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Tag: Health Plans

Reforming Health Reform

It may say something about expectations for the Affordable Care Act that the simplistic “just repeal Obamacare” cries of Congressional Republicans are starting to be supplemented by proposals for its replacement.

The most detailed so far is from the conservative American Enterprise Institute, which has published an unexpectedly non-doctrinaire study authored by Harvard professor Michael Chernew and seven other respected academics.

It’s far from perfect, but it’s worth reading.

Structural details of the AEI proposal, modestly titled “Best of Both Worlds,” aren’t always clear (page 1 lists four “principles,” page 5 lists five “priorities”, and page 16 lists three “major planks”), but it does attempt a bipartisan approach, combining ideas from left and right.

Some of these ideas have been contained in other proposals, such as those of Wyden and Bennett and Fuchs and Emanuel (which may damn the AEI proposal in right-wing eyes), and most recently in a THCB piece by Martin Gaynor. They include the elimination of the employer coverage tax preference, the provision of “premium support” subsidies for most individuals, and the establishment of a national insurance exchange. Together, they are designed to encourage individual choice and responsibility and to maximize competition between insurers, while removing some of the inequities of the present system (and of the ACA).

The AEI proposal assumes that eliminating the employer coverage tax preference will result in most individuals obtaining coverage through a national exchange, with national regulation of insurance plans. Current Medicaid eligibles will be included, with the replacement of acute care Medicaid funding by subsidies for conventional coverage. All individuals will be able to choose between fully-subsidized “basic plans” and more generous partially-subsidized options, typically with substantial deductibles tied to income and health status. Insurers will be encouraged to offer multi-year coverage and, unlike in the ACA, medical underwriting will be allowed. The only government financing will be for premium subsidies, to be funded by the additional income and payroll tax revenues resulting from elimination of the employer tax preference and by redirecting federal and state Medicaid payments.

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Health Exchange Confusion: Why We’re Getting the IBM Story Wrong

I was a bit surprised by the front-page headline and accompanying article in the weekend Wall Street Journal (IBM to Move Retirees Off Its Health Rolls). The headline and subtext of the article are that IBM is ending health benefits for retirees, leaving them to fend for themselves. But as I read through the specifics that doesn’t appear to be at all what’s happening. Unfortunately, the article’s main impact is to leave an unduly negative impression of private health insurance exchanges.

Retiree health benefits are a big deal, especially for employees who retire before they reach the Medicare eligibility age of 65. A typical early retiree in his or her 50s will face high premiums in the individual market compared to a younger, and typically healthier, person. If they are among the few whose company provides generous coverage they are very lucky.

[On a side note, life is about to get easier for early retirees who have to buy their own insurance, thanks to Obamacare’s banning of medical underwriting and limits on the ratio of premiums charged to older people versus younger ones.]

When a person turns 65 life gets a lot easier on the health insurance front as the federal government takes over the vast majority of costs. As a result, a retiree on Medicare is much cheaper for an employer to provide health care benefits to, since they are essentially just paying for supplemental coverage.

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The 9th Grade Class Does Obamacare Math (Can Journalists Do the Same?)

Welcome, students, to our special combined 9th grade math and civics class. Today, we’re going to look at the “Cadillac tax” in the Affordable Care Act.

Yes, Mitt, you have a question already? No, no, “Cadillac tax” is just an expression. No one is going to tax your family’s cars, Mitt, I promise.

Paul, you also have a question? I’m sorry, Paul, but if you had done the reading, you would know that the “Affordable Care Act” and “Obamacare” are the same thing. And yes, it is still the law, as I must have told you and your friends 40 times. Now can we get on with the class?

As those of you who did do the reading know, most American workers get their health insurance through their employer. The company, in turn, is allowed to deduct the cost of that insurance from its taxes. If the insurance for workers is very generous, it can encourage people to use too much medical care. This not only drives up costs, but we all pay for it a second time through the tax code. The Affordable Care Act addresses that problem by placing an excise tax on rich benefit plans starting in 2018, which is informally known as the “Cadillac tax.”

Economists of all viewpoints generally agree that an open-ended tax deduction for health insurance encourages overconsumption. What do we call that kind of agreement? Michelle?

No, Michelle, I’m afraid, “liberal conspiracy” is not the answer I was looking for. “Bipartisan consensus” was the correct response.

