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What Will Shape Joe Biden’s Health Care Agenda?

I’m thrilled to have health futurist Jeff Goldsmith back on THCB, and given Biden was only confirmed as President-elect this morning, his article on what to expect is extremely timely!–Matthew Holt

By  JEFF GOLDSMITH

The Trump administration’s health care journey began with a trillion dollar near miss–the failed Repeal and Replacement of ObamaCare- and ended with a full-on train wreck, the catastrophically mismanaged COVID epidemic that will have claimed 300,000 lives by the time he leaves office. After four years of posturing and lethal incompetence, it will be a relief to see caring and professionalism return to the White House health policy under President-Elect Joe Biden.   

Like Inheriting a Badly Managed World War

Like Barack Obama, Joe Biden will be saddled at the beginning of his regime with a damaged national economy. He will also walk in the door to the immediate need to manage the greatest public health catastrophe in a century as well as its economic consequences–a deep and enduring recession. Biden will be inheriting the equivalent of a badly managed World War we are presently losing.

Public health professionals who were marginalized by Trump will be challenged not only to craft coherent policy to contain and extinguish COVID  but also to sell it to a frightened and polarized general public, many of whom reject the need for basic public safety measures.    

Controlling COVID and rebuilding the critical public health agencies–CDC and FDA–that have damaged by political meddling will consume the lion’s share of the administration’s health policy bandwidth in its first year. It will be pressed to address a huge readiness gap–from critical PPE supplies to the development and deployment of testing and tracing capability to public health co-ordination and messaging–for the next pandemic. Increasing the presently inadequate level of public health funding (less than $100 billion a year in a $21 trillion economy) seems inevitable.

The inability of Congress to produce a fall round of COVID relief will create pressure on Biden to take immediate action to help struggling sectors of the economy, like airlines, restaurants and hospitals, as well as further help for the long term unemployed. Only a little more than half of the 22 million jobs lost in the spring have returned by November. Twenty million Americans were stranded by the July expiration of supplemental unemployment benefits as well as countless millions more “free agents” and contractors not eligible for traditional unemployment that are losing coverage at the end of the year. Mortgage, credit card and consumer loan forbearance are ending, and unless Congress acts, acres of rotten credit will turn rapidly into a banking and bond market crisis which the Federal Reserve cannot fix by itself.   

State governments face FY21 deficits equaling $500 billion over the next two years , against a current annual spending base of about $900 billion.  Further assistance to state and local governments will almost certainly include an additional increase in the federal match for Medicaid (FMAP), beyond the 6.2% temporary increase passed in March). Medicaid enrollment will likely top 80 million by mid 2021, almost one-quarter of the US population. Some states will have upwards of 40% of their population on Medicaid by mid-2021.

States laboring under severe revenue shortfalls will be unable to afford the expanded Medicaid program that was part of ObamaCare without a further increase in the FMAP rate.  President Trump and Senate Republicans blamed the state and local government fiscal crisis on profligate Democratic mismanagement, and blocked aid to them during 2020. But Texas, Florida, Georgia and other red states have the same problems New York and California do. 

Serious Fiscal Limitations Push the Health Policy Agenda Away from Coverage Expansion

Barack Obama entered office with a FY08 federal deficit of $420 billion. Joe Biden enters with a FY20 deficit of $3.1 trillion and a baseline FY21 deficit of $1.8 trillion, before adding the cost of the likely additional trillion dollar-plus stimulus package early next year. It will be passed over the dead bodies of Republican Congressional leadership suddenly recommitted to deficit reduction after racking up $8 trillion in deficit spending during the four years they controlled the federal government.

Coverage Expansion via Medicare and Public Option Unlikely

That deficit will significantly constrain a further expansion of health coverage. Not only will “Medicare for All” be off the table. Severe fiscal pressures will cause the new administration to “slow walk” a public option (which would require federal subsidies to implement) and Medicare expansion to people over age 60. These expansions were going to be  controversial and politically costly because they would be fiercely contested by hospitals and other care providers concerned about the erosion of their commercial insured customer base (the source of perhaps 130% of their bottom lines) as well as the use of Medicare as a de facto price control lever. 

