When silver loading discounts trump strong CSR (the nonexpansion state "advantage," take 5)

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This post picks up where the last one left off, further examining potential partial explanations for why ACA marketplace enrollment declines on HealthCare.gov in 2019 were much sharper in states that have expanded Medicaid than in states that have refused the expansion. I raised a question in that post, bolded in the excerpt below.

Enrollment changes by income, HealthCare.gov states
2019 enrollment as a percentage of 2018, as of the end of OE in each year

State group	Total enrollment	100-150% FPL	150-200% FPL	100-200%  FPL	200-400% FPL	Unsubsidized
Expansion*	93%	93%	91%	92%	95%	88%
Nonexpansion	99%	100%	98%	100%	102%	82%

* Excluding Virginia and Maine   Source: CMS state-level public use files 

The enrollment performance gaps at 100-200% FPL and 200-400% FPL are comparable. I would be tempted to suggest that the gap at 100-150% FPL is due to the concentration of low income enrollees in the nonexpansion states (those at 100-138% FPL, who pay less for top-level CSR silver plans than do those at 138-150% FPL), and that the gap at 200-400% FPL is due to stronger silver loading in the non-expansion states. But the large performance gap at 150-200% FPL kind of belies that -- unless, perhaps, silver loading at that income level is pulling more prospective enrollees into free or ultra-cheap bronze plans in the nonexpansion states. In the silver loading era, silver plan selection at 150-200% FPL has dropped from 83% in 2017 (pre silver loading) to 76% in 2019 in HealthCare.gov states. The lure is bronze coverage that is often free at that income level, while benchmark (second cheapest) silver costs about $130/month at 200% FPL. I guess I need to test whether bronze selection in this income band has risen faster in nonexpansion states.

Why 2019 ACA enrollment drops were concentrated in Medicaid expansion states on HealthCare.gov, Take 4

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In December and January, I took several whacks at explaining why 2019 enrollment losses in the 39 HealthCare.gov states were concentrated in the states that had expanded Medicaid. In those 21 states, plan selections as of the end of Open Enrollment were down 7% from 2018, compared to a 1% drop in 16 states that have refused to expand Medicaid. (I excluded Virginia and Maine, which expanded Medicaid in 2019, affecting enrollment options and results.)

First hypothesis was that the heavy concentration of enrollees in non-expansion states with incomes that would have qualified them for Medicaid in expansion states is especially "sticky." People in this income group (100-138% of the Federal Poverty Level) pay just 2% of income for a benchmark silver plan that comes with the highest level of Cost Sharing Reduction (CSR), raising the actuarial value of a silver plan to 94%, which usually translates to a deductible in the $0-500 range.  About a third of enrollees in nonexpansion states are in this income category. While about 15% of enrollees in expansion states have incomes in the 138-150% FPL range, which qualifies them for the 94% AV silver, they pay 3-4% of income for the benchmark.

Second hypothesis was that silver loading effects are stronger in nonexpansion states, because all those low income enrollees raise the average actuarial value of silver plans (which varies with income). In Florida, the blended AV of all silver plan enrollees is 91.5% in 2019.  (If you're unfamiliar with silver loading, see the note at bottom.)

Recently a third possible factor occurred to me: expansion states have a higher percentage of enrollees with incomes too high to qualify for subsidies, and enrollment losses among the unsubsidized were much steeper in the market as a whole than among the subsidized. This factor did play a role, but it was partly offset by the fact that in this category losses were steeper in nonexpansion states. The higher concentration of unsubsidized enrollees in expansion states cancelled out that advantage, however, so that losses in unsubsidized enrollment took basically equal bites out of total enrollment in both groups.

For further study

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I'm going to be a little Labor Day weekend lazy here and jot down a few questions I'd like to look into, rather than provide any actual information about them. If you have any answers, please comment!

1. Credential inflation.  My wife, a certified nurse-midwife, rolls her eyes at the increasing impossibility of getting credentialed in her field without a doctorate. She spoke recently to a young labor & delivery nurse who's planning to become a midwife and is facing four years of study and likely debt. Apparently you can't get certified as a midwife in NJ now without doing the doctorate (not a Ph.D.), and that's a nationwide trend. "We have to do it," was the word for a university program director, because all the other nursing specialty and other non-physician medical professions like OT are doing it.

Healthcare reformers can't leave employer-sponsored insurance untouched

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Presidential candidates and other Democrats who want to patch or build on the ACA rather than create a substantially new system generally neglect, to varying degrees, an attendant problem: employer-sponsored insurance (ESI) is also in dire need of reform.

A Kaiser Family Foundation's report on large employer coverage released this month found that health spending by families in large employer plans has grown twice as fast as wages over the past decade. The employer share of costs in family coverage (premium plus out-of-pocket) has downticked only slightly:  it was 68% in 2008 and 66% in 2018.  But families and employers alike are tapped out: total costs increased 67% over those ten years. The total cost of large group coverage for a family of four now averages $22,000 per year. Reducing healthcare costs is among voters' top priorities.

Beyond the steady-but-high yearly increases recorded by Kaiser, yesterday NYT reporters Reed Abelson and Katie Thomas spotlighted a recent development that could be destabilizing: the proliferation of specialty drugs for rare diseases, which can carry price tags in the millions per patient per year. As Abelson and Thomas note, about 10% of the population is afflicted with rare diseases,  and more than half the drugs approved in 2018 targeted such diseases.

Who pays for astronomically expensive orphan drugs? Some questions prompted by the NYT report

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The Times' Reed Abelson and Katie Thomas have a major story exploring a key factor in rising healthcare costs: specialty drugs for rare diseases, which increasingly can carry price tags in the millions per patient per year. The trend and the impact are laid out succinctly:

Rare diseases, however, aren’t all that rare. There are an estimated 7,000 of them, and about 30 million Americans have one — roughly the same number of people in the United States with diabetes. And although there are no treatments for most rare diseases, new therapies are coming on the market nearly every month,  with some reaching beyond $2 million a year for a single treatment. Of 59 new drugs approved in 2018, more than half, or 34, were for rare diseases. 

Leaving aside the broad question of how the U.S. might contain costs for these drugs without choking off their development, the story prompted a few thoughts and questions about how these costs are currently distributed, and how that might change. Some factors to consider:

Surprise! New Jersey ACA marketplace outperforms the national market

When CMS reported enrollment totals in the ACA marketplace at the end of Open Enrollment last December, the news for New Jersey was disappointing.

Despite (or per below, partly because of) a 9% average reduction in premiums last year, fruit of a new reinsurance program and a state-enacted individual mandate, on-exchange enrollment dropped 7.1% -- a performance that lagged the national marketplace (down 2.7%) and the 39 states that rely on the federal HealthCare.gov platform (down 3.8%) -- though right at the median for HealthCare.gov states that have expanded Medicaid (and so get less juice from silver loading)*.

When the state released off-exchange numbers in June, the results provided a measure of consolation. Off-exchange enrollment was up 3%, shrinking the total individual market enrollment loss to 4% from Q1 2018 to Q1 2019.

The main cause of the contrary results is not hard to find. Three quarters of on-exchange enrollment in New Jersey is subsidized.  In David Anderson's pithy formulation, "Reinsurance, all else being equal, helps the unsubsidized and hurts the subsidized." That's true of any measure or market force that reduces average premiums. When the benchmark (second cheapest silver) plan premium goes down, subsidies are reduced accordingly, and price spreads between the benchmark and cheaper plans tend to shrink, reducing discounts.

