Late Days of Empire Edition: Health Wonk Review

We're addled on many fronts here in Trumpville, and this week's Health Wonk Review reflects that. We have snapshots of a country that continues to trail its peers in population health measures; an opioid vendor looking to short-circuit potential tobacco industry-level liability; an individual market for health insurance offering unaffordable plans to many of the unsubsidized, and freakish bargains to some of the subsidized; and, for a little futuristic relief, a human resources tech vendor that may chain healthcare data to a block, where it shall remain unaltered forever and ever.

At Workers' Comp Insider, Tom Lynch  looks at what the U.S. gets for spending 41% more on health care than our wealthy nation peers in the OECD and 81% more than the entire 35-nation OECD average. Spoiler: not much. We're "sort of like a big-market baseball team spending gazillions more for players than any other team, only to finish out of the running."

At Managed Care Matters, Joe Paduda notes that Purdue Pharma is trying to strike a deal to resolve all state claims relating to opioids. He warns:

The marketplace isn't all roses for the subsidized, either

Sam Baker has an insightful take on the bifurcation of the individual market between the subsidized and the unsubsidized, exacerbated by Trump. I want to offer a caveat, though.

Of the fallout from Trump's cutoff of Cost Sharing Reduction (CSR) reimbursement -- premium spikes for the unsubsidized, bronze and gold bargains for some subsidized -- Baker writes:

All of this has compressed the ACA's benefits. The law was initially designed to move a lot of people into the same system, in which even the people who didn't get a subsidy would benefit from a competitive marketplace to shop for coverage.

Instead, we're ending up in a place where the poorest consumers can get even cheaper coverage than the ACA intended, especially if they choose less comprehensive care, while wealthier consumers increasingly don't have much incentive to get covered at all. Those trends will only grow more pronounced if Republicans successfully repeal the individual mandate in their tax bill, leaving the law with only its carrot, and no stick.

There's nothing inaccurate here. But in general discourse if not here, the perceived bonanza for the subsidized stemming from inflated subsidies may be somewhat overstated.

A Medigap for the Marketplace?

It's well known by now that Trump's cutoff of federal funding for Cost Sharing Reduction (CSR) subsidies in the ACA marketplace has had the paradoxical effect of making free bronze plans widely available to subsidy-eligible marketplace enrollees.

The blessing is something of a mixed one for many buyers with incomes up to 200% of the Federal Poverty Level (FPL), however. Silver plans up to the 200% FPL level come with strong CSR that reduces average deductibles to under $300 (for enrollees up to 150% FPL) or under $1000 (for those in the 151-200% FPL range). That's in contrast to bronze plan deductibles that average over $6,000.  Other out-of-pocket cost differences are commensurate. More than half of current marketplace enrollees have incomes under 200% FPL, and most can probably now find free bronze plans.

CSR was designed to make actual healthcare affordable to low income enrollees -- who, again, constitute more than half of all marketplace enrollees (and more than half of the uninsured; as of 2013, 55% of the uninsured had incomes under 200% FPL). $6,000 deductibles are not generally appropriate for low income people (or arguably, for almost anyone).

On the other hand, a benchmark silver plan for a solo buyer with an income of $24,000 just under 200% FPL costs $126 per month -- versus $0, in many cases now, for bronze.

Since CSR costs the enrollee nothing, CSR-enhanced silver plans used to be worth considerably more in absolute terms than bronze, providing more actuarial value for the buck. That's not necessarily true any more. And a fair number of bronze plans do not subject services such as doctor visits and generic drugs to the deductible. The yearly out-of-pocket maximum for a bronze plan, on the other hand, is $7,350 for an individual -- versus $2,450 for a CSR-enhanced silver plan for enrollees with incomes up to 200% FPL. The out-of-pocket maximum represents an enormous amount of risk for a low income person.

There is an existing market resource, however, that could give some enrollees in free or very cheap bronze plans significant relief from high out-of-pocket costs. That's so-called gap insurance, which offers first-dollar coverage for a range of expenses up to a limit of, say, $5,000 or $10,000. It's not available everywhere, coverage for preexisting conditions is excluded, and coverage is not comprehensive -- it's for named perils such as accidents and critical illness, as commenter Bob Herz cautions below [I have updated here to make those limitations clearer].  But for a healthy enrollee, plans of this sort may provide coverage up to the bronze out-of-pocket maximum and beyond. [Update, 11/23: Comment by Bob Hertz below is on point -- the policy featured below is for named perils only, e.g., accident, heart attack/stroke/"invasive"cancer, plus limited hospital indemnity.]

