan Collins would probably like to do  There's no shortage of proposed conservative tweaks that might do minimal harm and in some cases perhaps even some good. Yevgeniy Feyman and Paul Howard could write such a bill. Here's my sense of what concessions might be won from Democrats in exchange for CSR and reinsurance funding.

An exit ramp for Republican senators queasy about ACA repeal-and-delay

Yesterday, two Republican senators who have been most vocal about the dangers of repealing the ACA without replacement, Bill Cassidy of Louisiana and Susan Collins of Maine, introduced a "replacement" bill that looks something like the compromise envisioned by many healthcare wonks, giving states the freedom to accept or redesign the core ACA benefit structure. Senators Shelley Moore Capito, R-WV, and Johnny Isakson, R-GA, are co-sponsors. Vitally, it does not repeal the taxes that fund ACA benefits. Full text is here; a one page summary, here

The plan is offspring of a bill Cassidy introduced in 2015*, when the possibility loomed that the Supreme Court would rule for the plaintiffs in King v. Burwell and ban the federal exchange HealthCare.gov, from granting premium subsidies. It allows states to either keep their ACA marketplace as is, or opt for a conservative alternative based on subsidized Health Savings Accounts (HSAs) and catastrophic plans offered in a deregulated market. It also leaves intact the ACA's "innovation waivers" allowing states to cook up their own coverage schemes to deploy comparable dollars to cover comparable numbers of people. A Republican HHS would presumably be disposed to wave through such alternative schemes if they have a conservative cast.

Underinsurance: What's offsetting the rise in deductibles?

On the weekend, I posed a few questions raised by the Commonwealth Fund survey of underinsurance released this week. I've since heard from Commonwealth's Sara Collins, VP of health care coverage and access, the lead researcher in the study. Her answers highlight some significant unknowns about what's going on in employer-sponsored insurance.*

To recap, Commonwealth found that among those American adults under age 65 who were insured for a full twelve months, 23 percent were underinsured – that is, their deductibles and copays were high enough to cause severe financial strain. That top line is almost unchanged since 2010; the real damage on this front was done from 2005 to 2010, when employers started shifting costs en masse to employees. Among those who get insurance from an employer, the Commonwealth found an underinsurance rate of 20%, unchanged since 2012 and up from 17% in 2010.

Mysteries of underinsurance in the Commonwealth Fund survey

A Commonwealth Fund survey released this week found that among those American adults under age 65 who were insured throughout 2014, 23 percent were underinsured – that is, their deductibles and copays were high enough to cause severe financial strain. That top line is almost unchanged since 2010; the real damage on this front was done from 2005 to 2010, when employers started shifting costs en masse to employees.

I have several questions about the report, to which I'm seeking answers from the authors. If you have any insight, please let me know (email address is in profile to right).

In the questions below, please keep in mind Commonwealth's definition of underinsured: 1) total out-of-pocket costs exceed 10% of annual income, or 5% if the person's household income is under 200% of the Federal Poverty Level (FPL), or 2) the plan deductible exceeds 5% of the beneficiary's annual income.

1. While deductibles in employer-sponsored plans continue to rise, most notably among those with less than 100 employees, the underinsurance rate actually dropped among large employers from 2012 to 2014, from 16% to 14%.  In the same period, the percentage of large-firm employees whose deductible exceeded 5% of annual income rose from 6% to 8%.  What's offsetting that rise in the ranks of those whose deductibles alone classify them as underinsured? Do the free preventive services mandated by the ACA play a role? Or rather, since "the out-of-pocket cost component of the measure is only triggered if a person uses his or her plan," could reluctance to use (and pay for) any medical services be inhibiting the underinsured total?

2. More generally, , among all insured Americans under age 65, Commonwealth finds an increase of 7 million since 2010 in those whose deductibles qualify them as underinsured, but a net increase in underinsureds of only 2 million . Again, something seems to be offsetting the relentless rise in deductibles. Since 2010,

How conservatives might amend (rather than destroy) the ACA

The Affordable Care Act is by any rational assessment a conservative plan to expand access to healthcare -- relying in large part on private insurance and competition, devolving oversight and insurance industry supervision to the states, and imposing fiscal 'responsibility' on individuals with incomes as low as 138% of the Federal Poverty Level to contribute to the cost of their healthcare.

