Revisiting Cassidy 2015 as a potential deal

Margot Sanger-Katz from the NY Times flags an interesting pre King vs. Burwell Republican plan that could actually pass the Senate with more than sixty votes.  It was designed to deal with a conservative win in King vs. Burwell.

Let’s look at it with the 53 page PDF here:

Section 101 is the three options a state has if the Supreme Court ruled in favor  in King in King v Burwell and thus knocking out advanced premium tax credits for people who lived in states.

Option 1 would be to stay under PPACA and establish a state based exchange. Option 2 would be a complete withdrawal from PPACA with no subsidies. Option 3 would be to establish a HSA-like equivalent of coverage with most of the regulator requirements, taxes and mandates of PPACA thrown out. This is actually interesting if the funding makes sense. The default assumption is a complete opt-out. States would have to to opt into either Option 1 or Option 3.

Section 102 talks about the state alternative with HSA. It wipes out mandates and federal regulation. Essential health benefits, minimal actuarial value coverage and other regulatory requirements of PPACA that define a qualified health plan also are junked in this section. 102-4-A authorizes an initial HSA grant and the rest of 102-4 describes the mechanics of that grant. 102-C establishes a public health block grant that is 2% of the eligible funds for the HSA.

Section 103 determines the size of the HSA subsidy. This is where the money matters. The HSA amount is age and geography adjusted which is very similar in function as the ACA benchmark Silver is determined by zip code and age of the recipient. Bingo — 103-1-B is meaty.
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Is there any space for a Medicaid deal in N.C.?

Yesterday, a federal judge issued a 14 day temporary restraining order against the federal government granting the Cooper Administration’s request for Medicaid expansion. I am unsure if there will be more federal judges or if this is the end of the Governor’s request, because 14 days is lots longer than the Obama Administration has left.

In the longer run, is there any space for a Medicaid deal between the Governor and the General Assembly? A few thoughts:

  • North Carolina’s pending Medicaid 1115 waiver will be taken up by the Trump Administration. I doubt a Clinton Administration would have granted it without an expansion of coverage, but who knows what the Trump administration will do on any topic. But, the executive branch implements changes to Medicaid and typically negotiates with CMS about such things. Governor Cooper has obviously shown policy initiative here whether you agree with what he did about expanding Medicaid, or not. And he has nominated a seasoned health policy professional with great experience running CMS as his own Secretary of HHS–you couldn’t ask for a more capable secretary to lead a negotiation with CMS and to roll out a reform. The General Assembly needs the Governor and his team to bring about the reforms they desire for Medicaid.
  • The Governor showed the policy priority that is coverage expansion for Democrats by stating his intent to expand Medicaid as he did, at some risk politically. That may be dead, but the winds of health reform that have blown nationally in the face of Dems politically for the past 6 years are getting ready to change 180 degrees (google loss aversion). There will almost certainly be some maintenance of extra federal monies to states for expanding coverage to low income persons (just look at the GOP Senators asking for this in States that have expanded), and if there is not a maintenance of the private insurance coverage gains that have come via the ACA, there are going to be 500,000 angry North Carolinian’s with subsidized coverage today who no longer have it. To expand coverage, the Governor will need to the General Assembly to finance North Carolina’s share of any such coverage expansion using federal money with presumably fewer strings attached than in the ACA 1.0.
  • I can think of one big idea that could improve the odds of a deal. First, assuming new flexibility for states in Health Reform 2.0, I would suggest the state saying we will work to expand coverage of low income persons and reforming the delivery system while giving the federal government the responsibility for financing Long Term Care in Medicaid, especially for the so-called dual eligibles who are covered by Medicare and Medicaid (much reading on this here). The dual eligibles are the most expensive part of Medicaid and their care wasn’t changed by the ACA, and the pending 1115 waiver doesn’t address dual eligibles. Off-loading financial responsibility for this group while taking more responsibility for low income persons in return for flexibility in how that is done is a trade that makes sense for N.C. because this effort can more directly help us move towards a stable safety net and individual insurance market to run along side our employer based insurance system.