By the time Biden addresses the first two problems–COVID and the economic crisis–he will probably have expended his limited stock of political capital and be weakened enough to be unable to take on the large messy issues of health coverage expansion and cost control. The Affordable Care Act exhausted Obama’s store of political capital, by early 2010. His administration’s failure to turn the economy cost the Democrats control of the House of Representatives and 20 (!) state legislatures in 2010.

What Can Biden Do in Health that Does Not Require Federal Spending?

Thus, the focus of Biden health policy is likely to be on items not requiring fresh spending.

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Why Should You Care Whether or Not Your State Decides to Expand Medicaid Coverage?

By expanding Medicaid, the state-federal partnership that offers health insurance to low-income Americans, the Affordable Care Act set out to cover some 17 million uninsured – or roughly half of the 34 million who are expected to gain coverage under reform. But when the Supreme Court ruled on the Affordable Care Act in June, it struck down a key provision which threatened that if a state refused to co-operate in extending Medicaid to more of its citizens, it could lose the federal funding it now receives for its current Medicaid enrollees.

In a 7-to-2 decision, the justices ruled that this punishment was too coercive: “withholding of ‘existing Medicaid funds’ is ‘a gun to the head’” – that would force states to acquiesce.

As a result, states can, if they choose, opt out of the Medicaid expansion, and some governors are threatening to do just that – even though the federal government has committed to pay 100 percent of the cost from 2014 to 2017. After that, the federal share would gradually decline to 90 percent in 2020, and remain there. This is a generous offer; today the federal government now picks up just 57 percent of the Medicaid tab.

Nevertheless, some states claim that the 10 percent that they would have to ante up after 2020 is more than they can afford. A few go further and admit that this isn’t just about money: by rejecting the federal funds, they are voicing their objection to “Obamacare.”

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States Should Opt Out of Medicaid — All The Way Out

With over a dozen conservative states leaning against expanding Medicaid to cover poor workers without health insurance, perhaps it is time to resuscitate an idea embraced by President Ronald Reagan. Let the federal government take over Medicaid lock, stock and barrel.

In 1982 the president who ushered in the modern conservative era offered to assume federal responsibility for the program that now consumes over 22 percent of state government budgets in exchange for states taking over welfare. His offer built on a series of recommendations going back to 1969 by the U.S. Advisory Commission on Intergovernmental Relations, which called for a federal takeover of all public assistance programs.

President Obama’s health care reform law, if it survives the final hurdle of next November’s election, could give that idea new life. Under the Affordable Care Act, states are responsible for creating insurance exchanges where individuals and businesses can buy individual or group health plans.

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What Romney Should Do On Health Care

Americans believe in second chances. Mitt Romney will get his if the Supreme Court rules to throw out part, or all, of the president’s federal health insurance law. Should Romney propose replacing it with a federal version of the Massachusetts health law or a federal mega-bill that mandates a one-size-fits-all free-market solution?

The question is now central to the election — the high court has made that certain — and eclipsed in importance only by the debate over jobs and the economy.

President Obama may cite Romney’s Massachusetts reform as an inspiration for his own efforts, but there are profound differences between the laws — the size and reach, financing, the underlying philosophy. Romney sought an open marketplace for individuals to purchase benefit plans ranging from catastrophic to generous. Romney’s successor, Democratic Governor Deval Patrick, has obscured those differences by taking a big-government approach to implementation, drastically limiting choices and mandating minimum coverage levels beyond private-market norms.

Even with weak implementation, the Massachusetts law has yielded some positive results, including broadening insurance coverage, especially for minorities, and decreasing premiums for individual purchasers of insurance.

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The Case For the Exchanges


The Federal government will push forward to establish health insurance exchanges regardless of how the Supreme Court rules on the Affordable Care Act in the weeks to come, argues THCB contributor Maggie Mahar.  The only sensible conclusion?  The states should accept Washington’s help and open up the market for insurance online.

The Affordable Care Act (ACA) calls on the states to create health insurance exchanges – marketplaces where individuals and small businesses can shop for and compare health insurance plans. Beginning in 2014, insurers peddling policies on an exchange will have to meet the ACA’s standards by covering “essential benefits,” capping out-of-pocket expenses for individuals, and offering more transparent information about costs and benefits.

Best of all, insurers will not be able to turn down customers suffering from chronic diseases, or charge them higher premiums.

So far so good.