Yet conservatives complain bitterly that the private market is not free (i.e., to exclude benefits now deemed 'essential'); that the states are commanded to administer within a federal straitjacket; that the employer mandate will choke off job growth; and that the individual mandate is an unconstitutional impingement on personal liberty.

Looking back at a year of blogging about the ACA's increasingly successful implementation, it occurs to me that I've addressed three possible changes to the law that could reasonably be called conservative. Two increase viable consumer choice within the exchanges; one takes seriously the possibility of replacing the individual mandate, and one would loosen or perhaps partially replace the employer mandate.

Here they are:

Employers, HSAs and the ACA

Jay Hancock at Kaiser Health News reports that significant numbers of small businesses may stop offering health insurance to their employees, sending them instead to the ACA exchanges. This could be a good thing for employees who earn little enough to qualify for strong ACA subsidies -- win-win for employer and employee at the federal government's expense.

According to the Kaiser Family Foundation, small employers in 2014 paid an average of nearly $5,000 for solo coverage and a bit more $10,000 for a family premium. What if an employer wants to compensate employees for dropping a benefit that constitutes such a large share of their compensation?  There's a problem with straight salary increases: they reduce employees' ACA subsidies and so give a portion of the extra income back. At healthinsurance.org, I examine three scenarios in which a pay hike worth about 70% of a typical employer premium contribution triggers subsidy reductions ranging roughly from about 25-- 80%.

An employer who really wants to help employees can avoid this problem by getting creative about compensation.  One striking way to do so would be to fully fund Health Savings Accounts (HSAs) that employees can use with HSA-qualified plans on the exchanges. Here's how I described the possibility in the healthinsurance.org piece:

What Avik Roy won't tell you about healthcare in Switzerland and Singapore

Avik Roy so despises the Affordable Care Act that he wants it to swallow Medicare and Medicaid.

According to Roy's latest sketch of a conservative plan to offer universal health insurance, Medicare and Medicaid are the chief culprit in the United States' uniquely expensive healthcare system -- notwithstanding that they pay less per procedure than private insurers and patients, and that most experiments in alternatives to fee-for-service payment are located within them.

In Roy's free-market healthcare vision, Medicare and Medicaid patients would be transitioned onto deregulated health insurance exchanges, where insurers would be free to offer even skimpier insurance than the current exchange bronze plans, designed to cover just 60% of average patient costs. They might also be free to expand the ACA's age-rating, which limits the ratio of older patients' premiums to young patients' to 3-to-1, and be freed from offering the ACA's minimum essential benefits.

To flesh out this vision, Roy touts the virtues of his two favorite national systems: those of Singapore, which features mandatory individual health savings accounts (HSAs), and  Switzerland, in which everyone buys insurance on private exchanges (subsidized for about a third of the population). But as is his wont, Roy fails to mention the feature that enables each of these systems work: strong government influence over pricing.

Take first Roy's sketch of Switzerland's free market system:

David Goldhill, consider our dental dystopia

David Goldhill, long an advocate of shunting all but catastrophic health care costs onto consumers (pairing super-catastrophic insurance with mandatory HSAs) offers, I must admit, a compellingly negative view of what's likely to become of cost controls embedded in the ACA or favored by the health care experts I like to read. It's a kind of mirror image of Atul Gawande's thousand flowers vision:

Through private insurance, Medicare and Medicaid, our health system relies on centralized cost control and clever adjustments to payment formulas to try to tame the beast. Traditional health experts may repackage their ideas, but they are never discouraged by past failure. So the new Accountable Care Organizations are a reinvention of H.M.O.’s. The Independent Payment Advisory Board is the new Medicare Payment Advisory Commission, or MedPAC. Bundled payments are the new Prospective Payment System.