The short, and obvious answer is that the Governor and the General Assembly need each other to achieve their goals. And the people of North Carolina need for them to figure this out. Perhaps the policy space needs to expand to work out a deal that makes sense for everyone.

ACA Element inventory

The ACA is a complicated law.  It has a lot of moving and interacting parts in it.  It also has parts that can be severed from the rest of the law without significant operational impact.  I want to conduct an inventory of the major elements that we will need to be familiar with during the second round of healthcare and health finance reform debate.  A basic understanding of what the different parts of the law do and how they play nicely with the other parts of the law will put you in good shape over the next couple of months.

I will break things down to the broadest stand alone structure and make comments as needed.

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Advance Care Planning in Medicare: Year One

On January 1, 2016, Medicare began reimbursing physicians for Advance Care Planning (ACP), using the following CPT Codes:

CPT Code 99497 – Advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; first 30 minutes, face-to-face with the patient, family member(s), and/or surrogate


CPT Code 99498 – each additional 30 minutes (List separately in addition to code for primary



According to the AMA’s CPT Assistant, advance care planning “involves learning about and considering the types of decisions that will need to be made at the time of an eventual life-ending situation and what the patient’s preferences would be regarding those decisions.”

Paying for ACP incentivizes health providers to have these conversations with their patients and clearly demonstrates the value that Medicare places on this service. According to the Institute of Medicine’s pivotal report, Dying in America, patients often fail to obtain the care they need at end of life, and an uncoordinated and inefficient delivery system incur unsustainably high costs. Broader delivery of advance care planning could help address two key priorities from the report—ensuring that patients’ needs and goals of care are met, while reducing unnecessary costs resulting from uncoordinated care.

What’s remarkable about Medicare’s implementation of ACP reimbursement is how unrestrictive it is for billing providers. There are no limits set on appropriate use of the code related to place of service, diagnosis, frequency, or provider type (any primary care or specialist physician, nonphysician practitioner, or other staff under a treating physician can deliver the service, with no required training), and it can be billed independent of and on the same day as E/M services. The ACP conversation does not even need to be delivered directly to the patient, but can be had with a family member or surrogate instead.

As ACP claims are now being adjudicated, in practice, Medicare has not placed any additional limitations on the general CPT description. The rule authorizing payment of the new codes included no national coverage determination, which means that the regional Medicare Administrative Contractors (MACs) “are responsible for local coverage decisions in the absence of a national Medicare policy.” In early 2016 we contacted the MACs responsible for each of the 10 jurisdictions and learned that none had a specific local coverage determination in place, nor did any have plans to develop one.[1] Since then, CMS released an FAQ document in July explicitly clarifying that qualified providers may bill for ACP with no limitations related to place of service, diagnosis, or frequency, and that while providers should refer to their MAC for minimum documentation requirements, completion of an advance care directive is explicitly not required to bill for the service. Shortly after implementation, one of the MACs was denying ACP claims based on place of service codes, but quickly attributed the problem to system error rather than a deliberate coverage determination and reversed those claims.

For comparison’s sake, consider smoking cessation counseling (CPT codes 99406 and 99407), which CMS made a covered benefit in 2010. It’s similar to ACP since it’s a conversation delivered by a provider and aimed at improving patient health and reducing future costs of smoking-related illness. However, some  reasonable and intuitive limits are placed on billing of the code—Medicare requires that the patient be a smoker with corresponding diagnosis codes reported, cessation counseling attempts can only be billed twice per year, and although some state Medicaid programs permit billing for cessation counseling with the parents of patients with child eligibility coverage, CMS otherwise only pays for counseling directly to patients.

The lack of restrictions on ACP reimbursement is not a simple oversight by CMS, but seems to be a conscious decision to encourage widespread provision of the service. In the Federal Register for the 2016 Physician Fee Schedule that establishes ACP as a covered benefit, CMS acknowledges the comments it received with concerns about lack of a national coverage determination and potential for abuse of the code, but provided the following response:

We believe it may be advantageous to allow time for implementation and experience with ACP services, including identification of any variation in utilization, prior to considering a controlling national coverage policy through the National Coverage Determination process (see 78 FR 48164, August 7, 2013).