But some states are attempting to derail “Obamacare.” Florida, Louisiana and Alaska have openly declared that they will have nothing to do with setting up exchanges. Last week, Politico.com reported that many others are stalling. The post quoted one consultant predicting that “between five and 10 states” will meet the 2014 deadline. The American Prospect confirmed the news, adding that some states that had begun making plans “have slowed down while awaiting the Supreme Court ruling on the health law.”

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Will the Feds Be Ready?

Insurance exchanges have to be up and running in all of the states by October 2013 in order to be able to cover people by January 1, 2014.

If the states don’t do it, the feds have to be ready with a fallback exchange. States have to tell HHS if they intend to be ready by January 1, 2013.

The White House just released a report saying that good progress is being made in 28 states. That begs the question, what about the other 22?

Writing in Kaiser Health News, Julie Appleby recently reported that HHS has let just two contracts toward building the federal fallback exchanges. One is for $69 million to build the data hub so that federal agencies can share data with the exchanges–the IRS for example. The other contract is more directly related to building federal fallback exchanges, a $94 million contract.

But in their progress report today, the administration said that they have already advanced $729 million to the states for exchange construction––17 of those states receiving $1 million, or less. So, more than $700 million has gone to 33 states–and that is just federal money to date.

If the feds are going to be ready to launch 10 or 20 federal fallback exchanges these numbers just don’t compute. It is going to take a lot more than the $94 million HHS has contracted for to launch that many federal exchanges in the states that refuse to do so.Continue reading…

Too Many Promises

I don’t know what it is about public officials and Ponzi schemes, but the former finds the latter irresistibly attractive almost everywhere. Maybe it’s the fact that the law lets them get away with it. They get off scott-free when they do the very same thing that landed Bernie Madoff in the hoosegow.

Although national attention tends to focus on Social Security, Medicare and other unfunded federal obligations, many state and local governments are in far worse shape. As I explained at my blog the other day, post-retirement health care promises are the fastest growing component. I believe we are on the cusp of a spate of local bankruptcies. Although states cannot declare bankruptcy, they can default on their debt. In California, this seems almost inevitable.

Did you know that the average state has unfunded retiree benefits equal to more than one-fifth (22%) of the income of its residents? Seven states (Alaska, Ohio, Hawaii, New Jersey, New Mexico, Illinois and Kentucky) have unfunded obligations in excess of one-third of their states’ annual income. In Alaska, it’s about half (48%). Take Ohio, for example. The state needs 41% of one year’s income of its citizens right now — in the bank, earning interest — in order to fund its future obligations. And if it doesn’t do that this year, next year it will need even more.

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Are The Attorneys General’s Constitutional Claims Bogus?

6a00d8341c909d53ef012876544c5e970c-320wi Immediately after passage of health care reform, over a dozen state A.G.s sued to declare it unconstitutional, as violating states’ rights. The Florida complaint is here, and Virginia’s here. Reminiscent of southern governors in the 1960s blocking their state universities’ gates, these legal officers in effect are saying “not on our sovereign soil.” Since the constitutional issues have already been hashed through so thoroughly, what’s new to talk about?

First, the Florida complaint, which a dozen other states joined (AL, CO, ID, LA, MI, NE, PA,SC, SD, TX, UT, WA), focuses mainly on the financial burdens of expanding Medicaid. This is challenged under the “commandeering” principle, as requiring states to devote sovereign resources to achieve federal aims. But, as we know, states are free to withdraw from Medicaid, so the argument seems to fall entirely flat. The complaint makes a bait-and-switch type of estoppel argument , that states got into Medicaid without any expectation of this expansion, and now it’s too damaging for them to withdraw. So, in effect, states argue that the Constitution allows them to keep the federal carrot but refuse the federal stick. Good luck selling that to an appellate court.Continue reading…

States Should Have Flexibility to Develop Own Health Reform Plans

One issue has generated little discussion during the heated health care reform debate: whether states should have the right to develop their own approaches to universal coverage.

The Health Security for New Mexicans Campaign wants to see language included in the national proposal that gives states flexibility to develop their own approaches to solving rising health care costs and growing numbers of uninsured.

The focus of current health care reform proposals is to create “insurance market exchanges.” These one-stop-shopping insurance exchanges must offer consumers — primarily the uninsured — choices of different insurance products, including some type of public option. A less than robust public option is in the proposal passed by the House of Representatives. The Senate is in the process of negotiating an alternative to the House version.

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