We often see some early benefit from the introduction of new ideas, but over time such initiatives are always subjugated by our system’s nefarious economic incentives. Implement cost control reforms and watch providers circumvent new rules and guidelines. Reduce reimbursement rates for procedures, and witness providers expand the definition of required services. Convert fee-for-service reimbursements into bundled payments, and soon more severe diagnoses are given. Attempt to use government buying power, and see providers turn to lobbyists to keep prices up. We are approaching a half-century of fighting this losing battle.

It's true that power industries and interest groups are very successful at gaming new regulations. It's also true that today's reforms bear some resemblance to prior efforts.

Of venal dentists and patients' incentives

Don't get my father, 81, started on the incompetence and venality of (some) dentists. Troubled with bad teeth -- most of which he's managed to keep -- all his life, he's had several bouts of long, painful, expensive bridge work, periodontry, implants, etc. He's learned always to get two or three opinions. He loves to tell of the guy who told him he needed $4,000 worth of bridge work -- which another dentist told him was totally unnecessary, proving it with effective, much more limited treatment.

It occurs to me that dentists are likely no more venal than doctors (or members of any other profession). The difference is that since most of us don't have dental insurance, we know how much dental treatments will cost, if we care to ask. While I disagree with health care free marketeer David Goldhill's solutions to our health care crisis (ultra-high deductible insurance for all; HSAs for all; substantial services paid out of pocket), he has a point that we're apt to spend like drunken soldiers on health care when doctors tell us to, because we don't know the cost and don't bear much of it -- if we have decent coverage.

It stands to reason that many specialists, e.g., surgeons, whether out of unabashed "entrepreneurialism" or a natural tendency to believe that most people suffering from the ailments they treat will benefit from the very expensive treatments they offer, are as apt to recommend unnecessary expensive treatment as the dentist villain of my father's tale. When the procedure is high risk, many patients are likely to seek at least a second opinion. When it's not -- when the procedures are diagnostic, or hold out what seems a reasonable chance of quick relief from pain, or seem likely to eliminate what may be a very low-odds but deadly risk -- most people will go for it.

It is quite difficult to figure out the appropriate mechanisms and agency and incentives for cost-benefit analysis. Much of our problem is cultural. In a paper (fee required) on the causes of Americans' "overutilization" of medical services, Ezekiel Emanuel and Victor Fuchs identified 7 factors -- "4 related to physicians and 3 related to patients." Doctors' factors, according to Emanuel and Fuchs, are 1) training that places a premium on "enumerating all possible diagnoses and tests that would confirm or exclude them"; 2) fee-for-service, which creates incentives for overtreatment; 3) pharmaceutical marketing to doctors; and 4) medical malpractice laws. On the patient side, there is 1) the American cultural tendency "to embrace technologic fixes for problems"; 2) direct-to-consumer pharmaceutical marketing ; and 3) third-party payment for services, as outlined in this post.

Changing doctors' incentives has been the focal point of most discussion of health care cost containment. But changing the maximalist culture that patients have imbibed -- which starts by at least making costs transparent -- must also be part of the mix. No politician is going to tell the American people that. "It's your fault too" has never been a winning political message -- except to a minority, when a majority is calculated to overhear.

UPDATE: Ezra Klein, referring to the employer tax break for health care that produced our current system and so hides their cost of health care from most of us, points a way to change patient incentives:

I would like to see the tax preferences eliminated, and I would like to see every worker get the money their employer pays for their health care put back into their wages. Then I would like them to purchase health insurance on their own, so they see the full cost of it, and can decide whether they're willing to support more radical efforts to bring those costs down, or whether they're willing to accept more care management in order to save some money. This is, basically, how the Wyden-Bennett bill works, and it's why it's such a gamechanger. It's also why it has so little legislative support: It tries to solve the full problem when people only feel a small fraction of the problem.

In agreement with Klein and contra Goldhill, I would add that it makes more sense to induce people to give up a degree of autonomy over treatment courses in advance than to force each of us to factor in cost when we're up against major treatment decisions, such as whether to undergo bypass surgery.