As the first full year of ACP billing in this laissez faire environment concludes, the claims record will start to reflect any increase and/or variation in utilization of the code. A national survey of both primary care and specialist physicians conducted at the start of the year found that 75% of respondents reported being either much more likely or somewhat more likely to talk with patients about advance care planning thanks to the new Medicare benefit.

If utilization of ACP does in fact increase, it may still be years before robust claims and medical record data indicate whether these conversations impacted end-of-life care decisions and reduced cost to the Medicare program. However, as a final point, it’s worth considering reimbursement in the context of the payment reform transformation currently underway as Medicare and other payers move from fee-for-service models to value-based arrangements.

In the prevailing fee-for-service environment, ACP has been a service with obvious potential benefits for patients and payers, but not necessarily for providers, who may have recognized the importance of ACP conversations but encountered barriers to delivery and have to balance meeting the many demands of their practice and patient panel. In a value-based payment future—where providers will be accountable for quality of care but also able to share in savings realized through better coordination of end-of-life care—patient, provider, and payer will all be organically aligned to place high value on delivery of ACP. Given the high costs and unique demands of end-of-life care, health system embrace of ACP could prove to be a key driver for achieving the triple aim of improved quality of care, patient satisfaction, and reduced costs. Medicare’s addition of the ACP benefit is a critical first step for helping orient providers towards this future.

[1] Thanks to stellar Research Assistant, Sara Constand, for gathering this information.

Welcome Dave Anderson

Dave Anderson has joined our team in the Duke-Margolis Health Policy Evidence Hub at Duke University, and he will also be blogging here at freeforall. His first post went up yesterday.

You may know Dave under his pen name of Richard Mayhew, a prolific blogger on health policy at Balloon Juice who has forgotten more about the intricacies of ACA insurance market reform and subsidy details than I ever knew. He will keep blogging there and a subset of his posts will appear here. The exact focus will be worked out over time.

At Duke, we are thrilled to have Dave’s health policy-infused data scientist/counterfactual thinker perspective applied to our ongoing work on the development of Palliative Care payment changes, and end of life policy generally. Further, we are hoping to build the go-to shop (policy analysis, some evaluation work in conjunction with partners) for health reform in States that haven’t yet expanded Medicaid in the belief that action in these States is likely to accelerate, and evidence based policy analysis is needed. Duke is in the South  you know (don’t tell anyone), and we want to help provide this across the nation, but particularly in the South.

There will be some other Duke colleague voices joining the blog as well.Look for more on that later this week.


Exchange Actuarial Value spreads and de minimis exploits

The ACA simplifies insurance by restricting the actuarial value of the plans that can be sold.  Bronze covers roughly 60% of expected pool costs, Silver covers roughly 70% of the expected pool costs, Gold covers roughly 80% of the expected pool costs and Platinum covers roughly 90% of the projected pool costs.  Cost Sharing Reduction (CSR) adds three more layers of coverage at roughly 73%, 87% and 94% of the projected pool costs to be covered by the insurer.  

However the law allows for the Secretary of Health and Human Services (HHS) through the Center for Medicare and Medicaid Services (CMS) to make rules that allow for de minimas variation from the targeted actuarial value.  CMS has had a consistent rule that a 2% variation in actuarial value is the maximum allowable wiggle room for a policy to be included in a band.  Therefore a Silver policy with no CSR could cover anywhere from 68% to 72% of the pool’s expected cost.  

This is an area of exploitation for premium tax credit benchmark strategic manipulation. The benchmark for all premium tax credits is the cost of the second least expensive Silver plan.  A large spread between the least expensive Silver plan and the benchmark Silver plan advantages subsidized buyers.  Most of my analysis of the Silver Gap strategy space has focused on network manipulation as an obvious source of creating a usable gap between the first and second least expensive Silver plans in a region.  My background is in network and provider configuration so this was my prism.  

However, the de minimis actuarial value variation in a band is another opportunity for aggressive gap creation.  In this scenario, a carrier with a low cost network and product type can use two different cost sharing structures to create two plans.  The first plan would have a minimal actuarial value of 68% while the second, benchmark plan would have an actuarial value of 72%.  