The retentive ACA marketplace, revisited

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In my last post, I noted that enrollment drops in the ACA marketplace recorded in each year of the Trump era at the end of Open Enrollment more or less evaporate in yearly comparisons of average monthly enrollment, or end-of-year enrollment.

That is, it seems that fewer people in the last two years drop out without paying, and perhaps a higher percentage remain enrolled all year (many people in the ACA marketplace do have good reasons not to remain enrolled all year -- one of the marketplace's vital roles is as a stopgap). That's congruent with another change recorded in 2019: new enrollments down (-15.7%), re-enrollments up (2.3%), as of the end of Open Enrollment.

Why have apparent enrollment drops as of the end of OE in each of the last three years either shrunk or eroded entirely over the course of the year? A few possibilities:

CMS subtext: The ACA marketplace is in recovery

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The CMS report on long-term enrollment trends in the ACA marketplace has a stark lede:

During two successive years of declining enrollment, from 2016 to 2018, unsubsidized enrollment declined by 2.5 million people, representing a 40 percent drop nationally. 

That's bad. But the report includes data that leads to a clear conclusion: The ACA-compliant individual market has stabilized. It is rife with problems and there are many enrollees whom it does not serve well, but it's passed through a crisis. Consider the following points (some derived from the report, others not):

1. Subsidized enrollment was higher in 2018 than in 2016, generally understood to be the enrollment peak. In fact, total on-exchange enrollment was higher in December 2018 than in 2016. (Off-exchange enrollment, where the bulk of unsubsidized enrollment occurs, did drop sharply in those years.)


2. Subsidized enrollment is higher in 2019 than in 2018, as of February of each year, when all enrollees have had at least one payment due (see CMS's  (2018 and 2019 Effectuated Enrollment Snapshots). 

Is subsidized enrollment in the ACA marketplace really up since 2016?

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CMS's report on long-term enrollment trends in the ACA marketplace released this week emphasized the 40% drop in unsubsidized enrollment from 2016 to 2018. But the counterpoint came as something of a surprise: subsidized enrollment, according to CMS, is up since 2016.

If you look at the most often cited enrollment numbers for each year -- total plan selections reported by CMS annually at the end of the open enrollment season  -- total subsidized enrollment is down substantially -- 7.1% from 2016 to 2018, and 7.7% from 2016 to 2019. But average monthly enrollment was higher in 2018 than in 2016 -- and probably will be slightly higher this year.

It might appear that retention has improved -- more people stay in their plans for more of the year. But that's not clear, as average monthly enrollment in 2018 is not quite the same measure as in years prior.  Let's look at the numbers:

CSR attrition vs. silver loading stimulus, 2017-2019

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In my last post, I noted that in the Trump era, ACA marketplace enrollment has shifted toward the middle of the income distribution. While enrollment has cratered for the unsubsidized, and eroded by 16% since 2016 among low income enrollees (100-200% FPL, in HealthCare.gov states), it's stayed basically flat at the upper end of the subsidy-eligible income scale, 201-400% FPL.

In brief, the market got much worse for the unsubsidized, as premiums spiked 21% in 2017 and 26% in 2018, and marginally worse for low income enrollees, as out of pocket costs rose yearly in plans with fixed actuarial values. It got better, however, for many enrollees in the 200-400% FPL income range, since a) rising premiums made more people at the upper end of the range subsidy eligible, and b) Trump's cutoff of direct CSR reimbursement for insurers in fall 2017 induced "silver loading" that created discounts in bronze and gold plans (see note below if you're unfamiliar with silver loading).

ACA marketplace enrollment is down at low incomes as well as at high ones

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[Update, 8/15: CMS data on average monthly enrollment in each year appears to suggest that apparent year-over-year enrollment drops among the subsidized as of the end of Open Enrollment may have evaporated (in 2018, and perhaps 2019) as the year progressed. See this post.]

CMS is out with a report highlighting, not to say gloating over, a steep decline in unsubsidized enrollment in the ACA-compliant individual market from 2016 to 2018.  Nationally, while subsidized enrollment was up 1.3% in that period, unsubsidized enrollment crashed 40%, from an average monthly enrollment of 6.27 million in 2016 to 3.77 million in 2018.

That's not surprising, given premium increases averaging 21% in 2017 and 26% in 2018, and the obvious fact that the ACA marketplace was under-subsidized from the start and essentially unaffordable for many people with incomes modestly above the 400% FPL subsidy cutoff, as Urban Institute scholars Linda Blumberg and John Holahan pointed out in 2015:

Here I'd like to add a corollary: Enrollment since 2016 has declined not only at the top of the income scale, among those with incomes above 400% FPL, but at the bottom, among those with incomes up 200% FPL. It's shifted toward the upper end of subsidy eligibility, into the 200-400% FPL income range. The percentage of enrollees with incomes in that range has risen from 29.5% in 2016 to 34% in 2019 in HealthCare.gov states, and from 40.4% to 44.1% in California.

New Jersey individual market premiums set to rise, bucking national trend

Surprise...while individual market premiums for 2020 are up an average of just 0.7% in the 40-odd states tracked so far* by Charles Gaba, requested rates are up a weighted average of 8.6% in New Jersey -- after a 9% drop last year, the product mainly of a new reinsurance program and a state-enacted individual mandate.

AmeriHealth, which gained market share this year and currently enrolls 41% of the total NJ individual market, is requesting increases averaging 11%. Horizon Blue Cross, with 62% market share, is requesting increases averaging 6.2%. Oscar, with 4.4% market share, is requesting a 16.3% average increase.

Here are the rate requests (from https://ratereview.healthcare.gov/). Enrollment is negligible in Horizon Health of New Jersey, Horizon's HMO. AmeriHealth HMO accounts for 11.4% of AmeriHealth's Q1 2019 enrollment. Oxford Health enrollment is negligible.

Some context, presented without attempt at causal explanation:

Triage: A moderate healthcare reform proposal

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Prescript (8/7/19): it occurs to me that this rather kludgy patch to our current system boils down to a simple rule: no one pays more than 8% of income for less than 80% AV insurance.  Paid for in part by expanding the footprint of Medicare payment rates.

*          *          *

I want to float here a path to healthcare system reform that starts a gear shift or two below the Medicare for America bill, which creates a strong public option that anyone can buy into at an income-adjusted price. I am mindful of David Anderson's warning that a Democratic president who goes for sweeping healthcare reform (assuming at best a narrow Senate majority and abolishment of the filibuster) will have bandwidth for little else -- and I think other imperatives, like attacking global warming, should come first.

First, a set of working assumptions (and background on current bills) that undergird where I land (skip to the subhead, where the proposal starts, if you're so inclined).

1. The U.S. healthcare system is outrageously expensive, unjust, and inefficient, distorted by two related structural flaws:

Should the U.S. ditch private insurance?

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Elizabeth Warren has gotten tight with Ady Barkan, a brave ALS patient and advocate for Medicare for All. In the July 30 debate, she told his tale:

The guy who has ALS, this isn’t this is somebody who has health insurance and dying. Every month he has about $9,000 in medical bills that his insurance company won’t cover. His wife Rachel is on the phone for hours and hours and hours begging the insurance company please cover what the doctors say he needs.