The tax bill from hell

Let it not be said that I take forecasts as gospel. But three forecasts about the Senate tax bill from our appointed Congressional arbiters, the Joint Committee on Taxation and the Congressional Budget Office, do form a remarkable trifecta. Over ten years, the bill is forecast to

• Increase the deficit by $1.4 trillion
• Raise taxes on every income band up to $50-75,000
• Uninsure 13 million people.

If they teach legislating in hell, this is what you'd learn to come up with.

Halfway back to the future in the individual market for health insurance

The ACA-compliant individual market for health insurance is at a mid-point between Trump sabotage that's been executed and Trump sabotage that's threatened. At present, the market remains viable for most subsidized prospective enrollees -- and even accidentally improved for a good number of them via discounts for bronze and gold plans. It's largely dysfunctional for the unsubsidized, however, after two years of average premium hikes in excess of 20%.

The main (though by no means only) act of sabotage in 2017 was Trump's long-running threat -- executed in October -- to cut off federal reimbursement that the federal government is legally obligated to pay insurers for providing Cost Sharing Reduction (CSR) payments to qualifying enrollees. Stiffed by Trump, insurers had to boost premiums to cover the cost of CSR. That in itself accounted for nearly half of this year's 29% average premium hike, according to Charles Gaba.

The next sabotage threat is individual mandate repeal, coupled with pending administrative action to empower a non-ACA-compliant market of medically underwritten, loosely regulated plans. -- which currently do not satisfy the mandate. Those measures in combination will trigger a fresh wave of premium hikes in the ACA-compliant market by draining its risk pool. Many if not most of the 6-7 million current unsubsidized enrollees in ACA-compliant plans will probably be driven perforce into the unregulated market if this next round of sabotage is fully implemented.

We are already halfway there, I suspect.  Recently I spotlighted the choice facing a 58 year-old in Pottsville, PA who's ineligible for subsidies -- that is, with an income over $47,520 for an individual or $64,080 for a couple. For this person

Replacing the individual mandate with auto-enrollment, part II

A week ago, I suggested that the wide availability of free bronze plans in 2018 for subsidy-eligible potential ACA marketplace enrollees opens a window for replacing the individual mandate with auto-enrollment of the uninsured, a measure that's popped up in various Republican bills and conservative repeal-and-replace proposals.

That was tongue-in-cheek, since the House and Senate tax cut bills make it obvious that Republicans are not interested in using current federally budgeted dollars to insure more people. They'd rather give the subsidy money to the wealthy via tax cuts.

That said, a fact brought to my attention by Politico's Dan Diamond does boost the case for auto-enrollment. 80% of the 6.7 million households that paid the mandate penalty in 2016 (for tax year 2015) had incomes below $50,000 -- that is, near the subsidy eligibility threshold for a single person, $48,240. Many of those households with incomes over $50,000 are also doubtless subsidy eligible. (On the other hand, a good number of those with incomes in subsidy range may have been disqualified for subsidies by an offer of insurance from an employer. Kaiser estimates that 3.7 million are rendered subsidy-ineligible for this reason.)

IRS tables show that payers of the mandate penalty in tax year 2015 were pretty heavily concentrated at income levels where free bronze plans are common this year:

Who'll go to the mat for the individual mandate?

I fear that the trio of Republican senators who killed "skinny repeal" in late July (Collins, Murkowski, McCain) are going to have a hard time rejecting the tax cut bill in the name of the individual mandate.

Skinny repeal was linked to a (somewhat uncertain) presumption that the bill would be merged in conference with the House bill, which included repeal of enhanced federal funding for the Medicaid expansion and imposition of per-capita caps on federal Medicaid spending. Defense of Medicaid was the heart and soul of the Resistance, as it should have been.

Now, we may well get a partial birth abortion of the ACA - - mandate now, massive cuts to Medicaid (including expansion repeal) later. As Andy Slavitt has warned, that splits the "23 million uninsured" baby.

The individual mandate has always been unpopular -- and frankly, after years of both self-inflicted wounds and sabotage of the ACA marketplace, it has cause to be.  Health economists say that the mandate penalty was too small and too lightly enforced to be fully effective. The counterpoint is that a stricter mandate requires stronger subsidies - e.g., a cap on insurance premiums as a percent of income for all buyers, perhaps one that that matches the "affordability" threshold (currently 9.56% of income for employer-sponsored insurance and 8.05% of income for an ACA-compliant bronze plan).