Rand, you seem quite agitated. Yes? “Government intervention in markets is never the right answer.” OK. Well, Rand, let’s talk about that another time and move on from civics to the mathematics part of today’s lesson. We’ll start with a word problem from the New York Times.

The Times quoted a study from a health policy journal as saying that 75 percent of health plans could be affected by the Cadillac tax over the next decade. That’s a big number, isn’t it?  And the tax itself is 40 percent – another big number. No wonder the story was on the first page of the Business section.

But here are a few other numbers from the same study: just 16 percent of plans are likely be affected by the tax when it starts in 2018 ­– a much smaller number. And the “next decade” the study is talking about starts in 2018. What the study actually says is that by 2029 the tax could reduce benefits for affected plans by 3.1 percent. That’s an even smaller number and even further away.

Class, why would the New York Times emphasize the biggest numbers they could find?

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Are Employers to Blame For Our High Medical Prices?

In a recent New York Times blog, Uwe Reinhardt places much of the blame for high and rising medical prices on passive employers. He argues that employers should work just as hard to reduce healthcare benefit costs as they work to reduce other input costs. But he then observes:

“One reason for the employers’ passivity in paying health care bills may be that they know, or should know, that the fringe benefits they purchase for their employees ultimately come out of the employees’ total pay package. In a sense, employers behave like pickpockets who take from their employees’ wallets and with the money lifted purchase goodies for their employees.”

I think that Reinhardt gets the economics wrong here and, in the process, he puts too much of the blame on employers. Reinhardt is right in one respect – employees care about their entire wage/benefit packages. If benefits deteriorate, employers will have to increase wages to retain workers. Thus, it seems that if an employer reduces benefit costs, it must increase wages by an equal amount. If that is true, we can understand why employers are passive.

The correct economic argument is a bit more nuanced. Employees do not care about the cost of their benefits; they care about the benefits. If an employer can procure the same benefits at a lower cost, the employer need not increase wages one iota. In this regard, there is nothing special about health benefits. Suppose an employer offers employees the use of company cars. Workers don’t care what the employer paid for the cars, and if the employer can purchase cars at a deep discount, it will pocket the savings.

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Will the Affordable Care Act’s Health Insurance Exchanges Be Ready On Time? The Obama Administration’s Top Secret Enterprise

Last week, I received my weekly email update from the Maryland health insurance exchange:

Maryland Health Connection completed its Final Detailed Design Review (FDDR) live system demo on Thursday, May 30. The FDDR is a federal stage-gate required of all state-based exchanges. Maryland Health Connection successfully demonstrated end-to-end enrollment of a split family scenario including user log in, eligibility determination, real-time data verification through the Federal Data Services Hub, enrollment into plans, payment and file generation to be sent to an insurance carrier. This major information technology milestone received high marks by federal partners. We will continue with development of Maryland Health Connection over the next several weeks and begin user acceptance testing in July.

This report tells us a few things.

First, the Maryland health insurance exchange is on track to launch on time and ready to serve all comers. I continue to be impressed by how well this state-run health insurance exchange is working toward implementing the Affordable Care Act (“ObamaCare”) on October 1, 2013.

Second, apparently the Federal Data Hub is up and running. While that is what the Obama administration has been telling us, it has been hard to find anyone who has actually seen it or used it.

Third, Maryland has its system ready to exchange eligibility and premium information with the health insurance plans––perhaps the biggest challenge the new exchanges, state or federal, face.

Across the country, I am not so worried that consumers will have a website to go to on October 1 in order to shop for the new health plans as I am concerned with how things will go on January 1, 2014 when patients show up in a doctors office. If we don’t have a clean exchange of eligibility and payment information there are going to be lots of people who will have their doctor or hospital telling them they don’t know anything about their coverage.

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When Retiree Benefits and Obamacare Collide

Oct. 1, 2013 is a focus of increasing anxiety in this country. That’s the date when enrollments begin for the federally run health insurance exchanges, created under the Affordable Care Act (ACA). No one really knows what to expect, but it could be far worse than advertised —and for a reason that has more to do with the federal deficit than health care.

What’s anticipated is unsettling enough. President Obama speaks of inevitable “glitches and bumps” in the implementation. Senate Finance Committee Chairman Max Baucus (D-Mont.) sees the possibility of “a huge train wreck” if the public isn’t adequately educated and prepared. Supporters of the ACA, especially Democrats in the Congress, are nervous about taking the blame if the exchanges don’t unfold as intended.

