Going Japanese with Medicaid for the duration of the pandemic

As pandemic-triggered weekly job losses climbed into the millions and then tens of millions this spring, a cry went up among the healthcare-concerned on Twitter: now the catastrophic weakness of an employer-based health insurance system will hit home.

To which, a reasonable counter: what about Japan? The country has truly universal healthcare, and about 60% of the population is insured through employers. Almost all the rest are insured through residence-based plans run by local governments, including citizens' plans for the nonelderly, covering 27% of the population, and specialized plans for the elderly, covering 13%, according to the Commonwealth Fund. Those proportions are broadly similar to those of the U.S., leaving aside 10% of the U.S. population that was uninsured just prior to the pandemic.  In the U.S., about 54% of the insured population is covered by employer-sponsored plans, 22% by Medicaid, and 15% by Medicare.

Jon Walker has suggested that adapting Japanese model might provide the least disruptive route to universal coverage for the United States:

All adopting a Japanese type of system would require is for the U.S. to take what it is currently doing and heavily standardize it. The biggest change would be scrapping the individual non-employer-based market to put everyone on a government plan, but the individual market is the least popular part of our system anyway.

Americans, like the Japanese, have regionally-based government-run and financed health plans for the (mostly) non-elderly. They're known as Medicaid.*

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.

A hole in the heart of Medicaid/Medicare buy-in plans

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A catch-22 bedevils Medicaid or Medicare buy-in plans designed to co-exist with the ACA marketplace, whether on the state or national level.

On one hand: If the public option is integrated into the marketplace and conforms to ACA benefit and subsidy levels, it won't help subsidized buyers much. They will still pay the same premium for the same level of benchmark plan benefits. The affordability of their options besides the benchmark plan depends on price spreads -- how much less or more other options cost compared to the benchmark. It's highly unpredictable how a public option will affect those spreads -- unless the silver public option plan is the cheapest in that market and way cheaper than the benchmark.

A public option may help unsubsidized buyers by providing a low-overhead choice and possibly stimulating lower unsubsidized premiums across the board. That helps the federal treasury too. But it may compress premium spreads and so make subsidized buyers' choices worse. The problem for subsidized buyers (over 85% of enrollees on ACA exchanges and over 60% of enrollees in ACA-compliant plans) is that the marketplace is under-subsidized. Premiums and out-of-pocket costs are just too high at income levels above 150% FPL.

Not throwing away our Schatz: What kind of public option in the ACA marketplace?

Senator Brian Schatz's proposal to allow any American to buy into Medicaid is frustratingly vague: we don't know the plan design and how it would be integrated into the ACA marketplace, as David Anderson and Loren Adler point out in this Vox roundup of expert assessment.

Two disclosed details are salient, though -- and to me, point toward two essential features of an ACA redesign from the progressive side. The first is the provider payment rate: bumped up to Medicare. The second is a cap on premiums as a percentage of income -- 9.5% -- for any buyer. (Larry Levitt mentions that feature in the Vox roundup; it's apparently not yet part of any published plan outline.)

Those features bring me back to the compromise package floated by the Urban Institute's Linda Blumberg and John Holahan back in January (which in turn built on their 2015 ACA enrichment plan, with concessions to Republicans salted in). That plan included an 8.5% of income cap on premiums for any buyer -- and a cap on payment rates paid to providers (in concert with reinsurance):

An American road to single payer

Ezra Klein offers an astute political forecast:

...if Republicans leave Obamacare gutted and the political arguments that led to it in ruins, there’s not going to be a constituency for rebuilding it when Democrats win back power.

Instead, they’ll pass what many of them wanted to pass in the first place: a heavily subsidized buy-in program for Medicare or Medicaid, funded by a tax increase on the rich. A policy like that would fit smoothly through the 51-vote reconciliation process, and it will satisfy an angry party seeking the fastest, most defensible path to restoring the Affordable Care Act’s coverage gains.

A few thoughts:

1. If a Medicaid income-adjusted buy-in were offered only to nonelderly who lack access to employer-sponsored insurance or other government programs, it shouldn't require more funding than the ACA marketplace. OTOH, if the AHCA has passed, Democrats will need to replace the revenue provided by the ACA taxes Republicans will have repealed (close to $900 billion over ten years, rather than the $600+ billion Klein cites, if you include revenue from the repealed ACA mandates).

2. If a buy-in were subsequently offered to employers -- perhaps starting with small employers -- that buy-in would amount to a voluntary payroll tax.

Bill Clinton's other "craziest thing in the world"

I have a post up at healthinsurance.org that looks at an apparent slip from Bill Clinton's political id regarding Obamacare. No, not that "craziest thing in the world" slip -- the one about allowing those who earn too much to qualify for subsidies in the ACA marketplace to buy into Medicaid.

To buy into what? Who suggested that? Certainly not Hillary. But it -- or something very like it  -- might not be such a bad idea. Please take a look.

My last several posts at healthinsurance.org explore outside-the-box ideas for strengthening and/or amending the ACA. They include a Medicare buy-in that Republicans might like and a way to get public option pricing into the ACA marketplace without the 'public' part. Also pointing possible alternate paths: a close look at the Basic Health Programs and proposals to expand them in Minnesota and New York.