WSJ editorial board: Insuring low-income "able-bodied" adults is a waste of federal money

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Providing ideological cover for Republicans who seek to cut hundreds of billions of dollars out of federal Medicaid funding, the Wall Street Journal editorial board would have you believe that federal Medicaid spending is out of control, that rich states get more than their fair share of federal Medicaid funding, that cuts to the projected spending growth rate under current law are not cuts, and that Medicaid isn’t much worth having anyway. That’s all false of course.

Let’s look at these nostrums one by one.

Undue spending in Medicaid growth. The WSJ editorialists write:

Medicaid spending as a share of federal outlays rose to 10% from 7% between 2007 and 2023, while the share of Social Security and Medicare remained stable.

Well yes, of course. The ACA Medicaid expansion, rendered optional by the Supreme Court in 2012, offered Medicaid eligibility to all lawfully present U.S. adults with income up to 138% of the Federal Poverty Level, excepting those subject to a federal 5-year bar on new immigrants. As of the program’s full launch in 2014, 24 states had enacted the expansion, and as of now, 40 states plus D.C. have done so. Medicaid enrollment has accordingly grown by 38% since 2013 (and had swelled even higher as of 2023, the year cited by the Journal, as a result of the pandemic-induced three-year moratorium on disenrollments. Medicaid enrollment has dropped 17% since the 2023 peak.)

Democratic states grab more than their fair share of federal largesse. We are asked to believe:

Democratic-run states receive disproportionately more federal Medicaid dollars. New York received $3,046 for each state resident in 2023 based on the most recent federal data. Federal Medicaid dollars also subsidize California ($2,167 per resident) and Illinois ($1,715) much more than Florida ($991) and Texas ($1,239).

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Girding for healthcare battle at Families USA's Health Action 2025

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The Families USA conference convened in February 2017 felt a bit like the U.K. after the Dunkirk evacuation — an all-hands-on-deck mobilization to prevent Republicans from tearing down what many of those present* had worked for decades to build (the ACA, and Medicaid as it had evolved over decades).

It was my first Health Action conference, and I was heartened by the concentrated expertise and determination of the speakers — activists and advocates, healthcare scholars, former government officials — who shared a wealth of practical knowledge as to how to move elected officials and mobilize people with stories to tell.

Though I’m not a Lord of the Rings fan, I was reminded of a scene where the fellowship accompanying Frodo and his fellow hobbits on their quest to deep-six the ring of power is assaulted by a pack of super-wolves. As the wolves circle, there’s this exchange:

My heart’s right down in my toes, Mr. Pippin,’ said Sam. ‘But we aren’t etten yet, and there are some stout folk here with us. Whatever may be in store for old Gandalf, I’ll wager it isn’t a wolf’s belly.’

The dominant chord was struck by incoming FUSA executive director Frederick Isasi: "Our action should lead to inaction" — that is, failure to pass a repeal bill. That dictum proved prophetic.

At this year’s conference, the mood was grimmer but the determination was the same, as was the focus on grassroots action. As to the legislative prospects compared to 2017, both the stakes and the odds are hard to gauge — they appear both better and worse.**

In which JD Vance fleshes out Trump's "concept of a plan" for healthcare

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JD Vance is catching a lot of flak for seconding Trump’s debate assertion that when “Obamacare was collapsing…[it wasn’t], he chose to build upon it and make it better” — and for claiming that Trump currently has a healthcare reform plan.

While Vance’s claims are misleading, and the “concepts of a plan” he went on to sketch out would harm the ACA marketplace, not help it, it is in fact true that after Republicans’ drive to substantially repeal the ACA collapsed in 2017, the Trump administration did implement measures that according to conservative precepts would improve markets. A second Trump administration would probably more or less repeat those measures and extend them - -if it fell short of substantially repealing the ACA.

Here is part of what Vance sketched out (via my own near-verbatim transcript):

President Trump’s healthcare plan is actually quite straightforward: you want to make sure pre-existing conditions are covered, make sure people have access to the doctors they need…you also want to implement some deregulatory agenda so people can pick a health plan that suits them. Think: a young American doesn’t have the same health needs as a 65 year-old American. A 65 year-old American in good health has much different healthcare needs than a 65 year old with a chronic condition. We want to make sure everyone is covered, but the best way to do that is to actually promote some more choice in our healthcare system and not have a one-size fits all approach that puts a lot of people into the same insurance pools, the same risk pools — that actually makes it harder for people to make the right choice for their families….

He [Trump] of course has a plan for how to fix American healthcare, but a lot of it goes down to deregulating the insurance markets so that people can choose a plan that actually makes sense for them.

