Fixing the ACA’s Medicare Glitch

By Louise Norris and Andrew Sprung

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It's my pleasure to team up in this post with Louise Norris, a health insurance broker and ACA chronicler extraordinaire at healthinsurance.org and verywell.com. At those two sites, Louise has effectively created a constantly updated encyclopedia of the ACA, covering a host of enrollment situations, regulations, marketplace features, and histories of each state marketplace. She has done similar work about Medicare at Medicareresources.org.

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For most Americans, enrollment in Medicare is cause for celebration. At last: affordable, reliable insurance you can’t lose. Medicare enrollment can entail some complex determinations (do I qualify for any Medicare Savings Programs?) and decisions (Medigap or Medicare Advantage?) For many seniors, too, the burden of premiums and out-of-pocket expenses is heavy. Still, by American standards, Medicare is reliable and affordable.

For “near-elderly” couples (under age 65)  who are insured through the Health Insurance Marketplace established by the Affordable Care Act, however, the transition of the elder spouse into Medicare can bring sticker shock and extra expense. That’s because ACA premium subsidies are designed so that enrollees pay a fixed percentage of household income for the benchmark (second cheapest) silver plan in their area – and they pay the same percentage (reduced through 2022 by the American Rescue Plan enacted in March 2021) regardless of how many people need insurance. 

A couple that was paying 8% in premiums for a benchmark silver plan to cover both of them will still pay 8% of income when only one of them is covered in the marketplace. When one of them transitions to Medicare, they will pay the marketplace premium plus the Medicare premium. In the illustration below, they will pay somewhere between 11% and 14% of income in premiums to cover them both, depending on whether the Medicare enrollee opts to buy a Medigap policy.

If BBB remains blocked and ARPA subsidies go poof, what can CMS do to mitigate the damage?

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In the wake of Manchin's weekend declaration that he won't vote for the Build Back Better bill,  I am sure I'm not alone in choosing to hope that this is not game over, that some fragments of Biden's domestic agenda will become law. Still, it's time to face the strong possibility that the major temporary subsidy boosts in the ACA marketplace enacted in the American Rescue Plan Act will expire, and that the marketplace will revert to its under-subsidized pre-ARPA state in 2023.

It's time, then, to recall the various ways the administration can boost affordability in the marketplace without legislation, leaving coverage less affordable than it is now, but more affordable than it was before March 2021, when ARPA was enacted. 

Making the ACA work 2014-2016: Administrative roads not taken

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The Obama administration stood up the ACA's core programs in the face of a never-ending shitstorm of Republican defamation, disinformation, noncooperation on the state level, total litigation warfare, and fiscal sabotage. For that they deserve our undying thanks. 

By the time Obama left office, the ACA had cut the ranks of the uninsured by about 40 percent, mainly through Medicaid expansion. The marketplace and the expansion proved resilient through the Trump years and provided a vital safety net when the pandemic struck. Since February 2020, Medicaid enrollment by those rendered eligible by the expansion has increased by about 5 million, and marketplace enrollment (with a large push by the Biden administration) by close to two million.

In administering the ACA, however, the Obama administration operated under self-imposed restraints. Pre-Trump, and before Republicans passed their $2 trillion tax giveaway to the wealthy in 2017, Democrats had yet to recognize -- or rather, acknowledge --  the full extent of Republicans' economic fraudulence. Without new appropriations by Congress that they knew would not be forthcoming,  Obama and administration officials were reluctant to increase spending on ACA programs and so increase the deficit. They declined to take several measures that would make coverage more affordable or credible. These included the following.

Putting the "Affordable" in the Affordable Care Act: A role for the IRS

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 After the boost to ACA marketplace subsidies enacted as part of the American Rescue Plan Act (ARPA), the largest remaining bar to affordable coverage for all but undocumented Americans (who are barred from any government help for coverage) may be the affordability threshold for employer-sponsored insurance. It's ridiculously high. The IRS can provide some relief now, without portentous rulemaking.