For many who don't qualify for marketplace subsidies but must look to the individual market for coverage, the mandate is already effectively dead - -and so is the market.  To cite just a couple of cases I've had cause to look up lately:

Tax math for dummies like me

The math is plain as day, and Senate Republicans have seized on it: According to the Joint Committee on Taxation, the nonpartisan tax policy counterpart of the Congressional Budget Office, the Senate tax bill cuts taxes on low and middle incomes more sharply than on higher incomes. Right?

Wrong, explains David Kamin, Obama's former Special Assistant to the President for Economic Policy.  The percent cut in your tax rate is very different from the percent increase in your after-tax income. Here is his chart  (with an adjustment at the top end for repeal of the estate tax, which JCT leaves out):

Trump thinks Putin's mind works like his

Trump's walk-back of his avowals that he believes Putin's denials with respect to interfering in US elections is a window into Trump epistemology.

Here's the walk-back:

I believe that he feels that he and Russia did not meddle in the election...I believe very much in our intelligence agencies...what he believes is what he believes.

That, incidentally, does comport with what he said about the Putin:

He said he didn't meddle. He said he didn't meddle. I asked him again. You can only ask so many times...Every time he sees me, he says, 'I didn't do that".. And I believe, I really believe, that when he tells me that, he means it.

Trump actually did not say that Putin didn't meddle. He said Putin "means it" when he say he didn't meddle.

In other words, Trump thinks, or purports to think, that Putin thinks like he does: Whatever he wants to believe is true is true. Or, whatever he finds convenient to affirm is true.

Hey, Republicans: Auto-enrollment is within reach

Put it in Chapter 1 of the Annals of Unintended (though not un-forecast) Consequences: Trump's cutoff of federal funds to reimburse health insurers for Cost Sharing Reduction (CSR) subsidies has made free bronze plans widely available to subsidized buyers in the ACA marketplace*.

So available, in fact, that the Kaiser Family Foundation has calculated that more than half of the 10.7 million people who are uninsured and eligible for marketplace coverage can find free bronze plans in the ACA marketplace, and 70% can access bronze plans for less than the cost of paying the penalty for going without coverage.

That paradoxical effect of cutting off funding for a subsidy suggests a political deal -- a second paradoxical effect.  Recall that ever since Democrats included the individual mandate in the various bills that became the ACA, Republicans have cast the mandate as a mortal threat to freedom -- and seek to this day to repeal (and maybe replace) it.

As a substitute for the mandate, several Republican bills and plan outlines included auto-enrollment of the uninsured in a catastrophic plan that would cost the enrollee nothing, since its premium would equal whatever subsidy the enrollee was eligible for.

For Whom the Bronze Bell Tolls in the ACA Marketplace

My last post looked at the likely impact of the availability of free or very cheap bronze plans for ACA marketplace customers who are eligible for strong Cost Sharing Reduction (CSR), available only with silver plans, in the five largest markets in the country.

In this post, we'll look at current CSR takeup in the five counties in question and consider how it's likely to change. Here are the counties, with their 2017 initial marketplace enrollment totals:

Miami-Dade, FL              387,848
Los Angeles, CA             380,520
Broward, FL                    240,984
Harris, TX (Houston)      240,064
Cook, IL (Chicago)         144,418

While bronze plans generally have deductibles above $6,000, CSR-enhanced silver plans, for enrollees with incomes up to twice the Federal Poverty Level, generally have deductibles in the $0-1,000 range. Silver plan premiums can be hard for CSR-eligible buyers to afford, though. The wider the spread between cheapest bronze and cheapest silver premiums, the more people will choose bronze.

Free bronze or CSR-boosted silver? The choice in 5 top marketplace counties

Trump's cutoff of federal reimbursement to insurers for Cost Sharing Reduction (CSR) subsidies has led to two pricing anomalies in the ACA marketplace that have rightly gotten a lot of attention: gold plans that are cheaper than silver plans (or close to it) in some regions, and bronze plans that are free for large swaths of the subsidy-eligible population.

The gold and bronze discounts* available in many regions of the country are an unmixed blessing for subsidized buyers with incomes above 200% of the Federal Poverty Level (FPL), who are eligible either for no CSR or very weak CSR. The blessing is more ambiguous for buyers with incomes below 200% FPL, however, because for them CSR, which is available only with silver plans, remains a major secondary subsidy. For these buyers, silver plans are priced as if they have an actuarial value of 70% (that is, are designed to cover 70% of the average user's medical costs) but, enhanced by CSR, have AVs of 94% (for buyers up to 150% FPL)  or 87% (for those in the 150-200% FPL range). That translates to an average deductible of $255 (for 94% AV) or $809 (for 87% AV), compared to over $6,000 for bronze plans.