UPMC Health Plan in Pittsburgh is an example of the foregone opportunity.  Plan 16322PA0050104 is the least expensive Silver in zip code 15219.  It has an actuarial value 71.53%.  Plan 16322PA0050103 Is the benchmark Silver.  It has an actuarial value of 71.5%.   These values are from the 2017 PUF URRT Worksheet 2.   Both plans are at the high end of the allowed actuarial value range.  They are both using the same network and the same EPO plan type.  The extreme similarity means the premiums minimally differ.  Healthy, low income individuals will not be seeing a significantly better deal on the least expensive Silver after the subsidy than the same value proposition for the least expensive Silver.  

If UPMC Health Plan elected to offer a their lowest priced offering a 68% Silver** plan with a comparatively higher cost sharing structure and concurrently lower actuarial value  and then offered 16322PA0050103 as the benchmark Silver, the almost four percent actuarial value spread would, all else being equal, lead to 4% to 5% reduction in premium for the least expensive Silver plan compared to the current case.  The lower premium will mildly advantage most non-subsidized buyers as their option space will have expanded.  It will significantly advantage low income, subsidized buyers who previously were marginally deciding to not buy at the current price points.  These individuals are highly likely to be comparatively healthy and profitable for a carrier and their decision to opt out of the market and pay either the individual mandate tax or claim an exemption leads to a less healthy risk pool.  

Carriers who have a dominant position at the lowest price Silver Plans without proximate competition due to either their sole carrier status or the lack of low priced, narrow network competition should seek to offer a significant actuarial value spread as allowed by the de minimis variation in order to improve the risk pool by including more comparatively healthy and low cost subsidized buyers.  

** Plan ID 76179IN0110008 (68.1% AV) and 54192IN0040001 (68.8%)   are good examples of 68% AV Silver plans.


Did Gov Cooper Raise Taxes Yesterday?

Governor Cooper announced yesterday that he would expand Medicaid via an Executive order, setting up a legal dispute with the North Carolina General Assembly which in 2013 passed a law saying the State would not expand. Leaders in the General Assembly announced they would ask Congress and “Federal Officials”–presumably in the Center for Medicare and Medicaid Services (CMS) to deny the request. I don’t know how this will play out, but it represents the new Governor making clear his policy preference in this area.

Speaker of the N.C. House Tim Moore, and Majority Leader John Bell (from my hometown of Goldsboro) took another tack in criticizing the move, and said the Governor was raising taxes by his proposed action.

“Gov. Cooper proposed raising taxes on North Carolinians today, just over 72 hours into office.”

This is not true for the federal cost of Medicaid expansion (95% this year, dropping to 90% in 2020). No tax provisions were changed yesterday, nor will they change if North Carolina expands Medicaid (or does not expand Medicaid for that matter).

The Affordable Care Act (Obamacare) did raise a variety of taxes to pay for Medicaid expansion (full list of taxes, and credits related to ACA from IRS). On January 1, 2013, North Carolinians with salary or self employment incomes over $200,000 for individuals, $250,000 for couples had a tax increase of 0.9% levied on the amounts above these  thresholds. In addition, a tax on investment income (Dividends and capital gains) above $200,000/$250,000/year for individuals or couples of 3.8% also went into effect on January 1, 2013. Taxpayers in all states with salary and investment income above these thresholds have been paying increased taxes for 4 years, but so far North Carolina has not taken advantage of these monies to expand Medicaid in our state.

How about the State share of expansion costs?* Governor Cooper proposed that Hospitals and Health Systems in North Carolina pay for the States portion of Medicaid expansion. You could call that a tax if you want, but its worth noting that the hospitals have never been so ready to pay up. The hospitals will gladly pay the State’s expansion costs since they will benefit greatly from the increased revenue that will flow to them as a result of North Carolinians who would become covered by Medicaid expansion. Hospitals take care of our fellow North Carolinians who are uninsured when they get sick now. Expansion would mean there far fewer such persons in our State.

*I have a commentary piece in the next issue of the North Carolina Medical Journal that gives lots more detailed arguments, but I can’t put that out prior to publication. Hopefully it will be out in the next couple of weeks.