Barkan, in his turn, tweeted during the next night's debate: 

Every candidate on stage who doesn’t want to get rid of private insurance should have to explain what a company like Aetna adds to our health care system. How do they make patients’ lives better? #DemDebate

— Ady Barkan🔥🌹 (@AdyBarkan) August 1, 2019

Fair enough. Whether to preserve private insurance, and how to reform it if so, are the questions that divide Democratic candidates' approaches to healthcare reform, at least theoretically (what each of them would truly aim to accomplish via legislation introduced in 2021, and how they would balance their healthcare goals with other priorities, are questions they should be asked). 

In any case, let's look at the rap sheet against insurance companies -- and set it against their claims to add value to our healthcare system.

The raps

• Divided and conquered: All but uniquely among wealthy countries, the U.S. leaves private insurers to each separately negotiate payment rates with healthcare providers. The fragmented payer universe gives providers outsized bargaining leverage, particularly in areas with dominant hospital systems or provider shortages.  Accordingly, commercial insurers pay hospitals about 189% of Medicare rates, according to a Congressional Budget Office estimate, and 241% Medicare according to a more recent RAND study. Commercial rates for doctors are about 128% Medicare, according to MEDPAC. 

Bernie Sanders is the Pied Piper of Healthcare Hamlin

Political battles can be semantic, but important. Such is the case with Democrats wrestling with the meaning of Medicare for all.

This week Kamala Harris came out with a healthcare reform plan that seems designed to resolve her past flip-flops as to whether private insurance should be phased out entirely. In brief, she proposed a 10-year path to "Medicare for all" that includes Medicare Advantage -- private plans reimbursed by the federal government and conforming to strict coverage rules. Employers could also offer "Medicare Advantage" plans.  Lots of question marks, but the intent to preserve the public/private hybrid of Medicare as we know it is clear.

Bernie's camp lit into the plan, claiming in effect that the his bill's title (Medicare for All) is politically trademarked. “Call it anything you want, but you can’t call this plan Medicare for All," Sanders' campaign manager Faiz Shakir said in a statement. Pramila Jayapal, lead sponsor of the House version, tweeted, "as lead sponsor of #MedicareForAll, I find it misleading when my fellow Democrats use the #M4A name to describe proposals that are NOT #MedicareForAll."

That's a straight trademark play: we own the hashtag, we own the name. The subtext is that the One True Path to Medicare for All is Sanders and Jayapal's Big Rock Candy Mountain in which a single government entity provides 100% coverage of everything for everyone, funded entirely by over $3 trillion per year in new taxes ($1.5 trillion according to Bernie).

New colors in the spectrum of Democratic healthcare reform plans

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For some time, Democratic next-gen healthcare reform proposals have fallen on a spectrum  that I've thought as anchored by three main proposal types. Here they are, in ascending order of cost and degree of system change:

• ACA 2.0 - Improve the ACA mainly by a) bulking up the subsidies and extending them farther up the income scale, and/or b) introducing a national public option within the ACA marketplace framework. Chief exemplars: Elizabeth Warren's ACA 2.0 bill; Senators Bennet and Kaine's Medicare-X. 


• Medicare for all who want it: Introduce a strong public option that anyone can buy into on an income-adjusted basis, even if they have access to other affordable insurance, e.g., insurance offered by an employer. Chief current exemplars: The Center for American Progress's Medicare Extra, which is the basis of Reps. DeLauro and Schakowsky's Medicare for America bill.


• Medicare for All (that covers everything for everyone at no cost to anyone except via taxes). Private insurance essentially ends. Chief exemplars: - Bernie Sander's Medicare for All bill, and Rep. Jayapal's House variant.

The Ten Counts of Obstruction (with apologies to Lin-Manuel...)

It's been said no one's read Mueller's 448-page report. Well but, the 8-page summaries of Parts 1 and 2 are pretty direct. Well but, that's still a lot of text.

So let's try it Lin-Manuel Miranda style (soundtrack here):

The Ten Counts of Obstruction

For the nation's instruction,
The ten counts of obstruction:

Number 1: 

Russian hacks electrify the nation.
Call it fake news while you seek more information.

Number 2

Summon Comey to the throne like you're royalty.
Tell him you demand unconditional loyalty.

Pelosi and co. on impeachment: Not if, when?

In some ways, the press conference held by Pelosi, Cummings, Nadler and Schiff in the wake of Mueller's testimony today was exquisitely frustrating. Their dual message made no sense on its face: the president manifestly deserves impeachment but we need more evidence. Nadler said the president committed crimes. Pelosi also said that "crimes were committed against our Constitution," albeit in passive voice. Schiff said Trump was disloyal to the country, citing his negotiating the Moscow Trump Tower deal while seeking the presidency without telling the public. So how can they not open an impeachment inquiry?

At the same time, it seemed to me that these committee chairs and Pelosi in particular may have turned a corner. This was the first time I've heard Pelosi speak about impeachment without actively undercutting it. They were stalling, but they were implicitly promising to get there.

This promise -- too strong a word -- was almost explicit at the end. Schiff, all but acknowledging that the Senate would not convict, also declared that that was not the point. My emphasis (and rough transcript) below:

New enrollment drop in California: Probably the mandate repeal

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Covered California, the state's ACA exchange, recently released its March Active Member Profile, the year's first detailed breakout of enrollment data for all enrollees (repeated quarterly). It follows a prior breakout for new enrollees. The Active Member numbers show some market stability -- they're broadly similar to last year's. They may also support CoveredCA's previous explanation of a drop in new enrollment.

On January 30, CoveredCA put out an analysis  as of the end of open enrollment, emphasizing that while enrollment was virtually flat overall compared to 2018 (down 0.5%), new enrollments had tumbled 23.7%. CoveredCA attributed this worrisome drop (offset by a 7.5% increase in re-enrollments) to repeal of the individual mandate penalty, noting that the new enrollment drop was "relatively evenly spread across demographics." California has since enacted measures intended to reverse the damage, instituting a state individual mandate and state-funded premium subsidies to supplement the federal subsidies.

I wondered whether part of the drop in new enrollment may have been caused by an overall 8.7% average weighted increase in premiums in 2019 and/or by changes in the discounts in gold and bronze plans generated by silver loading (see note at bottom for an explanation). The answer appears to be no -- it was the mandate repeal. Ready for a null-result report?

Gold plans are pretty cheap in Florida's ACA marketplace. They should be way cheaper

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Florida's ACA marketplace has benefitted from silver loading. But not as much as it should.

("Silver loading" refers to the pricing of Cost Sharing Reduction subsidies into silver plans only, creating discounts in bronze and gold plans. The practice began in 2018 after Trump cut off direct reimbursement to insurers for CSR. See note at bottom for a fuller explanation.)

Florida has more marketplace enrollees than any state -- and has marginally increased enrollment since 2016 (up 2%) while enrollment has dropped 10% nationally and 14% in the 39 states on the federal exchange, HealthCare.gov. There are several reasons for that:

Biden Plan: An ACA 2.0/Medicare for America hybrid

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Joe Biden released a healthcare reform plan outline today. It looks like a cross between the Medicare for America bill, which would create a strong national public option, and various "ACA 2.0" bills, which would bolster ACA premium subsidies and reduce enrollees' out-of-pocket costs.