Various healthcare experts, including KFF’s Larry Levitt, have taken this as a proposal to establish high risk pools — a favorite conservative nostrum with a long history of being underfunded and inaccessible to those who need them. That may be true in a sense. But based on the past Trump administration actions that Vance alludes to, the “high risk pool” may be the current ACA marketplace itself — after a second Trump administration gets through with it.

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The Trump administration’s major initiative to “build on” the ACA marketplace after repeal failed was to stand up (by administrative rule in 2018) a parallel market of medically underwritten, lightly regulated plans by extending the allowable duration of already-existing so-called “short-term, limited duration plans” (STLD) to up to one year, renewable twice. The Obama administration had limited STLD duration to three months, though not until 2016. In combination with the Republican Congress’s zeroing out of the tax penalty for failing to obtain ACA-compliant insurance, the STLD market was an alternative for people who were priced out of the regulated ACA marketplace — as several million people were before the Biden administration removed the income cap on subsidy eligibility via the American Rescue Plan Act (ARPA) in March 2021. (The ARPA subsidy enhancements were temporary, and extended by the Inflation Reduction Act only through 2025.)

STLD plans can refuse access to people with pre-existing conditions or exclude coverage for the condition. They do not have to cover the ACA’s Essential Health Benefits and generally offer very limited prescription drug coverage, if any, and no substance abuse coverage. They are not subject to the ACA requirement to spend at least 80% of premiums on members’ medical bills (and on a few allowed other expenses) and have been reported to spend as little as 45% of premiums on claims. They do not have to offer a provider network and can pay providers what they deem appropriate, exposing enrollees to balance billing. They do not have to provide an annual out-of-pocket cost cap on covered benefits, though some do. They are much like the plans offered in the pre-ACA individual market.

[n.b. the rest of this post more or less remixes my discussion of the STLD market under the last subhead in this post].

Taking the short term and limited duration out of Short Term Limited Duration insurance was a bad solution to a real problem. The Affordable Care Act promised to make adequate, affordable insurance available to all, via public program or private insurance, but under-subsidization meant that the program fell far short of that promise. Most acutely, the income cap on subsidy eligibility (400% of the Federal Poverty Level) ensured that minimum essential coverage was unaffordable to several million people (as the ACA’s guaranteed issue and EHB requirements had raised the price of coverage). In the most extreme case, a pair of 64 year-olds in Nebraska with an income of $67,000 — just over the 400% FPL threshold in 2018— would have to pay an average of $2,667 per month for the lowest-cost bronze plan available. That year, the average bronze plan single-person deductible was $6,002. More broadly, in August 2015 Urban Institute scholars Linda Blumberg and John Holahan calculated, in a proposal for ACA reform, that marketplace enrollees in the 400-500% FPL range (just over the subsidy eligibility threshold) would pay 18% of income for marketplace premiums and out-of-pocket costs at the median and 25% of income at the 90th percentile.

The expanded STLD plan market at least potentially degraded ACA marketplace risk pools while saddling some people with illusory insurance that failed them when they needed it, as several news accounts related. Still, not all STLD plans were (or are) terrible. Some have extensive provider networks and out-of-pocket cost caps. For some customers not shut out of coverage for a serious pre-existing condition, they offered better-than-nothing coverage at a price well below ACA marketplace coverage — though ARPA’s removal of the income cap on subsidy eligibility vastly reduced the pool of people for whom this is true (and letting the ARPA subsidy boosts expire is therefore essential to remaking the market along these lines). From a healthcare conservative’s perspective, Trump could be said to have “built on” the ACA — though his measures plainly were designed to undermine the ACA-compliant individual market.

To further stimulate the parallel market, CMS administrator Seema Verma proposed loosening the requirements for state “innovation waiver” proposals authorized under ACA Section 1332 and issued a set of “waiver concepts” inviting states to propose schemes that would enable ACA-noncompliant plans to access federal premium subsidies. Georgia was the only state to partially accept the invitation, filing a waiver proposal in late 2020 that, along with establishing a reinsurance program, would eliminate a centralized state-sponsored exchange, establish a “copper” plan level with an actuarial value below the minimum required by the ACA statute, and, in one early iteration, allow plans that did not include all EHBs to be paid for with federal subsidies (that provision was cut from the submitted waiver, as it violates the ACA statute too plainly even for Trump-appointed administrators). While the Trump administration approved the waiver in November 2020, the Biden administration suspended approval of all but the reinsurance program, pending redesign. Georgia has now received CMS approval to open a conventional state-based marketplace, albeit the first to enable Enhanced Direct Enrollment on commercial sites. (Promotion of EDE, which facilitates fast work by brokers, is another Trump administration initiative that can be said to have “built on” the ACA, and was continued by the Biden administration — though EDE has recently proved double-edged, enabling large-scale agent/broker fraud. Weirdly, the pending Georgia exchange has certified for use in November two EDE entities suspended by CMS in August for suspected security breaches and participation in enrollment fraud.)