The ACA defines employer-sponsored insurance (ESI) as affordable if a plan providing Minimum Essential Coverage (MEC) as defined by the ACA costs less than 9.5% of income. That baseline is adjusted annually to account for inflation in premiums in excess of inflation in the consumer price index and currently stands at 9.83% of income.  MEC is equivalent to bronze-level coverage in the ACA marketplace, which typically means a single-person deductible in the $7,000 range. Those for whom an employer's offer of insurance is deemed affordable are ineligible for ACA marketplace subsidies (though not ineligible for Medicaid). KFF estimates that 3.5 million uninsured people are in this category.

A healthcare reform plan for Joe Biden with a Republican Senate

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If, as seems likeliest but by no means certain, we have a President Biden and a retained Republican majority in the Senate, the ACA's core programs are likely to limp along fully funded but not radically improved.

Biden had proposed major reforms to the ACA, including: 1) establishing a public option, 2) allowing those with access to affordable employer-sponsored insurance to buy in to the marketplace on a subsidized basis, 3) capping premiums for a benchmark plan at a maximum 8.5% of income, with no income cap on subsidy eligibility, 4) boosting subsidies at every income level, and 5) offering free marketplace coverage to low income people in states that refused to enact the ACA Medicaid expansion.

None of that is likely to happen. At best, Biden may be able to convince McConnell to render moot Texas v. California, the case before the Supreme Court seeking to have all or part of the ACA declared unconstitutional on patently fraudulent grounds, by either repealing the individual mandate or raising the penalty to $1. 

There's much that can be done to improve the ACA -- and the entire U.S. healthcare system -- administratively, however. And we have a blueprint -- provided by an indefatigable and aggressive reformer with administrative smarts: Elizabeth Warren.

You may recall that during the campaign, Warren jumped through some convoluted hoops to straddle the gap between Medicare for All and more incremental (though still sweeping) and swiftly achievable reform.  

To that end, she released a transitional plan for her prospective first term as president last November. What's relevant now: a sweeping set of proposed administrative actions.  They include:

Chipping away at the uninsured: What about those who can't afford employer-sponsored insurance?

Last week, I explored  why HHS's estimate that 9 million of the uninsured may be eligible for ACA marketplace tax credits is so much larger than the Kaiser Family Foundation's estimate of 5.4 million. In brief, the chief differences seem to be a) Kaiser takes into account those among the uninsured who have an offer of insurance from an employer, most of whom are probably ineligible for tax credits, and b) Kaiser also estimates and excludes those with incomes in the 250-400% FPL range who are "potentially" tax credit eligible but in fact ineligible because the unsubsidized premium for the benchmark silver plan in their area is deemed affordable by ACA criteria (i.e., costs under 8-10% of income).

Today, Kaiser updated its 2015 estimates, published in January 2016, of various categories of uninsured. The first thing to note is that the pool has shrunk: Kaiser now estimates 27.2 million nonelderly uninsured in 2016, down from 32.3 million in 2015. Next, the estimated percentage of uninsured who are eligible for financial assistance -- either Medicaid or marketplace subsidies -- is down from 49% to 43%.

That's due in large part to Medicaid enrollment: The estimate of uninsured people eligible for Medicaid is down from 8.9 million in 2015 to 6.4 million at present. But the estimate of the uninsured who are eligible from marketplace tax credits is also down, from 7.0 million in 2015 to 5.3 million now (an estimate Kaiser had already published, with minimal difference, earlier this year, and which I cited in the prior post).

As the ACA marketplace and the larger individual market with which it shares a risk pool wobble this fall, a key question is how close to capacity those linked markets are. Kaiser's new estimates suggest that not only has the pool of uninsured and potentially subsidizable marketplace candidates shrunk, but so has the pool of those who earn too much to qualify for subsidies yet remain uninsured -- from 3.7 million in 2015 to 3.0 million this year. (One thing to watch this year is whether premium spikes reverse that progress among the unsubsidized.)

Put the two together, and the pool of uninsured who might buy health insurance in the individual market has shrunk from 10.7 million to 8.7 million.

Are 2.5 million off-exchange health plan enrollees subsidy-eligible?