In brief, here are the core features of these antecedents:

• ACA 2.0 bills and plans, including Elizabeth Warren's, are generally variants on an ACA enhancement plan published in August 2015 by Urban Institute scholars Linda Blumberg and John Holahan.  The core is simply to increase ACA premium subsidies and extend them to more people. Blumberg and Holahan proposed raising the ACA benchmark, against which subsidies are calculated, from "silver" to "gold" - -that is, from an actuarial value of 70% (paying that percentage of the average user's annual medical costs) to 80%. They further proposed raising AV higher than that income levels up to 300% FPL, improving the ACA's Cost Sharing Reduction subsidies at lower income levels; reducing the percentage of income paid for the benchmark at every income level; and capping premiums as a percentage of income at 8.5% for anyone at any income level who lacks access to employer insurance or other insurance -- removing the ACA's 400% FPL income cap on subsidies. At bottom, I've posted Blumberg and Holahan's proposed premium and AV schedule.


• The Medicare for America Act of 2019 would create a revamped Medicare available to people at all income levels, paying Medicare rates (adjusted modestly) to providers, and costing no one more than 8% of income. All Americans would be eligible for income-based premium subsidies, even if their employers offer affordable coverage. The plan would be free -- with no cost-sharing -- to people with incomes below 200% of the Federal Poverty Level (FPL). Newborns would be auto-enrolled. Employers could "buy in" by paying a payroll tax, or continue to offer coverage. Existing Medicare and Medicaid would be integrated into the new program, which would include long-term care insurance. Medicare would negotiate drug prices, and a price review board would be empowered to crack down on price gouging.

Ambiguity on key points

Biden's plan would establish "a public health insurance option like Medicare" that, "like Medicare...will reduce costs for patients by negotiating lower prices from hospitals and other health care providers."  Note that it's not entirely clear whether this option will simply adopt Medicare prices or negotiate separately -- in fact, the language implies the latter. The plan will be available to anyone, including those with access to employer insurance -- but here too the language is ambiguous; it's not clear whether those with access to employer insurance would be eligible for subsidies.

Sweeney's amendment to ACA exchange bill: Moar Medicaid enrollment integration?

Some clarification about what New Jersey state Senate president Stephen Sweeney was seeking when he held up passage of the bill to create a state ACA exchange -- other than leverage in bigger battles with Gov. Phil Murphy. 

After threatening not to allow a floor vote on the bill, Sweeney relented at the last minute after negotiating an amendment concerning integration of Medicaid processing in the platform. If the bill had not passed by the end of the legislative session, there would not have been time to meet federal requirements to get the exchange up and running in the fall of 2020 for enrollment in 2021.

Sweeney's amendment changed the language concerning Medicaid integration, directing the state to pursue federal funding for the integration. The text to be replaced is in brackets.

Mining the silver lode (or not): A tale of two blue states

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I have argued in recent posts that

1. State insurance regulators should take the advice of actuaries Greg Fann and Daniel Cruz and force the silver loading spring -- that is, pretty much mandate that insurers price on-exchange gold plans below or at least only slightly above on-exchange silver plans. Fann and Cruz recommend that regulators require insurers to price silver plans more or less as if their actuarial value is 87% or higher, as it is for enrollees with incomes up to 200% FPL. If they do so, no one at incomes above 200% FPL will buy silver, so the AV estimate will become a self-fulfilling prophecy. (See note at bottom for a brief explanation of silver loading, which began in 2018.)


2. New Jersey enrollment has suffered since 2017 from a lack of discounts in bronze and gold plans that silver loading has produced in many other states. 

States that have refused to expand Medicaid have a built-in silver loading advantage. Since eligibility for marketplace subsidies in nonexpansion states begins at 100% FPL rather than the 139% FPL threshold in expansion states,  the nonexpansion states have a high concentration of silver plan enrollees who obtain the highest level of CSR, which raises the actuarial value of a silver plan 94%.  Still, some expansion states have enjoyed pronounced silver loading effects, while others have seen almost none.

Below, I contrast the experience of two expansion states, New Jersey and California. All enrollment figures are derived from the 2019 state-level Public Use Files published by CMS, unless otherwise noted.  I am going to indulge in a bit of shorthand in this post and neglect to provide definitions and back story, excepting the note on silver loading at bottom.

Turning Washington's public option to gold

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Washington state legislators made ACA history last month by passing the first state-based "public option," to be sold in the state ACA marketplace. An unkind reaction reaction, partly prompted by the main actors' own assessments, would be that the creators labored mightily to produce a mouse.

In an early version, the bill to create the public option stipulated that the program would pay healthcare providers at Medicare rates. As the bill neared passage, the payment rate jumped to 150% Medicare -- and then, at passage, to 160%. David Frockt, the bill's sponsor in the state Senate, claimed that providers would not participate at lower rates, particularly in rural areas, where the state has had a hard time attracting insurers into the exchange.* Frockt later told Sarah Kliff that the bill would not have passed without the rate bump.

State officials estimate that the plan will reduce individual market premiums by a modest 5-10%. That's a boon to unsubsidized enrollees -- with no guarantee of any pricing benefit to subsidized enrollees, who pay a fixed percentage of income for the benchmark (second cheapest) silver plan in their area. In fact, lower base premiums sometimes reduce affordable options for subsidized enrollees as lower premiums tend to reduce price spreads between the benchmark, which determines subsidy size, and cheaper plans.

Perhaps the public option's chief benefit is the guarantee that at least one insurer, paying not-exorbitant rates to providers, will operate in rural areas ( though the bill also empowers the state exchange to pay higher rates in areas where they can't attract sufficient providers). That's not nothing, but it's not exactly a game changer [though per update at bottom, 14 of 39 counties in 2019 had just one insurer, and some have no bronze plans]. The state exchange also will design the plans with an eye to reducing deductibles and offer some services not subject to the deductible, presumably favoring those that meet a stated goal of encouraging "choice based on value." A plan designed with the intent to maximize benefit to enrollees is good -- but there's just so many ways to slice the actuarial value  mandated for each metal level by the ACA. And the state will not administer the plans -- it will engage private insurers to do so.

Some regulatory alchemy is needed

There is a way, however, that the plan's administrators (which include the state exchange, the insurance commissioner, and the state Health Care Authority), could  increase the value of the public option to enrollees at the upper income levels of  subsidy eligibility. They could require  that gold plans be priced more cheaply than silver plans. They should be, because Washington's silver plan enrollees, taken together, obtain a slightly higher actuarial value than do gold plan enrollees -- and that value difference will expand if the plans are priced appropriately. (Actuarial value is the percentage of the average enrollee's costs a plan is designed to cover, computed according to a federally mandated formula.)

New Jersey Senate passes bill to establish state-based ACA exchange: What was the holdup about?

Updated in 7/10/19 post: the question was how much Medicaid integration to seek, and when.

After an alarming delay,  the New Jersey Senate passed a bill late yesterday afternoon to create a state-based exchange. State Senate President/boss Stephen Sweeney had held the bill (S3807/A5499) up, and if it had not passed by the end of this month, when the legislative session ends, it would likely not have been possible to get the exchange up and running in time for Open Enrollment 2021, i.e. by November 1, 2020 (which may prove difficult in any case).

The state exchange is Gov. Murphy's initiative, and Sweeney may just have been holding it as a pawn in their death match over the state budget. But Sweeney claimed to have a substantive point that he needed fixed, and he appears to have got what he said he wanted -- though why anyone would object, I don't know.  Here is a statement he put out yesterday:

“We are in the process of amending the legislation creating the state health care exchange to include Medicaid eligibility. This is a significant improvement that will provide a single front door access point for enrollees and a single eligibility process for health insurance coverage.