Failing legislative repeal and “replacement” of the ACA along the lines of the Frankenstein-monster Republican bills of 2017 (the AHCA, the BCRA, and Graham-Cassidy) a second Trump administration could be expected to push Verma’s waiver concepts in directions that clearly violate the ACA statute, e.g. by allowing federal subsidies to fund medically underwritten plans or plans that do not include all of the ACA’s required Essential Health Benefits. On this as on all other fronts, a second Trump administration would likely be less constrained by law than the first one. In combination with sunsetting the ARPA enhanced subsidies, such measures could indeed convert the ACA-compliant into a high risk pool, as former Obama-era acting CMS administrator Andy Slavitt warned that Trump’s STLD market would do. That is, with medically underwritten plans eligible for subsidies, only those with pre-existing conditions might choose ACA-compliant that don’t discriminate on the basis of health.

Takeup of STLD plans appears to have been far more limited than some market watchers feared or CBO predicted in the wake of the Trump rule. That’s in part because more than half of states either limited STLD terms on their own (as the Trump administration rule permitted) or banned them altogether. The Biden administration removed most (not all) of the demand for STLD plans as a full-year coverage option via the ARPA subsidy enhancements, and retracted the Trump administration’s extension of allowable STLD plan terms, limiting them once again to three months. A recent Commonwealth Fund analysis concluded:

A modest number of people — no more than one-fifth of the 1.5 million the CBO projected — are likely to have enrolled in STLDI plans that became available after the Trump administration’s regulatory change. This enrollment mainly appears to have displaced marketplace coverage. There is no evidence that the broader availability of STLDI plans had any meaningful effect on nongroup coverage in general or on uninsurance.

If the ARPA subsidy enhancements are allowed to sunset, however, and the Trump administration encourages state initiatives like Georgia’s, effectively eliminating government-sanctioned exchanges and allowing subsidies for ACA-noncompliant plans, Trump’s “concept of a plan” may take chaotic but recognizable shape.

I should add, too, that fraught and important as political combat over the shape of the individual market for health insurance was, is, and will be, to a large extent this fifteen-year battle obscures the core battleground of ACA-related healthcare policy: funding and eligibility for Medicaid. Virtually all formal Republican healthcare proposals, from ACA repeal bills to Republican Study Group plans, Project 2025, and Trump administration budgets, include massive cuts to Medicaid, including rollback of the ACA expansion of Medicaid eligibility. The ACA extended Medicaid eligibility to all citizens and most legally present noncitiizens with incomes up to 138% of the Federal Poverty Level — an expansion rendered optional for states by the Supreme Court in 2012 and currently implemented by 40 states plus D.C. At most recent count (December 2023), some 22 million Medicaid enrollees are rendered eligible by ACA eligibility criteria. Proposed Republican cuts to Medicaid invariably go far beyond repeal of the ACA eligibility expansion by converting Medicaid funding to block grants or imposing per capita caps on funding, plans. CBO forecast in 2017 that the BCRA, the Senate ACA repeal bill, would cut Medicaid funding compared to then-current law by 26% in the first ten years and 35% in the next ten ($2.1 trillion by CRFB’s estimate). Those plans are core to the Republican agenda, and would do more damage than any disfigurement of the individual market.

Ultimately, the pre-existing condition that matters most, and is shared by most Americans (and indeed most humans), is inability to pay full price for health insurance. For most Americans under age 65, an employer pays the bulk of the premium, typically about three quarters of family coverage or five sixths of individual coverage. In the ACA marketplace, the government fulfills that role for more than 90% of enrollees, paying an average of more than 80% of the premium. In Medicaid, federal and state government pay the entire premium. Republicans want to kick 15-20 million people off Medicaid, sharply cut subsidies in the individual market, and alleviate the cost of those individual market cuts for some by subsidizing medically underwritten, lightly regulated insurance. That’s their concept. That’s their plan.