That bargain remains in place. But silver plans can be quite expensive for low income enrollees. The premium for a benchmark silver plan ranges from 2% of income for those in the 100-138% FPL income bracket to 6.3% for enrollees at 200% FPL. The benchmark premium at 200% FPL comes to $127 per month in 2018.

Will the outsized bronze plan discounts available in many places this year tempt a lot CSR-eligible buyers into bronze plans?**  In 2017, over 85% of enrollees with incomes up to 200% FPL selected silver plans and accessed CSR in the 38 states that use the HealthCare.gov federal exchange.

To gauge whether discount bronze is likely to take a big bite out of CSR takeup this year, let's look at the choices facing CSR-eligible enrollees in counties with the most marketplace enrollees. In 2017, these were

Miami-Dade, FL              387,848
Los Angeles, CA             380,520
Broward, FL                    240,984
Harris, TX (Houston)      240,064
Cook, IL (Chicago)         144,418

CSR windfall: Will it have bronze or gold cast?

Those of us who have been anticipating the paradoxical effects for subsidized ACA marketplace shoppers of Trump's cutoff of CSR reimbursement have to split our gaze more between shiny objects.

Designed as an add-on benefit, CSR (Cost Sharing Reduction) radically reduces out-of-pocket costs for silver plan enrollees with incomes under 200% of the Federal Poverty Level (and much more modestly for enrollees in the 200-250% FPL range). Until this month, the federal government reimbursed insurers for the extra benefit. In 2018, insurers will price it in.

What excited folks like David Anderson, Charles Gaba and I* (though we're also appalled by the premium hikes for the unsubsidized) was the prospect that in many states and regions, gold plans would be cheaper than silver. That's because 38 states (according to Charles Gaba's tracking) instructed insurers to load the cost of CSR onto silver plans only, since CSR is only available in silver plans.

This has, um, panned out -- as we now know, since prices have been posted for almost all states. The cheapest gold plan is cheaper than the cheapest silver plan in Pennsylvania, Kansas, New Mexico, Wyoming, most of Texas and Wisconsin, much of Michigan and Florida (including Miami, which has the heaviest concentration of marketplace enrollees in the country), much of California, and parts of several other states. In other regions, the price of gold plans is closer to the price of silver plans than it used to be.

Alert: HealthCare.gov "plan preview" tool is malfunctioning [FIXED as 10/28]

UPDATE, 10/28/17: The main glitch identified in this post -- the HealthCare.gov "preview plans" tool's failure to calculate the subsidy accurately for households in which not all members are seeking marketplace insurance - was fixed in the late hours of 10/27.  The second glitch identified below, pertaining to CSR, is unlikely to be fixed.
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People concerned with the functioning of the ACA marketplace were pleasantly surprised yesterday when HealthCare.gov's "Preview 2018 Plans & Prices" tool went live a week in advance of the launch of Open Enrollment. And as I noted a couple of weeks ago, the information flow on the site is streamlined and well-designed, routing visitors as appropriate to check their eligibility for a special enrollment period for 2017, preview 2017 plans and prices, prep for 2018 enrollment, or apply for Medicaid if their income and state of residence indicates it. It has seemed so far that Trump administration sabotage of the marketplace has not so far extended to the federal exchange.

There are, however, important glitches in the functioning of the preview tool that are likely to seriously mislead some visitors.

The most important glitch was pointed out to me on Twitter (when I pointed out a somewhat more understandable one described below):

Try a married couple with spouse on Medicare. Subsidy estimate is way too big and every plan is free, even if more expensive than benchmark.

— Brian Setzler (@BrianSetzler) October 26, 2017

Like the Alka Seltzer guy, I tried it, and Mr. Setzler is right. If you enter info for a married couple,  and one has access to other insurance, the estimated subsidy is the same. In Essex County, NJ, for a married couple ages 40 and 38 with an income of $33,000 --- slightly over 200% of the Federal Poverty Level -- the estimated subsidy is $633, whether or not one has outside coverage.

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

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

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

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

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


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

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

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

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

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

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

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

Bronze and gold plan discounts in California, 2018

As I noted recently, Covered California has acted on its plan to shield marketplace enrollees from the effects of Republicans' CSR sabotage.  For 2018, a surcharge averaging 12.4% has been loaded onto silver on-exchange plans only (the only plans with which CSR is available) to cover the cost that until now has been reimbursed by the federal government.