Elizabeth Warren is faking it on healthcare, part 2

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I was deeply disappointment by Elizabeth Warren's response to a question about Medicare for All in last night's debate. In brief, she went all in for Bernie's bill and Bernie's short path.

Charles Gaba usefully contrasts Warren's response last night to her response to a  question from a union member worried about losing good private insurance in a March Town Hall. There, Warren expressed openness to an incremental path either to Medicare for all (lower case "all," given the multiple paths she name-checked) or to universal coverage with a role for private insurance preserved (temporarily or permanently).

I don't think it's wise for Warren to leave herself no wiggle room to pursue health reform short of Medicare for All.  Last night she didn't:

There are a lot of politicians who say, oh, it's just not possible, we just can't do it, have a lot of political reasons for this. What they're really telling you is they just won't fight for it. Well, health care is a basic human right, and I will fight for basic human rights...

Fight, yes, but pick your battles and their pacing. If Warren fights all-out for Medicare for All -- Bernie's bill, which eliminates all other forms of insurance within four years and would require at least a doubling of federal revenue -- what happens to all those other plans she's got? Is she going to "fight for" universal childcare and free public college and near-total student loan forgiveness and a wealth tax and a sweeping new corporate charter -- all while making an industry that accounts for 1/6 of the country's economy in one fell swoop? And all with a razor-thin Senate majority -- if she's lucky.

Warren is doubtless aware of the extent to a drive to remake healthcare would absorb all political capital -- hence her earlier touting of multiple paths to universal coverage. I doubt Warren would disagree with this well informed liberal realist:

If we enact a voluntary public option, and huge numbers of people end up preferring public coverage, we might someday evolve to a public-dominated system. The chances that we will leap to that from our current system are essentially zero.

— Harold Pollack (@haroldpollack) June 27, 2019

Promising to fight for M4A might be tactically justifiable in a Democratic primary -- particularly for someone promising to fight moneyed special interests on all fronts and fighting Bernie Sanders for the left-end vote. But as in the past, Warren's diagnosis of what's wrong with U.S. healthcare is one-dimensional -- and disingenuous.

WARREN: So, yes. I'm with Bernie on Medicare for all. And let me tell you why. I spent a big chunk of my life studying why families go broke. And one of the number-one reasons is the cost of health care, medical bills. And that's not just for people who don't have insurance. It's for people who have insurance.

Look at the business model of an insurance company. It's to bring in as many dollars as they can in premiums and to pay out as few dollars as possible for your health care. That leaves families with rising premiums, rising copays, and fighting with insurance companies to try to get the health care that their doctors say that they and their children need. Medicare for all solves that problem.

She added in a later interjection:

...the insurance companies last year alone sucked $23 billion in profits out of the health care system, $23 billion. And that doesn't count the money that was paid to executives, the money that was spent lobbying Washington. We have a giant industry that wants our health care system to stay the way it is, because it's not working for families, but it's sure as heck working for them. It’s time for us to make families come first

$23 billion! American payers (federal and state government, employers, individuals) spend $3.5 trillion per year on healthcare. Insurers are certainly part of the systemic problem -- but mainly because they pay too much to providers in our divide-and-conquer payer system.  Medicare for All is as much anathema to hospitals and doctors as it is to insurers, as it would radically cut their payments rates. Warren knows this, but she never mentions providers' role in making healthcare ruinously expensive and a source of constant financial threat in Americans' lives.  As I noted after hearing Warren speak about healthcare in January 2018:

...she also presented the unaffordability of healthcare in the U.S., and the huge out-of-pocket costs that many insured Americans face, as purely a product of insurance industry rapine. Not a word about pricing-gouging by hospitals and doctors; the fine science of upcoding; the loopholes allowing self-dealing; the privileging of expensive procedures; the outsourcing to hedge fund- and private equity-backed price maximizers; the predatory balance billing. Providers got a total pass. I sentence Senator Warren to read Elisabeth Rosenthal's An American Sickness, which meticulously documents all these cost inflators and their evolution

I am a Warren admirer. I have heard her deliver her capsule diagnosis of American economic and social woes -- we sold our birthright for a mass of Reaganite pottage -- and I think all her many plans are designed (many if not all well-designed)  to undo galloping oligarchy. But on her policy piano, healthcare gets her left hand.

Warren is willing to take on banks and the tech giants -- and health insurers -- but healthcare providers are spared from her rhetorical fire. That won't make them any the less anxious to defeat her if she remains all-in on Medicare for All.

Related: Elizabeth Warren is faking it on healthcare

Did the Trump administration just open a back door to to a massive "Medicare" buy-in?

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The Trump administration has potentially shaken up American health insurance markets by finalizing a new rule allowing employers of all sizes to fund employees' health insurance premiums in the individual market in lieu of offering them access to an employee-sponsored group health plans. They can do this by funding Health Reimbursement Arrangements (HRAs), currently used for medical expenses excluding premiums for individual market plans, to fund individual market premiums to any level they choose -- e.g., to roughly the percentage of premiums they currently contribute to group health plans.

Many healthcare scholars and stakeholders worry that the alternative will be particularly attractive to employers with older, sicker employees, or that large employers will find ways to send sicker employees to the individual market. As a defense against that, the rule stipulates that a given employee group (sliced various ways, e.g., part-time vs. full time) can't be offered a choice between a group health plan and the individual market -- the employer must offer either/or. The rule also suggests (pdf pg 9) that the narrow provider networks prevalent in the individual market would be more attractive to healthier than to sicker populations -- and presumably, such preferences would influence the choices employers offer.

The administration forecasts that over ten years, about 11 million people will access HRAs to enroll in individual market coverage, while the number of people covered in employer-sponsored plans will drop by about 7 million (current ESI enrollment is about 150 million). The impact on the individual market would be major, but on the employer group health market, relatively modest.

But the HRA rule potentially cracks the door for a future Democratic Congress and president to vastly expand access to public insurance within the current Affordable Care Act structure. Suppose the next Congress, enabled by a Democratic president, injects into the ACA marketplace a national public option, paying Medicare rates to providers or some adjusted version of them, and requiring providers who accept Medicare to accept the public option?

Voters understand Medicare-for-all better than Bernie does

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I would think long and hard about contradicting Larry Levitt (of the Kaiser Family Foundation) and Jonathan Cohn (of HuffPost) together on anything but semantic grounds.  But on semantic grounds...I don't think their framing of the results of a Kaiser poll voters' understanding of "Medicare-for-all" is quite right.

Kaiser asked some 1200 voters what the healthcare system would look like "under a national health plan, sometimes called Medicare-for-all." Majorities, varying moderately by partisan affiliation, assumed:

• Taxes for most people would increase 
• People would continue to pay premiums, deductibles and copays for medical services
• People with private insurance would be able to keep their plans
• Private health insurance companies would not be the primary way Americans can get health coverage*
• All U.S. residents would have health insurance coverage

On Twitter, Larry Levitt alluded to "how confused the public is about Medicare-for-all based on our new poll." Jonathan Cohn, who wrote about the results, tweeted, "Voters like Medicare for All, but there's a catch: They don't understand what it'd do."

I don't think the survey respondents and focus group participants were collectively confused, though they're not informed about current bill specifics. I think they're realistic about the furthest likely extent of next-gen Democratic healthcare reform. Their responses lack coherence only to the extent that "Medicare-for-all" can't be understood to encompass "Medicare access for all," particular in the refracted context of a "a national health plan, sometimes called Medicare-for-all."