UPDATE, 9/20/24: As noted at the top, most interpreters of Vance’s comments assume he was proposing the kind of high risk pools that existed — and generally failed to make adequate affordable coverage available to those who needed them — before the ACA. Further Vance comments on Sept. 18 , in which he alluded to allowing “people with similar health situations to be in the same risk pools,” reinforce that impression. Today, however, a statement the Vance campaign provided to the Washington Post’s Dan Diamond and Meryl Kornfield, make me think that I was on the right track in this post:

“Senator Vance was simply talking about the significant improvements President Trump made to the Affordable Care Act through his deregulatory approach, which aimed to bring down the cost of premiums while ensuring coverage for pre-existing conditions,” spokesman William Martin wrote in a text message.

Again, the full context was defending Trump’s claim that after ACA repeal failed, he “built on” the program — as well as that he has “concepts of a plan” for new reform.

See also the next post: Did Trumpcare really insure Vance family members for the first time?

UPDATE, 9/23/24: A fresh look at Seema Verma’s waiver concepts for states (11/29/18) reinforces my sense that these concepts plus a revived full-term STLD market (or equivalent) is Vance’s “concept of a plan.” The waivers concepts (abbreviated below) include:

• Account-Based Subsidies: Under this waiver concept, a state can direct public subsidies into a defined-contribution, consumer-directed account that an individual uses to pay for health insurance premiums or other health care expenses [e.g., for a medically underwritten alternative to ACA-compliant plans]

• State-Specific Premium Assistance: A state may design a subsidy structure that meets the unique needs of its population in order to provide more affordable health care options to a wider range of individuals, attract more

  young and healthy consumers into their market, or to address structural issues that create perverse incentives, such as the subsidy cliff.

• Adjusted Plan Options: Under this waiver concept, states would be able to provide financial assistance for different types of health insurance plans, including non-Qualified Health Plans, potentially increasing consumer choice and making coverage more affordable for individuals.

• Risk Stabilization Strategies: To address risk associated with individuals with high health care costs, this waiver concept gives states more flexibility to implement reinsurance programs or high-risk pools. For example, a state can implement a state-operated reinsurance program or high-risk pool by waiving the single risk pool requirement under section 1312(c)(1) of the ACA.

So, high risk pools per se are one option, while drawing the young and healthy voluntarily out of the ACA marketplace, rendering the marketplace a high-risk pool of sorts, is another. These concepts really fit Vance’s sketch to a T

"Not losing, choosing"? - Avik Roy turns up the gaslight on the BCRA

Two weeks ago, I took on the argument of various BCRA proponents that most of the 22 million people forecast by CBO to lose insurance coverage should the bill become law would be "choosing, not losing." That write-off of legions of uninsured was founded on CBO's assertion that most of the first-year coverage loss of 15 million would occur "primarily because the penalty for not having insurance would be eliminated."  Expect to hear more of this, I forecast.

In brief, I suggested that argument depended on  1) conflating the forecast immediate effect of mandate repeal in 2018 with the ten-year effect; 2) ignoring the extent to which, in CBO's own telling, the mandate interacts with other changes in the marketplace and Medicaid; and 3) pooh-poohing the obvious and stated purpose of the mandate, which is to boost the ranks of the insured and reduce premiums by improving the risk pool -- which CBO clearly assumes it has accomplished in some measure.

Now here cometh Avik Roy, chief healthcare apologist for the Republican establishment, making the "choosing not losing" argument in detail.  Roy's addition to the argument hinges mainly on a rather breathlessly presented look at CBO's unpublished estimate of 10-year coverage losses attributable to mandate repeal under the BCRA (provided to Roy by a Congressional staffer). This estimate closely tracks CBO's published December 2016 analysis of the effects of repeal of the mandate alone, with the ACA left otherwise intact. CBO forecast that straight mandate repeal under the ACA would result in a ten-year coverage loss of 15 million, as compared to CBO's forecast that 22 million will lose coverage under the BCRA. Here's CBO's breakout of the losses under straight mandate repeal:

Quick thoughts before the bill hits the tape

The Senate iteration of the AHCA is due out in about 40 minutes. A couple of quick thoughts, brought into focus by David Anderson's "how to read the bill" cheat sheet:

1) Back-loaded per capita caps imposed on Medicaid can theoretically be repealed before they kick in. But if the bill's massive tax cuts are not similarly back-loaded (to improve the CBO score), new tax increases would have to be passed in concert with repeal.

2. The more Republicans fiddle around with and publicly fight over individual market subsidies and rules, the easier they'll likely find it to pass the massive cuts to Medicaid that are the bill's core feature.