We can now examine the effects of the surcharge, which I've done below.  The effects should theoretically be as follows (more detail here):

1. Off-exchange plan pricing should be unaffected by CSR; price differences between metal levels should remain proportionate to actuarial value at each level.
2. Enrollees with incomes under 200% of the Federal Poverty Level (FPL), for whom strong CSR is available, should be unaffected. Subsidies will rise to cover the additional premium, and silver plans will continue to offer outsized value, covering 94% (at incomes up to 150% FPL) or 87% (for incomes from 150-200% FPL) of the average user's costs.
3. Subsidized enrollees in the 200-400% FPL income range will see discounts in bronze and gold plans, since premium subsidies, which are keyed to silver plans, will rise to cover the inflated silver premium.

Let's look at how the expected bronze and gold discounts play out in some of California's 19 rating regions. Because California has standardized plan benefits at each metal level, relatively clean comparisons are possible -- though I would note that last year, relatively expensive PPOs (plans with broader provider networks) were popular in many areas.

Does the Alexander-Murray bill adequately protect vulnerable groups?

The changes to the ACA's Section 1332 state innovation waivers in the Alexander-Murray marketplace stabilization bill  have broad support, having been proposed by multiple HELP Committee hearing participants and endorsed by bipartisan outside advocates including  former acting CMS director Andy Slavitt, one of the ACA's most vocal defenders. These include providing for an expedited waiver process, an emergency waiver process, and the creation of "cookie cutter" waiver templates that multiple states may opt to adopt. (There are dissenters, however, as discussed below.)

Also a matter of broad consensus: easing the terms by which states meet the requirement that a waiver proposal be budget-neutral by 1) allowing states to combine Section 1332 waivers with Medicaid and CHIP waivers and using savings from one to offset extra spending on another, and 2) considering budget impact over the 6-year term of the waiver and a ten-year budget plan.

There is one alteration, though, that gets to the crux of the debate over state flexibility, and was probably a matter of intense negotiation. That is a change to the so-called "guardrails" pertaining to quality and affordability of coverage.

Wrong, wrong, wrong, wrong, wrong

Quick, ACA marketwatchers: what's wrong with the headlines below?

Trump didn't end the Cost Sharing Reduction benefit,  of course, He didn't end government funding for CSR, either -- he just redirected it into a less efficient channel that will cost the Treasury hundreds of billions, hurt unsubsidized enrollees in states that don't make insurers price in CSR in the most efficient way, and provide a windfall for many more affluent subsidized enrollees in states that do concentrate the premium hike where it belongs, in on-exchange silver plans.

Those headlines did a real disservice. A lot of people in this country must be under the impression that a major ACA benefit has been stripped away.  The ledes in many cases did not repair the damage.

60% of ACA marketplace enrollees with CSR are in nonexpansion states

In February of this year I noted that the 19 states that refused to implement the ACA Medicaid expansion comprised 38% of the U.S. population but 53% of ACA marketplace enrollment and 60% of enrollees who accessed Cost Sharing Reduction (CSR) subsidies.

That seems relevant now that Trump has abruptly cut off federal funding for CSR, stiffing insurers for the remainder of this year and leaving them to price the benefit into their 2018 premiums. I've pasted the whole of the post below. Enrollment stats are as of March 31, 2016. There's a state-by-state breakout at bottom of population, CSR enrollment and APTC (premium tax credit) enrollment. This year's enrollment breakout would be roughly proportionate: nationwide, the same 57% of enrollees access CSR. As of the end of the first quarter 2017, CMS reported 10.3 million total enrollees (which, per Charles Gaba, may well have been an undercount, leaving out up to a half million late enrollees), compared to 11.1 million at the same point in 2016.

Before getting to the repost below, a few notes:

1. Many observers are drawing a somewhat misleading conclusion from the high concentration of CSR enrollees in red states. They will be hurt by the CSR funding cutoff only insofar as insurers pull out of the market -- and, longer term, by the thinning of the risk pool caused by unsubsidized enrollment dropping off, which will reduce competition and so plan choice. Unsubsidized enrollees bear the brunt of the premium increases driven by the cutoff of federal funding for CSR. And most of the damage on that front is already done, as most insurers in most states filed rates assuming that CSR would not be reimbursed in 2018 (and/or accounting for more general politically induced uncertainty).