New Jersey off-exchange enrollment rose in 2019: Did cheap off-exchange silver help?

Good news for New Jersey's individual market for health insurance: while on-exchange enrollment, announced late last December, was down a disappointing 7%, those losses were partly offset (as some observers had hoped) by off-exchange enrollment gains announced today:


Why was enrollment down on-exchange, and up off-ex?  In brief: the state's swift action in 2018 to stand up a reinsurance program and pass a state individual mandate resulted in an average premium decrease of 9%, That drop did not help the large majority of on-exchange enrollees who obtained premium subsidies. As I explained last January:

base premiums affect only unsubsidized buyers, and in 2019 premiums in New Jersey were actually higher than in 2018 for most subsidized enrollees, as benchmark silver plan premiums, which determine subsidies dropped further than the average for all plans. For a 40 year-old with an income of $30k, the cheapest bronze plan cost 12-22% more in 2019 than in 2018 (varying by region) -- that is, $13-$25 more per month. Cheapest silver was also up slightly in most of the state

The drop did help unsubsidized enrollees, however. And as DOBI notes today, the unsubsidized had some motive to migrate off-exchange:

ACA Medicaid expansion: Lien on me?

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N.B. 6/19: See second update at bottom: there is a bill in the New Jersey legislature, S3489/A5064, that would ended the pursuit of asset recovery for Medicaid enrollees who are not enrolled in long-term care.

I think it's fairly widely understood (at least by me) that Medicaid picks up the tab for long-term care only when the beneficiary has spent down her assets (if she had any), and that when the spouse of such a beneficiary passes the state can claim remaining assets, such as a house.

What I didn't know, and just learned via  New Jersey-based elder lawyer Lauren Marinaro, is that most states can recover assets from any Medicaid recipient over age 55 upon that person's death or the death of his spouse (or any children passing age 21 or blind or disabled). In most states, that's true whether or not the Medicaid enrollee obtained long-term care.

A 1993 federal law required states to recover assets from the estates of recipients of long-term care services under Medicaid. States also have the option of recovering for other Medicaid benefits obtained above age 55. As of 2014, 35 states and D.C. were recovering for other benefits.

The ACA Medicaid expansion complicated the picture. Pre-ACA, Medicaid eligibility generally included an asset test -- as it still does for Aged, Blind and Disabled (ABD) Medicaid. In states that have accepted the ACA expansion, however, Medicaid eligibility is extended to anyone* whose household income is below 139% of the Federal Poverty Level (FPL) -- or $17,236 for a single person in 2019.

There is no asset test for Medicaid eligibility under ACA expansion criteria.  But in many states (including New Jersey) anyone over age 55 who qualifies as an "expansion" enrollee (as well as any other Medicaid enrollee) is potentially subject to lien on assets and state recovery after death. In New Jersey, the tab would include total capitated premium paid to a Medicaid managed care organization (MCO) for enrollment in a managed Medicaid health plan. (A 2017 update to NJ asset recovery rules is here.)

Now they really are a dream team

Congratulations to the Toronto Raptors, a team that everyone seems to admire and wish well, including Golden State. The last time I considered this team's existence, the city of Toronto was holding a contest to name their new expansion team This triggered a happy half hour with my then 11 year-old son Ben, spent dreaming up ever more preposterous names, memorialized some weeks (months?) later in the Globe and Mail...full text below the screenshot, minus a couple of editorial intrusions in the opening lines...nice graphic, isn't it?

Dream Teams

The mayor  said, "Citizens! Dare to dream!
Invent a tag for our basketball team.
Season tickets for the right name:
A reserved seat in history--ten minutes of fame."
     We got right to it with dreams of glory,
Choosing animals fierce and gory:

Just how much does Medicaid expansion lighten the silver load?

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Picking up on a premise explored last week...

Actuaries Greg Fann and Daniel Cruz have pointed out that the effects of silver loading [see note at bottom*] in the ACA marketplace should intensify over time (as CBO forecast), with silver plan premiums rising relative to those of other metal levels, increasing discounts in gold and bronze. Fann and Cruz argue that regulators should help the process along by stipulating that insurers must price plans proportionate to actuarial value, with only limited adjustment for their estimates of "induced demand," the higher usage prompted by lower out-of-pocket costs.

...and on a complicating factor: silver plan AV is substantially lower in states that have expanded Medicaid, because those states have far fewer low income enrollees for whom CSR has boosted silver plan AV to 94%:

In states that have refused to expand Medicaid, silver loads are larger, because eligibility for marketplace subsidies begins at an income of 100% of the Federal Poverty Level (FPL), as opposed to 139% FPL in expansion states. More than one third of enrollees in nonexpansion states have incomes below 139%, which qualifies them the for highest level of CSR -- and close to 90% in this income range select silver plans. Hence the estimated cost of CSR, priced into silver plans, should be higher, rendering bronze and gold plans relatively cheaper.

Most recently I noted that in New Jersey in 2019, silver plan enrollees obtained an average actuarial value of 80%, compared to  87% for the 39 HealthCare.gov states taken together. Today I want to sharpen that contrast with a measure of just how much more silver load the nonexpansion states have to work with generally than the expansion states.

The problem with silver loading in New Jersey

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New Jersey's ACA marketplace disappointed in 2019. Prior to open enrollment, the state passed an individual mandate to replace the zeroed-out federal mandate and also stood up a reinsurance program. Together, these measures dropped premiums 22% below where they would otherwise have  and 9% net compared to 2018. Governor Murphy also directed all state agencies to encourage enrollment outreach and devoted a small sum of state funds to partly offset massive federal cuts to advertising and enrollment assistance.  

Nonetheless enrollment dropped 7% from 2018 levels -- higher than the overall 4% drop in the 39  states using the federal exchange, HealthCare.gov, though right at the median for states on the platform that had expanded Medicaid.

Silver loading* effects were likely a key factor in a wide performance gap between expansion and nonexpansion states on HealthCare.gov in 2019. In states on the platform that have not expanded Medicaid, 2019 enrollment was 99% of the 2018 total and 95% of 2017. In expansion states, enrollment in 2019 was 93% of 2018 and 87% of 2017. Why do nonexpansion states have a silver loading advantage? As I outlined in January (with a hat tip to Dave Anderson):

In states that have refused to expand Medicaid, silver loads are larger, because eligibility for marketplace subsidies begins at an income of 100% of the Federal Poverty Level (FPL), as opposed to 139% FPL in expansion states. More than one third of enrollees in nonexpansion states have incomes below 139%, which qualifies them the for highest level of CSR [94% AV]  -- and close to 90% in this income range select silver plans. Hence the estimated cost of CSR, priced into silver plans, should be higher, rendering bronze and gold plans relatively cheaper.

In New Jersey, the silver loading gap is particularly acute; the practice has yielded essentially no discounts at all for subsidized buyers, though in 2019 it did generate discounted off-exchange silver for unsubsidized enrollees.

Silver loading and 2019 enrollment: A compendium

Well, we've had a few months to digest how open enrollment for 2019 went down in the ACA marketplace. Recently, it's been borne in on me that silver loading effects intensified in 2019; that they should intensify further; that this process should continue to improve marketplace offerings, all other conditions remaining stable (quite an if...)'; and that regulators can help this process along.