3.I can't shake the feeling that McConnell has some trick up his sleeve to make the CBO score a positive shock that helps sweep the moderates into the yes column. A "positive shock" might be a forecast of,, say, a reduction of a mere 8 million in the number of people with insurance by 2026, which Republicans can explain away as a result of personal choices (no mandate coercion) or CBO error.

4. What could that shock be? A cap on the tax exclusion for employer-sponsored insurance? Hard to believe. A little coup within CBO? Don't know how that work. Something else? Nothing?

So much for idle speculation....

The Medicaid Dismemberment Act

Over at healthinsurance.org, I've made a case that the AHCA is not simply -- or even primarily -- an ACA repeal bill. It's a Medicaid dismemberment bill.  That goes for the Senate variant in progress as well.  Furthermore:

The degree of damage to be wrought by the legislation's various spending reductions is almost the inverse of where media emphasis falls;

and finally

the damage Republicans will likely do to the individual market is dwarfed by the damage they will certainly do (if they pass anything) to Medicaid. Thus all the high drama over medical underwriting and EHBs continues to serve as a smokescreen for Medicaid's dismemberment.

I rank the bill's three primary means of doing violence to existing parts of our healthcare system. Hope you'll take a look. 

Senate Republicans may outspend the ACA on individual market subsidies -- at Medicaid's expense

While Republican senators working on ACA repeal will doubtless screw up the individual market for health insurance, they are not planning to spend less money on it. All of their spending cuts -- needed to pay for tax cuts -- will come out of Medicaid's hide. Since the Medicaid expansion they're planning to repeal is a roaring success, they're following the House in diverting everyone's attention with emotionally fraught questions about individual market structure.

According to Vox's Dylan Scott, Senate Republicans are near agreement on the basic outline of their Medicaid cuts -- they will roll back the expansion over more or less years and impose per capita caps on all Medicaid spending, as Ryan's AHCA does. As for the individual market:

There’s broad agreement to increase the money the House bill would spend subsidizing Americans who buy insurance on the individual market. That increase would probably improve, at least somewhat, the Congressional Budget Office’s projection that the House bill would cause 23 million fewer Americans to have health insurance a decade from now.

In fact, any improvement to the AHCA individual market design and funding will improve CBO's uninsured estimate for the AHCA only marginally. In CBO's forecast, the individual market will insure only two million fewer people under the AHCA than under current law ten years from now (though enrollees will be wealthier, younger and more skimpily covered, and most of the roughly 7 million ACA enrollees with incomes under 200% FPL will likely be priced out).

As Republican moderates cave on Medicaid cuts, what can Dems do?

As I feared back in March, the "moderate" Republicans in the Senate who profess concern about plans to repeal the ACA Medicaid expansion and impose per capita caps on federal funding for Medicaid are going squish. They'll settle for slowing repeal of the expansion rather than stopping it, and perhaps for some partial easing of the per capita caps, such as exempting coverage for the disabled.

Now as in March, Republican senators in states that have benefited from the expansion speak as if repeal of the expansion and a steady erosion in federal funding for all Medicaid programs is a natural disaster that they must help their constituents cope with, rather than their own free choice to inflict suffering on vulnerable people to fund tax cuts for the wealthy.

Here's Bill Cassidy of Louisiana, until now the strongest defender among Republican senators of maintaining ACA-level funding, speaking to Matt Fuller and Sam Stein of the Huffington Post. Over 300,000 Louisianians have gained Medicaid coverage since incoming governor John Bel Edwards implemented the expansion, beginning July 1, 2016.

AHCA Reduces Federal Spending on Private Health Insurance by....4%

[originally posted May 30]  The Republican bill rejiggers subsidies for the individual market but barely reduces them on net. Almost all the real cuts are in Medicaid     

Hours before House Republicans introduced the American Health Care Act, their ACA partial repeal/replace bill, on March 6, former CMS director Andy Slavitt tweeted:

When #ACA replacement bill is out, don't get distracted by exchanges.

The big issue is dramatic cuts in Medicaid to pay for huge tax cuts.

— Andy Slavitt (@ASlavitt) March 6, 2017

That remains true. In fact, it's truer than has been fully recognized.

The basic math of the AHCA, according to the Congressional Budget Office (CBO), is a $992 billion* reduction in federal revenue over ten years, offset by a $1.1 trillion reduction in spending on health insurance benefits. Most of that spending cut is in Medicaid, reduced by $834 billion over ten years, according to the updated CBO analysis released on May 24.

The rest of the spending reduction ostensibly comes from cuts in subsidies to private insurance. But that reduction is largely illusory -- - because two of the major tax cuts included in the AHCA subsidize privately purchased health insurance and medical care.