A recent HHS ASPE* analysis of the ACA marketplace and the uninsured found that an estimated 2.5 million people currently enrolled in health plans bought in the off-exchange individual market are potentially eligible for premium subsidies in the ACA marketplace. That is, 2.5 million people may have foregone subsidies by buying off-exchange or may be eligible for them in 2017. That's a pretty eye-popping number -- indicating that 70% of those currently enrolled in the individual market (on- and off-exchange) are subsidy-eligible.

HHS further estimated that 9 million of the uninsured are potentially eligible for subsidies in the ACA marketplace, and that a total of 20.9 million people are subsidy-eligible -- more than double the 9.4 million enrolled in subsidized marketplace plans as of March 31 of this year. Those estimates are markedly different from those of the Kaiser Family Foundation, which estimates that 5.4 million of the uninsured are potentially subsidy-eligible, and pegs the total subsidy-eligible population at 14.9 million.

The HHS analysis is based on different survey data than the Kaiser estimate: HHS uses the National Health Interview Survey (NHIS) while Kaiser relies on the Current Population Survey (CPS). But HHS's higher estimates may stem in large part from two more fundamental differences.

Can Hillary Clinton strengthen the ACA without legislation?

Jonathan Cohn has a post urging Bernie Sanders to use his enhanced visibility in the Senate to push for incremental moves toward his long-term goal of a single-payer healthcare system. Shorter term goals within the realm of imagination include letting CMS negotiate drug prices (and, I would add, leave some drugs off the formulary); gradually opening Medicare to people under 65 (perhaps starting with a buy-in option at age 60); and pushing for the widely popular "public option" that didn't make it into the ACA.

So much for Bernie in the Senate. What about Hillary in the White House? Let's be optimistic for a few minutes and assume she gets there. What can she really do to improve healthcare access and affordability?

We don't have to speculate wildly. In typical Hillary Clinton fashion, she has posted a raft of proposals to supplement and strengthen the Affordable Care Act and rein healthcare cost growth. They're lightly sketched in, though, and it's hard to know where Clinton would place her emphasis

One obvious starting point is with those that can be effected by executive action and administrative focus rather than by legislation. Steps requiring legislation are for the most part unlikely to happen, except in the unlikely event that a Democratic blowout takes back the House as well as the Senate -- and legislative possibilities would probably be quite limited even with a narrow Democratic majority.

In which Hillary Clinton is confronted by a likely ACA loser (UPDATED)

[Please see 3/16 and 3/17 updates at bottom]

In last night's Democratic town hall forum, an audience member, Teresa O'Donnell of Powell, Ohio, told Hillary Clinton that she voted for Obama, "but then my health insurance skyrocketed, from $490 a month to $1,081 a month, for a family of 4." Charles Gaba has the clip, his own transcription, and an analysis here.

The question's a toughie, because Clinton couldn't very interrogate Ms. O'Donnell to determine all the factors behind her claim.  She did ascertain that the family had previously bought their insurance in the individual market. She then faintly intimated that perhaps O'Donnell hadn't fully checked out her options; credited the ACA with getting costs down generally (though not for all); stressed that she wanted to work to better contain costs; and implicitly blamed the absence in many markets of nonprofit insurers for much of continued cost hikes.

Underinsured and deep in debt: which cracks did this family fall through?

USA Today has a story today, by Jayne O'Donnell, highlighting the plight of (under)insured Americans who face crippling out-of-pocket healthcare costs. The lead example raises a couple of question marks about exactly how this family fell through various cracks:

Christian and Jaycee Garcia of Silver Spring, Md., have been hard hit by medical bills, even with their out-of-pocket maximum of $6,350 a year for each family member. Their 20-month-old son, CJ, was born with the rare genetic disorder Eagle Barrett Syndrome and severe scoliosis. He will have his 13th surgery in August, with two more to follow in September, all to rebuild his digestive system and urinary tract and to insert metal rods next to his spine so he can sit up without a brace.

Although Christian Garcia earns $60,000 a year as a restaurant manager, the more than $700 monthly insurance premiums for his work plan and another privately purchased plan for his wife and kids plus other monthly bills make paying the family's share of the hospital bills impossible. The couple have $11,000 in medical bills they are paying $270 a month on, and bills from two other hospitals have gone to collections. Monthly expenses, including the payment on his medical bills, are about equal to his take-home pay of about $3,000 a month.