Chewing over the data has sent me back to my own posts about 2019 enrollment; as usual, I'd forgotten much of what I'd written. For my own sake if no one else's, here's an index of posts about 2019 enrollment data and/or silver loading worth returning to, for me at least. I'll update as more are added.

A couple of takeaways (or spoilers): 1) nonexpansion states on HealthCare.gov had smaller enrollment losses than expansion states on the platform -- almost certainly a silver loading effect; 2) silver loading intensified in 2019; 3) silver loading has quite a ways to go. especially in New Jersey.

Note to self: there are posts about 2019 enrollment that are not included here, because they don't address silver loading.

The posts:

Silver is platinum. Insurers should treat it as such. Regulators should make them.

Actuaries Greg Fann and Daniel Cruz have pointed out that the effects of silver loading in the ACA marketplace should intensify over time (as CBO forecast), with silver plan premiums rising relative to those of other metal levels, increasing discounts in gold and bronze. Fann and Cruz argue that regulators should help the process along by stipulating that insurers must price plans proportionate to actuarial value, with only limited adjustment for their estimates of "induced demand," the higher usage prompted by lower out-of-pocket costs.

In my last post, I cited evidence that the self-perpetuating engine that should increase silver loading effects over time worked in 2019, the second year that the practice was in effect. The average actuarial value of silver plans sold on HealthCare.gov rose measurably in 2019 as higher income enrollees switched to bronze and gold. Here I want to bring further evidence that this process advanced in 2019, and that silver premiums should accordingly rise more in 2020 than gold or bronze (or now-rare platinum) premiums.

Silver loading is just getting started

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A bit more than a year ago, I calculated that silver loading, a disruption that Trump accidentally injected into the ACA marketplace just in time for 2018 Open Enrollment, had boosted enrollment by several hundred thousand, perhaps in the 350,000-700,000 range.

Silver loading was prompted by Trump's cutoff in October 2017 of direct reimbursement to marketplace insurers for the Cost Sharing Reduction (CSR) subsidies that reduce out-of-pocket costs for low income enrollees who select silver-level plans. State regulators responded by allowing or encouraging insurers to price CSR into the premiums of silver plans only.* Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark , inflated silver premiums create discounts for subsidized buyers in bronze and gold plans.

These discounts are often dramatic. As Stan Dorn notes in Health Affairs this week, "By 2019, 15 states had average gold premiums lower than average benchmark silver premiums, and in 15 other states gold premiums exceeded benchmark silver by less than 10 percent."  In 2018, zero-premium  coverage (usually but not always in bronze plans) was available to more than half of marketplace participants, thanks to silver loading.

What state laws ratifying ACA marketplace rules can and can't accomplish

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On May 31, New Jersey legislators introduced, with Governor Murphy's support, a raft of bills* that  codify in state law the ACA's coverage rules in the individual and small group health insurance markets, including protections for people with pre-existing conditions

Separate bills maintain a ban on medical underwriting or exclusion of pre-existing conditions (S626), mandate coverage of the ACA's Essential Health Benefits (S562) and a set of preventive services (S3803), and limit age rating -- the degree to which the oldest enrollees can be charged more than the youngest adult enrollees -- to the ACA's 3-to-1 ratio (S3810).**

Many other states with Democratic governors and legislatures have passed or have in progress similar laws that duplicate the ACA's federal standards. Such laws are redundant by definition; they are designed as protection against future further Republican action to undermine the ACA.

I can imagine these laws serving a useful function under two circumstances:

Michael Bennet misrepresented his Medicare-X bill on CNN

Colorado Senator Michael Bennet, who entered the presidential race on May 2, made headlines yesterday for taking on Bernie Sanders' Medicare for All plan in a CNN Town Hall yesterday. Bennet claimed that it's impracticable to take employer-sponsored insurance away from "180 million people" currently insured through their employers ( a high estimate), especially from millions whose unions have negotiated good benefits.

It's a familiar line of attack. More noteworthy was the fact that Bennet misrepresented his own ACA reform bill, the Medicare-X Choice Act, which introduces a national public option into the ACA exchanges. Here's what Bennet said (my transcript and emphasis):

What we would be much better off doing to get to universal healthcare quickly is to finish the job we started with the Affordable Care Act and have a true public option...The one that I have designed would be administered by Medicare and it would give all of you the chance to choose what's right for you and your family. If you want a public option then you can have it. Basically it's Medicare for all if you want it. But if you to keep the insurance you have, which many people do, you'd be able to do that as well.

This is not literally untrue. As of the fifth year after enactment, anyone could buy into Medicare-X, which would be offered in all counties nationwide alongside private plans in the ACA marketplace. But only a limited number of people could buy in on a subsidized basis. Most people whose employers offer insurance would not be subsidy-eligible.

Medicare for all who want it: Potential and pitfalls

I have suspected for some time that the longest-lasting Democratic presidential candidates may converge on health care reform plans that enable any American to buy into a strong public option (probably deemed "Medicare") at an affordable price. That would include people whose employers offer coverage -- they would be subsidy-eligible if they opt into the public plan.

The existing bill that fits this description is the Medicare for America Act -- a bill that takes such an open-to-all public plan to its logical conclusion by phasing out Medicaid and revamping the Medicare currently available to seniors and the disabled -- and, crucially, adding long-term care insurance. The bill is rich in promise and not free from pitfalls, which I've been more or less live-blogging over the past couple of weeks. I thought I'd take some space here to index those posts, a step toward making something of a coherent whole of them (including some earlier posts). Here goes, then.

The plan that lets anyone buy into Medicare (3/21/19)
This overview at healthinsurance.org starts with my core question: Can Democrats bite off as much healthcare reform as Medicare for America encompasses? Might they pare it back to its core -- a public option buy-in for anyone who wants/needs it?

Medicare for America might let private insurance thrive (3/22/19)
The key condition is that healthcare providers would have to accept "Medicare" payment rates from commercial insurers.

"Medicare for all who want it" raises the kludge question

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Given the "triple veto" imposed on legislators by the U.S. Constitution, U.S. policy is doomed to kludge. Policy design that's logical and internally coherent often can't survive the legislative process.

On the healthcare front, it's been evident since the early aughts that the logical, feasible, appropriately incremental way to improve access and control costs without throwing multiple healthcare industries into chaos and swiftly transitioning 150 million people out of employer-sponsored insurance is to offer a public plan on affordable terms to both employers and employees -- leaving employer insurance to either compete effectively or die on the vine.

Early iterations of such a "public option" included Helen Halpin's CHOICE program (2003), Rep Peter Stark's Americare bill (2006),and Jacob Hacker's Health Care for America plan (2007). All of these enabled any individual to buy in on an income-adjusted basis regardless of whether her employer offered insurance, and gave employers the option of paying into the public plan (e.g., via a payroll tax) rather than offering their own plans.  Instead we got the ACA -- with subsidy eligibility limited to those without access to employer insurance deemed "affordable" (by dubious standards), inadequate subsidies, and dependence on the whims, pricing, negotiated provider payment rates and plan designs of private insurers.

Now we're back to the future with the Medicare for America Act, introduced in late 2018 by Reps Rosa DeLauro and Jan Schakowsky and reintroduced last month. Medicare for America offers a revamped "Medicare" on affordable terms to any citizen or legally present noncitizen who opts in.

The kludge question: Does offering a truly comprehensive and affordable plan on affordable terms to anyone who wants it necessarily entail ending our existing mammoth and Byzantine public health insurance programs, Medicaid and as-currently-structured Medicare? Medicare for America's creators answered "yes."