All these worries are legitimate. The American people, already burdened by a numbingly complex, inefficient and inequitable tax system, now wonder if an increasingly government-run health care system will follow suit. Many are concerned that some employers will dump their current health care plans and pay the relatively modest fine. There’s also worry that young people will opt out of the exchanges (preferring to pay the small penalty), leaving the exchanges with a disproportionately older and sicker pool. Then there’s the very real uncertainty surrounding the ACA’s ultimate cost — illustrated by the impact of Medicare alone, which the Office of the Chief Actuary of Medicare estimates could cost cost $10 trillion more than claimed.

Amid all these concerns and speculations, almost no attention is being paid to the opportunity that the ACA’s insurance exchanges could represent for state and local governments’ retiree health care programs. It’s time to think about it because the consequences could be far-reaching.

States in a deep hole

We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.

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Is the Suspension of the Pre-Existing Condition Insurance Plan a Preview of Obamacare’s Failure?

Following the Obama administration’s announcement about the suspension of enrollment in a high-risk health insurance program known as the Pre-Existing Condition Insurance Plan, a flurry of commentary began on what the move means for the Affordable Care Act.

Some observers said that the program’s underwhelming enrollment numbers and high costs foreshadow inevitable problems with the ACA’s health insurance exchanges, while others drew a clear division between a program intended to insure only those with pre-existing health conditions and state marketplaces designed to spread risk by insuring both those who are sick and those in good health.

Two months after the halted enrollment, the debate continues.

Closing the Pools

The high-risk pools were designed to help sick U.S. residents gain coverage ahead of January 2014, when the ACA’s ban on denying individuals coverage because of pre-existing conditions will take effect.

In early February, the administration announced several cost-saving reforms intended to prevent the $5 billion program from running out of money. However, on Feb. 15, HHS officials announced that enrollment in the high-risk pools would end because of rising costs and limited funding.

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Obamacare’s Other Benefit

If it is done right, the Affordable Care Act (a.k.a. Obamacare) may well promise uninsured Americans a lot more than cheap, reliable medical care. It can also open the door to the democratic empowerment of millions of poor people, who are often alienated from much of the nation’s civic life, by strengthening the organizations that give them a voice.

This year more than 30 million uninsured Americans are to begin signing up for Obamacare, but the vast majority of those eligible for either the expanded Medicaid program, or for subsidized private health insurance through state health exchanges, have no idea how to enroll. Surveys and focus groups have found that up to three-quarters of Americans who might directly benefit from the program are skeptical that the law can provide high-quality insurance coverage at a price they can afford.

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Six Months Out Health Plan Execs Say They Doubt Exchanges Will Be Ready

As the Obama administration continues its top secret effort to build federal insurance exchanges in about 34 states while 16 states are doing it on their own, that continues to be the big question.

HHS is using IT consulting firm CGI for much of the work on the exchanges and the federal data hub. CGI has their plate full since they are not only working on the federal exchange but also doing work for the state exchanges in at least Colorado, Vermont, and Hawaii.

Earlier this month, the Senate Finance Committee held an oversight hearing. The Obama guy in charge of exchange development testified before them. I thought it was notable that it was the Democrats who expressed the greatest concern, and frustration, over senators not getting a clear idea for just where the administration is toward the goal of launching the new health insurance exchanges on October 1.

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Case Study: What Should the Health Plan Executive Do?

Here’s a hypothetical question Roger Longman posed to a panel at the recent Real Endpoints Symposium that is probably worth a little thought from everyone; since the issues raised are intended to be general, I’ve modified this scenario slightly to try to make it as non-specific as possible, so it explicitly doesn’t (and isn’t intended to) apply to a particular disease state or to particular drugs.

Here’s his hypothetical:

Let’s say you are the CMO of a not-for-profit health plan, and are considering costs and reimbursement approaches associated with therapies for a disease that could be treated with Drug A or Drug B. The disease doesn’t cause any symptoms, but if untreated, serious organ damage could occur after many years. Drug A offers a 95% cure rate. Drug B offers a 88% cure rate. The manufacturer of drug B offers a very good economic deal to the payor, saying “If you place our drug first, we’ll offer you excellent pricing and also pay for patients who are failed by our drug to receive drug A.” What would you do?

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