Folding Medicaid into Medicare for America: Will states pay their share?

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One of the many sweeping transformations of U.S. healthcare mandated by the Medicare for America Act is the absorption of all Medicaid programs -- currently serving some 72 million Americans -- into a revamped Medicare serving all ages. That would occur six years after enactment.

Medicare for America would be available to Americans of all ages and incomes -- and free to everyone in a household with an income below 200% of the Federal Poverty Level (FPL). That's far above the eligibility threshold for Medicaid programs -- with the exception CHIP in some states, for which children in families with incomes as high as 400% FPL may be eligible. Families with incomes between 200% and 400% FPL would have to pay a percentage of income -- probably not higher than 4% -- to insure the whole family. The new program would include comprehensive disability services and 100% coverage for the medically frail and for chronic disease treatment, as well as dental, vision and hearing services.

State governments -- many of them sure to be deeply hostile -- would be subject to two major requirements: 1)  cede control of service for their Medicaid populations, and 2) reimburse the federal government with "maintenance of effort" payments equivalent to their current Medicaid responsibilities, adjusted annually for inflation. Those requirements are certain to be challenged in court, as was the ACA Medicaid expansion.

Seniors' costs under Medicare for America, continued

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In my last post I noted that while the revamped and expanded Medicare available to all under the Medicare for America Act of 2019 would serve most Americans very well, some people who turn 65 after full enactment would pay more in premium than they would today for traditional Medicare Parts B and D, or comparably priced Medicare Advantage.

They would get far more for the money -- most notably, long-term care insurance, dental, visual and hearing coverage, and 100% coverage for a host of vital services like chronic disease management, addiction and mental health treatment, and care for the medically frail. Still, higher premiums for seniors with incomes above about $50,000 for an individual or $80,000 for a couple is a political problem that needs to be thought out.  Here, I have a bit more data to sketch in.

If Medicare for America passes, some seniors would pay more (and get more) than at present

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Medicare for America,  the bill that would allow anyone at any age to buy into a revamped Medicare at an income-adjusted price (e.g., $0 for the bottom 30% of the income distribution), would be a clear benefit to anyone under 65. Even for those who continue to get insured through their employers, it would offer the true freedom from job-lock that the ACA promised and largely failed to deliver.

Most seniors who turn 65 after the new program would come into full effect (2023 were it to pass this year) would be gainers too (those enrolled in current Medicare before the new program launches would have the option of continuing to pay their then-current premiums). A fair number of new enrollees, however, would pay far more in premium than they would for existing fee-for-service Medicare or a Medicare Advantage plan. They would get more for their money. But the expectation that when you turn 65 you can get reliable insurance for under $200 per month is pretty hard-wired into Americans, I suspect. Violating that expectation for a substantial subset of the 3-4 million people who age into Medicare in year one (and every year following) is a political problem to be reckoned with.

Would Medicare for America phase out employer-sponsored insurance?

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It's often regarded as an open question whether the Medicare for America Act, were it to become law, would lead to a phase-out of private insurance. The bill makes a revamped Medicare available to anyone of any age who wants or needs it, with premiums adjusted by income even if the enrollee has access to employer-sponsored insurance.

The revamped "Medicare" is free to anyone whose household income is below 200% of the Federal Poverty Level (FPL) -- about 30% of the population. For those with incomes over 600% FPL, the premium is 8% of income. Those in the 200-600% FPL range will pay a sliding scale, topping out at 8%. Newborns are auto-enrolled, as are the uninsured. Employers can either pay an 8% payroll tax and direct their employees to the public program, or continue to offer their own health plans. Medicare Advantage continues alongside the public program.

I do not think the bill would kill of employer-sponsored insurance, though it would likely shrink the market to a kind of blue-chip perk for well compensated employees. ESI is likely to persist for several reasons:

• The bill stipulates that medical providers have to accept "Medicare" payment rates (not identical to current rates, but based on them) from private insurers.


• The employer tax exemption for health benefits persists. In fact, the ACA's "Cadillac Tax" on especially generous plan (long postponed) is repealed.


• Most importantly, the 8% of income that affluent people would pay for the revamped "Medicare" is considerably more than many pay out-of-pocket for employer-sponsored insurance.

The average premium for family coverage in ESI was $19,616 in 2018, according the Kaiser Family Foundation's Employer Health Benefits Survey, with the employee footing $5,547, or 28%.  For a couple with one child earning $125,000 -- a shade over 600% FPL -- that's 4% of income.

A major fix in Medicare for America 2.0

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Medicare for America, the sweeping healthcare reform bill that allows anyone to buy into a revamped Medicare at an income-adjusted premium, has the potential to transform U.S. healthcare into either an all-payer or a single-payer system.

The bill, first introduced by Reps Rosa DeLauro and Jean Schakowsky in December 2018 and reintroduced on May 1 this year, allows both Medicare Advantage and employer-sponsored insurance to continue, and stipulates that healthcare providers must accept (revised) Medicare payment rates from those private programs.  But because employees can opt into "Medicare" on an income-adjusted basis even if their employers offer compliant private insurance, private insurance will have to establish a real competitive advantage if it's to survive alongside the generous public program.

The headline change in the reintroduced bill is elimination of deductibles, which were modest enough in the original bill (topping out at $350 individual/$500 family). But a more significant change improves the bill's financing and provides ballast for the competition between public and private sectors.

Benefit cliffs in the ACA marketplace

Dave Anderson highlights an important weakness in the subsidy structure for the ACA marketplace. As income rises, the enrollee's share of the premium for a benchmark silver plan is subject to sudden and irregular bump-ups, which Anderson compares to jolts in marginal tax rates.  Take the case of a couple looking to buy a benchmark silver plan:

From $17,000 to$20,000 this couple pays an extra $2 per month for every thousand dollars more they earn a year.  Annually this is about a 2% marginal tax rate on the additional income.  And then there is a huge bump from $20,000 to $21,000.  The benchmark premium suddenly becomes $256 more expensive.  This is a 25% marginal rate...

And then the marginal rate drops again when the family increases their earnings from $21,000 to $22,000.  The marginal rate for this slice is now about 11%.  The marginal rate for couples earning under 300% FPL is in the mid-teens, and then there is a drop in the marginal rate to just under 10% for 300% to 400% FPL and then a potential massive spike as soon as someone earns over 400% FPL.

The spikes in out-of-pocket (OOP) costs this couple is exposed to as income rises are even more sudden -- and, I think, potentially damaging to family finances -- than the premium spikes. The main benefit cliff is formed by the sudden fadeaway of Cost Sharing Reduction (CSR) subsidies at 201% FPL, where the actuarial value of a silver plan drops from 87% to 73%.  CSR disappears entirely at 251% FPL, and the coverage offered by a benchmark silver plan with no CSR, which has an AV of 70%, is clearly underinsurance for those without significant financial resources.

Take a hike, xpost

I neglected to mention that I'm on vacation this week. I'll be back early next. I've been reluctant to spoil my frame of mind with news of our latest spasms toward oligarchy, authoritarianism and/or war, so I'm pretty out of it.  I gather Trump has taken a stand against balance billing. Does he know what it is?  I have long suspected that balance billing is the one healthcare abuse so egregious that even Americans won't tolerate it indefinitely. But watch our pols bipartisanly give away the store to providers.